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Category: blogSource: theflyonthewallMay 26th, 2021

The Island of Death: Visiting the gulag where my grandfather was tortured, but didn"t officially exist

My grandfather was held at Bulgaria's most notorious gulag. This summer, I saw it for the first time. A Belene survivor crosses the bridge across the Danube that connects the town of Belene and Persin island in 2015. Dimitar Dilkoff/AFP via Getty Images) This summer, Tana Ganeva traveled to Belene, Bulgaria's most notorious prison camp, where her grandfather was held in the 1950s. Bulgaria has effectively buried the history of its Communist-era gulags, where thousands were starved, tortured, and killed. Ganeva's grandfather attempted to escape Bulgaria four times, before making it to California. See more stories on Insider's business page. The island of Persin is a bird-watcher's paradise. Set on the Danube River, which divides Bulgaria and Romania, it's a nature park covered in wetlands and home to hundreds of rare bird species: the spoonbill, the pygmy cormorant, the corncrake, as well as herons, eagles, storks, and pelicans. Amid the natural beauty, it's jarring to consider that this was the location of a concentration camp where thousands of Bulgarian political prisoners were brutalized and killed from 1949 to 1953 - and in some cases for years after that. Though it's officially known as Belene after the quiet Bulgarian village that sits 750 feet away on the mainland, old-timers here call it by another name: the Island of Death.My stepgrandfather, Georgi Tutunjiev, was sent here at age 24 and spent four years and three months interred at Belene after someone (he suspected his ex-wife) told the authorities of his plan to escape the country. In his notebooks - he had planned to write a memoir about Belene but never did before he died in 2011 at 87 - he remembered the place as "brutal facilities for re-education," where he'd endured "indescribable physical and psychological abuse." He finally managed to escape Bulgaria in 1966 and settle with my grandma in California. In 1989, my parents and I left Bulgaria and joined my grandparents in California, thanks to the family-reunification policy. While many survivors of trauma shut down, my grandfather never stopped talking about the gulag. He seemed to have an unending loop of stories about Belene. For my immediate family, it could be exhausting, and we were alarmed to discover his extensive gun collection, which my grandmother gamely dismissed as a coping mechanism. But guests who came to the house were often riveted by his dark tales, which he mixed with his sense of humor. "Jeko! The Communistie shot you!" he'd shout at his terrier mix, and the dog would sprawl on his back, playing dead. An aerial view of Persin island. The gulag was known as Belene, after the nearby town. Tsvetomir Nikolaev I've come to the town of Belene on a brutally hot day in August for a tour of the Island of Death. I meet Nedyalka Toncheva, who works for the Belene Island Foundation, a nonprofit that organizes tours of the island, close to the bank of the Danube.We cross a rickety water bridge on foot and then jump aboard a Jeep driven by a 24-year-old Belene native named Peter. Toncheva, who is 35, is passionate and knowledgeable about the island's flora and fauna. Every few minutes, she tells Peter to stop the car to point out a roosting stork or a water eagle. She talks about her plans to make Persin a tourist destination comparable to Borovets, a ski resort with luxury hotels in the Rila mountains; or Koprivchitsa, a living museum honoring the Bulgarian rebels who mounted an uprising in 1876 against the Ottoman Empire.In the three decades since the fall of communism, Bulgaria has effectively buried the history of its many gulags, which operated mostly in the 1950s during the early, and most violent, days of Communist rule in the country. In Belene itself, many lower-level guards came from the village and a former mayor was also the gulag's first superintendent. It's not surprising that the village doesn't advertise its history.After 1989, survivors who had been forced to sign documents promising to never talk about the camps started speaking out. For a brief time, they became the subjects of documentaries and newspaper profiles. But soon, the consensus was that it was better to move on. An interior minister tasked with investigating the camps instead secretly ordered a purge of thousands of pages of documents - 40% of the government record. While Bulgaria's defeat