Tuesday, May 29, 2018

PBOC's Yi Says China's Capital Account Opening Must Be Gradual

People’s Bank of China Governor Yi Gang said policy makers should press on with efforts to open the financial sector, ease foreign exchange restrictions and gradually relax restrictions on cross-border transactions.

Reaching full capital-account convertibility will be a long and slow process, Yi said Tuesday in a speech to the 2018 Annual Conference of Financial Street Forum in Beijing. He also cautioned against too abrupt an opening, citing Thailand’s 1997 financial crisis. China will ensure that such reforms will be pushed ahead “gradually, steadily”, he said.

“In this new era, our financial sector still has a lot room to open up relative to the requirements of economic and financial development,” Yi said. “The three reforms -- opening up the financial sector to internal and external firms, exchange rate mechanism, and capital account convertibility -- have to be coordinated and pushed ahead together.”

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Yi Gang

Photographer: Qilai Shen/Bloomberg

While China pledges to further open the economy, strict capital controls remain in place in the wake of turbulence caused by a shock currency devaluation in 2015. That’s weighed on ambitions for more internationalization of the yuan, which made up 1.62 percent of global transactions in March, down from a high of 2.79 percent in August 2015.

“Yuan internationalization requires steady progress on capital account convertibility,” Yi said. “If many capital account items are restricted, then the financial sector opening is only in name instead of in reality. Only when our capital account is basically convertible and that our financial sector opens up in both ways, will our currency mechanism and the entire financial sector achieve a coordinated development.”

— With assistance by Xiaoqing Pi, and Heng Xie

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Sunday, May 27, 2018

BOE's Carney Says Central Banking Comes Down to Trust in Money

The primary role of central banks is maintain trust in money, according to Mark Carney.

Speaking on a panel in Stockholm on the future of central banking, the Bank of England governor said the “past, present and the future” of institutions came down to holding on to public confidence. Carney said that, in order to keep money safe, the BOE has overhauled the financial system since the crisis, making it more resilient to shocks such as cliff-edge Brexit.

The governor also said he was open-minded about the prospect of a central-bank-issued digital currency, but added such a thing was not imminent, and that cryptocurrencies currently don’t perform the role of money.

Carney concluded by saying that the BOE was trying to boost diversity within the institution, adding that, by looking beyond those with a economics background, “the future of central banking may involve fewer central bankers.”

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Friday, May 25, 2018

IRS Warns About New Scam Targeting Tax Professionals

&l;p&g;&l;img class=&q;dam-image shutterstock size-large wp-image-1096733720&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/1096733720/960x0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; Shutterstock

Professional associations can be a valuable tool for tax professionals, providing industry updates, opportunities for networking, and access to continuing education credits. Unfortunately, scammers are capitalizing on these relationships to gain access to taxpayer information. The Internal Revenue Service (IRS) and its state and industry Security Summit partners are warning tax professionals about a new scam involving phishing emails posing as accounting and professional associations.

The IRS has received reports from tax professionals who received fake emails that were trying to trick them into disclosing their email usernames and passwords. So far, the IRS says that tax professionals in Iowa, Illinois, New Jersey, North Carolina, and Canada (yes, Canada) have been targeted.

If you live outside of those states (and Canada), don&s;t let your guard down. Crooks can - and do - easily change their tactics. It&s;s not unlikely that this scam will make the rounds using other association names or making other adjustments.

As for the current scheme? Here&s;s what to look out for. According to the IRS, to date, the scam involves an&a;nbsp;&q;awkwardly worded phishing email&q; which states:

&l;/p&g;&l;blockquote&g;We kindly request that you follow this link HERE and sign in with your email to view this information from (name of accounting association) to all active members. This announcement has been updated for your kind information through our secure information sharing portal which is linked to your email server.&l;/blockquote&g;

The email is, of course, a phishing attempt. Your information can be captured and used to access your account, or you may be directed to a malware site. It&s;s similar to a scheme &l;a href=&q;https://www.forbes.com/sites/kellyphillipserb/2017/08/08/irs-warns-tax-pros-about-new-phishing-scam/#773d2c4e4daa&q;&g;reported last year&l;/a&g; involving a phishing email scam impersonating tax software providers and attempting to steal usernames and passwords from tax professionals.

If you receive a suspicious email from a professional association asking you to click on links or open attachments, use care. It&s;s best to go directly to those associations&a;rsquo; websites rather than open any links or attachments. Tried and true professional organizations include groups like &l;a href=&q;https://www.naea.org/&q; target=&q;_blank&q;&g;National Association of Enrolled Agents (NAEA)&l;/a&g;; &l;a href=&q;https://www.aicpa.org/&q; target=&q;_blank&q;&g;American Institute of Certified Public Accountants (AICPA)&l;/a&g;; and the &l;a href=&q;https://www.americanbar.org/aba.html&q; target=&q;_blank&q;&g;American Bar Association (ABA)&l;/a&g;, as well as their state and local affiliates. Also, be on guard for emails purporting to be from groups that use variations on established associations.

