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GOOD WEEK $46 BILLION
TIME TO FOLLOW WARREN BUFFETT'S STOCK PICS
Boeing Co.’s (NYSE: BA) share price added about 0.5% last week, making up for an equal-sized loss the week before. The stock easily held on to its position as the best performing stock among the 30 stocks that make up the Dow Jones Industrial Average. Shares gained $1.41 last week to boost the year-to-date gain to 68.5%.
Of the three other stocks closest to Boeing’s yearly gain, Apple Inc. (NASDAQ: AAPL) dropped more than 2.5% to close the week up 46.9% for the year to date, while Caterpillar Inc. (NYSE: CAT) dipped by about 0.3% to a gain of 46.8% and Wal-Mart Stores Inc. (NYSE: WMT) tacked on 7.2% to bring its annual gain to 41%.
Boeing had a good week at the Dubai Air Show, beginning with new orders totaling some $17 billion on Monday and adding another order valued at $2.2 billion on Tuesday. At that point, archrival Airbus had taken exactly no new orders for commercial airplanes.
The fireworks came on Thursday when Airbus announced an order for 430 new airplanes from private equity firm Indigo Partners. The planes will be parceled out to four airlines: Frontier, Hungary’s Wizz, Chile’s JetSMART and Mexico’s Volaris. Airbus said it expects to convert the memorandum of understanding (a relatively weak agreement) to a signed contract by the end of the year.
The announcement surprised Boeing, which rushed out with another order of its own for 225 single-aisle 737s. The commitment was valued at $27 billion and brought Boeing’s total for the week to more than $46 billion. Needless to say, it was a good week for both Airbus and Boeing.
Boeing also released an updated market forecast for new airplanes in the Middle East. The total number of new planes is 3,350, at an estimated value of $730 billion over the next 20 years.
Twin-aisle airplanes are expected to make up nearly half (1,500) of the new airplanes in the Middle East, and more than 70% of the value at $520 billion. Both percentages are significantly higher than the global average. According to Boeing, operators in the region will need 1,770 single-aisle airplanes valued at $190 billion, driven by the growth of low-cost carriers.
Boeing stock closed at $262.26 on Friday, down about 0.6% on the day, in a 52-week range of $146.52 to $267.62. The 12-month consensus price target is $280.83, just seven cents lower than last week’s target. The low price target is $170 and the high is $350
Two traits are the key drivers in making a buy or sell decision in investing. One is fear and one is greed. After the continued stock market surge of 2017, the greed has won over the fear as this bull market is now nearing its ninth year. That great rally will come to an end one day, but one particular play on words now emulated the greed side of this bull market and then some — FOMO, or fear of missing out!
A problem is emerging now. As of November 2017, some investors are getting concerned that stocks have rallied too much and that the stock market may be ripe for a big sell-off. By November 15, the Dow Jones Industrial Average had sold off by over 300 points in less than a week. Still, it cannot be ignored that investors have become ever richer buying into each and every big market sell-off. That trend has been in place for than five years, and stocks haven’t sold off by 10% for almost two years now.
If investors are scared to be in the market, perhaps following the smartest grandpa strategy might be the best pursuit in a chicken-bull strategy. This would allow those investors who are scared that the market has peaked to also not miss out on the bull market if it keeps charging higher.
When it comes to a smart grandpa strategy, Warren Buffett of Berkshire Hathaway Inc. (NYSE: BRK-A) may be the best person to emulate. After all, Buffett held the world’s wealthiest individual position title for some time. And he’s considered the world’s greatest investor of the modern era. If those titles are both true, this old grandpa has to know more than just a thing or two about investing.
24/7 Wall St. follows many of the so-called whale watching transactions. Quite simply, this is following what the smart money is buying and selling in stocks. We’ve already determined that Buffett is worth watching.
In mid-November of 2017, the markets have risen more than 200% since the March 2009 bottoms. And the post-election rally continued with major steam, with the Dow up over 18% and the S&P 500 up over 15%. Returns of that magnitude just aren’t normal, and the gains are even larger if you go back a full year to election day.
