>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • LIZI +29.2%, GLOG +25.1%, SVAC +11.7%, PTNR +11.3%, REI +6.6%, VXX +4.1%, DISH +3.9%, KOS +0.7%
  • Gapping down:
    • EBIX -32.5%, PBR -17.1%, MOGO -10.4%, ARR -7.4%, BA -4%, ATO -4%, EVGN -3.9%, CDXC -3.7%, FAII -3.6%, MTDR -2.8%, TOL -1.9%, DIS -1.5%, QQQ -1.5%, CLA -0.9%, IWM -0.9%, SPY -0.8%, C -0.6%, DIA -0.6%

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • DISCA +7.9%, KOS +4%, DORM +3.4%, DISH +1%

M&A news:

  • CTB +17.1% (Cooper Tire to be acquired by Goodyear Tire & Rubber (GT) in cash and stock deal for implied consideration of $54.36 per share)
  • GLOG +16.8% (announces take private transaction with BlackRock's (BLK) global energy & power infrastructure)
  • PBCT +10% (to be acquired by M&T Bank (MTB) in an all-stock transaction)
  • SVAC +8.9% (Cyxtera agrees to merge with publicly listed Starboard Value Acquisition Corp. in $3.4 bln transaction)
  • NSTB +6.4% Northern Star Investment Corp II and Apex Clearing enter merger agreement)

Other news:

  • CLSN +55.3% (received Fast Track designation from the FDA for GEN-1 for the treatment of advanced ovarian cancer)
  • LIZI +24.4% (announced that its audio product has been launched in Mercedes Benz S-Class cars via Huawei Mobile Services for car)
  • VBLT +18.8% (receives green light to OVAL Phase 3 registration enabling study of VB-111 in ovarian cancer)
  • PTNR +10% (provides update regarding a possible transaction in the fiber optics field)
  • KSS +9.7% (Investor group nominates nine highly-qualified independent candidates for election to Kohl's Board)
  • REI +9.2% (provides operational and financial update and initial 2021 plans & guidance in line with new strategic vision)
  • BHVN +8.6% (BHV-1200, a multimodal antibody therapy enhancer, demonstrates effective neutralization of multiple strains of COVID-19)
  • CGEN +5.6% (expands its clinical collaboration agreement with Bristol Myers Squibb (BMY))
  • VXX +3.8% (trading up in response to US futures pre-mkt declines)
  • CLA +2.4% (shareholders to approve proposed business combination with Ouster at extraordinary general meeting to be held on March 9, 2021) . 

Analyst comments:

  • AAL +6.3% (upgraded to Buy from Hold at Deutsche Bank)
  • JBLU +2.9% (upgraded to Buy from Hold at Deutsche Bank)
  • SAVE +2.2% (upgraded to Buy from Hold at Deutsche Bank)
  • DAL +1.9% (upgraded to Buy from Hold at Deutsche Bank)
  • ALK +1.7% (upgraded to Buy from Hold at Deutsche Bank)
  • TPR +1.1% (upgraded to Outperform from Neutral at Credit Suisse)

WSJ : SoftBank’s Other Big E-Commerce Bet Is About to Pay Off

SoftBank’s Other Big E-Commerce Bet Is About to Pay Off
The coming New York IPO of Korea’s fast-growing Coupang looks like another windfall for SoftBank’s Vision Fund

The crown jewel in SoftBank’s investment portfolio is Chinese e-commerce giant Alibaba. Now SoftBank 9984 1.74% is hoping for a repeat in South Korea.

Coupang, a fast-growing Korean e-commerce company founded in 2010, filed this month for an initial public offering in New York that could come as early as March. It is expected to value Coupang at more than $50 billion, the most for a foreign company since Alibaba in 2014—creating another windfall for SoftBank’s Vision Fund. The Japanese company is a 38% owner, a stake it acquired by investing a total of just $2.7 billion since 2015.


Coupang has quickly become Korea’s largest e-commerce player, according to Euromonitor International—booking $12 billion in revenue last year, its IPO prospectus says, compared with $2.4 billion in 2017. While still unprofitable, the company narrowed its losses by about a third last year. Coupang has spent heavily building its own delivery network and fulfillment centers, helping it entice customers with next-day delivery and easy returns.

