DAILY UPDATE: Record Stock Market Blast Off Post Trump Presidential Election

Posted on November 7, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

MEDICAL EXECUTIVE-POST – TODAY’S NEWSLETTER BRIEFING

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Essays, Opinions and Curated News in Health Economics, Investing, Business, Management and Financial Planning for Physician Entrepreneurs and their Savvy Advisors and Consultants

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Stocks Up

  • One more group of stocks that soared on a Trump election: Big Tech companies with antitrust problems. Another Trump presidency should go a long way toward clearing up the regulatory hurdles many companies have faced recently, which is why Alphabet popped 3.99% and Amazon rose 3.8%.
  • CVS Health surged 11.33% after meeting revenue forecasts but missing earnings expectations. However, the miss was due to a one-time charge, so shareholders quickly forgave the healthcare retailer.
  • Planet Fitness gained 6.09% on a surprise bid for bankrupt fitness chain Blink Holdings in an attempt to bolster its own gym business.

Stocks Down

  • Super Micro Computer had a chance to show the world it wasn’t committing the fraud it has recently been accused of. Instead, the company announced it is still unable to determine when it will file the quarterly report due August 29. Shares crashed 18.05%.
  • Home builder stocks sank on fears that a Trump presidency will slow the rate of Fed rate cuts, keeping mortgage rates higher for longer. DR Horton fell 3.8%, Lennar dropped 4.84%, Pulte Group lost 3.09%, and Toll Brothers tumbled 1.46%.
  • Cannabis stocks were betting big on a ballot measure in Florida to allow the sale of recreational marijuana. The initiative’s failure sent shares of Curaleaf plummeting 29.17%, Trulieve Cannabis plunged 38.8%, and Ayr Wellness sank 55.87%.

CITE: https://tinyurl.com/2h47urt5

Here’s where the major benchmarks ended:

  • The S&P 500® index (SPX) rose 146.28 points (2.53%) to 5,929.04; the Dow Jones Industrial Average® ($DJI) added 1,508.05 points (3.57%) to 43,729.93; and the NASDAQ Composite® ($COMP) gained 544.29 points (2.95%) to 18,983.47—a new closing high. 
  • The 10-year Treasury note yield (TNX) surged 14 basis points to 4.43%, its highest level since July.
  • The CBOE Volatility Index® (VIX) fell sharply to 16.3 as election-related uncertainty diminished.

CITE: https://tinyurl.com/tj8smmes

Visualize: How private equity tangled banks in a web of debt, from the Financial Times.

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GDP: Private Domestic Health Care Investments

Posted on November 5, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Dr. David Edward Marcinko MBA MEd CMP™

SPONSOR: http://www.MarcinkoAssociates.com

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SPONSOR: http://www.CertifiedMedicalPlanner.org

GROSS PRIVATE DOMESTIC HEALTH CARE INVESTMENTS

Classic:  Investment purchases and private expenditures of healthcare firms, the value of related construction, and the change in inventory during the year.

Modern: Gross Revenue Per Day is the average amount charged by a hospital for one day of inpatient care (gross inpatient revenue divided by patient-census days).

CITE: https://www.r2library.com/Resource/Title/0826102549

Examples:

  • Gross Revenue Per Discharge: The average amount charged by a hospital to treat an inpatient from admission to discharge (gross inpatient revenue divided by discharges).
  • Gross Revenue Per Visit: The average amount charged by a hospital for an outpatient visit (gross outpatient revenue divided by outpatient visits).

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DAILY UPDATE: MBAs, Apple and Goldman Sachs as Stock Markets Mixed

Posted on October 25, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

MEDICAL EXECUTIVE-POST – TODAY’S NEWSLETTER BRIEFING

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Essays, Opinions and Curated News in Health Economics, Investing, Business, Management and Financial Planning for Physician Entrepreneurs and their Savvy Advisors and Consultants

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SPONSORED BY: Marcinko & Associates, Inc.

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Applications to MBA programs are up 12% in 2024 after declining for two years, according to the Graduate Management Admission Council, which surveys business school admissions offices.

Apple and Goldman Sachs were ordered to pay $89 million by the Consumer Financial Protection Bureau for failing to address thousands of consumer disputes of Apple Card transactions.

