Month: February 2024

© Reuters. Citi – Introducing Europe’s ‘Super 7’

In a note to clients this week, Citi analysts introduced its European “Super 7,” telling investors they offer similarly attractive margins to the “Magnificent 7.”

The firm notes that while the solid performance of the US Magnificent 7 has captured headlines, “narrowing dynamics have actually been stronger in Europe [year-to-date].”

“Should narrowing continue, we screen for European mega-caps with similar characteristics as the Magnificent 7 that could outperform,” wrote the firm. “Our European “Super 7″ are cheaper than the US Mag 7, offer similarly attractive margins, and have underperformed the Mag 7 by 70% since the start of ’23, leaving room for catch-up.”

Citi’s European Super 7 is made up of Novo Nordisk (NYSE:NVO), ASML Holdings (ASML), LVMH, SAP (SAP), Schneider, Richemont, and Ferrari (NYSE:RACE). The bank states that while these stocks have performed well of late, they lagged the US Magnificent 7 in 2023.

The bank feels that if the narrowing dynamics were to continue, the Super 7 may follow a similar trajectory as in the US.

© Reuters Citi remains ‘wildly bullish’ on chip stocks

Citi is still “wildly bullish” on semiconductor stocks, based on the current demand trends, the firm stated in a note Thursday.

Analysts at the bank noted stable demand in PCs, handsets, servers (which is 53% of the semiconductor total addressable market), and inventory replenishment.

“We look for at least 11% YoY growth in global semiconductor sales in 2024,” said Citi, adding that artificial intelligence leads the way, and they stay long NVIDIA (NASDAQ:NVDA), AMD (NASDAQ:AMD), Broadcom (NASDAQ:AVGO).

“The AI market continues to grow and our checks indicate TAM expansion with government agencies, universities, and large/medium businesses all buying AI chips,” analysts added. “We continue to favor NVDA, AMD, and AVGO and expect the upcoming AVGO earnings to be another positive catalyst.”

However, Micron Technology (NASDAQ:MU) remains the bank’s top pick as analysts believe the DRAM upturn has begun, highlighting the recent beat and raises by Samsung and Hynix.

© Reuters. Tesla (TSLA) Megapack business could be worth ‘substantially more’ than car business – analyst

Analysts at RBC Capital believe Tesla’s (NASDAQ:TSLA) Megapack utility-grade battery storage business could be worth substantially more than its standalone car business.

The firm, which has an Outperform rating and a $297 price target on Tesla, said the Elon Musk-led company believes the world needs at least 2TWh of annual battery storage at scale, which analysts assume will be reached around 2040.

“This could yield $600B in annual industry revenues,” analysts wrote. “A 15% market share could mean at least $90B in Tesla-specific battery storagerevenue.”

“Applying a 15x cap goods EBITDA multiple results in a $345B EV for Tesla’s Megapack business, and discounting this back to 2024 from 2040 results in a $120B valuation,” analysts added.

In addition, RBC Capital believes its assumptions are conservative as it assumes Tesla maintains its 15% market share despite having a 30% cost advantage over peers and that margins stay constant despite battery prices coming down.

Analysts also value Tesla’s car business conservatively at around $70 billion, well below their Megapack business valuation. However, the firm still thinks autonomy is central to the investment case and that Tesla’s new affordable model, slated to start production in the second half of 2025, “should be the next catalyst for shares.”

© Reuters.

Just as you thought the month of February was already behind us, another one of our top selection of Al-powered picks is rallying.

Applied Materials (NASDAQ:AMAT) has seen a remarkable 20% increase since being featured in our Beat the S&P strategy at the beginning of the month. This surge was fueled by its Q1 results, which exceeded expectations thanks to robust demand for advanced chips for artificial intelligence and a revival in the PC market.

But the list doesn’t stop there. Our regular readers would know that we just keep on picking winners, day after day.

And what’s more impressive? All that for just under $9 a month. In essence, opting out of ProPicks means you’re overlooking potential gains – or to put it bluntly, leaving money on the table.

By the way, our AI will rebalance again tomorrow, providing you with 70+ fresh top picks for March.

Subscribe now and don’t miss out on the bull market by not knowing what to buy!

Don’t believe us? Check out these other winners our predictive AI picked for you in February.

