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HIGH OIL PRICES
Many European nations have gross domestic product (GDP) growth rates that are the worst since the Great Recession. The region’s largest economy, Germany, already may have tipped into negative growth. The United Kingdom’s economy may be flipped into a downturn because of Brexit.
Most major data out of China shows its economic growth decelerated quickly. The United States is the only major nation measured by GDP that has not sent alarm signals. Very high-priced oil, based on the standards of the past five years, will raise prices of gasoline, heating oil, jet fuel and many petrochemical products used by businesses. There is a case that oil prices may surge toward $100 a barrel, a price last posted in 2008.
High oil prices that may spread over future months have not arrived yet. The worry is that a military conflict could arise out of the drone attack on the Saudi oil fields. Also, the Saudis appear to have no defenses to block another. Given how much of the Saudi production was taken off-line by the first attack, any further successful ones could devastate the amount available to the world, even though Saudi Arabia is among the nations that spend the most on war.
While the United States at least has the ability to produce huge amounts its own crude, particularly due to shale deposits, and it also has the 645 million barrels of oil in the Strategic Petroleum Reserve, the largest such facility in the world, the country is not immune from the short-term need for imports, nor the effects if their prices are higher. Gasoline and fuel oil prices remain fairly large portions of the monthly budgets of American low-income and middle-income families.
China, the world’s second-largest economy, faces a particular problem as the largest importer in the world. Either tight oil supply, which raises prices, or tight demand, which lowers imports, could slow China’s already wobbling economy. These are the 15 countries that control the world’s oil.
How close is the global economy to recession without the hit from oil supplies? The International Monetary Fund and the World Bank have lowered GDP expectations for most countries recently. Few economists believe the global economy is growing or will grow soon, at least at a healthy level. High oil prices only make the dicey situation that is the global economy worse.
SEPTEMBER NEWSLETTER 2
Bob Iger, the Walt Disney Co. (NYSE: DIS) board chair and chief executive officer, has been on the Apple Inc. (NASDAQ: AAPL) board since 2011. He decided to leave as of September 10. He gave no reason for his departure, nor did Apple. However, the reasons are clear. Apple TV+, its play into the streaming market, launches within two weeks of the competing Disney+ product.
Iger joined the Apple board almost immediately after Steve Jobs died and had a prominent position. He was chair of the Apple board’s nominating committee, which picks new board members, and he was a member of the compensation committee, which sets the pay for Apple’s senior management. Iger made $377,000 as Apple board member last year, a modest sum for a man worth tens of millions of dollars. He also owns just over 50,000 Apple shares. The stock currently trades above $218 a share.
Apple and Disney each believe that they need to be major players in a crowded market dominated by Netflix Inc. (NYSE: NFLX) and Amazon.com Inc. (NASDAQ: AMZN). Netflix has over 150 million subscribers worldwide, while Amazon has over 100 million via its Prime membership program. Netflix has a base monthly price of $12.99 for its “standard” plan. The base monthly rate for Amazon Prime is $12.99, but that includes free shipping and special offers on some Amazon.com products.
The competition is fierce and also includes products from WarnerMedia and CBS. The largest independent company in the business is Hulu. Apple and Disney will go head to head in a market in which both believe they need to become a dominant force.
Disney+ launches on November 11, and Iger repeatedly has made it clear the service is critical to Disney’s future. Its library of videos is substantial. It includes Disney films and exclusive access to Pixar, Marvel, Star Wars and National Geographic, all brands Disney owns. The Marvel and Star Wars libraries contain some of the most successful movies in history, based on box office ticket sales. At a monthly price of $6.99, the service is priced well below Netflix and Amazon.
Apple released final details on Apple TV+ this week as it launched new versions of its iPhone, Apple Watch and tablets as well. It has set a price of $4.99 a month, starting with a seven-day free trial, which puts it well below all its major competitors. It will launch on November 1. Apple does not have a library nearly as extensive as Disney’s. It will, however, have original programming, which includes content from a partnership with Oprah Winfrey.