Apple is cutting production of Vision Pro due to slow sales. The tech giant is scaling down production of its $3,500 Vision Pro VR headset and might halt assembly of new ones next month,

CITE: https://www.r2library.com/Resource

STOCKS UP

  • UPS delivered a strong earnings report, with revenue beating analyst expectations for the first time in two years. Shares popped 5.28%.
  • ServiceNow rose 5.41% to a new all-time high thanks to a beat-and-raise third-quarter earnings report powered by higher AI demand for the enterprise software company.
  • Whirlpool climbed 11.20% after announcing solid earnings and reiterating guidance for the rest of the fiscal year, reassuring worried shareholders.
  • Molina Healthcare soared 17.67% after beating both top and bottom line estimates in the third quarter, thanks to the health insurer reaping the rewards of higher Medicaid payouts.

STOCKS DOWN

  • IBM dropped 6.17% on disappointing third-quarter results, missing on both top and bottom line forecasts thanks to lower consulting and infrastructure revenue.
  • Peloton pedaled higher yesterday after Greenlight Capital’s David Einhorn declared that the company was undervalued while he was pedaling on a Peloton. The stunt only worked for a quick sprint, though, with shares back down 2.07% today.
  • TKO Group Holdings got hit with a piledriver after the owner of the WWE and UFC announced it is acquiring several entertainment companies, including Professional Bull Riders. Investors bucked shares off 8.69%.
  • Keurig Dr. Pepper fizzled 4.80% thanks to lower sales last quarter, though the company is trying to bolster revenue by acquiring energy drink maker Ghost.
  • Air taxi startup Lilium crashed 61.50% on the news that its main subsidiaries have run out of cash and are filing for insolvency.

CITE: https://tinyurl.com/2h47urt5

Here’s where the major benchmarks ended:

  • The S&P 500® index (SPX) rose 12.44 points (0.21%) to 5,809.86; the $DJI fell 140.59 points (–0.33%) to 42,374.36; and the NASDAQ Composite® ($COMP) added 138.83 points (0.76%) to 18,415.49.
  • The 10-year Treasury note yield fell four basis points to 4.20%.
  • The CBOE Volatility Index® (VIX) was about flat at 19.18.

CITE: https://tinyurl.com/tj8smmes

Visualize: How private equity tangled banks in a web of debt, from the Financial Times.

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DAILY UPDATE: Stock Markets Fall

Posted on October 22, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

MEDICAL EXECUTIVE-POST – TODAY’S NEWSLETTER BRIEFING

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Here’s where the major stock market benchmarks ended:

  • The S&P 500® index (SPX) fell10.69points (–0.18%) to 5,853.98; the Dow Jones Industrial Average® ($DJI) lost 344.31 points (–0.80%) to 42,931.60; and the NASDAQ Composite® ($COMP) rose 50.45 points (0.27%) to 18,540.01.
  • The 10-year Treasury note yield (TNX) climbed 11 basis points to 4.18%, outpacing a 7 basis-point rise for the 2-year Treasury note yield.
  • The CBOE Volatility Index®(VIX) climbed to 18.6 but remains below recent peaks.

CITE: https://www.r2library.com/Resource

STOCKS UP

  • Spirit Airlines soared like one of its bankrupt planes, rising 53.06% thanks to an extension for refinancing its debt.
  • Boeing popped 3.11% on the news that it has reached a tentative deal with the machinists union that has been on strike for over a month now. With Boeing’s earnings announcement coming Wednesday, shareholders are definitely breathing a sigh of relief.
  • Activist investor Starboard Value has taken a sizable stake in Tylenol-maker Kenvue, which was spun off of Johnson & Johnson just last year. Kenvue shares rose 5.52% on the news.
  • Warby Parker climbed 9.84% thanks to an upgrade from Goldman Sachs analysts, who like the company’s strong margin growth and improved operational efficiency.

CITE: https://tinyurl.com/2h47urt5

STOCKS DOWN

  • Cigna will once again attempt to acquire fellow health insurer Humana. Shareholders on both sides didn’t like the idea: Shares of Cigna sank 4.69%, and Humana fell 2.51%.
  • UPS dropped 3.38% on a downgrade from Barclays analysts citing pressures on the company’s margins, including higher competition and weaker demand. Management will have a chance to respond when earnings drop on Thursday.
  • Southwest Airlines fell 1.74% after Bloomberg reported that the beleaguered airline wants to call a truce with activist investor Elliott Investment Management.

CITE: https://tinyurl.com/tj8smmes

Visualize: How private equity tangled banks in a web of debt, from the Financial Times.

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2024 NOBEL PRIZE ECONOMICS: Daron Acemoglu, James Robinson and Simon Johnson

Posted on October 17, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Authors of the seminal textbook Why Nations Fail, Daron Acemoglu, James Robinson, and former International Monetary Fund chief economist Simon Johnson will split the roughly $1 million cash prize for their research, which found a link between a country’s prosperity and the institutions it established during European colonization.