If you receive a suspicious email related to taxes or the IRS, or phishing attempts to gain access to practitioner databases, forward those emails to &l;a href=&q;mailto:phishing@irs.gov&q; target=&q;_blank&q;&g;phishing@irs.gov&l;/a&g;. Remember: The IRS never initiates initial contact with a tax professional (or taxpayer) via email.

The Security Summit partners also urge practitioners to follow additional safeguards, including using strong passwords, encrypting sensitive files and emails, and limiting access to taxpayer data to individuals who need to know. Regularly back up sensitive data and wipe any old disks or drives before disposal. For more information about data security, including how to create a data security plan, check out &l;a href=&q;https://www.irs.gov/pub/irs-pdf/p4557.pdf&q; target=&q;_blank&q;&g;IRS Publication 4557, &l;em&g;Safeguarding Taxpayer Data&l;/em&g;&l;/a&g;, and &l;a href=&q;https://nvlpubs.nist.gov/nistpubs/ir/2016/nist.ir.7621r1.pdf&q; target=&q;_blank&q;&g;&l;em&g;Small Business Information Security &a;ndash; The Fundamentals&l;/em&g;&l;/a&g;, by the National Institute of Standards and Technology (both download as a pdf).

Thursday, May 24, 2018

Hot Low Price Stocks To Watch For 2019

tags:DGICB,SCHW,ITHUF,OXY,ECOL,PSXP,

Stocks finished the week lower as oil prices fell and the Federal Reserve looks set to raise interest rates next week.

Agence France-Presse/Getty Images

The S&P 500 fell 0.4% this week after rising 0.3% to�2,372.60 today, while the Dow Jones Industrial Average dropped 0.5% this week after advancing�44.79 points, or 0.2%, to�20,902.98 today. The Nasdaq Composite dipped 0.2% this week after gaining 0.4% to�5,861.73 today.

The S&P 500 and the Nasdaq Composite snapped six-week winning streaks, while the Dow ended a four-week winning streak.

Wellington Shields’ Frank Gretz notes that the “market is supposed to be anticipatory.” He explains:

Opinions follow price �� memories do as well. If higher prices alone were not enough, the news always seems to improve as prices move higher. After all, the media always needs to explain the higher prices, and the good therefore becomes the emphasis. For example, there��s little talk of the all-but-certain pending rate hike. Since the election the market has had a remarkable run, one built more on policy hope than policy reality. This complaint is met with the retort that it has only been 50 days, or whatever. Fair enough, but the point remains. Then, too, the market is supposed to do this, it��s supposed to be anticipatory. Investors are getting this, and hence, what has been persistent strength. Interestingly, investors will begin to believe they always got it �� no one was really worried about a possible trade war, and so on. The psychologist Baruch Fischhoff called this ��creeping determinism,�� the idea that unexpected events turn into the expected. In other words, we will remember being more bullish in November than we were.

Hot Low Price Stocks To Watch For 2019: Donegal Group, Inc.(DGICB)

Advisors' Opinion:
  • [By Stephan Byrd]

    Media headlines about Donegal Group (NASDAQ:DGICB) have been trending somewhat positive on Thursday, Accern reports. Accern ranks the sentiment of press coverage by analyzing more than twenty million news and blog sources. Accern ranks coverage of companies on a scale of negative one to one, with scores closest to one being the most favorable. Donegal Group earned a news impact score of 0.13 on Accern’s scale. Accern also assigned news stories about the insurance provider an impact score of 47.2596177658095 out of 100, meaning that recent press coverage is somewhat unlikely to have an effect on the stock’s share price in the near term.

Hot Low Price Stocks To Watch For 2019: The Charles Schwab Corporation(SCHW)

Advisors' Opinion:
  • [By Stephan Byrd]

    Zurcher Kantonalbank Zurich Cantonalbank grew its position in Charles Schwab Co. (NYSE:SCHW) by 1.1% during the first quarter, according to the company in its most recent filing with the Securities and Exchange Commission (SEC). The fund owned 253,187 shares of the financial services provider’s stock after acquiring an additional 2,700 shares during the quarter. Zurcher Kantonalbank Zurich Cantonalbank’s holdings in Charles Schwab were worth $13,221,000 as of its most recent filing with the Securities and Exchange Commission (SEC).

