>>> US Gapping up

Gapping up
In reaction to earnings/guidance
:
  • N/A
M&A news:
  • HCOM +19.6% (Cincinnati Bell to combine with Hawaiian Telcom and OnX Enterprise Solution)
  • KOOL +13.4% (acquires substantially all of SynGen's operating assets, including its proprietary cell processing platform technology)
  • CETV +7.4% (sells Croatian and Slovenian assets for €230.0 mln)
  • RMBS +2.4% (follow-up to reports the company is weighing a possible sale)
  • CBB +1% (Cincinnati Bell to combine with Hawaiian Telcom (HCOM) and OnX Enterprise Solution)
Other news:
  • MYCC +30.2% (to be acquired by funds affiliated with Apollo Global Management (APO) for $17.12 per share)
  • AVEO +9.7% (continued volatility in pre-mkt)
  • AMD +2% (WSJ's Heard on the Street column discusses valuations and continued demand for semiconductors)
  • VRX +1.7% (announces that following the recent closure of the sale of Dendreon, it has used the net proceeds of the sale to pay down $811 mln of its senior secured term loans)
  • EXEL +1.5% (Exelixis and Bristol Meyers initiate phase 3 CheckMate 9ER trial to evaluate Opdivo in combination with CABOMETYX)
  • TSLA +1.3% (Elon Musk highlights first production Model 3 in series of weekend tweets)
  • JAKK +1.3% (signs a multi-year licensing agreement with Chicco)
  • MU +0.7% (WSJ's Heard on the Street column discusses valuations and continued demand for semiconductors)
Analyst comments:
  • NVDA +2% (target raised to $200 at Needham)
  • XLNX +1.6% (upgraded to Buy from Hold at Jefferies)
  • PYPL +1.5% (upgraded to Outperform from Mkt Perform at Bernstein)
  • BUD +1.3% (added to Conviction Buy List at Goldman)
  • ATNX +1% (initiated with a Buy at Deutsche Bank)
  • BA +0.7% (target raised to $230 from $200 at Jefferies)
  • DEO +0.6% (upgraded to Neutral from Sell at Goldman)

>>> US Early premarket gappers

Early premarket gappers
Gapping up:
  • CETV +9.9%, AVEO +3.9%, XLNX +2.2%, MZOR +1.9%, AMD +1.6%,NVDA +1.5%, TSLA +1.5%, PYPL +1.4%, MU +0.7%, NFLX +0.5%
Gapping down:
  • INTC -1.2%, SHPG -1.2%, SU -0.8%, RIG -0.6%, RDS.A -0.5%, BP-0.5%, OXY -0.5%

REcode.net : Amazon is quietly rolling out its own Geek Squad to set up gadgets

Amazon is quietly rolling out its own Geek Squad to set up gadgets in your home
The new service is aimed at educating customers about “the smart home” — and, naturally, about Alexa.

For 15 years, Best Buy’s Geek Squad installation and repair service has served as one key advantage over Amazon that the e-commerce giant seemed unlikely to match.

But over the last few months, Amazon has quietly been hiring an army of in-house gadget experts to offer free Alexa consultations as well as product installations for a fee inside customer homes, multiple sources told Recode, and job postings confirm.

The new offering, which has already rolled out in seven markets without much fanfare, is aimed at helping customers set up a “smart home” — the industry term used to describe household systems like heating and lighting that can be controlled via apps, and increasingly by voice.

While Amazon has a marketplace for third parties to offer home services like TV mounting and plumbing, these new smart-home-related services seem important enough to Amazon that it is hiring its own in-house experts. And perhaps for good reason.

Smart-home gadgets make up one of the fastest-growing segments of the consumer electronics industry, but they can be difficult to set up and integrate with each other. That hurdle has led to higher-than-normal return rates, experts say, so Amazon is likely looking at the in-home services as one way to lower that number.

Perhaps more importantly, controlling the smart home by voice is one of the most promising use cases for Alexa, the virtual assistant built into the Echo line of gadgets, which Amazon is betting heavily on. So it’s not totally surprising that Amazon would make the effort to close the education gap for these products by sending its own hires into customer homes.

An Amazon spokesman declined to comment.

Amazon is charging $99 for installation services like setting up an Ecobee4 Alexa-enabled smart thermostat, though some services are discounted by 20 percent this week. Multi-device set-ups that take more than an hour may cost more. In eligible cities, shoppers can book the installations during the checkout process.

Amazon is also offering free 45-minute “Alexa Smart Home Consultations,” which were first spotted by The Spoon, a website that reports on food tech. The Amazon expert answers questions, demos Alexa-compatible gadgets and — surprise, surprise — creates a personalized shopping list for the customer.