American Express

Shares of American Express (NYSE:AXP) reached their all-time high yesterday. This extraordinary performance was seen in advance by ProPicks. The company has been an integral part of our Dominate the Dow strategy since December 2023. Subscribers who joined us at that time would have seen a 28% return on their investment in American Express alone.

Dominate the Dow, focuses on identifying 10 standouts from stocks in the Dow Jones Industrial Average most likely to outperform the market. Over the past ten years, this strategy outperformed the market by an impressive 452.9%.

Super Micro Computer

Shares of Super Micro Computer (NASDAQ:SMCI) experienced a remarkable increase, soaring over 187% year-to-date. This surge can largely be attributed to its impressive Q2 earnings, which surpassed analyst expectations due to the continued demand for data center hardware driven by AI advancements. Super Micro Computer was added to our Tech Titans strategy at the beginning of January, coinciding with the start of its significant growth phase.

Tech Titans strategy, focused on identifying 15 companies with the most exciting tech opportunities, outperformed the market by a lofty 1,183.8% over the last decade.

PACCAR

PACCAR (NASDAQ:PCAR) shares saw an increase of over 14% year-to-date, buoyed by robust Q4 results in January that surpassed consensus estimates. The company reported a record-breaking revenue of $35.13 billion for fiscal 2023, up from $28.82 billion in 2022. PACCAR has been an integral part of our Top Value Stocks strategy from December 1 to January 31. During these two months, the stock experienced a surge of more than 13%.

Top Value stocks strategy focuses on identifying up to 20 undervalued U.S.-listed stocks, each with solid earnings that are primed for growth. These companies are usually trading lower than their perceived intrinsic value – which means they’re also a potentially huge bargain. This strategy outperformed the market by 621.8% over the last decade.

Cirrus Logic

Cirrus Logic (NASDAQ:CRUS), renowned for its low-power, high-precision mixed-signal processing solutions that enhance user experiences across top mobile and consumer applications, has experienced a notable uptick following its release of better-than-expected Q3 financial results earlier this month. The company was added to our Mid-Cap Movers strategy at the beginning of February. Since then the stock gained a solid 16%.

Subscribing to ProPicks grants you access to a curated list of 20 stocks in our Mid-Cap Movers strategy, each chosen for their promising growth prospects and solid fundamentals. This strategy outperformed the market by an impressive 370.2% over the last decade.

Concluding our suite of six strategies is the Best of Buffett strategy, which meticulously selects only the best stocks within Berkshire Hathaway (NYSE:BRKa) ‘s (NYSE:BRKb) portfolio. These stocks are evaluated then every quarter (every time Buffett’s quarterly 13F holdings are disclosed) to ensure up-to-date accuracy.

This refined selection process has demonstrated its superiority by outpacing the S&P 500 by an impressive 174.3% over the past decade.

And these are just a few stocks from a robust selection of 70+ companies distributed across six market-beating strategies. Want to see all our market-beating picks? Join the elite circle of ProPicks users and start outperforming the market today. Remember, it’s not just about the stocks you pick; it’s about picking the right tool for the job. And with ProPicks, you’re always one step ahead.

Subscribe here and never miss a bull market again!

© Reuters. These are the top 5 stocks owned by Hedge Funds

This InvestingPro article is being provided to you for FREE to highlight the incredible insight being shared with pro users in real-time. To see more insightful market-focused articles like this upgrade to InvestingPro today using promo code HOT2024 and receive an additional 10% off already discounted prices. This offer won’t last long. Act today! Click here to upgrade and don’t forget the promo code.

*******

In a recent note from Wednesday, strategists at Jefferies said that hedge funds entered 2024 with a more cautious approach, reducing their overall risk exposure to below the long-term average at 166%.

Specifically, these funds have adjusted their investments toward the so-called Secular Growth sectors as they move into 2024, yet they remain overweight (OW) by 7% in these areas, which account for half of their portfolio.

Despite decreasing their stake in Secular Growth, investors have increased their investments in what Jefferies refers to as the ‘Sweet 16’ (akin to the ‘Magnificent 7’), with their allocation in these specific stocks reaching 36%, the highest since July, and standing 3.3% overweight compared to the S&P 500.

“The big cut in Secular Growth’s weight took place in Health Care, as the group was trimmed by over 10% from the previous month, but was OW by 4%. Comm Services was trimmed once again, with the weight now at 12.2% vs. its recent peak of 19.0%,” analysts said in the note.