CITE: https://www.r2library.com/Resource/Title/0826102549

According to the award-winning research:

  • Places developed either “inclusive” or “extractive” institutions based on population density. The former allowed for inclusive governance (i.e., democracy), while the latter extracted resources to benefit a small group of elites.
  • Countries that developed inclusive institutions have experienced long-term prosperity; those with exclusive institutions haven’t. “Broadly speaking, the work that we have done favors democracy,” Acemoglu said.

Eample: In the twin cities of Nogales, on the US-Mexico border, the north and south parts of the transborder city have the same climate and the same resources, but the section in the US is far richer because of the country’s institutions, according to the researchers.

Critics. Some academics argue the Nobel winners’ premise ignores the effects of culture on prosperity. Others point to an irrefutable counterexample: China continues to experience explosive growth despite having an autocratic government.

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DAILY UPDATE: Ikea & Fidelity Investments with SPX Bank at New High

Posted on October 12, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

MEDICAL EXECUTIVE-POST – TODAY’S NEWSLETTER BRIEFING

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Essays, Opinions and Curated News in Health Economics, Investing, Business, Management and Financial Planning for Physician Entrepreneurs and their Savvy Advisors and Consultants

“Serving Almost One Million Doctors, Financial Advisors and Medical Management Consultants Daily“

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SPONSORED BY: Marcinko & Associates, Inc.

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Daily Update Provided By Staff Reporters Since 2007.
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Ikea’s revenue fell for the first time in four years after it lowered prices to spark an increase in orders.

CITE: https://www.r2library.com/Resource

Stocks up

Stocks down

  • Stellantis continued to tumble today, falling another 2.22% after the carmaker announced its CEO will step down in early 2026.
  • A.O. Smith probably doesn’t ring a bell, but there’s a good chance they made the water heater in your basement. Unfortunately, they’re not selling too many these days, and shares sank 6.25% after the company cut its full-year outlook.

CITE: https://tinyurl.com/2h47urt5

Here’s where the major benchmarks ended:

  • The SPX rose 34.98 points (0.61%) to 5,815.03 to end the week up 1.11%; the $DJI added 409.74 points (0.97%) to 42,863.86 to end the week up 1.21%; and the $COMP gained 60.88 points (0.33%) to 18,342.94 to end the week up 1.13%.
  • The 10-year Treasury note yield (TNX) fell two basis points to 4.07% but rose nine basis points this week.
  • The CBOE Volatility Index® (VIX) slipped to 20.41, still up slightly for the week.

CITE: https://tinyurl.com/tj8smmes

Fidelity Investments has notified 77,099 people that their personal information was stolen in an August data breach. he mega asset manager has not disclosed what data the digital crooks nabbed, but assured customers that the security snafu “did not involve any access to your Fidelity account(s).” But hey, no worries, the firm claimed no evidence of data misuse.

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TELECOMMUNICATIONS: The Infinite Game

Posted on October 6, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Vitaliy Katsenelson, CFA

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CABLE COMPANIES
CHTR, just like Comcast, showed only a very slight decline in broadband customers in the last quarter. Most of the decline came from the US government removing subsidies for rural customers. Overall, the business is doing very well.

I want to remind you that broadband is not a secularly challenged business, but an advantaged business that we believe will resume growth soon. 

Cable companies continue to offer a great product on the market, which is actually improving in quality as I type this because they are upgrading their networks to be as fast as fiber. They should be done with their full network upgrade in a year or so.

Also, cable companies have shown that they are very good at attracting wireless customers from wireless carriers. (They have grown their wireless business by 25% in 2024). The more we analyzed this industry. the more bearish we became on AT&T and Verizon.

Though owning cable stocks has not been rewarding (I’m being very gentle to myself), the more research we’ve done into the industry, the more convinced we’ve become that once the dust settles, their market share will not decrease but likely increase. Fixed wireless has taken all the share it will take and will start donating share to cable companies as customers get frustrated with intermittency of the service and usage caps. 

The industry is moving towards the bundle – one bill for broadband and wireless (and maybe TV service, though that has been marginalized by streamers). It’s a lot easier for cable companies to add wireless customers than for wireless companies to add wired broadband customers. 

This point is paramount! 

It costs very little for a cable company to add a wireless subscriber, as 80-90% of a subscriber’s data is traveling on Wi-Fi (i.e., the cable network is already there). 