The new in-home services are currently available in seven markets — Seattle, Portland, San Francisco, San Diego, Los Angeles, San Jose and Orange County, Calif — and appointments can be booked through Amazon.com

It seems like a large expansion is on the horizon, according to Amazon job listings for “field technicians” in cities like Tampa, Hoboken, Miami, Orlando, Houston, Dallas and Las Vegas. Preferred qualifications include past work as an Apple Genius or Geek Squad Double Agent.

While you can make sound arguments for why this new initiative is smart and strategic, it’s still jarring to watch the same company that wants to pioneer drone delivery and floating warehouses invest in such an in-person experience.

Then again, some of Amazon’s big recent moves — the rollout of a chain of Amazon bookstores and its plan to acquire Whole Foods — seem to be a clear recognition by Amazon that, in some categories, there’s still huge value in translating the customer experience of Amazon.com into the physical world.

If Amazon has success with the in-home visits — as of now, 95 percent of the 551 reviews for the free Alexa consultations are rated five stars — you have to wonder what other services Amazon might think up for an employee that customers trust to be in their homes.

Still, Amazon is playing a bit of catch-up. Best Buy’s Geek Squad has been offering free smart-home consultations as well as similarly-priced paid installations. Best Buy also recently announced that it will be offering Alexa and Google Home demos and tutorials in 700 of its stores.

Startups like HelloTech also play in this space, along with Enjoy, the two-year-old company founded by retail veteran Ron Johnson. Enjoy offers in-house or in-office setups for free on gadgets purchased through its site, but on a smaller selection of items than Amazon.

WSJ :Oil Up? Oil Down? Blame the Algorithms

Oil Up? Oil Down? Blame the Algorithms
As market moves confound analysts and longtime investors, many are pointing fingers at the rise of automated trading and algorithms

When energy analysts and investors couldn’t figure out oil markets this year, they blamed one group: algorithmic traders.
On various days over the first six months of 2017, even amid signs of tightening supply, oil prices fell sharply, eventually sinking into bear market territory.
Such moves confounded longtime watchers of oil, who said that based on the fundamental information, prices should have been rising.

Oil investors, who make bets relying on data like production and demand, say that such forces are no longer always driving crude. They argue that program trading is distorting the market, often causing shallow price drops to snowball.
Take May 25. Even after the Organization of the Petroleum Exporting Countries agreed to continue cutting back supply, oil fell almost 5%.
While some observers attributed the move to investor expectations for deeper cuts from OPEC, others said the drop steepened as algorithms hopped on the trend. To fundamental oil investors, it was an example of how algorithmic trading and technical signs have been influencing commodities like never before.

Saudi Arabia energy minister Khalid al-Falih was among those who pointed to technical trading for causing the May 25 selloff to intensify. “For many people, it was time to sell,” he said in an interview after the May 25 OPEC meeting. “Once you broke some of the technical barriers,” that also had an impact, he said.
Although automated trading has swept stock and bond markets for years, it has only recently accounted for the majority of trades in energy.

Automated trading in energy-related contracts accounted for 58% of volume in the period from 2014 to 2016, compared with 47% from 2012 to 2014, a March study by the Commodity Futures Trading Commission shows.
Weekly data releases on U.S. crude storage are still a significant factor in market movement, but price swings have been magnified by programmed trading, analysts say.
On March 8 and 9, analysts say algorithms kicked in after data showed record-high inventory levels. Oil slid that day below $50 a barrel for the first time this year.
“An increasing number of market participants are being swayed more by the headlines than by counting physical barrels,” said Michael Tran, director of energy strategy at RBC Capital Markets. “A lot of this has been driven by algos and quants.”
Strategies vary greatly among funds, making the impact of algorithms and automation difficult to quantify. The complexity of algorithms also make them an easy and misguided target for blame, said Michael Pomada, chief executive of Crabel Capital Management, a hedge fund with $2.2 billion in assets and $700 million in trend-following strategies.
“It’s like the boogeyman,” said Mr. Pomada. “People tend to blame things that they don’t know much about.”

