Gapping up
In reaction to strong earnings/guidance:
- SMPL +9%
Other news:
- TWO +46.3% (provides update; states liquidity remains strong)
- MESO +31.2% (clears investigational new drug application for mesoblast to use remestemcel-l in patients with acute respiratory distress syndrome caused by COVID-19)
- CODX +31% (receives FDA Emergency Use Authorization for COVID-19 Test)
- RDHL +18.1% (announces first COVID-19 patient treated with opaganib in israel under compassionate use)
- TCS +13.9% (provides store operations and customer service update)
- XBIT +11.4% (announces collaboration for FDA program for US blood centers to begin collecting and distributing convalescent plasma from COVID-19 healed patients)
- LGIH +10.8% (reports March closings increased 40.5% yr/yr)
- OSUR +9.5% (receives BARDA contract for rapid oral fluid pan-SARS-coronavirus in-home self-test)
- AXSM +9.5% (reports Phase 3 trial of AXS-07 met primary endppoints)
- VRA +8.3% (announces it will continue to furlough the majority of its store employees, announces other actions)
- SEAS +8% (senior mgmt changes)
- SDC +6.4% (provides update in response to COVID-19 outbreak)
- MYGN +6.2% (receives reimbursement for the BRACAnalysis diagnostic system in Japan for Patients with Breast or Ovarian Cancer Associated with HBOC)
- MNK +5.9% (initiates rolling submission of Biologics License Application to FDA for StrataGraft)
- LMNX +4.5% (receives Emergency Use Authorization from FDA for its ARIES SARS-CoV-2 Assay for rapid detection of the virus that causes COVID-19)
- INCY +4.4% (presents Phase 3 data from the TRuE-AD Program of Ruxolitinib Cream; plans to file NDA before end of 2020)
- MMM +4.3% (responds to reports of alleged seizure of N95 respirator shipments)
- JPM +4.2% (CEO Jamie Dimon says bank will consider suspending dividend only during "extremely adverse conditions")
Analyst comments:
- TEVA +6.5% (upgraded to Buy from Neutral at UBS)
- EBAY +5% (upgraded to Buy from Neutral at Guggenheim)
- TSLA +4.8% (upgraded to Buy from Hold at Jefferies)
- INTC +4.3% (upgraded to Mkt Perform from Underperform at Raymond James)
- CHRW +4.1% (upgraded to Overweight from Equal-Weight at Stephens)
US shareholders brace for nine-year squeeze on dividends
Recovery in payouts expected to take longer than after 2008 crisis
Dividends paid to investors by big US companies will take nine years to recover from the downturn caused by coronavirus, according to bets in the futures market, marking the biggest hit to corporate payouts since the second world war.
Companies in the S&P 500 delivered almost half a trillion dollars in dividends last year, or $56 per share. But companies around the world have come under pressure to cut payouts to shareholders and focus on keeping up payments to workers and other stakeholders, now that the virus has in many cases hit revenues.
It will take until 2028 to beat the tally from 2019, according to the prices of futures contracts linked to annual dividends for the benchmark. That compares with the three years dividends took to recover after the 2008-09 financial crisis and a 19-year run from the Great Depression through to 1949, according to data compiled by Robert Shiller, the Yale University economist.
Just a month ago investors were betting the S&P 500 would deliver a record $61 per share in payouts this year, noted BNY Mellon. That expectation now stands at just $40, mirroring a 27 per cent fall in US stock prices since the peak in February.
The lacklustre outlook for payouts reflects the pain facing the global economy from the coronavirus pandemic. The dip will hurt investors who rely on steady income from stocks, such as pension funds, and comes after the yield on safe corporate and government bonds has dropped sharply in recent years.
“The reason you own a stock is you want to own a share of the profits of the business,” said John Velis, director of FX and macro strategy at BNY Mellon. “This will make holding stocks a less attractive option.”
Dividends are a marker of financial stability for listed companies that try to raise payouts year after year, and which are typically penalised by investors when they fail to do so. The steady growth of dividends contrasts with the recent explosive growth of share buybacks, which are seen as a more flexible way to hand money back, as programmes can be paused or scrapped without much fanfare.
“You don’t want to cut dividends because it’s a really bad signal,” said Mr Velis. “Once you’ve established your dividend you only cut in extreme circumstances.”
