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- 🌽 Goldman’s Bioenergy Bulls
🌽 Goldman’s Bioenergy Bulls
Plus, stocks that might actually benefit from a rising rate environment
Happy Sunday to everyone on The Street.
A few weeks ago we wrote about one of the hottest IPOs of the year that "you’ve never heard of." We're back this week with another edition of an "IPO you may have missed". This one took place in South Korea and shares of the company, Doosan Robotics, jumped nearly 130% in its trading debut.
So are these robots going to help us cure cancer or propel us beyond Mars? Nope, they're going to pour us a nice tall boy at the local pub.
That's right, Doosan "is a leading maker of so-called collaborative robots that work side-by-side with humans and are increasingly used for tasks in cafes and bars," according to Reuters. Doosan isn't the only beneficiary either the outlet notes. "Pent-up demand for robotics stocks have driven shares of smaller rival Rainbow Robotics up 312% year-to-date."
Robotics stocks (that may or may not one day take away jobs from humans) are having a moment at the same time organized labor initiatives are gaining steam. It's an interesting dichotomy to watch. Let's dive in.
PRESENTED BY FOREMOST LITHIUM
Why Foremost Lithium (NASDAQ: FMST) Could Play A Key Role In Supporting The Growth Of The EV Market And Meeting Sustainability Goals
The electric vehicle (EV) revolution is no longer just a dot on the horizon. It's here.
With projections indicating that 75% of vehicles could be EVs by 2050, the race to decarbonize the world is in full swing. Central to this transformation is the lithium-ion battery market, anticipated to reach a sizable $182.53 billion by 2030.
But what powers these batteries? The answer lies in the complex process of producing lithium oxide (Li2O) and lithium hydroxide (LiOH).
The Lithium Production Process: Emergent EV industry leader Foremost Lithium Resource & Technology Ltd (CSE: FAT) specializes in extracting lithium oxide.
This chemical compound is then converted into lithium hydroxide, which is crucial for high-energy-density batteries that power modern EVs.
Foremost Lithium — with its expansive 43,000 acres in the "Lithium Lane Properties” — is an ideal partner in this endeavor, offering manufacturers a reliable source of premium lithium in an ever-expanding North American market. Click here to see how Foremost Lithium is leading the charge.
Review
U.S. stocks rose on Friday after a better-than-expected jobs report. While the unemployment rate remained unchanged at 3.8% in September, the U.S. economy added 336,000 jobs, nearly double what economists had expected.
It marked the strongest job growth in eight months, with the bulk coming from leisure and hospitality, government, and healthcare sectors. The report also highlighted a slowing pace of wage inflation, with average hourly earnings rising only 7 cents or 0.2%.
Even so, the labor market remains hotter than perhaps expected and that has an effect on the inflation the Fed is trying to get under control.
Following the news, the U.S. 10-year Treasury yield rose to just below 4.89%, but retreated later in the session.
The Dow Jones Industrial Average rose 290 points or 0.9%, while the S&P 500 added 1.2%. The Nasdaq Composite jumped 1.6%.
In company news, Tesla announced additional price cuts to its Model 3 and Model Y vehicles after seeing a decline in third-quarter deliveries.
While the move will reduce the automaker’s margins, it hopes to offset those losses with higher sales volume. Tesla shares were flat on the day.
Elsewhere, MGM Resorts announced it faced a cyberattack last month that would lead to a $100 million loss in its third-quarter results. MGM said hackers did not obtain any customer bank or card information, but reported a personal data breach that potentially included Social Security numbers. Still, MGM shares finished Friday up 4.9%.
Preview
The biggest economic data points of the week are once again related to inflation.
The Bureau of Labor Statistics will on Wednesday publish the Producer Price Index, which measures wholesale inflation, followed by the Consumer Price Index on Thursday. In August, prices of consumer goods rose 0.6% month-over-month. The annual rate rose to 3.7%, the second-straight increase from the near 3% low seen in June.
On Friday, the University of Michigan’s Consumer Sentiment survey will give us more insight into how American consumers are feeling at the start of October.
Elsewhere on the docket, the NFIB Small Business Optimism Index will provide insight into how small business owners view the economy on Tuesday. In August, 23% reported inflation as their biggest concern. The Fed will release the minutes from its last policy meeting on Wednesday.
Earnings Spotlight
On Tuesday, PepsiCo (PEP) will release its third-quarter earnings results. Last quarter, the multinational food and beverage company updated its full-year guidance, projecting revenue growth of 10% and earnings per share growth at 12%.