The tech sector saw its weight in hedge fund portfolios increase to 25.4% from 19.7% just a month prior. However, even with this increase, the sector is still underweight (UW) by more than 3% relative to the S&P 500.

The investments from Secular Growth were mainly shifted to Cyclicals, increasing their weight in the latter to 47%. There was also a notable move from the Industrials to Discretionary sectors, with the former now being UW and Discretionary OW.

Further, funds transitioned from a net short to a net long position in Energy for the first time since September 2022.

As for individual stocks, the hedge funds’ top 5 holdings are Microsoft (NASDAQ:MSFT), with a net weight of 8.7%, while Amazon (NASDAQ:AMZN) sits close behind at 7.2%.

“Half of Hedge Fund holdings are in the “Most Popular Longs” portfolio, and it saw modest turnover: Across our “Most Popular Long” portfolio, we see that these names represent half of the Hedge Fund assets with MSFT and AMZN combined representing 16%,” analysts highlighted.

Meta Platforms (NASDAQ:META) is the third highest-owned stock with a net weight of 4.9%, followed by Nvidia (NASDAQ:NVDA) and Alphabet (NASDAQ:GOOGL) at 4.1% and 3.7%, respectively.

© Reuters. FILE PHOTO: A woman shops in a supermarket as rising inflation affects consumer prices in Los Angeles, California, U.S., June 13, 2022. REUTERS/Lucy Nicholson/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. prices accelerated in January amid a surge in the costs of services like housing and finance, but the annual increase in inflation was the smallest in three years, keeping a mid-year interest rate cut from the Federal Reserve on the table.

The report from the Commerce Department on Thursday also showed consumer spending slowing last month, restrained by decreases in outlays on goods, including motor vehicles, furniture and other long-lasting household equipment.

The inflation and consumer spending readings were in line with economists’ expectations. But with the costs of services increasing by the most in 12 months, likely as businesses raised prices at the start of the year, the timing of the first Fed rate cut remains uncertain. Most economists do not expect the price increases to repeat in February.

Services, which also include healthcare, restaurants, hotels and motels as well as recreation, are at the heart of the U.S. central bank’s fight against inflation. Policymakers have said they are in no rush to start lowering borrowing costs.

“The economy is not going off the rails and the inflation scare in January seems unlikely to continue, so Fed officials are still likely to consider a first interest rate cut when they meet in June,” said Christopher Rupkey, chief economistat FWDBONDS.

The personal consumption expenditures (PCE) price index rose 0.3% last month, the Commerce Department’s Bureau of Economic Analysis said. Data for December was revised lower to show the PCE price index gaining 0.1% instead of the previously reported 0.2%. Goods prices fell 0.2% as the cost of energy dropped 1.4%, offsetting a 0.5% rise in food prices.

There were also decreases in the prices of motor vehicles and parts, clothing and footwear. But recreational goods and vehicles cost more, as did furnishings and household equipment.

In the 12 months through January, PCE inflation rose 2.4%. That was the smallest year-on-year increase since February 2021 and followed a 2.6% advance in December.

The monthly data mirrored rises last month in consumer and producer prices, which were also attributed to increases at the start of the year. Economists believe the model used by the government to strip out seasonal fluctuations from the data is probably not fully incorporating these price hikes.

Excluding the volatile food and energy components, the PCE price index increased 0.4% last month. That was the largest monthly rise since last February and followed a downwardly revised 0.1% gain in December. The so-called core PCE price index was previously reported to have climbed 0.2% in December.

Services prices jumped 0.6%, the most since last January, after climbing 0.3% in December. They were boosted by a 0.6% rise in the cost of housing and utilities. The cost of financial services and insurance surged 1.3%, likely reflecting higher share prices. Prices for services at restaurants, bars, hotels and motels rose, as did those for recreation and healthcare.

Core inflation increased 2.8% on a year-on-year basis in January, the smallest advance since March 2021, after rising 2.9% in December. The Fed tracks the PCE price measures for its 2% inflation target. Monthly inflation readings of 0.2% over time are necessary to bring inflation back to target.

Stocks on Wall Street were trading mostly higher, while the dollar fell against a basket of currencies. U.S. Treasury prices rose.

