MarketBites Daily Investment Commentary: One Ship To Rule Them All I Vizio Goes Public

Stock Market Commentary for 3/25/2021:
  • Cyclical and Value stocks led the market higher.
    Last week, new jobless claims fell to their lowest level since the pandemic first began.

    – Fed Chair Jerome Powell hinted at one day removing the stimulus that has boosted the market during the pandemic. The fact that stocks dropped on this news, highlights the vulnerability of this market.
    – Oil prices fell nearly 4% on Thursday, as demand concerns (again) mixed with fresh Coronavirus lockdowns.


  • Stock Talk:
    The Winner of the Day: Darden Restaurants
    Darden Restaurants, most famous for owning “Olive Garden” and “LongHorn Steakhouse,” has been a late re-open trade bloomer. As vaccinations continue to rise and states open up, it appears the firm has finally gained interest from investors.What’s Moving Pre-Market: Vornado Realty
    Vornado Realty has been on a tear since its last earnings. Influential momentum from its New York City office and retail portfolio, has been the main catalyst to the near 30% run-up in stock price.

    The Loser of the Day: Discovery
    Discovery and ViacomCBS continued their multi-day slide on Thursday. Concerns that neither firm is equipped to take on big streamers has investors worried about the long haul.


  • The Data Room:
    – Per the CDC, 87.3 million Americans have received their first round of vaccinations.

– By Raymond Kanyo

 


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Top Investment Story #1: Blocked

What is Happening?

A 200,000-ton cargo ship has been stuck in the Suez Canal for 3-days. This trade route handles 12% of the planet’s seaborne trade, and each passing day disrupts more than $9 billion worth of goods being transported.

Why does this Matter?

Suez, a shortcut through Egypt from the Red Sea to the Mediterranean, is one of the most important canals globally. It makes it possible to travel from the Middle East and Asia to Europe by sea, without sailing around Africa. Such a route slashes shipping times and costs.

The Suez Canal incident highlights the vulnerability of global supply chains that have already been weakened from the Covid-19 pandemic. While the situation should be resolved soon, some investors see this an investment opportunity called “re-shoring.” The re-shoring trade is predicated on the idea that companies need to diversify supply chains away from a handful of main Asian countries. (Similar to Intel investing $20 billion to begin building chip-plants in America.)

Bank of America’s Andrew Obin, sees an opportunity for some industrial stocks to benefit from this trend. He highlights Parker-Hannifin (PH), Rockwell Automation (ROK), Eaton (ETN), Fortive (FTV), Emerson Electric (EMR), and PTC (PTC) as potential beneficiaries of re-shoring.

Are there any casualties of the Suez incident? Braemar ACM estimates that roughly 2% of the world’s daily oil consumption is currently stuck in the canal. Among many, Chevron (CVX) and Royal Dutch Shell (RDS.A) are believed to have vessels blocked.

The Takeaway:

The pandemic and the Suez Canal incident both highlight the vulnerability of global supply chains. Re-shoring has already begun, and some stocks stand to benefit from this trend.

Liked this story? Forward it to your friends 

– By Raymond Kanyo

– Published in MarketBites Daily Newsletter


Meet the Authors
Top Investment Story #2: Vizio IPO Flops
What is Happening?

Television maker, and former industry rising star, Vizio went public on Thursday. The company trades under the ticker $VZIO.

Why Does This Matter?

Vizio is unique, because it focuses on both hardware and software. A majority of its revenues come from its business in selling flat screen-TVs, but its streaming services paid via advertising, is what fuels the firm’s growth.

Television and home entertainment margins have been shrinking for a decade, and Vizio only saw 7% sales growth in the business unit year over year. Although its streaming package is only about 10% as large as its hardware business unit by revenues, it is growing at a 133% rate year over year. This is an encouraging sign for the firm and investors alike.

$VZIO opened at $17.50, below its $21 IPO price. The stock finished more than 16% lower on Thursday.

The Takeaway:

Vizio is a household name for TVs, but analysts don’t see it becoming a household name for its stock. The market is extremely crowded, and it is unlikely that its current growth rate for its software business unit is repeatable.

– Published in MarketBites Daily Newsletter


Raymond grew up in Budapest, Hungary, where he played tennis for the Hungarian Junior Davis Cup team. At the age of 16, he received the Davis United World College Scholarship, which was established by legendary investor Shelby Cullom Davis, allowing him to attend the Taft Boarding School in Watertown, CT. After Taft, Raymond received a Presidential Scholarship to the Robins School of Business at the University of Richmond, where he studied Quantitative Economics and Finance. Raymond is a CFA Level III Candidate. Prior to joining Taylor Hoffman, Raymond worked at various financial institutions in the insurance, asset management, and financial consulting space. Outside of the office, Raymond enjoys playing tennis at ACAC and Westwood Country Club.

Raymond Kanyo
Product Manager & Investment Analyst

Jack graduated from the Robins School of Business at the University of Richmond with concentrations in Marketing and Finance in 2019. Prior to joining Taylor Hoffman, he worked in high-growth B2B SaaS marketing; assisting Fortune 100 firms to improve their web performance experience. A Long Island New York native, Jack’s hobbies include passionately supporting the Mets and Islanders, and he enjoys skiing whenever he can.

Jack Dunne
Investor Education Specialist
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