DIS Stock – Here’s One Way to Profit From the Archegos Hedge Fund Blowup
stock was caught in a crisis of someone else’s making. Now with its stock cut in half, Wall Street sees profit in someone else’s pain.
Shares of the entertainment conglomerate started the year out at about $37 and promptly raced higher, reaching about $100 by mid-March. The reason was a little mysterious. Was it a short squeeze? Was it the launch of Paramount+? Was it Tom Brady’s Super Bowl win, broadcast on CBS?
Whatever the reason, Wall Street started to take their chips off the table. Nine analysts recommended buying Viacom shares at the start of 2021. That was down to five by the time the stock hit $100.
Then the stock started falling, from a high of $101.97 to a low of $39.81. ViacomCBS stock collapsed because huge, concentrated bets by “family office” Archegos went south quickly, leading to forced selling.
Wall Street, however, is coming around to ViacomCBS again. Seven analysts now recommend buying the stock after another upgrade Wednesday. Wolfe Research analyst John Janedis took his rating on shares to Buy from Hold, arguing that the Paramount+ streaming service is undervalued and that management’s subscriber targets look reasonable. His price target is $70 a share, up 55% from a recent $45.21.
The whole situation is a mess. But there’s a lesson in this: When things get weird, nimble investors look for opportunities.
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McConnell Tells Corporations to Stay Out of Politics
Some corporations and Major League Baseball took a stance against Georgia’s new voter law. Senate Minority Leader Mitch McConnell (R, Ky.) offered a warning. The Masters golf tournament is now in the spotlight.
- Last month, Georgia Gov. Brian Kemp signed a new voting law that some argue will make it more difficult for Georgians to vote in future elections. In response to the bill, Major League Baseball pulled its 2021 All-Star Game from Atlanta.
Companies that criticized the new law include Georgia-based firms
Delta Air Lines
as well as about 200 other major corporations like
- McConnell warned that corporations should stay out of politics. “Taking a position on a highly incendiary issue like this and punishing a community or a state because you don’t like a particular law that passed,” he added. “I just think it’s stupid.”
What’s Next: The Masters are set to tee off at Augusta National Golf Club in Georgia later this week. President Joe Biden told reporters he thinks the decision to hold the event should be left to the organization. A spokeswoman for Augusta National Golf Club deferred comment to the club’s chairman, Fred Ridley. He is scheduled to give a press conference Wednesday.
Toshiba Considers $20 Billion CVC Buyout Offer
said Wednesday that it would give “careful consideration” to a $20 billion offer led by global private equity group CVC Capital Partners at a 30% premium to the troubled conglomerate’s share price.
- If concluded, the deal would come three weeks after Toshiba’s management suffered an unprecedented defeat by activist investors at an extraordinary meeting of shareholders, who voted for an independent probe into the company’s scandal-tainted recent past.
- Activist investors led by Singapore’s Effissimo Capital Management and U.S.-based Farallon Capital, had criticized what they called “suppression” at the company’s shareholders meeting last year, which was due to examine their critique of Toshiba CEO Nobuki Kurumatani.
- CVC has declined to comment on the offer, first reported by Nikkei Asia. Toshiba shares jumped 18% Wednesday before trading was suspended in Tokyo because of the influx of buy orders.
- Kurumatani, 63, served as head of CVC in Japan before joining Toshiba in 2018. He has since clashed with activist shareholders unhappy with the company’s governance.
What’s Next: Toshiba’s wide range of businesses, from nuclear plants to sewage facilities, electronic products or batteries, makes it likely that the company’s full takeover by a foreign owner will be carefully assessed by the Tokyo government, which would have to approve the deal.
Growing Controversy Over Use of Xinjiang Cotton Puts Companies in Tight Spot
Reports of forced labor in the cotton industry in the Xinjiang region of western China have put retailers and clothing brands that previously used cotton from there in a difficult position. Over half of all global cotton exports come from China, most of which is harvested in Xinjiang.
Multinational brands including
stopped buying cotton harvested in Xinjiang after reports of hundreds of thousands of Muslim Uyghurs and other ethnic minorities being forced to work in cotton fields and factories there.
- That led to a boycott of the brands amid nationalistic fervor in China. H&M was particularly hard hit. Its clothing disappeared from China’s biggest e-commerce sites, and it was recently forced to close at least six stores in what is its fourth biggest market.