As in other countries, e-commerce grew strongly in Korea during the pandemic. But online shopping has long been popular there, and will account for 28.9% of retail sales in 2021, market researcher eMarketer forecasts—second only to China. Korea’s population density helps: About half of the country’s 52 million people live in Greater Seoul, making it easier for Coupang to achieve the fast delivery it promises.

Coupang has unseated eBay as the market leader, but the sector remains fragmented. One of the strongest competitors is local giant Naver, whose leading position in search and payments has helped it push into online shopping too. Its e-commerce revenue last year was up 38% from 2019, and it has partners in CJ Logistics, one of Korea’s largest logistics companies, and BGF Retail, which runs its largest convenience-store chain.

Amazon has also jumped into the fray. The company announced in November it will team up with and potentially acquire a stake in 11st, an e-commerce company owned by SK Telecom, another local giant.

Korea’s plugged-in, densely urbanized population has great e-commerce potential. But the competition is heating up.

>>> Europe : Brokers Upgrades & Downgrades - 22nd of February 2021 V2(+)

>>> Up
* Airbnb Raised to Buy at Loop Capital; PT $240
* AstraZeneca Raised to Buy at Intron Health; PT 9,000 pence
* Beiersdorf Raised to Neutral at Goldman; PT 83 euros (+)
* Daimler PT Raised to 91 euros from 82 euros at M.M. Warburg (+)
* DNB Raised to Market Perform at KBW; PT 165 kroner
* El.En. Raised to Buy at Banca Akros (ESN); PT 32 euros (+)
* Elekta Raised to Buy at Handelsbanken; PT 150 kronor
* Eni Raised to Sector Perform at RBC; PT 10 euros
* Glencore Raised to Overweight at JPMorgan; PT 350 pence
* MARR SpA Raised to Accumulate at Banca Akros (ESN) (+)
* NEL Raised to Buy at Arctic Securities; PT 35 kroner (+)
* Snap Raised to Overweight at Morgan Stanley; PT $80
* Standard Life Aberdeen Raised to Equal-Weight at Barclays
* Temenos Raised to Neutral at Credit Suisse; PT 121 Swiss francs

>>> Down
* B&M European Cut to Hold at Peel Hunt; PT 575 pence
* EDP Renovaveis Cut to Hold at Commerzbank; PT 19 euros
* Fastighets AB Trianon Cut to Hold at Handelsbanken
* Fuller Smith & Turner Cut to Hold at Peel Hunt; PT 850 pence
* Gecina Cut to Neutral at JPMorgan; PT 130 euros
* Hostelworld Cut to Reduce at Peel Hunt; PT 65 pence (+)
* InterContinental Hotels Cut to Reduce at Peel Hunt (+)
* Smith & Nephew Cut to Hold at Commerzbank; PT 1,550 pence
* TechnipFMC Cut to Equal-Weight at Barclays; PT $7 (+)
* Varta Cut to Hold at Berenberg

>>> Initiation
* Norwegian Property Reinstated Buy at SEB Equities
* Technip Energies Rated New Equal-Weight at Barclays

>>> Call
* B&M Cut, Forecast Momentum is Coming Toward an End: Peel Hunt
* Continental’s Div. Suspension ‘Not Entirely Unexpected:’ Warburg (+)
* EDPR Downgraded to Hold at Coba, EDP Preferred Ahead of Results (+)
* Elekta Top Line Improves, Upgraded to Buy at Handelsbanken (+)
* Eni Upgraded at RBC Capital Amid More Constructive Oil View
* European Internet Stocks Can Maintain Outperformance, RBC Says
* Fuller Smith & Turner Cut at Peel Hunt on More Gradual Recovery (+)
* Insurers No Longer ‘Darlings’ of European Financials: Berenberg (+)
* Saab ‘Hard to Pigeonhole,’ Price Target Raised at Jefferies
* Varta Loses Sole Buy Rating as Berenberg Downgrades to Hold

WSJ : Bond Selloff Prompts Stock Investors to Confront Rising Rates

The sharp increase this month in U.S. government-bond yields is pressuring the stock market and forcing investors to more seriously confront the implications of rising interest rates.

The lift in yields largely reflects investor expectations of a strong economic recovery. However, the collateral damage could include higher borrowing costs for businesses, more options for investors who had seen few alternatives to stocks and less favorable valuation models for some hot technology shares, investors and analysts said.

