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🚢 Self-Driving Ship Stocks

🚢 Self-Driving Ship Stocks

Plus, new diet guidelines will be released in 2025. Here's the stocks that could be impacted.

February 11, 2024

Happy Sunday to everyone on The Street.

Although it can come across as somewhat counterintuitive, traders don't hate when a company announces a round of layoffs. It's a relatively quick way to tackle what can be a ballooning expense item.

But, according to Bank of America, companies need to be careful how much they say the "L-word" during their earnings calls.

Savita Subramanian, a strategist at the bank combed through countless earnings calls and studied transcripts that contained the word, "layoff". If the company mentions the word a few times, it's not enough to spark a negative reaction.

If "layoff" is mentioned seven or more times, however, there's a decent chance that there will be near-term underperformance. If the firm uses the word “layoff” 10 times during a call the average underperformance, relative to the industry the company is in, clocked in at 1.7%.

Although the January jobs report blew past expectations, quite a few companies have announced layoffs over the past few months. The Kobeissi Letter curated the list below and noted the odd dynamic we mentioned when compared to the blockbuster non-farm payrolls report. Take a look for yourself:

“Latest List of Layoffs Over Last 3 Months:

1. Twitch: 35% of workforce
2. Hasbro: 20% of workforce
3. Spotify: 17% of workforce
4. Levi's: 15% of workforce
5. Zerox: 15% of workforce
6. Qualtrics: 14% of workforce
7. Wayfair: 13% of workforce
8. Duolingo: 10% of workforce
9. Washington Post: 10% of workforce
10. eBay: 9% of workforce
11. PayPal: 9% of workforce
12. Business Insider: 8% of workforce
13. Charles Schwab: 6% of workforce
14. Macy's: 4% of workforce
15. Blackrock: 3% of workforce
16. Citigroup: 20,000 employees
17. UPS: 12,000 employees
18. Deutsche Bank: 3,500 employees
19. Pixar: 1,300 employees
20. Salesforce: 700 employees
21. American Airlines: 650 employees

January 2024 saw a total of 82,000 layoffs, the second-worst January since 2009. Meanwhile, the US just reported that 353,000 jobs were created in January. Something isn't adding up here.”

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The S&P 500 index surged past the 5,000-point threshold by the week’s end, setting new record highs on the optimism surrounding artificial intelligence. Both the S&P 500 and the Nasdaq 100 celebrated their 14th positive week out of the last 15, showcasing the resilience of the winter rally.

The Magnificent Seven companies – Microsoft Corp., Apple Inc., Alphabet Inc., Amazon Inc., Meta Platforms Inc., NVIDIA Corp. and Tesla, Inc. – collectively skyrocketed to a market capitalization of $13 trillion, accounting for nearly half of the entire U.S. economy and matching the combined GDP of Germany, Japan and India.

Among the Russell 1000, Palantir Technologies Inc. PLTR emerged as the top performer of the week, surging over 40%. Conversely, New York Community Bancorp NYCB lagged behind, plummeting nearly 30% amid concerns surrounding its commercial real estate portfolio.

Tesla’s position among the Magnificent Seven group of largest S&P 500 companies is in jeopardy as its market cap falls, placing it ninth. Eli Lilly Company and Berkshire Hathaway Inc. have surpassed Tesla, with Broadcom closely trailing and poised to join the ranks. Tesla’s recent stock decline reflects challenges that include slowing electric vehicle demand.

Facebook turned 20. Investing $1,000 in Facebook at its IPO in May 2012 would have grown to $10,180 by February 2024, reflecting a significant return. Despite controversies and challenges, Facebook’s parent company Meta Platforms has shown resilience, with strong financial performance and strategic acquisitions contributing to its growth.

Novo Nordisk's weight-loss drugs Wegovy and Ozempic are driving a transformation in the food industry as CEOs adapt to the decreased appetite these medications cause. This has led to a push for healthier food options in response to the changing consumer demand, affecting companies from Walmart Inc. to Chipotle Mexican Grill Inc.

Lastly, Billionaire Bill Ackman launched Pershing Square USA, a proposed fund on the NYSE aimed at retail investors, with no minimum investment requirement. This move democratizes access to hedge fund investments, leveraging Ackman’s notable successes.