  • [By ]

    Darn hard to not like the numbers out of Action Alerts PLUS holding JPMorgan & Chase (JPM) . Profits up nicely in all segments vs. the fourth quarter. Big year-over-year spikes in return on assets and equity from a year ago. Trading revenue up thanks to the return of volatility in the first quarter (can't wait to see the blowout quarters from TD Ameritrade (AMTD) and Schwab (SCHW) ). Good card revenue growth from the fourth-quarter bodes well for retailer's first-quarter results.

  • [By ]

    TheStreet's Scott Gamm recently spokes with Jake Gilliam, senior multiasset-class portfolio strategist at Charles Schwab (SCHW) about who uses target-date funds and why.

  • [By Ethan Ryder]

    Rockefeller Capital Management L.P. purchased a new stake in shares of Charles Schwab Co. (NYSE:SCHW) in the first quarter, HoldingsChannel.com reports. The institutional investor purchased 11,591 shares of the financial services provider’s stock, valued at approximately $605,000.

Hot Low Price Stocks To Watch For 2019: iAnthus Capital Holdings, Inc. (ITHUF)

Advisors' Opinion:
  • [By ]

    Much of the focus of cannabis investors has been centered on Canada and California. This makes sense given that they are the two largest recreational (or soon to be) cannabis markets in the world. However, one publicly traded company with US-centric cannabis operations has taken a different approach. iAnthus Capital is listed in Canada on the CSE (OTCQB:ITHUF), but is headquartered in New York and incorporated in Delaware. Unlike other Canadian-listed cannabis companies, most of which are aiming to get in on the highly competitive green-rush in California and Canada, iAnthus has set its sights on becoming the dominant player on the U.S. East Coast.

  • [By Spencer Israel]

    The charts below are courtesy of VantagePoint, a platform that uses Artificial Intelligence and machine learning to forecast future price movements 1-3 days in advance with up to 86 percent accuracy. The blue line represents a predictive moving average that shows what’s going to happen three days in advance, and the black line is a simple 10-day moving average. A crossover of the blue line over the black line indicates a bullish signal from the software, and vice versa for a bearish signal.

    iAthus Capital Holdings, Inc. (OTC: ITHUF)

    Up 94 percent YTD

  • [By Javier Hasse]

    Licensed cannabis production facilities owner and operator iAnthus Capital Holdings Inc (OTC: ITHUF) announced a $50 million investment from Gotham Green Partners. Management believes this is the largest investment to date by a single investor in a publicly traded U.S. cannabis operating company. iAnthus plans to allocate the proceeds of this financing to repay a $20 million one-year note and accrued interest to VCP Bridge LLC; continue to build out cultivation facilities and dispensaries in the New York and Florida markets; and, potentially, to expand activities. The remaining expenditures for completing iAnthus’ Massachusetts and Vermont operations will be funded with current cash on hand, management assured.

Hot Low Price Stocks To Watch For 2019: Occidental Petroleum Corporation(OXY)

Advisors' Opinion:
  • [By Chris Lange]

    Occidental Petroleum Corp.��s (NYSE: OXY) short interest increased to 10.74 million shares from the previous reading of 9.91 million. Shares recently traded at $76.60, in a 52-week range of $57.20 to $78.09.

  • [By Chris Lange]

    Occidental Petroleum Corp.��s (NYSE: OXY) short interest increased to 11.05 million shares from the previous reading of 10.74 million. Shares recently traded at $83.20, in a 52-week range of $57.84 to $84.28.

  • [By Chris Lange]

    Occidental Petroleum Corp.��s (NYSE: OXY) short interest decreased to 11.44 million shares from the previous reading of 11.77 million. Shares recently traded at $69.65, in a 52-week range of $57.20 to $78.09.

  • [By Joseph Griffin]

    Oxycoin (CURRENCY:OXY) traded 3.1% higher against the dollar during the one day period ending at 19:00 PM E.T. on May 20th. One Oxycoin coin can currently be bought for approximately $0.11 or 0.00001305 BTC on exchanges including Livecoin and Bit-Z. Oxycoin has a total market cap of $12.09 million and approximately $23,963.00 worth of Oxycoin was traded on exchanges in the last day. During the last week, Oxycoin has traded 25.4% higher against the dollar.

  • [By Logan Wallace]

    Occidental Petroleum (NYSE:OXY) has received an average recommendation of “Hold” from the twenty-two analysts that are covering the stock, MarketBeat reports. Two research analysts have rated the stock with a sell recommendation, eleven have issued a hold recommendation and eight have issued a buy recommendation on the company. The average 12 month price target among brokers that have issued a report on the stock in the last year is $76.94.

Hot Low Price Stocks To Watch For 2019: US Ecology, Inc.(ECOL)

Advisors' Opinion:
  • [By Maxx Chatsko]

    Success can be defined as small wins that accumulate over time. That definition helps to put the slow-and-steady progress made by US Ecology (NASDAQ:ECOL) in the first quarter of 2018 into perspective. Revenue and profits grew for both of the environmental services leader's segments compared to the prior-year period, which resulted in another solid quarter.