When evaluating if a stock is cheap or expensive, some investors need guidance. They might not understand if a P/E ratio or sales multiple or EBITDA multiple is good or not. This is where investors may start to look at what the pool of analysts has to say as a whole. The Thomson Reuters consensus analyst target price is the average (mean) of all sell-side analysts that are part of its analyst universe. If investors see the stock price trading under the consensus analyst target price, then they might think it’s a cheap stock as far as where the stock price is expected to go by a bunch of “smart” people.
Before thinking you can blindly trust analyst calls entirely, guess again. These are people, and people make mistakes. Sometimes some serious misfortunes pop up out of the blue. And sometimes even the smartest person in the room was working off a less-than-solid thesis.
24/7 Wall St. has perused the top holdings of Buffett by the size of his stake. One thing that stood out a day after Buffett showed which stocks he has been buying and selling is that all the major stocks he held were trading under their consensus analyst price targets. After tracking Buffett for two decades, and after considering the strength of this bull market, let’s just say that it’s not normal to see all the major holdings trading at a discount to what analysts are forecasting as a group.
Investors need to understand that the dollar valuations used for this analysis were based on the end of the third quarter. That being said, the share prices and the consensus target prices used here were used as of November 15. This report does not rank these by whether or not Buffett was buying or selling shares, but by name and value to keep consistency. After all, Buffett often sells a stock only to buy more later.
American Express Co. (NYSE: AXP) was a $13.7 billion stake, and trading at $93.40, it has consensus analyst target price of $95.29. American Express also comes with a 1.5% dividend yield, and it’s about to have a new CEO who might want a revamped strategy. American Express has traded as high as $96.90 in 2017, and its shares were up over 25% so far this year.
Apple Inc. (NASDAQ: AAPL) was a $21.3 billion stake for Berkshire Hathaway, but now its shares have sold off five straight days as profit taking has been seen. Trading at $169.50, Apple has a consensus target price of $186.57. Its 52-week high is $176.24. Even if investors worry that Apple analysts became too positive after earnings, the current share price is still under the $174 consensus target that was seen in October ahead of earnings. Apple’s sell-off has taken some strength out, but Apple was last seen up about 47% this year.
Bank of America Corp. (NYSE: BAC) was a $17.7 billion stake that came after Buffett converted its debt (imagine the tax he would have had to pay!). Shares were last seen at $26.80, with a consensus analyst target of $28.30. The dividend yield is 1.8%, and the 52-week high is $27.98. Shares are up 18% so far in 2017.24/7 Wall St.
GOAL IS SMOOTH
The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 18 billion cubic feet for the week ending November 10. Analysts surveyed by S&P Global Platts were expecting a storage withdrawal of around 14 billion cubic feet. The five-year average for the week is an injection of 15 billion cubic feet, and last year’s storage injection for the week totaled 34 billion cubic feet. Natural gas inventories rose by 15 billion cubic feet in the week ending November 3.Natural gas futures for December delivery traded up about 0.4% in advance of the EIA’s report, at around $3.09 per million BTUs, and it traded at about $3.11 shortly after the report was released. The highest close for the past five trading days was registered last Friday at $3.21. The 52-week range for natural gas is $2.85 to $3.75. One year ago the price for a million BTUs was around $3.12.Demand is expected to be moderate for the rest of this week with warmer temperatures in the central and southern states and mild weather in most of the West. The weekend forecast calls for a strong blast of cold across the Great Lakes, Northeast and Mid-Atlantic states, even pushing into the south. Overall demand will start off moderate, rising to high by this time next week.Total U.S. stockpiles fell week over week to 6.7% below last year’s level and remain 2.6% below the five-year average.The EIA reported that U.S. working stocks of natural gas totaled about 3.772 trillion cubic feet, around 101 billion cubic feet below the five-year average of 3.873 trillion cubic feet and 271 billion cubic feet below last year’s total for the same period. Working gas in storage totaled 4.043 trillion cubic feet for the same period a year ago.Here’s how share prices of the largest U.S. natural gas producers reacted to today’s report:Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, traded down about 1.3%, at $80.18 in a 52-week range of $76.05 to $93.22.