The outlook for dividends is further clouded by the US government’s $2tn spending package to buffer the economic shock from the pandemic. Companies that receive direct assistance face extra pressure to reduce both dividends and buybacks, said Mr Velis.
Boeing, the US aircraft manufacturer, and Delta, the US carrier, last month announced suspensions to payments on dividends and buybacks. Large US banks, meanwhile, intend to continue paying dividends, arguing such payments are a powerful signal of financial strength.
Meanwhile, the rapid drop in the price of oil this year has increased pressure on energy businesses to reduce dividends to preserve cash. Occidental, the US oil group, cut its dividend from $0.79 to $0.11 last month, in its first reduction since the Gulf war three decades ago.
Companies around the world will curb payouts as they draw down credit lines and tap the bond market for funds to navigate the downturn, said Sean Darby, head of global equities for Jefferies.
“Dividend cuts are likely the first casualties in addressing balance sheets,” Mr Darby said. “We expect dividends to be cut or slashed to preserve money.”
Early premarket gappers
- Gapping up:
- MESO +66.7%, CODX +40.7%, TWO +25.2%, XBIT +15.5%, OSUR +8.8%, LGIH +7.6%, SDC +7%, MMM +4%, CC +3.7%, OSW +3.5%, FND +2.3%, JBLU +1.5%, INCY +1.1%
- Gapping down:
- VRA -7.4%, DAL -6.9%, VXX -6.8%, INO -3.1%, BCLI -2.6%, AAT -2.3%
>>> Up
* 888 Raised to Buy at Deutsche Bank; PT 153 pence
* Aena Raised to Outperform at BBVA; PT 122 euros
* Aena Raised to Outperform at Credit Suisse; PT 148 euros (+)
* Aeroports de Paris Raised to Neutral at Credit Suisse (+)
* Bankinter Raised to Equal-Weight at Barclays; PT 4.10 euros
* BBVA Raised to Overweight at Barclays; PT 4 euros
* Carlsberg Raised to Outperform at Credit Suisse; PT 930 kroner (+)
* Carrefour Raised to Market Perform at Bernstein; PT 15 euros
* Cembra Money Bank Raised to Buy at Octavian (+)
* Clarkson Raised to Buy at HSBC; PT 2,800 pence
* DKSH Raised to Outperform at Credit Suisse; PT 57 Swiss francs (+)
* GAM Holding Raised to Buy at MainFirst; PT 2.60 Swiss francs
* H&M Raised to Hold at SocGen; PT 121 kronor (+)
* Infineon Raised to Hold at SocGen; PT 14.50 euros
* Johnson Matthey Raised to Hold at Panmure Gordon
* Kindred GDRs Raised to Buy at SEB Equities; PT 59 kronor
* Kinnevik Raised to Buy at ABG; PT 198 kronor
* Konecranes Oyj Raised to Neutral at Goldman; PT 18 euros
* Koenig & Bauer Raised to Hold at Commerzbank (+)
* Millennium Raised to Buy at Citi
* Petrofac Raised to Outperform at Bernstein; PT 290 pence
* Subsea 7 Raised to Outperform at Bernstein; PT 100 kroner
* Sumo Raised to Hold at Jefferies; PT 153 pence
* TechnipFMC Raised to Outperform at Bernstein
* Telecom Italia Raised to Outperform at Intermonte
>>> Down
* ADO Properties Cut to Sell at Hauck & Aufhaeuser; PT 15 euros (+)
* Airbus Cut to Sell at DZ Bank; PT 39 euros
* Anglo American Cut to Sector Perform at RBC; PT 1,500 pence
* Antofagasta Cut to Underperform at RBC; PT 600 pence
* Ascential Cut to Equal-Weight at Morgan Stanley; PT 250 pence
* BNP Paribas Bank Polska Cut to Sell at Citi
* Diageo Cut to Add at AlphaValue
* Equinor Cut to Sell at SpareBank; PT 130 kroner
* Marzocchi Pompe Cut to Neutral at EnVent S.p.A.; PT 4.27 euros
* MTU Aero Cut to Equal-Weight at Barclays; PT 100 euros
* Nokian Renkaat Cut to Underweight at Morgan Stanley
* Pirelli Cut to Equal-Weight at Morgan Stanley; PT 3 euros
* Playtech Cut to Hold at Deutsche Bank; PT 181 pence
* Playtech Cut to Neutral at JPMorgan; PT 335 pence
* Puma Cut to Sell at DZ Bank; PT 39 euros
* Sabadell Cut to Equal-Weight at Barclays; PT 65 euro cents
* Safran Cut to Equal-Weight at Barclays; PT 66 euros
* Spectris Cut to Hold at HSBC; PT 2,450 pence
* SSE Cut to Reduce at AlphaValue
* St James's Place Cut to Hold at Berenberg; PT 830 pence
* Telia Cut to Reduce at HSBC; PT 31 kronor
>>> Initiation
* Adyen Rated New Buy at Jefferies; PT 882 euros
* Ingenico Group Rated New Hold at Jefferies; PT 102 euros