  • [By Ethan Ryder]

    US Ecology (NASDAQ: ECOL) and Republic Services (NYSE:RSG) are both business services companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, analyst recommendations, risk, profitability, institutional ownership, valuation and earnings.

Hot Low Price Stocks To Watch For 2019: Phillips 66 Partners LP(PSXP)

Advisors' Opinion:
  • [By John Bromels]

    Phillips 66 was the midstream (transportation and storage) and downstream (refining and marketing) arms of oil and gas giant�ConocoPhillips, which spun the company off in 2012.�The company's midstream operations include income from its master limited partnerships�Phillips 66 Partners�(NYSE:PSXP) and�DCP Midstream�(NYSE:DCP), which it co-owns with�Enbridge.

  • [By Matthew DiLallo]

    While those customer commitments were hard to come by over the past few years due to the turbulence in the oil market, energy companies are beginning to grow more optimistic about the future. Because of that, Phillips 66 Partners (NYSE:PSXP) and several other partners were able to secure the necessary commitments to move forward with the Gray Oak Pipeline, which will transport oil out of the fast-growing Permian Basin. That project will enable these companies to generate more income, likely allowing them to boost their already above-average payouts.

  • [By Logan Wallace]

    Get a free copy of the Zacks research report on Phillips 66 Partners (PSXP)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com

Wednesday, May 23, 2018

Visa or No Visa, Abramovich Is Winning on London's Stock Market

Russian billionaire Roman Abramovich might not have been allowed back into the U.K. to watch his soccer team win the FA Cup last weekend, but his steelmaker is still making hay there.

Evraz Plc, in which he owns a 31 percent stake, is the best-performing stock on the U.K.’s FTSE 100 Index this year, gaining 42 percent. What makes that surge even more remarkable is that the stock lost as much as 21 percent in a single day after sanctions were announced against fellow oligarch Oleg Deripaska in April.

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Abramovich’s Chelsea Football Club beat archrival Manchester United 1-0 to win the English domestic title at Wembley Stadium on Saturday, but the tycoon wasn’t there to see it. According to people familiar with the situation, there were delays in renewing his investor’s visa.

Although the reason for the delay isn’t clear, it comes at a tense time in U.K.-Russian relations and may indicate the U.K. is growing tired of the rich, Kremlin-connected Russians like Abramovich who have made their second homes in Britain.

See also: Billionaire plans ‘party like a Russian’ as Deripaska stays away

Still, that hasn’t stopped Evraz. Global steelmakers are enjoying the best market conditions in years. Demand in almost every major market is forecast to grow this year and Chinese exports, which were long a drag on the industry, are receding. At the same time, President Donald Trump’s threat of tariffs in the U.S. has caused prices to soar to the highest in years. Evraz has also won support from investors after committing to pay a regular dividend.

That’s all helped Abramovich add $1.2 billion to his fortune this year, lifting his total wealth to $13.7 billion.

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Tuesday, May 22, 2018

Mnuchin: No "quid pro quo" on ZTE

Treasury Secretary Steven Mnuchin on Tuesday defended President Trump's request to ask the Commerce Department to take a second look at remedies imposed on Chinese smartphone maker ZTE.

Mnuchin said the president's directive is not "a function of back peddling," rather it's similar to other times world leaders have called Trump to discuss business matters.

"This was not a quid-pro-quo or anything else," said Mnuchin testifying before the Senate Appropriations Committee on the agency's budget request. "This was merely President Xi asking President Trump to look into this, which he's done. Any changes to this will fully support the mandate of making sure our sanctions and our technology are protected."

Mnuchin made clear that ZTE was a Commerce Department enforcement case, but the administration takes seriously national security issues tied the company.

"I can assure you whatever the Commerce Department decides, the intelligence community has been part of the briefings and that we will make sure we will enforce national security issues," he said.

He declined to comment on what alternative remedies Commerce may be considering.

"The objective was not to put ZTE out of business. The objective was to make sure that they abide by our sanctions programs," said Mnuchin.

Separately, Mnuchin said proposed steel and aluminum tariffs on China "will remain enforced. He said that has not been part of ongoing US-China trade discussions. "Those are not being touched," he said.

Monday, May 21, 2018

Should You Give Einhorn The Green Light?

One of the most successful corporate structures for long-term shareholder returns has been an insurer whose float is invested by a capable capital allocator. While Warren Buffett's Berkshire Hathaway (BRK.B) is the largest and best-known example, its success has been matched at a smaller scale by companies like Markel (MKL) and Alleghany (Y). Buffett explains the benefits of float in his 2009 annual letter:

If premiums exceed the total of expenses and eventual losses, we register an underwriting profit that adds to the investment income produced from the float. This combination allows us to enjoy the use of free money �� and, better yet, get paid for holding it.