Algorithms often have intricate and opaque methodology. They tend to follow set rules on when to buy and sell, using signals such as moving averages and volatility to identify trends. But traders may combine mathematical models and human discretion to place bets on price moves ranging from within one day to several months.
Although both human traders and algorithms use automation to execute orders, the rising level of automated trades is one benchmark that reflects the growing influence and speed of computers in oil trading.
Computerized trading is also taking over other commodities. According to the CFTC report, the share of automated trading in agriculture rose to 49% between 2014 and 2016 from 38% between 2012 and 2014, and to 54% from 47% in metals over the same periods.
But crude has been particularly vulnerable to big swings this year as traders try to gauge the impact of OPEC cuts amid a global oil gut. Meanwhile, momentum traders who use algorithms have grasped for market trends, said Peter Hahn, of Bridgeton Research Group, a quantitative research firm.
Oil is “in a transitioning period,” Mr. Hahn said. In that kind of market, “momentum-based algorithms are more likely to be whipped into and out of long and short positions.”
Money is also pouring into some algorithmic strategies. In 2016, investors pumped $25.5 billion of new money into commodity trading advisors, or CTAs—many of which use algorithms to follow trends in the futures market—according to data provider Preqin. CTAs attracted another $7.2 billion of new investor cash in the first quarter of this year, bringing total assets to $256 billion.
Funds that use trend-following strategies say it’s unlikely their models have been disrupting the market. Traditional funds that don’t specialize in systematic trading or commodities can also be trend followers.
“There can be a lot of momentum players out there of all different types,“ said Christopher Reeve, director of product management at Aspect Capital, a CTA that uses trend-following strategies and manages more than $6 billion. “We would see very quickly if we were having too high of a market impact.”
Goldman Sachs said CTAs can create trading opportunities. “Fundamental traders shouldn’t be afraid of the CTAs, but rather view them as creating opportunities when they push markets away from fundamentals,” the firm wrote in a commodities research report from June 29.
Even traders that take positions based on fundamental signs are building models to predict how trend-followers can move oil, said Anthony Caruso, head of quantitative and macro strategies at Mesirow Advanced Strategies, a fund of hedge funds.
“They know that trend-followers are kind of the elephant in the room,” he said.

FT : Brexit and the prospect of national humiliation

Brexit and the prospect of national humiliation
The UK faces a range of uncomfortable outcomes from negotiation with the EU

Things are going badly wrong in Brexit-land. The UK government is weak and divided. The EU is confident and uncompromising. The negotiation clock is ticking and only the wilfully deluded now believe that a “cake-and-eat-it” Brexit is on offer. Instead, Britain appears to face a choice between three different types of humiliation.

The first humiliating outcome is that Britain becomes so desperate for a trade deal that it is forced to accept the EU’s terms, more or less in their entirety. That will mean that Britain agrees to pay a bill of up to €100bn in gross terms, merely to get trade negotiations going. To then secure access to the single market, Britain would have to make further humbling concessions — accepting free movement of people and the jurisdiction of the European Court of Justice.

An alternative humiliating outcome would involve Britain refusing to make an agreement on these terms and crashing out of the EU without a deal in March 2019. British goods and lorries would then stack up at the Channel ports, as they hit new trade and customs barriers — amid general sniggering on the other side of the channel. Job losses would mount in manufacturing and a range of service industries, from finance to pharma. And as investment was diverted to continental Europe, the economy would take a permanent hit.

A weakened Britain would then turn to Donald Trump’s America, in the hope that the US president would make good on his promise of a “very, very big” trade deal. But the dream of a proud, prosperous, “global Britain” would look like a sick joke.

The third humiliating outcome involves Britain realising that there is no good Brexit on offer and abandoning the whole idea and returning meekly to the EU fold. Even to secure agreement to this outcome from the EU27, Britain might have to give up its cherished budget rebate.

Each of these results will cause dismay and anger in Britain. But there is an argument that a dose of national humiliation can be good for a country. The writer Ian Buruma argued recently that British and American politics have become vulnerable to nationalist self-harm because, after the second world war, “generation after generation grew up with . . . the feeling of being special”.

All of the other big nations in Europe experienced occupation, defeat, humiliation or the collapse of democracy during the 20th century. By contrast, Britain takes a frank and understandable pride in never succumbing, in its modern history, to political extremism or military defeat. However Britain’s national pride, viewed from the Brussels perspective, has made the UK an awkward customer that has never accepted the concessions of sovereignty that are necessary to make the EU work. The Eurocrats murmur that if Britain is humbled by Brexit, that might have a positive effect in the long run, persuading the UK eventually to return to the EU with a more realistic assessment of its own power, and of the benefits of the European project.

But is humiliation really good for a country? It is arguable that Britain’s much-prized record of political moderation is connected to the fact that the country has never really been humbled.