On Thursday, Domino’s Pizza, Delta Air Lines (DAL), and Walgreens (WBA) are due for earnings. Delta recently faced backlash over changes to its frequent flier program, and subsequently backtracked on them. CEO Ed Bastian could give further clarity on the upcoming modifications.
On Friday, three of the country’s largest banks — JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) — will share how their businesses are faring in the high interest rate environment. The reports from these three banking giants are often considered the official kickoff of earnings season, and can set the tone for the quarter.
UnitedHealth (UNH), the most heavily weighted stock in the Dow Jones Industrial Average, will also report.
Bioenergy Stocks Get “Buy” Rating from Goldman Analysts
Revolutionizing the Energy Industry
Companies at the forefront of the bioenergy sector are aiming to change the world in a big way, and analysts at Goldman Sachs (GS) are optimistic about the future.
The investment banking giant is bullish when it comes to bioenergy. So bullish, in fact, that the firm believes it represents the “largest source of renewable energy in the world.”
As production and innovation ramp up across the industry, the firm pointed out that bioenergy has the “potential to decarbonize road, marine and air travel as well as heating, industry and power generation.”
Regulation Providing Momentum
Goldman analysts are predicting growth opportunities for renewable diesel, sustainable aviation fuel, and renewable natural gas. This growth will be powered by regulation changes in bioenergy’s favor, resulting in a high demand for these products.
They have already seen this regulatory momentum in action. Renewable diesel, a product similar to regular diesel, is produced by processing fats and oils. Currently, it is projected to see a demand increase of a whopping 3 million metric tons in 2024, and 5-6 million metric tons by 2030. The driving force behind this surge is the EU’s passage of the Renewable Energy Direction III regulation which calls for the reduction of gas and liquid fuels for transportation.
Sustainable aviation fuel is another bioenergy innovation with the ability to decarbonize the airline industry. There are several companies positioned to control the market between 2025 and 2027, according to Goldman analysts.
Stocks to Watch
As the world continues its push towards sustainable products, there are several international stocks in a position to grow.
First on the list is Neste NESTE (Finland: Helsinki), which Goldman says is “the biggest renewable diesel and sustainable aviation fuel producer in the world.” Neste is a Finnish company that uses waste and residue to produce renewable fuel. The company is expected to command much of the bioenergy market in the months and years to come. Goldman predicts a potential price increase of over 42% for the stock over the next 12 months.
Italian company ENI S.p.A. (Italy: Milan) is another market mover that stands out to Goldman. The company produces biofuel from raw materials, and they currently account for around 10% of the world’s renewable diesel production at their two massive refineries in the U.S. and Italy.
An American company also made the “buy” list. Darling Ingredients (DAR) transforms food waste into sustainable products. Goldman analysts see the potential for a 95% upside from its Sept. 28 close.
Which stock do you think will outperform over the next 12 months? |
Rock on! Jefferies Releases List of “Rock-Solid” Dividend Stock Picks
Finding the Cream of the Crop
There is more to income stocks than just dividends. For example, investors should also consider risk, investment bank Jefferies notes.
But it’s probably not the kind of risk you’re thinking of. It’s not the risk that companies take, but rather the risks they DON’T take that matter. Risk avoidance is equally as important as risk taking, according to Jefferies. They describe stocks that pay dividends and avoid specific risks as being “rock-solid”.
In order to create their list of rock-solid dividend stocks, Jefferies scoured the MSCI USA Index for companies that have both dividend sustainability and buyback yields. Companies that didn’t include these features, or had other red flags – like poor balance sheets – were axed from the list. What Jefferies was left with was a “rock-solid” list of reliable stocks.
Rising Dividends
From a macro point of view, Jefferies is anticipating an increase in shareholder payouts over the next 12-15 months. The bank is projecting dividends in the U.S. to grow 5% this year and 5.6% in 2024.
“Despite the concerns about higher rates, US dividends have been rising steadily, reaching $614bn ([trailing 12 months], not adjusted for float), and $1.5tn including buybacks,” said Global Head of Microstrategy, Desh Peramunetilleke.
Rock-Solid Picks
Apple (AAPL), the largest company that made the cut, boasts a 3.5% total yield. The tech giant, known for buying back its stock, has a current dividend yield of 0.6%. The stock is up 32% year to date, even with a forecasted decline in revenue for the fourth quarter.
Meanwhile, Nike’s (NKE) stock price saw a bump on its most recent earnings report, which showed earnings per share at 94 cents, beating the expected 75 cents. Due to concerns with high inflation, consumers are less likely to spend on apparel items, resulting in an 18% drop in share price for Nike this year. However, the stock has proved resilient with a 5.5% total yield and a current dividend yield of 1.4%.