In other words, the company gets to invest the insurance premiums paid by policy holders, providing a source of capital. The combination of profitable underwriting and even average investment returns can lead to the massive compounding of capital.

Profits are by no means guaranteed, however. Poor underwriting can lead to losses of float, as can poor investment of the float. Insurance float functionally adds leverage to the capital of an insurer and small insurers can be especially sensitive to unexpected insurance payouts. This risk played out recently in the 2017 hurricane season that exposed insurers in the Caribbean and Puerto Rico to tens of billions in insured losses.

Nevertheless, the desirability of a permanent capital vehicle has led to the creation of insurance companies by hedge fund managers, including David Einhorn with Greenlight Re.

Greenlight Re Logo

Company Overview

Greenlight Re (GLRE) is a specialty property and casualty reinsurer with an A- A.M. Best rating. Einhorn, through DME Advisors, manages the investment portfolio of Greenlight Re with a hedge fund fee structure of 1.5% of assets and 20% of profits (with a loss carry forward provision that we will discuss the relevance of below). Greenlight Re does business in diverse lines of specialty reinsurance with heavy exposure to the U.S. auto insurance market.

Greenlight Re's insurance business operates in diverse lines out of two subsidiaries: one with a global focus in property, casualty, and various specialty lines operating out of the Cayman Islands and another writing property and casualty lines in Europe. Despite the broad mandate of its insurance business, Greenlight Re's underwriting business has been concentrated (>75%) in the U.S. and Caribbean over the past 3 years, and about 50% of gross premiums were derived from motor property and casualty lines.

The stock is a massive underperformer relative to the S&P 500 (SPY) in recent years with a loss in value of 11.8% in 2017 and 23.9% year-to-date. However, the insurance portion of the business appears to be improving with a combined ratio of 98.3% for the quarter ending March 31st, 2018. The biggest driver of Greenlight Re's recent negative performance is not its underwriting or a lack of capital to invest but its investment management by Einhorn and DME. Greenlight Capital, Einhorn's hedge fund proper, has experienced outflows of $3 billion over the last two years.

Poor Investment Portfolio Performance in 2017 and 2018

The book value of Greenlight Re fell to $18.35 per share as of March 31st, 2018, which represents a loss of 17.4% on the quarter and 22.1% on the year. While book value is not always indicative of true company value in many cases, its growth is how Greenlight Re itself measures its performance. This loss, however, is not attributable to the insurance underwriting business of Greenlight Re. Greenlight underwriting profits were $2.5 million in the first three months of 2018:

Greenlight March 18 Underwriting Profit

As you can see, the losses posted by Greenlight Re are fully attributable to its investment portfolio, which lost $145 million net of fees and expenses in this same period. These losses continued in April with another 0.5% detraction to the investment portfolio.

Einhorn is known for his long-short investing strategy, which led to marked outperformance during the last financial crisis. However, his recent performance, particularly in the last year, have been dismal compared to the overall market. In these three months, total losses in Greenlight Re's investments were 11.8% with the long and short portions of the portfolio contributing about equally to these losses. These results follow a tepid 0.9% net investment return for the 2017 calendar year while the S&P 500 (SPY) returned over 21%.

The biggest contributors to these declines were a short position in Netflix (NFLX), which gained 54% in the first quarter of 2018, and a long position in General Motors (GM), which lost 10%. Einhorn has been especially bearish the past few years on many high-flying tech names such as Netflix (NFLX) and Tesla (TSLA), which he shorts as part of his so-called "bubble basket".

An Opportunity to Invest Alongside an Underperforming Manager

Academic research has shown that managers that have underperformed over the past 3 and 5 year periods end up overperforming in the subsequent 3 and 5 year periods, what can be explained as a form of mean reversion in the best performing investment strategy. David Einhorn, with his long-short strategy, has been a perennial underperformer relative to the S&P 500 (SPY) since 2008/2009 where his portfolio strategy provided a buffer against the large losses posted during the last financial crisis. If you share an investment thesis with Einhorn, then investing in Greenlight Re could act as a hedge on the froth in the market, particularly in the technology sector.

So what is currently in Greenlight Re's portfolio?

As of December 2017, Greenlight Re's major (10%+) long positions were General Motors (GM), Brighthouse Financial (BHF), gold (GLD), Bayer (OTCPK:BAYZF), and Mylan (MYL). It also holds a long position in Micron (MU), which was the best positive contributor to its portfolio in the first quarter of 2018. These long positions were balanced by shorts in Tesla (TSLA), Netflix (NFLX), and other "bubble basket" stocks. The portfolio is also short Assured Guaranty (AGO), a municipal bond insurer, a position which is hedged by a simultaneous long in Puerto Rican debt. Overall, the portfolio is 93% gross long and 65% gross short. Unlike most insurance portfolios, just 0.5% of investments are in debt instruments and, in fact, Greenlight Re's short portfolio was 11% allocated to sovereign debt.