of the Ottomans is central to the national identity, and much is made of the fact that Bulgaria saved its Jews during the Holocaust, the memory of the Communist era is more fraught. Georgi Tutunjiev, the author's grandfather, in around 1977. Tana Ganeva Peculiar for a tour, most of our stops lead us to what's not left of the camp. The shacks where prisoners slept have been razed - there's no trace of them.At the entrance, in what is now an open field, an inscription says, "To be human is to have dignity." From inside the camp - what would have been visible to the internees - the engraving says, "If the enemy doesn't surrender, he is destroyed." But no one I've talked to knows whether it's the original or has been recreated. There are a few abandoned, falling-apart buildings, but those were built in 1959, six years after the camp's official (but not real) closing, when it was converted into a prison, in part to kill rumors that it had operated as a secret gulag. Todor Zhivkov, the Communist premier who took power in 1954 and stayed on until 1989, reopened it in the 1980s to detain Muslims who refused to take on Slavic names in place of their own - a disastrous bid to assimilate them. I ask Toncheva whether there's a list of everyone who was held in the camp. I'm thinking of my grandfather and wondering whether there's any documentation. She tells me everyone who comes here for the camp asks the same question."There's no way to know, no list," Toncheva says, apologetic. "There's almost no proof the camp even existed."'Perfectly calculated by Satan himself'The first contingent of 300 men arrived at the Belene camp in the summer of 1949, five years after the 1944 Communist coup. My grandfather, then 24, arrived that first winter. A camp for women was founded on an adjacent island soon after.It was modeled after Josef Stalin's gulags in Siberia. Most of the prisoners had been dragged from their homes by the military police and sent here without trial. (Estimates vary, but 20,000 to 40,000 people were thought to be murdered by the Bulgarian Communist Party.) Even Stalin eventually warned them to scale down the killing of prominent oppositional figures or risk creating martyrs.The first wave of prisoners had to hack through the unpopulated island and build small shacks that were so crowded the prisoners didn't have room to lie down. In his history of the camp, Borislav Skotchev wrote that the island was dotted with towers manned by guards with machine guns. A survivor of Belene during a commemoration ceremony in 2015. Dimitar Dilkoff/AFP via Getty Images) The men held here included the former leader of the Social Democrats, Orthodox priests (many in their 70s), and the mayor of Bulgaria's capital, Sofia. Tsveti Ivanov, the editor of the newspaper Svoboden Narod, or Free People, was sent to Belene after serving 10 months in prison. He was beaten so brutally that he got tetanus from his wounds and died in the compound. Much of what we know about the place comes from survivors' memoirs. They were fed a thin soup, sometimes with a handful of beans thrown in. Their bread ration - moldy or stale when it made its way to them - was small, and could be withheld by the guards as punishment. Sometimes they got tea. My grandfather told me that, in the winter, both the soup and the tea were given to them already frozen.When Toncheva takes us on a brief walk to go look at storks, the ground gives off wet heat, and brambles and thorns claw at us, as if the island is alive and doesn't want us there. I think of the people who had to work days and nights, in sweltering summers, devoured by mosquitoes. It's unbelievable that anyone survived.An internal CIA document described the grim situation of starving prisoners. "A frequent sight is that of a prisoner eating raw green leaves and roots," it said. "To be caught doing this, however, would result in 10 days in detention in a dungeon for such an offense." The lucky ones got packages from family, though those were often taken by guards. Many had little choice but to choke down the rotting carcasses of wild cats, killed and skinned for their fur by the villagers, or pick through horse dung for undigested barley. According to a CIA information report from March 13, 1952, during one brutal winter 30 prisoners died of cold or starvation."It was an Inferno circle, perfectly calculated by Satan himself," Liliana Pirinchiva, one of the female survivors of Belene, wrote in her memoir. "We were reduced to skeletons." A group of Bulgarian anarchists. Tsvetana Dzhermanova Then