CONSUMER SPENDING COOLS

PCE services inflation excluding energy and housing shot up 0.6% last month, the most since March 2022, after rising 0.3% in December. The so-called super core inflation increased 3.5% on a year-on-year basis in January after rising 3.3% in December.

The super core inflation has risen at a 4.1% annualized rate in the past three months. Policymakers are watching the super core measure to assess progress in their battle against inflation.

Financial markets have pushed back expectations for a rate cut to June from May. Since March 2022, the U.S. central bank has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.

With inflation picking up, price-sensitive consumers slowed their spending last month. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.2% after increasing 0.7% in December. When adjusted for inflation, spending fell 0.1% after rising 0.6% in December. This suggests that consumer spending moderated early in the first quarter after helping to power economic growth in the fourth quarter of 2023.

Spending remains supported by a still-tight labor market, though there are signs it is taking a bit longer for people who are unemployed to find new jobs.

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits increased 13,000 to a seasonally adjusted 215,000 for the week ended Feb 24.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 45,000 to 1.905 million during the week ended Feb. 17. The so-called continuing claims data covered the period during which the government surveyed households for February’s unemployment rate.

Continuing claims rose between the January and February survey weeks, suggesting the unemployment rate could rise this month from 3.7% in January. A Conference Board survey on Tuesday showed consumers less upbeat about the jobs market in February.

For now, the labor market is supporting wages, which rose 0.4% in January, contributing to the 1.0% jump in personal income. That was the largest increase in a year and followed a 0.3% gain in December. Income was boosted by a 3.2% cost-of-living adjustment for Social Security recipients and a special dividend paid by Costco Wholesale Corp (NASDAQ:COST).

But a sharp increase in taxes combined with inflation left income at the disposal of households unchanged after a 0.3% rise in December. With income outpacing spending, the saving rate rose to 3.8% from 3.7% in December.

“Consumer spending will continue to gradually increase over the course of 2024, although at a slower pace than in 2023 as job and wage gains soften,” said Gus Faucher, chief economist at PNC Financial (NYSE:PNC). “The economic expansion should continue throughout this year and into next.”

© Reuters. Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 28, 2024. REUTERS/Brendan McDermid

By Chuck Mikolajczak and Noel Randewich

NEW YORK (Reuters) -The S&P 500 and Nasdaq closed higher on Thursday, buoyed by tech stocks linked to AI, while inflation data and comments from Federal Reserve officials helped shape expectations for the timing of the central bank’s interest rate cuts.

Heavweight chipmaker Nvidia (NASDAQ:NVDA) advanced as the biggest boost to the benchmark S&P index and Nasdaq while smaller rival Advanced Micro Devices (NASDAQ:AMD) surged. Those and other technology companies have been the centerpiece of a Wall Street rally in recent months, fueled by optimism over growth prospects related to artificial intelligence.

Dell Technologies (NYSE:DELL), which sells AI-optimized servers made with Nvidia’s high-end processors, rose ahead of its report after the bell.

Traders added to bets the Fed will cut rates in June, according to CME’s FedWatch Tool, after a Commerce Department report showed U.S. prices picked up in January in line with expectations amid strong gains in the costs of services, while annual inflation was the smallest in three years.

“Without kind of a hawkish surprise here, which it wasn’t, it was soft or at least in line, then there’s no real reason for the market to expect the Fed to get more hawkish than they already outlined,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.

“It doesn’t matter what you think they should do. It’s what they say they’re going to do and once again, the market has been wrestled back into line to where the Fed said they’d be.”

According to preliminary data, the S&P 500 gained 27.78 points, or 0.51%, to end at 5,095.78 points, while the Nasdaq Composite gained 144.19 points, or 0.90%, to 16,091.93. The Dow Jones Industrial Average rose 24.07 points, or 0.07%, to 38,973.09.

Each of the three major indexes registered a gain for February, their fourth straight monthly advance.

Atlanta Fed President and voting member Raphael Bostic stressed taking data-dependent approach to monetary policy, saying it was going to be a bumpy path to the Fed’s 2% inflation target, and repeated his view that he sees the central bank cutting rates “in the summer months.”

Chicago Federal Reserve Bank President Austan Goolsbee said the improvements made last year in the supply of goods and the labor market paved the way for inflation declines this year, indicating he remains supportive of rate cuts later this year.