The long portfolio has a significant value-tilt. General Motors (GM), Brighthouse (BHF), and Mylan (MYL) all have forward P/E ratios < 7 and free cash flow yields > 10%. The short portfolio is comprised mainly of high growth names and other individual theses that Einhorn holds. Assured Guaranty (AGO) is not a growth stock but is shorted by Einhorn on his view that it lacks the financial strength to overcome its exposure to municipal debt, particularly that of Illinois and Puerto Rico.

Despite the fees charged to the investment portfolio, investing with Einhorn through Greenlight Re may be a compelling opportunity. The portfolio is not just randomly long-short but tries to take advantage of specific opportunities rather than simply being hedged to the fluctuations of the market. You get the benefit of exposure to the investment research of a hedge fund with a portfolio that is unlikely to be correlated with the overall market. If you generally agree with Einhorn's investment strategy or would like exposure to a long-short portfolio, Greenlight Re could act as a replacement to a pure investment in a hedge fund.

A further incentive to invest now is the discount to book value, which is currently 17%. The company itself recognizes this disparity between book and share price and has recommitted to a share repurchase program, which may help to narrow this gap in the short- to medium-term. As noted above, Greenlight Re has a loss carry forward provision with Einhorn and DME Advisors. The agreement is structured such that the 20% performance fee on net profits is reduced to 10% until 250% of the loss is recouped. Combined, a purchase at current prices (< $15.5 per share) gives a significant discount to exposure to Greenlight Re's investment portfolio and to a functional fee discount on potential future portfolio returns. Greenlight Re can be comfortably held in a taxable account as it currently pays no dividends.

Is the Insurance Vehicle a Boon or a Bane?

Buffett's deployment of insurance float to great success depended on the profitability of his underwriting business, and has lowered his exposure to reinsurance. In his 2017 annual letter, he warns on the long-tailed losses possible in property and casualty insurance that may not become apparent for many years. In this regard, Greenlight Re is relatively shielded from catastrophic losses as it largely exposed to shorter term policies such as motor liability. But, just how good is Greenlight Re's insurance business, to which an investor in the common stock of GLRE must be exposed in order to "access" Einhorn?

Because Greenlight Re's policies are generally short term, underwriting profits (and losses) should be reflected quickly in their financials. Unfortunately, despite profitability in the first quarter of this year, the past four fiscal years have all recorded underwriting losses and combined ratios greater than 100%:

Greenlight Underwriting

If Greenlight Re is losing money as it tries to generate float, an investment in the common at a book value discount may actually be a mark of market efficiency rather. However, if you believe that the most recent results and efforts on higher quality and more profitable underwriting described in Greenlight Re's last conference call, then perhaps the discount is unwarranted. Greenlight Re has recently entered into new insurance markets in London, an area where its executives claim they have particular expertise.

On a positive note, unlike many larger insurers that are struggling to profitably invest their float in a low yield environment, Greenlight Re is unrestricted in its investments and has practically no exposure to fixed income beyond cash equivalents. You are, in fact, getting significant exposure to Einhorn's investment strategy if Greenlight Re can continue to shore up its underwriting business.

Conclusion

Greenlight Re is an opportunity to invest in a permanent capital vehicle alongside David Einhorn that appears to be improving its underwriting business. The stock gives combined exposure to the reinsurance business and a long-short hedge fund portfolio at a discount to book value with heavy exposure to value.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in GLRE over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Sunday, May 20, 2018

Best Small Cap Stocks To Own For 2018

tags:CNR,PQ,FCEL,ACHN,

Yesterday, our Under the Radar Movers newsletter suggested small cap agricultural biotechnology Arcadia Biosciences (NASDAQ: RKDA) as a short/bearish trade:

��Arcadia Biosciences is just a straight-forward bearish momentum trade, and the chart speaks for itself. The clincher is the fact that the selling volume is surging today. You only have to go back to April and May to see what can happen once this stock picks up a head of steam. All the same, we'll be applying stops early and often here.��

Our Under the Radar Movers newsletter would have a further discussion of Arcadia Biosciences�� technical chart along with a potential short/bearish trading strategy:

Best Small Cap Stocks To Own For 2018: China Metro-Rural Holdings Limited(CNR)

Advisors' Opinion:
  • [By Shane Hupp]

    Wall Street analysts expect that Canadian National Railway (NYSE:CNI) (TSE:CNR) will announce $1.02 earnings per share (EPS) for the current quarter, according to Zacks Investment Research. Seven analysts have provided estimates for Canadian National Railway’s earnings, with the highest EPS estimate coming in at $1.06 and the lowest estimate coming in at $0.97. Canadian National Railway reported earnings per share of $1.00 in the same quarter last year, which would suggest a positive year over year growth rate of 2%. The company is expected to announce its next quarterly earnings results on Tuesday, July 24th.