Also on the list is Charles Schwab (SCHW), which has a 9.6% total yield and a current dividend yield of 1.8%. Second quarter earnings for Schwab beat expectations, but we’ll get to see their latest performance when they announce results in mid October.
Last but not least is First Citizens Bancshares (FCNCA), which is currently posting a dividend and buyback yield of 6.3%. The financial holding company has seen its shares rise 84% year to date. This is following its acquisition of failed Silicon Valley Bank’s deposits and loans. Morgan Stanley (MS) has even predicted a 35% upside from its recent closing price.
Which stock do you think will outperform over the next 12 months? |
PRESENTED BY FOREMOST LITHIUM
Why Foremost Lithium (NASDAQ: FMST) Could Play A Key Role In Supporting The Growth Of The EV Market And Meeting Sustainability Goals
The electric vehicle (EV) revolution is no longer just a dot on the horizon. It's here.
With projections indicating that 75% of vehicles could be EVs by 2050, the race to decarbonize the world is in full swing. Central to this transformation is the lithium-ion battery market, anticipated to reach a sizable $182.53 billion by 2030.
But what powers these batteries? The answer lies in the complex process of producing lithium oxide (Li2O) and lithium hydroxide (LiOH).
The Lithium Production Process: Emergent EV industry leader Foremost Lithium Resource & Technology Ltd (CSE: FAT) specializes in extracting lithium oxide.
This chemical compound is then converted into lithium hydroxide, which is crucial for high-energy-density batteries that power modern EVs.
Foremost Lithium — with its expansive 43,000 acres in the "Lithium Lane Properties” — is an ideal partner in this endeavor, offering manufacturers a reliable source of premium lithium in an ever-expanding North American market. Click here to see how Foremost Lithium is leading the charge.
Stocks That Might Actually Benefit From A Rising Rate Environment
Growth within the HSA Market
Interest rates keep rising, but some analysts believe a handful of names could actually benefit from this rising rate environment.
One of these stocks is Health Equity (HQY), which Baird recently upgraded to “outperform” from “neutral” because of the way that interest rates are now staying “higher for longer.”
Baird analyst Mark Marcon said that “We view HQY as an attractive investment in a higher interest rate environment that can function as a portfolio diversifier.”
The company’s yields have been lower in recent years, but analysts like Marcon believe high rates will change this. He pointed to strong earnings, acquisitions, and a strong management track record as reasons to be excited about the stock. Even with a past of slower growth, HQY shares are up over 18% this year.
Bunge
Bung (BG) is another name that bulls have their eyes on during this prolonged period of rising interest rates.
The company is in the agricultural commodities space and Goldman's theory is simply that they will be able to outlast middle-market businesses. According to Adam Samuelson, an analyst, this puts Bung in a position to think about strategic acquisitions and reorient working capital as its smaller competitors fight to stay alive.
It also doesn't hurt that vegetable oil is in demand right now and Bunge has proven it can execute when it needs to scale. Summing it up, Samuelson said these “cyclical tailwinds" should give the company a bump.
Toll Brothers
According to Raymond James, interest rates shouldn’t deter the homebuilder. Toll Brothers (TOL), a leading luxury homebuilder, remains a strong stock choice following the company’s excellent earnings report in August.
“Despite a steady increase in mortgage rates past the 7% threshold, new home demand has remained resilient as the lock-in effect from the existing home market grows even stronger,” wrote analyst Buck Horne.
Interest rates certainly aren’t bothering affluent buyers, and they keep putting their money where their mouth is by purchasing luxury homes.
“We think this dynamic is playing squarely into TOL’s wheelhouse given its best-in-class land locations, distinctive modern home designs, and a successful operating pivot towards more quick-delivery spec home production,” Horne added. It’s no secret that this leaves Toll in a strong position, and the proof is in the pudding. Their shares are up 48% this year.
Which stock do you think will outperform over the next 12 months? |
Last Week's Poll Results
Last Week’s Polls
Are you bullish or bearish on the UK private rental market?
🟩🟩🟩🟩🟩🟩 🐂 Bullish
🟨🟨🟨⬜️⬜️⬜️ 🐻 Bearish
Are you bullish or bearish on Truist?
🟩🟩🟩🟩🟩🟩 🐂 Bullish
🟨🟨🟨⬜️⬜️⬜️ 🐻 Bearish
Are you bullish or bearish on Coca-Cola over the next 5 years?
🟨🟨🟨🟨⬜️⬜️ 🐂 Bullish
🟩🟩🟩🟩🟩🟩 🐻 Bearish
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