- Chinese officials have called the forced labor accusations “malicious lies” fabricated to “smear China.”
- The U.S. has called China’s treatment of the Uyghurs genocide, banning Xinjiang cotton imports in January and sanctioning Chinese officials tied to the mass detentions.
What’s Next: Calls for countries to boycott the 2022 Beijing Olympics over China’s human rights abuses have grown. The Olympic Committee awarded a contract to make uniforms for the coming Tokyo and Beijing Olympics to a Chinese company that advertises its use of Xinjiang cotton, but the company has said it won’t use that cotton for the uniforms.
—Janet H. Cho
The Problem With the Electric Vehicle Revolution? Too Many Cars
announced Tuesday that it will begin building an all-electric Chevrolet Silverado at a new plant in Detroit in addition to the electric Hummer sport-utility vehicle unveiled last weekend. While increased selection is good for consumers, electric-vehicle makers will have to work harder to stand out from the pack.
- GM’s announcement is part of a $3 billion initiative to produce an entire lineup of electric vehicles, $2.2 billion of which will go toward its first plant exclusively for electric vehicles in Detroit. CEO Mary Barra has said the company will sell only zero-emission vehicles by 2035.
Cumulative worldwide sales of electric vehicles are expected to surpass $5 trillion between now and 2030, according to Wedbush’s Dan Ives, with $1.5 trillion of that in the U.S. By comparison, electric-vehicle leader
had $15 billion in U.S. sales in 2020.
- Noting that there will be 15 new hybrid or all-electric sport-utility vehicles in 2021 alone, Raymond James analyst Pavel Molchanov says “auto makers will need to work that much harder to stand out amid all the new entrants.”
What’s Next: More competition might be the reason smaller electric-vehicle stocks are struggling year to date. Shares of
—three U.S. based EV start-ups with passenger car and truck offerings—are down about 20% year to date on average.
—Anita Hamilton and Al Root
Get Ready for a ‘Golden Age of Travel’
Several analysts have come out with bullish views on the airline industry, arguing the stocks still have upside. While the sector isn’t cheap anymore, vaccine rollouts and a winding down of the pandemic are stimulating demand.
- “A Roaring 20s/Swinging 60s-like macro environment can drive traffic significantly higher than a 2019 baseline level,” writes Morgan Stanley analyst Ravi Shanker, who sees 30% upside to his price targets on buy-rated stocks and 45% gains longer term, based on consensus 2023 estimates.
- Travel appears to be taking off in a V-shaped recovery. Domestic passenger traffic hit 1.5 million passengers a day in early April versus 108,000 last April. It’s down just 38% from April 2019 levels of around 2.4 million daily passengers.
- The bull case on the stocks hinges on travel recovering quicker than consensus estimates. Shanker expects capacity to recover back to 2019 levels by early 2022, versus the consensus models of revenues that are 20% lower.
- Other reasons to be bullish include structurally lower operating costs throughout the industry and jet fuel prices that remain below 2019 levels—despite a 40% jump from their lows last year.
What’s Next: Analysts are split on which airline stocks will see the strongest growth. Investors who don’t want to pick sides in these debates can gain exposure to the sector through the
U.S. Global Jets ETF,
which is up 25% on the year.
After finishing graduate school, my wife and I decided to pay off all our debt before buying a home, or anything for that matter.
We have been cheaply renting for the last three years, and living as if I were still a very poor graduate student. During this time, we paid off all of our debts, and even went as far as to save around $350,000 in cash.
My wife is 30, I am 34, and we are ready to take the next step. We now have two children under two who have over $20,000 and growing in each of their 529s. We are both covered by ample term life insurance, and I have an own occupation disability policy. I make about $250,000 per year.
I am very fortunate in that my employer contributes about $40,000 into my 401(k) while I contribute up to the remaining Internal Revenue Service maximum of approximately $57,000 per year. Our family HSA contribution is maxed out and grows every year.
My spouse stays home with the children now. We have a combined retirement portfolio of around $325,000. At this point, should we put a cash offer on a home, or take out a loan and invest the difference? Not having a mortgage in our 30s seems awfully nice.
Conversely, investing could bring greater long-term returns.
—At A Crossroads
Read The Moneyist’s response here.
—Newsletter edited by Anita Hamilton, Stacy Ozol, Mary Romano, Matt Bemer, Ben Levisohn