  • [By Max Byerly]

    Canadian National Railway (NYSE:CNI) (TSE:CNR) – Cormark raised their Q3 2018 earnings per share (EPS) estimates for Canadian National Railway in a research report issued to clients and investors on Tuesday, April 10th. Cormark analyst D. Tyerman now expects that the transportation company will post earnings per share of $1.15 for the quarter, up from their previous estimate of $1.14.

Best Small Cap Stocks To Own For 2018: Petroquest Energy Inc(PQ)

Advisors' Opinion:
  • [By Ethan Ryder]

    News headlines about Petroquest Energy (NYSE:PQ) have been trending somewhat positive recently, Accern Sentiment Analysis reports. Accern identifies negative and positive news coverage by reviewing more than 20 million blog and news sources. Accern ranks coverage of publicly-traded companies on a scale of -1 to 1, with scores nearest to one being the most favorable. Petroquest Energy earned a coverage optimism score of 0.05 on Accern’s scale. Accern also gave news stories about the energy company an impact score of 47.638327846877 out of 100, meaning that recent news coverage is somewhat unlikely to have an impact on the company’s share price in the near future.

Best Small Cap Stocks To Own For 2018: FuelCell Energy Inc.(FCEL)

Advisors' Opinion:
  • [By Peter Graham]

    Small cap fuel cell stock�FuelCell Energy Inc (NASDAQ: FCEL) reported Q4 and fiscal year ended October 31, 2017 earnings�with�Q4 total revenues�being $47.9 million versus $24.5 million:����

  • [By Logan Wallace]

    FuelCell Energy (NASDAQ: FCEL) and HRG Group (NYSE:HRG) are both oils/energy companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, valuation, risk, analyst recommendations, institutional ownership, earnings and profitability.

  • [By Paul Ausick]

    FuelCell Energy Inc. (NASDAQ: FCEL) posted a decrease of 25.7% in short interest during the period. Some 5.86 million shares were short as of April 30. The stock closed at $1.93 on Wednesday, up about 1.6% for the day, in a 52-week range of $0.80 to $2.49. Shares traded down about 7.8% in the short interest period, and days to cover rose from six to eight.

  • [By Shane Hupp]

    FuelCell Energy (NASDAQ: FCEL) is one of 25 public companies in the “Miscellaneous electrical machinery, equipment, & supplies” industry, but how does it contrast to its peers? We will compare FuelCell Energy to related companies based on the strength of its risk, dividends, earnings, valuation, profitability, analyst recommendations and institutional ownership.

Best Small Cap Stocks To Own For 2018: Achillion Pharmaceuticals Inc.(ACHN)

Advisors' Opinion:
  • [By Stephan Byrd]

    Achillion Pharmaceuticals (NASDAQ:ACHN) has been given an average recommendation of “Hold” by the nine brokerages that are currently covering the firm, MarketBeat reports. Two analysts have rated the stock with a sell rating, four have issued a hold rating and three have issued a buy rating on the company. The average 12 month price target among analysts that have covered the stock in the last year is $5.20.

  • [By Stephan Byrd]

    Get a free copy of the Zacks research report on Achillion Pharmaceuticals (ACHN)

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  • [By Ethan Ryder]

    Achillion Pharmaceuticals (NASDAQ:ACHN) – Research analysts at B. Riley reduced their FY2018 EPS estimates for shares of Achillion Pharmaceuticals in a research note issued to investors on Wednesday, May 2nd. B. Riley analyst M. Kumar now anticipates that the biopharmaceutical company will earn ($0.58) per share for the year, down from their previous estimate of ($0.55). B. Riley has a “Neutral” rating and a $3.50 price objective on the stock. B. Riley also issued estimates for Achillion Pharmaceuticals’ FY2019 earnings at ($0.64) EPS, FY2020 earnings at ($0.71) EPS, FY2021 earnings at ($0.70) EPS and FY2022 earnings at ($0.84) EPS.

Saturday, May 19, 2018

$458.33 Million in Sales Expected for Diamondback Energy (FANG) This Quarter

Analysts predict that Diamondback Energy (NASDAQ:FANG) will post $458.33 million in sales for the current quarter, Zacks reports. Fourteen analysts have made estimates for Diamondback Energy’s earnings. The highest sales estimate is $508.00 million and the lowest is $410.00 million. Diamondback Energy posted sales of $269.43 million in the same quarter last year, which suggests a positive year-over-year growth rate of 70.1%. The company is scheduled to issue its next earnings results on Tuesday, August 7th.