Preview

Economic Data

Monday: Monthly U.S. federal budget
Tuesday: Consumer price index and Core CPI
Wednesday: None scheduled
Thursday: Initial jobless claims, Empire State Manufacturing Survey, Import price index, Home builder confidence index, and US retail sales
Friday: Housing starts, building permits, producer price index, Consumer sentiment (prelim)

Earnings

Monday: Airbnb, Delta, Avis Budget Group
Tuesday: AutoNation, Molson Coors Berage Co, Boston Beer Company
Wednesday: Altice USA, AppLovin, BJ's Restaurants, Barrick Gold, Kraft Heinza, Occidental Petroleum Corp, Redfin
Thursday: Oatly, Coinbase Global
Friday: Cinemark Holdings, DraftKings, Healthcare Realty Trust

Taking Portfolios Worldwide

Favored Global Stock Picks

Citi is sharing a list of its “high-conviction” equity ideas.

The bank believes these companies could be good for investors looking to build positions to “generate alpha.”

According to Citi, earnings growth opportunities are all around the world. Specifically, the bank argues that cyclical companies outside the US might wow investors.

Look Down Under

Two of the high-conviction names come from Australia.

Mineral Resources (MALRY) is a mining services firm based in Western Australia. The company generates steady revenue from commodities like iron ore and lithium. Citi’s target price for Mineral Resources gives it a 20% upside.

Stockland (STKAF), an Australian real estate company, is also on the list. The company rents out retail and office spaces. Citi sees the stock trading at a discount and predicts a 12% upside.

Year of the Dragon

Citi foresees a China recovery in 2024.

To play the comeback, the bank is eyeing European investment group Prosus (PROSY). The group is based in Amsterdam, but it has significant exposure to China. Citi says Prosus executives are honing in on capital allocation and transparency. The bank gives Prosus a 52.5% upside.

The S&P 500 wowed the world with a 24% return last year, but Citi encourages investors to expect growth opportunities in other parts of the globe as well.

Which global stock will have the best 2024?

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Slimming Down

Processed Foods Are Under the Microscope

Skepticism of processed foods is growing. Experts are trying to predict the effect this will have on processed food stocks.

Processed foods play a large part in American and British diets. Research shows that over 57% of food consumed in these countries is considered “ultra-processed.” The term applies to products with ingredients that “aren’t normally found in a domestic kitchen.”

US officials put out new diet guidelines every five years. There’s a growing belief that the advice in 2025 will put processed foods on the chopping block.

Cutting Costs and Saving Tastes

Big food companies are great at finding ways to preserve flavor while reducing costs.

Coca-Cola (KO) and Pepsi (PEP) swapped out sugar for high-fructose corn syrup decades ago. Customers kept drinking the sodas, and investors saw profits grow.

Snack makers have juiced margins by subbing animal fats for lower-cost oils.

Advocates say that even some so-called “healthy foods,” like plant-based meat, are ultra-processed to mimic animal products.

Skinny Earnings and Hungry Investors

Research from Barclays aims to quantify a potential impact on food makers if consumers in the US cut down on ultra-processed snacks.

The bank estimates that if Americans swapped out one processed food for a fresh meal or snack once a day, it would dent major food company sales by 7%.

Between the push against processed foods and new weight loss drugs, the food and beverage industry is certainly feeling some pressure.

How do you think the food and beverage industry will perform in the next year?

Don’t Miss the AI Boat

Self-Driving Ships

When you think of the impact of AI, you might not think of the shipping industry. Recently, AI technology has been used to develop self-navigating ships.

The shipping industry has long been plagued with high fuel prices, safety concerns, and employee shortages. AI-automated water vessels could provide a much-needed solution to those problems.

According to Emergen Research, the market for autonomous ships was $4.13 billion in 2022 and is expected to grow to $10.1 billion by 2032.

Customizable Technology

Avikus, a subsidiary of HD Hyundai (267250), successfully navigated an LNG carrier on an autonomous transoceanic trip in June 2022. This was the first time a large ship autonomously completed a journey over 10,000 km.

This successful voyage opened the door for increased implementation and commercialization of autonomous technology throughout the industry. The technology can be customized to existing ships and help provide up to 90% cost savings.

AI implementation comes at a huge up-front cost to shipping companies. But, it can greatly improve margins over the long run, according to Carol Schleif of BMO Family Office.

The Big Names

According to Schleif, the companies on top of the autonomous shipping AI game are the same ones at the top of the shipping industry as a whole. These companies include AP Moeller-Maersk (AMKBY), Yara International (YARIY), and Mitsui O.S.K. Lines (MSLOY).

Freight companies like J.B. Hunt (JBHT), CH Robinson (CHRW), and Expeditors International (EXPD) also stand to benefit from the AI revolution.

Analysts say that the shift toward autonomous shipping is here to stay. Investors can jump in when they’re ready.