Apple’s original content is a significant part of its ability to enter the competitive battlefield. Netflix and Amazon spend hundreds of millions of dollars a year to produce their own programming. The strategy is meant to get new subscribers and keep them because they can watch programs that are not available anywhere else. The plan is so crucial that Netflix has borrowed billions of dollars to underwrite its productions.
Industry experts believe that most people who stream content will subscribe to just one or two services, but few will subscribe to three, four or more. NPR editors recently wrote about the explosion of video-streaming services, “It can be frustrating when viewers try to figure out which service has what they want to watch — Netflix, Prime, Hulu? It’s about to get worse, as more streaming services launch this year.”
Because Disney and Apple are so late to the video-streaming game, they will need to dig for subscribers who probably have one or more services already. Each needs to compete based on its low price point, programs and whatever original content it can produce. That makes Apple and Disney mortal enemies in a business sense. Iger, under the circumstances, could not stay on Apple’s board.
Alphabet Inc.’s (NASDAQ: GOOGL) Google Play product has been the target of a huge malware attack which has affected as many as 36 million users. Google Play allows Android OS mobile users access to apps, movies, music, and books. Android is the most widely distributed mobile OS in the world and is used on almost all smartphones not produced by Apple Inc. (NASDAQ: AAPL).
According to research firm Check Point:
Check Point researchers discovered another widespread malware campaign on Google Play, Google’s official app store. The malware, dubbed “Judy”, is an auto-clicking adware which was found on 41 apps developed by a Korean company. The malware uses infected devices to generate large amounts of fraudulent clicks on advertisements, generating revenues for the perpetrators behind it. The malicious apps reached an astonishing spread between 4.5 million and 18.5 million downloads. Some of the apps we discovered resided on Google Play for several years, but all were recently updated. It is unclear how long the malicious code existed inside the apps, hence the actual spread of the malware remains unknown.
We also found several apps containing the malware, which were developed by other developers on Google Play. The connection between the two campaigns remains unclear, and it is possible that one borrowed code from the other, knowingly or unknowingly. The oldest app of the second campaign was last updated in April 2016, meaning that the malicious code hid for a long time on the Play store undetected. These apps also had a large amount of downloads between 4 and 18 million, meaning the total spread of the malware may have reached between 8.5 and 36.5 million users. Similar to previous malware which infiltrated Google Play, such as FalseGuide and Skinner, Judy relies on the communication with its Command and Control server (C&C) for its operation. After Check Point notified Google about this threat, the apps were swiftly removed from the Play store.
Malware attacks have been in the news recently. Ransomeware called WannaCry recently hit approximately 200,000 computers in 150 countries, and, in the process, virtually shut down the U.S. health care network.
BOARD OF DIRECTORS
While most of Wall Street focuses on large and mega cap stocks, as they provide a degree of safety and liquidity, many investors are limited in the number of shares they can buy. Often the biggest public companies, especially the technology giants, trade in the low-to-mid hundreds, all the way up to over $1,000 per share. At those steep prices, it’s pretty hard to get any decent share count leverage.
Many investors, especially more aggressive traders, look at lower-priced stocks as a way to not only make some good money but to get a higher share count. That can really help the decision-making process, especially when you are on to a winner, as you can always sell half and keep half.
Every week, we screen our 24/7 Wall St. research database looking for stocks with Buy equivalent rating at major firms and priced under the $10 level (last week’s picks included BlackBerry and TiVo), and this week was no exception. We found five more stocks that could provide investors with some solid upside potential. While more suited for aggressive accounts, they could prove exciting additions to portfolios looking for solid alpha potential.
This is a small-cap stock that Northland Securities favors. Callon Petroleum Co. (NYSE: CPE) is an independent oil and natural gas company that is engaged in the exploration, development, acquisition and production of oil and natural gas properties. The company focuses on the acquisition and development of unconventional oil and natural gas reserves in the Permian Basin.
Callon’s drilling activity focuses on the horizontal development of various prospective intervals in the Midland Basin, including multiple levels of the Wolfcamp formation and the Lower Spraberry shale. The company made a huge $570 million acquisition of 29,000 net acres last May, which more than doubled its Delaware Basin footprint.