On average, analysts expect that Diamondback Energy will report full-year sales of $1.93 billion for the current year, with estimates ranging from $1.73 billion to $2.17 billion. For the next financial year, analysts expect that the company will post sales of $2.54 billion per share, with estimates ranging from $2.33 billion to $2.98 billion. Zacks Investment Research’s sales calculations are an average based on a survey of research firms that cover Diamondback Energy.

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Diamondback Energy (NASDAQ:FANG) last announced its quarterly earnings results on Tuesday, May 8th. The oil and natural gas company reported $1.64 earnings per share (EPS) for the quarter, beating the Thomson Reuters’ consensus estimate of $1.59 by $0.05. The firm had revenue of $480.20 million for the quarter, compared to analyst estimates of $445.78 million. Diamondback Energy had a net margin of 35.09% and a return on equity of 10.53%. The business’s revenue for the quarter was up 104.1% on a year-over-year basis. During the same quarter in the previous year, the firm posted $1.04 EPS.

FANG has been the topic of several analyst reports. Zacks Investment Research lowered shares of Diamondback Energy from a “buy” rating to a “hold” rating in a report on Thursday, January 18th. Roth Capital boosted their target price on shares of Diamondback Energy from $120.00 to $145.00 and gave the company a “buy” rating in a research note on Monday, January 22nd. Morgan Stanley reduced their target price on shares of Diamondback Energy to $159.00 and set an “overweight” rating on the stock in a research note on Friday, April 20th. Credit Suisse Group set a $143.00 target price on shares of Diamondback Energy and gave the company a “buy” rating in a research note on Tuesday, January 23rd. They noted that the move was a valuation call. Finally, KeyCorp set a $137.00 target price on shares of Diamondback Energy and gave the company a “buy” rating in a research note on Sunday, January 21st. Three equities research analysts have rated the stock with a hold rating and twenty-six have issued a buy rating to the company. The stock presently has an average rating of “Buy” and an average target price of $142.04.

Shares of Diamondback Energy opened at $136.26 on Friday, MarketBeat Ratings reports. The firm has a market capitalization of $12.67 billion, a price-to-earnings ratio of 25.71, a price-to-earnings-growth ratio of 0.69 and a beta of 0.84. The company has a debt-to-equity ratio of 0.30, a quick ratio of 0.52 and a current ratio of 0.53. Diamondback Energy has a 52-week low of $128.00 and a 52-week high of $130.10.

The business also recently declared a special dividend, which will be paid on Tuesday, May 29th. Investors of record on Monday, May 21st will be given a dividend of $0.125 per share. The ex-dividend date of this dividend is Friday, May 18th.

In related news, CFO Teresa L. Dick sold 2,500 shares of the company’s stock in a transaction dated Monday, March 5th. The shares were sold at an average price of $130.97, for a total transaction of $327,425.00. The sale was disclosed in a filing with the SEC, which is accessible through the SEC website. Also, VP Randall J. Holder sold 7,120 shares of the company’s stock in a transaction dated Thursday, February 22nd. The stock was sold at an average price of $124.15, for a total transaction of $883,948.00. The disclosure for this sale can be found here. In the last quarter, insiders have sold 12,620 shares of company stock worth $1,567,773. 0.41% of the stock is owned by corporate insiders.

A number of hedge funds and other institutional investors have recently modified their holdings of the stock. Next Century Growth Investors LLC bought a new stake in Diamondback Energy during the 1st quarter worth about $121,000. ClariVest Asset Management LLC raised its holdings in Diamondback Energy by 14,557.1% during the 1st quarter. ClariVest Asset Management LLC now owns 1,026 shares of the oil and natural gas company’s stock worth $130,000 after purchasing an additional 1,019 shares during the last quarter. Signaturefd LLC bought a new stake in Diamondback Energy during the 1st quarter worth about $132,000. Zions Bancorporation bought a new stake in Diamondback Energy during the 1st quarter worth about $136,000. Finally, Captrust Financial Advisors bought a new stake in Diamondback Energy during the 4th quarter worth about $149,000.

Diamondback Energy Company Profile

Diamondback Energy, Inc, an independent oil and natural gas company, focuses on the acquisition, development, exploration, and exploitation of onshore oil and natural gas reserves in the Permian Basin in West Texas. Its activities are primarily focused on the Wolfcamp, Spraberry, Clearfork, Bone Spring, and Cline formations.

Get a free copy of the Zacks research report on Diamondback Energy (FANG)

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Earnings History and Estimates for Diamondback Energy (NASDAQ:FANG)