As of Friday, the yield on the benchmark 10-year U.S. Treasury note stood at 1.344%, up from 1.157% just five trading sessions earlier and roughly 0.9% at the start of the year.

The S&P 500 fell 0.7% for the week, dragged down largely by technology stocks, which after big gains in recent years are seen as especially vulnerable to rising yields. Banks, meanwhile, rose as investors bet that higher long-term interest rates would make their lending activity more profitable.

“The market’s wobbled a little bit,” said Brad McMillan, chief investment officer at Commonwealth Financial Network, an investment advisory and brokerage firm. “The market has principally been saying hooray, the pandemic is coming under control and the economy is starting to grow again. But now we’re actually starting to see the consequences of that in the form of higher rates, and I think the market’s processing that.”


Stuck near historic lows for most of last year, Treasury yields have climbed in recent months along with investors’ expectations for a strong economic rebound, driven in part by more debt-financed government spending.

The move over the past week caught investors’ attention because no specific catalyst was apparent. That raised the prospect that yields could rise more quickly and unpredictably than expected—an outcome that many believe would be more disruptive to other assets like stocks than a slow, orderly climb.

Rising yields, which result from falling bond prices, often reflect investor expectations of faster growth and an accompanying rise in inflation, which makes the interest payments of bonds less valuable. A pickup in inflation could also eventually lead the Federal Reserve to raise short-term interest rates, though most investors don’t expect that to happen in the near term. More government borrowing could boost yields as well just by increasing the supply of bonds.

Investors this week will monitor the latest developments in Washington, where House Democrats hope to finalize a $1.9 trillion stimulus package, as well as figures on consumer spending and earnings from consumer companies like Home Depot Inc. and Macy’s Inc.

They will also keep watching Treasury yields, whose rise can hurt stocks in a few different ways, according to investors and analysts.


As yields move up, borrowing costs for most businesses should also rise, crimping profits. Higher yields could also prompt some risk-averse investors to sell stocks and return to government and corporate bonds, now that they will earn a more meaningful return.

Finally, many investors use the 10-year Treasury yield as a discount rate in formulas to value stocks. All else being equal, the expected cash flows of companies are considered less valuable when yields are higher. That could threaten many tech stocks because much of their earnings are expected to come further in the future.

Treasury yields remain extremely low by historical standards but aren’t so low relative to stock prices, some argue. In recent years, the 12-month forward-earnings yield of world technology companies—their expected earnings per share as a percentage of their stock price—has generally exceeded the 10-year Treasury yield by at least 2.5 percentage points.

But the yield differential has recently fallen below that threshold, a sign that the stock-market rally that was previously justified by ultralow bond yields “is turning irrational,” Dhaval Joshi, chief European investment strategist at BCA Research, a Montreal-based investment research firm, wrote in a report last week.

Still, many investors aren’t too worried about rising yields, seeing them mostly as a welcome sign that the economic outlook is improving.

“Our base case is for the positives of a higher rate regime to outweigh the negatives,” said Matt Peron, director of research at Janus Henderson Investors.

Many professional stock investors have already baked higher yields into their valuation models, and the largest tech companies generally have earnings that justify their prices, he added.

Even so, rising yields could cause investors to rethink their allocations to different sectors, Mr. Peron said.

His own team started adding exposure in the second half of last year to companies such as certain retail brands and online travel businesses that stand to benefit from an economic recovery and are less vulnerable to rising rates.

The impact on stocks depends a lot on how high and how quickly yields can rise, analysts said. A range of analysts forecast that the 10-year Treasury yield will reach anywhere from 1.5% to 2% by the end of the year, as investors start preparing for future rate increases from the Fed.

So far, the sudden rise in yields reflects uncertainty about the future more than any tangible changes in the economy. Earlier this month, the Labor Department reported that core consumer prices, excluding the often volatile food and energy categories, were essentially flat for the previous two months.

Treasury yields fell at the time, only to begin their latest steep ascent just two days later.

FT : ESG investment favours tax-avoiding tech companies

ESG investment favours tax-avoiding tech companies
‘Dark secret’ of the sustainable strategy is its unintentional support of intangible assets over humans, analyst argues

The huge rise in environmental, social and governance-based investing is funnelling money into companies that pay less tax and provide fewer jobs than many counterparts with lower ESG ratings, analysis shows.