Northland Securities has a price target of $10, while the Wall Street consensus target was last seen at $8.78. The stock was trading at $4.51 a share on Friday’s close.
This off-the-radar pick could be poised to be a huge winner. Galmed Pharmaceuticals Ltd. (NASDAQ: GLMD) is a clinical-stage biopharmaceutical company that focuses on the development of the liver-targeted stearoyl-coenzyme A desaturase-1 modulator Aramchol, novel, once-daily, oral therapy for the treatment of nonalcoholic steatohepatitis (NASH) for variable populations, as well as other liver-associated disorders.
Its Aramchol is a synthetic conjugate of cholic acid, or a type of bile acid, and arachidic acid, or a type of saturated fatty acid, both of which, in their non-synthetic forms, are naturally occurring.
The analysts at Maxim have a towering $20 price objective, but the posted consensus target is even higher at $31.33. The shares were trading on Friday’s close at $5.23 apiece.24/7 Wall St.
Metals Stocks Still at Bargain Bin Levels During Rotation From Growth to Value
This stock has been blitzed this year but is showing signs it may have reached bottom, still offering aggressive accounts a timely entry point. Sientra Inc. (NASDAQ: SIEN) as a medical aesthetics company that engages in developing and commercializing plastic surgery implantable devices. It operates through two reportable segments.
The Breast Products segment focuses on sales of its breast implants, tissue expanders and scar management products under the brands Sientra, AlloX2, Dermaspan, Softspan and Biocorneum. The miraDry segment focuses on sales of the miraDry System, consisting of a console and a handheld device that uses consumable single-use bioTips.
With breast implants under scrutiny, the company has told the FDA that the primary focus is upholding the highest levels of patient safety. Importantly, the totality of the firm’s clinical and real-world data, including its 10-year Post-Approval Cohort Study, which included almost 1,800 participants fully met FDA’s compliance requirements, and has confirmed the long-term safety and effectiveness of the company’s products.
Stephens has set its price target at $16. The consensus figure is $15.30, and shares were trading at $7.10 as the week came to a close.
This company could be poised for big gains as liquefied natural gas (LNG) exporting continues to ramp higher. Tellurian Inc. (NASDAQ: TELL) is an LNG development company headquartered in Houston, Texas. The company plans to develop a 27.6 metric tonnes per annum, LNG terminal with five plants near Lake Charles, Louisiana, as well as upstream assets and pipeline infrastructure.
The initial phase likely will include three plants (16.6 metric tonnes per annum, capacity). The Driftwood project will be financed by equity customers and partners, as well as project debt financing. Tellurian will own 28% to 42% of Driftwood Holdings and 100% of Tellurian Marketing.
The company announced earlier this year that the U.S. Federal Energy Regulatory Commission issued the final Environmental Impact Statement for Driftwood LNG, an export facility and associated 96-mile pipeline (Driftwood project), proposed near Lake Charles on the U.S. Gulf Coast. The first LNG from Driftwood is expected in 2023.
The Raymond James $12 price objective compares with the $11.47 consensus target price. The share price ended the past week at $7.94.24/7 Wall St.
As ESG Investing Expands, the Theme’s Top Stocks Come Into Focus
This small-cap biotech could have monster upside potential. Viking Therapeutics Inc. (NASDAQ: VKTX) focuses on the development of therapies for metabolic and endocrine disorders. Its clinical program, VK5211, is an orally available drug candidate that is in Phase 2 clinical trial for acute rehabilitation following non-elective hip fracture surgery. VK5211 is a non-steroidal selective androgen receptor modulator.
The company’s second program is focused on the development of orally available small molecule thyroid hormone receptor beta agonists. Its two molecules are VK2809 and VK0214. The former is an orally available, tissue and receptor-subtype selective agonist of the thyroid beta receptor that is entering Phase 2 development for the treatment of patients with hypercholesterolemia and fatty liver disease.
H.C. Wainwright has a massive $31 price target, which compares the posted consensus target of $24.30. The shares closed on Friday at $7.15.