* LSL Property Resumed Hold at Jefferies; PT 173 pence
* Network International Rated New Hold at Jefferies; PT 390 pence
* Nexi Rated New Buy at Jefferies; PT 18 euros
* Worldline Rated New Buy at Jefferies; PT 73 euros
>>> Call
* 888 Cash Strong, Playtech Has More Virus Risk: Deutsche Bank (+)
* European Airlines’ Liquidity a Concern After End-May: Bernstein (+)
* Airbus PT Slashed 73% at DZ Bank On Longer, Stronger Virus Hit (+)
* Carrefour Raised at Bernstein on Virus Boost, Better Perception (+)
* Virus May Delay Soccer Star’s $108 Million Move, Berenberg Says
* Kindred Revenue Seen Resilient Despite Canceled Sports: SEB (+)
* Nokian, Pirelli Cut, Virus Restricts Movement: Morgan Stanley
* Pernod PT Cut at Jefferies On ‘Realistic’ Worst-Case Scenario
* Sage Update on Virus Impact as Expected, Stifel Says (+)
* 5G Virus Conspiracy Theories May Slow Its Rollout: Jefferies
Healthcare group Novacyt wins French approval for COVID testing product
PARIS (Reuters) - Novacyt’s COVID-19 testing product has been approved by France’s CNR arm of the Institut Pasteur, making it available for immediate distribution in France, the healthcare company said on Monday.
The company added that last week, it had also won approval for its COVID-19 test from Thailand’s Ministry of Health.
ALNOV FP
What Is ‘Buy the Panic’?
Buying stocks when others are selling is a proven approach—but sometimes it takes nerve
What does it mean when investment professionals say, “Buy the panic”?
It’s a phrase that investors might hear frequently given the recent widespread selling in the stock market. Despite snapback rallies on several days, the S&P 500 is down 23% for the year so far.
This particular phrase is a quip that urges investors to buy when others are selling (and in other markets, vice versa). It’s the sort of advice doled out by investing legend Warren Buffett, CEO of Berkshire Hathaway. “Widespread fear is your friend as an investor because it serves up bargain purchases,” he said.
The idea is that when people make panic stock sales, then quality companies can be purchased on the cheap. Indeed, while other people were unloading their stockholdings, Mr. Buffett’s company snapped up cheap securities during the 2008-09 financial crisis.
Buying stocks during a market panic sounds easy to do when you look at history. Still, it’s much harder in practice, says Richard Rosso, director of financial planning at wealth-management firm RIA Advisors LLC in Houston. “The problem is that shares can go even lower in a bear market,” he says.
In other words, the market being down 20%-plus might be just the beginning of an even more significant slide, or it might not. No investor knows for sure.
If investors wait for the market to rally again before investing, then they are giving up on potential profits. But if they act too early when making stock purchases, then they may incur even more losses.
Investors can conquer that problem by making measured purchases depending on how confident they are about where the market is moving. “Is it a big buy or a little buy?” Mr. Rosso says. Or put another way, are you adding 3% to your stockholdings or 1%?
However, the largest hurdle when investing during a panic is that the best time to do so is when you will likely be least willing, Mr. Rosso says. It’s the moment of maximum fear, which will also coincide with the peak in panic. “You sometimes have to think counterintuitively,” he says.
The last moment of heightened fear came at the beginning of 2009 in the dark days of the financial crisis when businesses were shedding hundreds of thousands of jobs each month. At the same time, the S&P 500 hit its lowest level in more than a decade. Fear was palpable.
Mr. Rosso says that at that time, when he rang his clients, the problem was that the individual investors he deals with were all too fearful. “Not one client said we should buy,” he says. The sad part of that anecdote is that March 2009 was the post-financial-crisis low for the S&P 500—the beginning of a historic bull market.