Reports on consumer and producer prices earlier in February, which pointed to stubborn inflation, had led investors to dial back expectations of rate cuts to June. At the beginning of this year, traders viewed March as the likely starting point for the Fed’s easing cycle.

Meanwhile, initial jobless claims for the week ended Feb. 24 stood at 215,000, greater than expectations of 210,000, economists polled by Reuters said.

Gains on the Dow were held in check, weighed down in part by a fall in Boeing (NYSE:BA) after a report of a probe by the Department of Justice.

Snowflake (NYSE:SNOW) slumped after the cloud data analytics company forecast first-quarter product revenue below Wall Street estimates and said CEO Frank Slootman was retiring.

Paramount Global climbed after the media conglomerate posted a surprise profit on streaming gains.

© Reuters.

Investing.com– The Nasdaq on Thursday closed at record highs for the first time since 2021, as the artificial-intelligence-led rally continued and an in-line inflation report boosted hopes of a summer interest rate cut. 

By 16:00 ET (21:00 GMT), the S&P 500 rose 0.4% to close at a record of 5,092.21, and NASDAQ Composite climbed 0.7% to also close at record of 16,091.92.  Both benchmarks their best monthly returns since November.  The Dow Jones Industrial Average was up 46 points, 0.1%. 

Fed’s preferred inflation gauge meets economists’ expectations 

The personal consumption expenditures (PCE) price index rose 0.3% last month, and 2.4% in the 12 months through January. That was the smallest year-on-year increase since February 2021 and followed a 2.6% advance in December, easing investor concerns that sticky inflation will see the Fed keep interest rates at elevated levels for longer.

Treasury yields fell on the news, though losses were kept in check by data showing personal income, which includes earnings, property income as well as other benefits, jumped 1% on the month in January, suggesting the consumer spending is likely to continue. 

In another positive development for rate-cut hopes, jobless claims rose 13,000 in the week ended Feb. 17, above economists estimates for an 8,000 increase. 

Retailers deliver mixed performance on earnings stage 

Best Buy (NYSE:BBY) stock rose more than 1% after the electronics retailer posted a smaller drop in fourth-quarter sales than expected and beat profit estimates, benefiting from holiday deals for big-ticket purchases and growth in paid memberships.

Bath & Body Works (NYSE:BBWI) stock fell 5% after the specialty retailer forecast annual sales and profit below analysts’ expectations as consumers scaled back spending on non-essential items like candles and fragrances.

Enterprise software companies shine, but Snowflake bulls melt after guidance falls short, HP (NYSE:HPQ) falters

Salesforce Inc (NYSE:CRM), up 3%, rolled out its first-ever quarterly dividend and boosted it buyback program offsetting full-year guidance that fell short of analyst estimates. Some on Wall Street believe customer relationship software maker is poised to take advantage of the artificial-intelligence boom, paving the way for increased market share. 

“We believe this is a major land grab opportunity that could significantly benefit CRM over the coming years and could increase overall revenue by $4 billion+ annually based on our estimates and field work by 2025,” Wedbush said in a note. 

Okta Inc (NASDAQ:OKTA) jumped 22% after the digital security company issued strong guidance for the current quarter following fourth-quarter results that topped Wall Street estimates.

Snowflake (NYSE:SNOW) fell 18% after announcing that its CEO Frank Slootman had retired and the cloud data analytics company forecast first-quarter product revenue below Wall Street estimates, pressured by rising competition. Still, Macquaries said the sell off represent buying opportunity, upgrading Snowflake to outperform amid AI-led optimism. 

Snowflake has “cleared the decks with its lower guidance, but we think its strong product and sales organization mitigate C-suite uncertainty,” Macquarie said in a note.

HP (NYSE:HPQ) fell nearly 1% after its quarterly revenue missed estimates, driven by weaker personal computing demand as enterprise customers push back upgrades. 

Lawmakers make progress on efforts to avoid government shutdown 

The U.S. House of representatives backed a bill to avert a partial government shutdown, sending the legislative measure to a vote the Senate. Should the stopgap funding bill, which aims to extend government funding for one week, clear the upper chamber, it will be sent to President Joe Biden’s desk to sign into law ahead of the midnight Friday deadline.

(Peter Nurse, Ambar Warrick contributed to this article.)