Angry and confused countries often take refuge in political extremism or aggressive nationalism. The Chinese government has made avenging the country’s “century of humiliation” (which began in 1839) the centre of a nationalist ideology that its neighbours find increasingly threatening. Vladimir Putin’s sense of humiliation at the collapse of the Soviet Union has driven Russian revanchism in Ukraine and Georgia. Going further back, German humiliation, following defeat in the first world war and the punitive terms of the Treaty of Versailles, contributed mightily to the rise of Hitler.

But if post-1918 Germany offers a warning about the dangers of national humiliation, post-1945 Germany demonstrates that being humbled can sometimes be good for the soul. Out of the moral and physical ruins of Nazism, the next generation of Germans built a country that is now rich, stable and widely admired.

Fortunately, however badly Brexit goes, it will never be a humiliation to rank alongside responsibility for the Holocaust or occupation by a foreign power. Nonetheless, any of the three possible Brexit humiliations will be a profound blow to national confidence.

The resulting public anger is likely to cause a further polarisation in domestic politics. The nationalist right is likely to blame Europeans for allegedly ganging up on Britain and the liberal establishment in the UK for “selling out the country”. The Corbynite left would also stoke anti-establishment anger, and would use the general chaos to push for a massive expansion in the state — and a radical realignment in British foreign and defence policy. That, in turn, would provoke a counter-radicalisation by the right.

But it also possible to imagine more cheerful scenarios. A country that has made the self-mocking ditty “Always Look on the Bright Side of Life” an alternative national anthem, might have the ability to shrug off a Brexit humiliation. Stereotypes about Britain’s “national character” tend to emphasise pragmatism, a sense of humour and an ability to cope with adversity. The Brits may need all of those qualities to cope with the fallout from Brexit.

Reuters - China attacks tycoon Guo for client leaks at HNA group: Xinhua

China attacks tycoon Guo for client leaks at HNA group: Xinhua

Exiled Chinese tycoon Guo Wengui is suspected of obtaining confidential client data of aviation-to-financial services conglomerate HNA from air traffic control and airline staff, the official Xinhua news agency reported, citing Chinese police.

A senior official of the air traffic control department and an airline duty manager have been arrested in connection with the matter, Xinhua said.

Chinese-born Guo, now based in New York, has unleashed a torrent of corruption allegations against high-level Communist Party officials and is facing multiple lawsuits in a number of different jurisdictions.

Chinese authorities have retaliated with stepped up attempts over the past few months to discredit Guo. Following a request from Beijing, Interpol issued a "red notice" for Guo in April. A red notice is an international alert for a wanted person.

Xinhua said Guo had, through a senior civil aviation official, Song Jun, obtained the private information on 146 clients of the HNA group, including flight times, destinations and flight numbers in order to spread and fabricate what it called "corruption" and "sexual" stories.

Song, a senior staff member of the civil aviation air traffic control department, had now been arrested by authorities on alleged private data violations, along with an airline duty manager, Xinhua cited the police as saying.

It wasn't clear in the article if Song had received payment from Guo, though it claimed Guo had offered benefits to Song including the use of a rental apartment in Hong Kong, as well as a high credit limit payment card for purchases.

The HNA Group declined to comment.

An assistant of Guo did not immediately respond to an emailed request for comment.

Writing in his Twitter account, Guo didn't appear to specifically address the allegations in the Xinhua article, but he said the news agency had "helped ... a lot".

"I really hope Xinhua will disclose more information".

Guo has previously denounced Chinese authorities for attempting to smear him as a criminal and to silence him.

In New York, Guo faces a defamation lawsuit from the HNA Group, which said Guo had injured HNA's "business reputation arising from repeated false and defamatory statements".

The summons, seen by Reuters, cites allegations made by Guo that "officials in China's Communist Party and their relatives are undisclosed shareholders" in the group, and that subsidiary Hainan Airlines had allowed government officials and their relatives to use its aircraft "for purely personal reasons".

Guo has mainly lived in the United States since leaving China two years ago after what he says was a business dispute with relatives of a retired top Communist Party official.

WSJ : And the No. 1 Stock Fund Is…

And the No. 1 Stock Fund Is…
Miller Opportunity Trust wins with a 48.55% gain for 12 months

The wheel of fate has turned, putting a stock-picking legend back on top for the third time in less than a decade in The Wall Street Journal’s Winners’ Circle contest.

The second-quarter 2017 laurels go to Bill Miller, this time at the helm of a different fund—his own Miller Opportunity Trust (LMOPX)—and operating independently from Legg Mason , the firm where he made his name and which he in turn helped make a household name. Mr. Miller and fellow portfolio manager, Samantha McLemore, left Legg Mason last year, but continue to provide investment services to the firm.