Assets under management in ESG ETFs jumped three-fold from just under $59bn at the end of 2019 to $174bn at the close of 2020, according to data from TrackInsight, an ETF data provider.

Yet while the ESG movement is driven by a stated desire to improve the world by tackling issues such as climate change and board composition, it is arguably exacerbating other fissures in society.

“ESG funds are unconsciously worsening the social and political crisis associated with automation, inequality and monopolistic concentration,” said Vincent Deluard, global macro strategist at StoneX, a New York-based brokerage.

“I doubt that the unfolding crises of the 2020s can be averted if the ESG movement’s ultimate effect is to funnel more money into tax-avoiding tech monopolies, pharmaceutical giants with few workers, and financial networks,” he added.

“Despite its noble goal, ESG investing unintendedly spreads the greatest illnesses of post-industrial economies. As ESG ratings increasingly determine the allocation of capital, we must pay attention to the kind of companies they reward.”


Deluard’s analysis found that companies with high ESG ratings pay much less tax than their lower-rated peers.

US-listed Russell 1,000 companies with the top triple-A ESG rating from MSCI, for example, paid an average tax rate of 18.4 per cent last year, while triple-C-rated firms typically paid 27.5 per cent.

“There is an almost perfect inverse relation between companies’ ESG ratings and their effective tax rate,” said Deluard.


The discrepancy is likely to be partially driven by sectoral effects, with ESG funds skewed towards technology companies, which arbitrage differences in tax regimes between the countries in which they operate in, minimise their tax liabilities via transfer pricing and have a lot of intangible assets, which they can locate in the most favourable tax jurisdiction.

Microsoft, for example, is rated “best in class” in most ESG metrics, helped by having a human rights policy, a biodiversity policy and plans to be carbon negative by 2030. Yet it has paid an effective tax rate of 16 per cent over the past eight years, he said, compared to the 47 per cent paid by triple-C rated Universal Health Services.

“Big tech’s profits are so massive that a small increase in tax compliance would do more social good than all the remarkable initiatives touted in their glossy corporate social responsibility reports,” said Deluard.

He argued taxation was a “blind spot” for the ESG industry as a whole with, for instance, only five of the 551 ESG metrics available on the Bloomberg platform related to taxes (although some other tax data is available via companies’ income statements).

Bloomberg declined to comment, as did a number of other ratings providers and ESG fund managers approached for this story.

Deluard also claimed that ESG investors were “winning their unintended war against people” by shunning labour-intensive companies.

Comparing a “virtuous 15” of the stocks most overweighted versus the S&P 500 in the 15 largest US ESG equity ETFs to an “ugly 15” of the most underweighted companies, he found that the former, which include Apple, Microsoft and PepsiCo, employ just 1.9m people, against 5.1m for the latter, which include Walmart, Philip Morris International and Boeing.

The average “virtuous” company has 20 per cent fewer employees than the median Russell 3,000 company, despite having a larger market capitalisation than the typical S&P 500 stock.

Last year, “the best [investment] strategy would have been to do exactly what ESG ETFs unconsciously do: sell companies with lots of employees and buy ones with lots of robots, patents and intellectual property”, Deluard said.

He described this as “the dark secret” of ESG investing. “The single most salient characteristics of these funds is that they favour machines and intangible assets over humans.”

Moreover, he argued this was a feature, not a bug, of ESG. “Companies with no employees do not have strikes or problems with their unions. There is no gender pay gap when production is completed by robots and algorithms.”

In order to tackle these issues, Deluard proposed that ESG metrics should be adapted to incorporate how many workers a company employs, relative to market cap.

“You should acknowledge that a job in itself has value, before you even talk about what sort of job it is.”

Further, he argued that ESG should be expanded to ESGT to incorporate taxation as a fourth pillar.

“How about taking the amount of tax they pay and just rewarding companies that pay a lot,” he said. “Part of being a good global citizen is that you pay taxes and those taxes help to solve problems.”

However, Deluard feared there would be pushback from much of the business community if this approach was adopted.

“You can get a company to try and protect the environment or have more diversity, it doesn’t affect the bottom line, but to make them pay more taxes . . . Right now, they have a legal duty to pay as little tax as they can.”