Chesapeake Energy Corp. (NYSE: CHK) traded up about 1.4%, at $3.90 in a 52-week range of $3.41 to $8.20.
EOG Resources Inc. (NYSE: EOG) traded up about 0.5% to $101.84. The 52-week range is $81.99 to $109.37.
Also, the United States Natural Gas ETF (NYSEAMERICAN: UNG) traded down about 0.2% at $6.32 in a 52-week range of $5.86 to $9.74.
Shares of Achillion Pharmaceuticals Inc. (NASDAQ: ACHN) saw a handy gain on Thursday after the company announced a secondary offering. While the offering is set to close on November 20, the company will not receive any proceeds. Instead, the selling shareholders will.
The 18.367 million shares in the offering are being sold by Johnson & Johnson (NYSE: JNJ) at $2.75 apiece. The entire offering is valued up to $50.51 million.
The underwriters for the offering are Goldman Sachs and Leerink Partners.
Achillion is a science-driven, patient-focused biopharmaceutical company seeking to leverage its strengths across the continuum from discovery through commercialization by discovering and developing small molecule therapeutics to meet the needs of patients with complement-mediated diseases.
Sponsored by CignaGet your annual check-up
Its current focus is on its complement inhibitor platform, directed at advancing small molecule compounds that have the potential to be used in the treatment of immune-related diseases associated with the alternative pathway of the complement system. The complement system is a part of the human innate immune system and is believed to comprise three pathways: the alternative pathway, the lectin pathway and the classical pathway.
Recently, the company said:
On November 14, 2017, we reported preliminary proof-of-concept results from the first patient group in our on-going phase II, open-label, 14-day study of ACH-4471 for patients with C3G or IC-MPGN. Interim data from the first patient group, consisting of two sentinel patients, demonstrated that ACH-4471 achieved complement alternative pathway inhibition resulting in a greater than 50% reduction in proteinuria, as measured by albumin to creatinine ratio over the 14-day treatment period, and demonstrated a favorable tolerability profile.
Keep in mind that the stock is down about 26% year to date, excluding Thursday’s move.
Shares of Achillion were last seen up about 10% at $3.35, with a consensus analyst price target of $5.92 and a 52-week trading range of $2.95 to $5.66.
Johnson & Johnson traded at $139.23. The stock has a 52-week range of $109.32 to $144.35 and a consensus price target of $145.33
NOVEMBER NEWSLETTER 4
Jerry Jones is not backing down from his increasingly contentious feud with his fellow National Football League owners and the league office. The Dallas Cowboys owner on Thursday requested a special league meeting to discuss commissioner Roger Goodell's contract extension negotiations according to a letter reviewed by The Wall St Journal, further stoking his bitter conflict with the NFL' leadership The letter addressed to Mr Goodell was sent a day after the league warned Mr. Jones to drop the issue. INstead, Mr Jones cited a laundry list of problems facing the NFL as justification for his actions, a move that turns one of the league's most powerful owners into one of its fiercest critics. In this fight, though, he is increasinglyh isolated
Later Thursday, the owners on the compensation committee from teh Falcons, Chiefs, Patriots, Giantgs, Texans and Steelers rejected Mr Jones's request. The six owners said an already planned special meeting on Dec 13 will provide ample opportunity for the owners to discuss the issues Mr Jones raised. They wrote that the committee intends to continue to work diligently to fulfill its manate from the unanimous resolution in May when all the owners voted to extend Mr Goodell In the letter he cited the severe threats of retaliation against him that demonstrate the dysfunction of the current process, a reference tot discussions among some owners to potentially remove him. In recent weeks, Mr Jones has been on a mission to stymie an extension for Mr Goodell. Mr Jones hired high profile litigator David Bolies and threatened a lawsuit over the issue, which resulted in his ouster from his status as an adhoc member of the compensation committee in charge of negotiations