Mr. Miller’s Baltimore-based fund beat its nearest rival by nearly 6 percentage points, with a return for the 12 months ended June 30 of 48.55%.

The quarterly Winners’ Circle contest is designed to identify which U.S. stock fund with at least $50 million in assets and a record of more than three years posted the best performance in the trailing 12 months. Index funds and exchange-traded funds don’t qualify because they aren’t actively managed; leveraged funds also aren’t included.

Mr. Miller was a top runner-up in this contest in the final quarter of 2009, when his other fund, Legg Mason Opportunity Trust, posted an 86% gain in the midst of the recovery from the financial crisis. The same fund dominated the Winners’ Circle for several quarters in a row, in 2013 and 2014, when some of the turnaround companies it held in its portfolios posted triple-digit returns in only a few months. Now, once again, Mr. Miller’s patient buy-and-hold strategy has paid off for investors, with retailer Restoration Hardware Holdings rebounding by about 110% in the past six months alone.

Mr. Miller says adding Restoration Hardware to the portfolio was originally Ms. McLemore’s idea. Her interest in the company was piqued by arguments that Restoration Hardware RH -7.46% was poised to benefit from millennial spending habits. “When the stock was hit hard last year and fell to a low of $24, we went and visited the company,” Ms. McLemore says. The duo concluded that the issues plaguing it—excess spending on warehouses, among them—were temporary, and that when the company’s earnings power became visible once more, the stock would benefit.

Ms. McLemore also advocated investing in Wayfair Inc., which has soared about 90% over the past 12 months. After Wayfair’s 2014 initial public offering, it spent heavily at a time when investors were fearful that Amazon would annihilate all other retailers. After analyzing the business, Mr. Miller and Ms. McLemore concluded that the stock’s selloff and the massive short selling weren’t justified. “The firm was making sound investments, and management owned 40% of the company,” Ms. McLemore says.

Unafraid of dark clouds
Mr. Miller doesn’t shy away from companies with dark clouds hanging over their heads, having profited from investing in market pariahs in the past. He found the idea of investing in Valeant Pharmaceuticals International Inc., the specialty pharmaceuticals company that came under investigation for price gouging in 2015 and that other hedge-fund managers lost millions on, intriguing in the wake of a management shake-up last year.

Mr. Miller bought Valeant when it fell to $30, figuring it could rebound to $60. That’s still a distant prospect, since the shares have fallen further and now change hands for about $17. Still, the company remains an example of his long-term strategy. “The new team is doing everything that they said they would do, and Valeant has several quite good businesses,” he says. “The top line should start growing again in 2018.”

Meanwhile, Mr. Miller can point to payoffs from other long-term investments, such as his airline holdings, as proof of his strategy: United Airlines is up 83% and American Airlines Group has gained 80% in the past year alone. In both cases, the fund invested when shares were trading at about $7.

Among other ventures Mr. Miller likes is bioengineering firm Intrexon , which he describes as a financially sound company that needs FDA approval for some key products to become a big winner. The products include an apple that doesn’t brown when it has been cut or bitten into, and a topical cream designed to be a safer, less painful alternative to laser removal of tattoos.

In second place
The Winners’ Circle runner-up for the second quarter in a row was Baron Discovery Fund (BDFIX), which posted a gain of 43.85% for the 12 months ended June 30 but actually outperformed the winner in the second quarter. The Baron fund, co-managed by Laird Bieger and Randy Gwirtzman, earned 10% in the June quarter, compared with 6.43% for Miller Opportunity.

The fund’s returns come courtesy of an intriguing assortment of holdings in 62 smaller growth companies, including its biggest winner, Everspin Technologies Inc., which makes a new kind of memory chip known as MRAM for which new applications are being found daily. Another related holding is Impinj Inc., which went public in July 2016 and has more than doubled since then. “They make a microchip the size of a grain of sand that can be placed on a tag,” says Mr. Bieger, noting that two of the firm’s biggest customers are retailers Macy’s Inc. and Zara, which can now manage their inventory in real time. Delta Air Lines Inc. has begun to use the microchips, enabling travelers to confirm that their checked bags are on the same plane they are, and after landing to see if they are making their way to a luggage-claim area.

Mr. Bieger is looking for opportunities to profit from technological disruption—such as the fund’s investment in Trade Desk Inc., a platform that uses algorithms to buy online advertising—and avoiding areas where online trends are creating headwinds, such as e-commerce and retailing more generally (except for specialist firm Party City Holdco Inc. ). While the fund managers are patient, they don’t want to battle adverse cyclical trends: Their goal is to double their money in five years, or generate a 15% compounded annual return.

Now, that sounds like a winner’s recipe.