Meanwhile, the cost of building out broadband is pushing into uneconomical territory, for several reasons. First of all, all the low-hanging fruit has already been picked. It costs, let’s say, $50-100 thousand dollars to lay a mile of fiber, whether that covers one or a thousand homes. High-density areas already have cable or fiber service. With the latest upgrades the cable industry is doing, both their upload and download speeds are on par with fiber. Second, labor costs have gone up significantly over the last few years.

Verizon just announced buying Frontier Communications for $20 billion. Frontier has 2.2 million fiber subscribers. With this purchase, Verizon is paying $9,000 per fiber subscriber.

Let’s examine the economics of this transaction:

Frontier gets about $800 a year of revenues from these broadband customers (on a par with Charter and Comcast). Let’s say they achieve a 23% margin (Frontier is barely a profitable business, so I’m using Charter’s margins). Thus, each customer will generate $184 of profit for them. So Verizon is paying $9,000 for $184 of profit, and it will take Verizon 49 years to break even on this transaction. 

As you can see, these economics make no sense. Verizon and AT&T are horrible at capital allocation, and this deal is a sign of supreme desperation. The market has been slow to see what we see in Charter and Comcast, and this is always our goal – we want the market to agree with us, later. 

Our very conservative estimate of Charter’s 2028 free cash flow per share is $48-60. In this estimate we are assuming no customer growth in broadband and 2% price increases a year. At 13-15 times free cash flows, we get a price of around $630-900 in 2028. Charter is trading at about $320 as I write this. 

We really like Charter’s management. We heard an anecdote about Charter CEO Chris Winfrey that warmed our soul. A week after he became CEO, Charter announced a huge, multibillion-dollar upgrade for its broadband network. This news sent the stock down 15%. (I wrote about it; we thought it was a great idea.) Anyway, someone met Chris at a party and told him, “That’s the right move, but very gutsy.” Chris said, “We build the company for our grandchildren.” This is what we want to see from our CEOs. They’re willing to sacrifice short-term profitability to improve the business’s moat.

Often, the idea of “creating shareholder value” is misunderstood. Paying employees poorly, abusing suppliers, and trying to rip off your customers is not going to create long-term (key term) shareholder value. It may bring short-term profits and boost the stock price, but it shortens the company’s growth runway and erodes its moat.

I don’t want to get off topic, but I’ve been thinking a lot about this. We’ve spent a lot of time studying the aircraft industry; our focus was Airbus, and thus we spent a lot of time looking at Boeing.

Boeing, under previous management, focused on “shareholder value creation.” It cut costs, laid off a lot of workers, including many quality control folks. Its “shareholder value creation” didn’t stop there; it willingly lied to regulators and took shortcuts in safety. Specifically, Boeing made critical design changes to its 737 MAX aircraft without fully informing regulators or pilots, and pushed for reduced pilot training requirements to save costs. These decisions directly contributed to two fatal crashes in 2018 and 2019, resulting in 346 deaths and the worldwide grounding of the 737 MAX for nearly two years.

Did its management actions maximize shareholder value? Well, it depends on the time frame. It boosted short-term earnings and drove the stock price higher. It may have made its CEO rich beyond belief.

But.

Over a longer time frame, these decisions have destroyed shareholder value. People used to say, “If it’s not Boeing, I’m not going.” Today, I become slightly more religious when I board a Boeing plane. The company has incurred over $20 billion in direct costs related to the 737 MAX crisis, including compensation to airlines and families of crash victims, and increased production costs. 

This doesn’t account for the incalculable damage to Boeing’s reputation and loss of market share. It gave Airbus an opening to produce more planes and take market share, with Airbus surpassing Boeing in deliveries and orders in recent years, particularly in the crucial narrow-body market.

We want to own companies that aim to maximize long-term shareholder value by treating all their stakeholders fairly. We want our companies to play the infinite game. What does “fairly” mean in this context? I’ll borrow from US Supreme Court Justice Potter Stewart, who famously dodged defining pornography by saying, “I know it when I see it.”

Update: After I wrote the above, Charter proposed to buy Liberty through a merger. We don’t own Charter directly, but rather through Liberty Broadband, which holds a 25% stake in Charter. Liberty was trading at a significant discount (around 30%) to the value of its Charter shares. Liberty agreed, but at a higher price. Our estimate of Liberty’s net asset value is about $88. The shares are trading at $75 as of this writing (up from $60). If the deal goes through we’ll end up owning shares of Charter at a significant discount.

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