- The Street Sheet
- Posts
- 🎲 Playing Political Possibilities
🎲 Playing Political Possibilities
Plus, a look at the future of Taiwan's chip industry
Sponsored by
Happy Sunday to everyone on The Street.
EV maker Rivian Automotive saw its shares fall 5% this past week.
Tesla’s disappointing earnings results did weigh the EV sector down, but there’s another reason investors were pulling out of Rivian — and it still has to do with Tesla.
Tesla filed a lawsuit against Rivian in 2020 that alleged Rivian poached Tesla employees to steal trade secrets.
After four years of the judicial process playing out, Judge Zayner just denied Rivian’s motion to dismiss the lawsuit. In other words, the two companies are heading to court.
Here’s what Musk had to say on why his company is suing Rivian:
“They’ve definitely taken a bunch of Tesla’s intellectual property…It’s not cool to steal our IP and for people to violate their confidentiality agreements…that kind of thing. They’re doing bad things, so we sued them.”
While no one can be certain about the outcome of the case, if found guilty, Rivian may have to pay Tesla substantial monetary damages along with other remediation measures.
Plus, today’s partner can help you transform your trading with access to a free masterclass.
ICYMI: Here’s what drove the markets last week and what to keep an eye out for in the coming week.
TOGETHER WITH THEOTRADE
Transform Your Trading: Join TheoTrade and Gain Free Masterclass Access
Dear Trader,
Imagine a space where profitable trading ideas flow freely every day, shared among thousands of traders by seasoned professionals…
No need to imagine any longer…
Welcome to TheoTrade – a groundbreaking community where expert traders guide both experienced and novice traders through the complexities of the stock market. We share profitable trades, measure risk, and have fun along the way.
My best,
Don Kaufman / TheoTrade
P.S. For the next thirty days I’ll be extending complimentary access to my Options Quick Start Masterclass.
Caught in the Crossfire
Shots From Both Sides
The chip industry isn’t just one of the hottest sectors right now - it’s also one of the most political.
Chip stocks were recently sent into a freefall following news that the Biden administration was considering implementing stricter trade restrictions to keep technology out of Chinese hands.
But it isn’t just Democrats causing a stir. Donald Trump recently said in an interview with Bloomberg that if he’s elected, he may consider cutting security efforts for Taiwan if the island doesn’t pay up.
Taiwan’s Part in the Play
Taiwan is vital to the chip industry since tech companies heavily rely on the country for chip production. The island is a hotbed of production for the world’s most advanced semiconductors, not to mention the chips that power our everyday appliances.
Last month the CEO of Nvidia (NVDA) Jensen Huang called Taiwan the “unsung hero” of the computer industry. Now investors are considering the risks the country faces as the Chinese “reunification” threat looms large.
Weighing the Risks
Military action in Taiwan is far from a guarantee. However, investors are forced to consider that risk when they create their portfolios. The risk is expected to grow as we near the election, and the topic continues to arise.
The biggest tech stocks have continued to rack up market share this year. But as the industry's political exposure gets highlighted, investors might grow skeptical.
Are you bullish or bearish on Taiwanese chip stocks over the next 12 months? |
Playing Political Possibilities
Experiencing Turbulence
The election has caused some volatility for healthcare stocks. According to Raymond James (RJF) analyst Chris Meekins, each candidate holds distinct and essentially opposite health policy views. The industry doesn’t know what to expect.
Affordable Care Act subsidies are set to expire in 2025, and Medicare Advantage plans have been experiencing cost problems, so health insurers are particularly vulnerable this election cycle.
A Hypothetical Republican Win
Experts believe a Republican victory would result in lessened red tape from the FTC and the Department of Justice and eased drug prices. Another Trump presidency could also be a tailwind for Medicare Advantage carriers, helping to solve their cost issues.
On the flip side, a Republican win could bring the end of expanded individual healthcare subsidies established under Obamacare. This could result in a high number of uninsured Americans, which would negatively affect hospitals and managed-care organizations.
A Hypothetical Democrat Win
If Democrats are victorious, the Affordable Care Act could survive. This would help hospitals and managed-care facilities with enrollment. Bernstein analyst Lance Wilkes expects Centene (CNC), the largest Medicaid managed-care company, to benefit. Raymond James analysts also see Oscar Health (OSCR) benefiting from a Democratic win.
Regardless of the winner, Meekins noted that the healthcare sector historically struggles during election years and the year following but outperforms during the second year following the election.
Are you bullish or bearish on the healthcare sector following the election? |
It’s Adapt or Die for Tobacco Companies
Waning Cigarette Sales
According to Philip Morris (PM), cigarette sales fell from 915 billion in shipment volume in 2011 to 613 billion in 2023. The figure has steadily declined for the past 10 years.
The cigarette market is shrinking, and there’s no doubt that tobacco alternatives like vapes and tobacco-free pouches are playing a substantial role. Governments around the globe have been making a significant effort to curb cigarette usage.
Investing in Alternatives
Now, tobacco companies are exploring other options for their futures, dubbed reduced-risk products, or RRPs. These include offerings like vapes and tobacco-free pouches. Two examples are Altria’s (MO) purchase of the vape product NJoy and Philip Morris’ acquisition of Zyn.
According to AdvisorShares COO Dan Ahrens, tobacco companies are doing whatever they can to stay alive. Entering these markets has been slow for most, with cigarettes still accounting for the largest percentage of their total revenue.
A Possible Winner
According to Jefferies analyst Owen Bennett, many tobacco stocks are still popular with investors thanks to their generous dividends. He believes many of these dividends can survive the switch to RRP’s.
One stock he’s bullish on is Philip Morris, with an average rating of overweight and around a 3% upside. The company reported Q2 earnings this past Tuesday, beating analyst expectations for the quarter.
Tobacco and nicotine markets have evolved significantly over the past few decades, and investors are anxious to watch as the future unfolds.
Are you bullish or bearish on the tobacco industry over the next 10 years? |
TOGETHER WITH THEOTRADE
Transform Your Trading: Join TheoTrade and Gain Free Masterclass Access
Dear Trader,
Imagine a space where profitable trading ideas flow freely every day, shared among thousands of traders by seasoned professionals…
No need to imagine any longer…
Welcome to TheoTrade – a groundbreaking community where expert traders guide both experienced and novice traders through the complexities of the stock market. We share profitable trades, measure risk, and have fun along the way.
My best,
Don Kaufman / TheoTrade
P.S. For the next thirty days I’ll be extending complimentary access to my Options Quick Start Masterclass.
Are you bullish or bearish on Amazon (AMZN) over the next 12 months?
🟩🟩🟩🟩🟩🟩 Bullish
🟨⬜️⬜️⬜️⬜️⬜️ Bearish
Which stock do you think will outperform over the rest of 2024?
🟨🟨🟨🟨⬜️⬜️ Dexcom (DXCM)
🟩🟩🟩🟩🟩🟩 Samsung (005930)
Do you think Google and Microsoft will hit their current carbon emissions goals?
🟨🟨🟨🟨⬜️⬜️ Yes
🟩🟩🟩🟩🟩🟩 No
Reply