there were the guards, who brought an especially sadistic approach to their work. Some would chase packs of prisoners on horseback, letting their rifles off "as if we were a flock of sheep," wrote Stefan Botchev, a survivor. When he got a severe case of scabies, the mites burrowing into his skin, he was locked up in a shed alone because the guards didn't want him to infect the cows. He recalled seeing a beating so severe that a prisoner's spine was broken, turning him into a "reptile crawling on the ground."Kouni Genchev Kounev, the chairman of the Bulgarian Youth Agrarian Union who also survived Belene, recalled one especially brutal punishment, in which the guards would pull back a prisoner's head and strike him in the trachea. They called it the "sword stroke."Years later, Krum Horozov, a survivor, would draw water colors of the camp from memory - it's virtually the only visual documentation that exists. In 2011, six years before his death, Horozov wrote: "And when we die, which will be soon, who will remember what happened on that island in the 1950s, and will they know that people were sent there without a trial and sentence?"Lilia Topouzova, a historian in Toronto who writes about the history and the memory of the camps, recalls meeting Horozov at an academic conference; he was trying to give away copies of his drawings of Belene to university students, but they avoided him as if he were a pesky street vendor.The CricketAt 93, Tsvetana Dzhermanova is the last known survivor of the women's camp, which was known as Shturets, or Cricket. We're sitting outside her home in the mountain village of Leskovets, and she's talking so fast I wonder how she manages to breathe.She smiles and laughs a lot, and she reminds me of my grandfather, who also spoke with the speed of a motorboat, frantic to tell his story."I promised to outlive the Communistie, and here I am!" she boasts. (My grandfather also took an understandable delight at outliving the Communistie. "I survived the Communistie, but I won't survive old age," he once told me, when I was 25 and had no idea about either.) Tsvetana Dzhermanova. Tsvetana Dzhermanova Dzhermanova was an anarchist in the 1950s, and still is today. "That's my personal ideology," she says. "I'm not sure humans are evolved enough to make either anarchism or socialism work the way they should, but for me, anarchism is it. Because I value freedom, family, friendship, and love."When she first heard about anarchism as a teenager, she asked her mother what it meant. "Anarchists are the people all regimes persecute," her mother had replied. That sold her. Dzhermanova joined a village group. She had no designs on power (detesting it) and mostly spent her time reading anarchist literature and working on a community vegetable garden. She estimates that 800 anarchists from the town were swept up in a night and sent to the gulags."We sang songs while we worked," Dzhermanova tells me. "That helped." Last spring the sprightly nonagenarian made the three-hour trip to Belene to speak with a group of students about the camps. "They had no idea about this. They were really surprised," she says. "No one had ever talked to them about it, and they don't learn about it in school."'Out of Fashion'Toncheva and our driver, Peter, walk through a falling-down building that was constructed in 1959, in part to hide evidence of the camp. It's covered in bird shit. Plant life is taking over its rotted remnants, and old decayed furniture has been abandoned here and there. We talk about how nobody talks about the camp.Peter tells us that despite having spent almost his entire life roughly 750 feet from Persin, in Belene village, he learned about the camp only two weeks earlier, when Toncheva hired him as a driver for her tours."To think they only gave them bread and water, and made them work so hard," he says, shaking his head in disbelief. A crumbling building built on the site of Belene. Stoyan Nenov/Reuters As far as Toncheva knows, no one from her family was held here, but she remembers asking her grandmother about the island when she was a teenager and again after reading the memoirs of survivors. "Shhh. Don't talk so much about this," her grandmother would say. "You don't want to bring trouble."There are rumors of a mass grave near Persin. Mikhail Mikailev, the head of the Belene Island Foundation, wants to find it. But money for the equipment required to find and dig up the remains eludes this two-person staff.Unlike Peter and Toncheva, my parents, who were born in the mid-1950s and grew up in Bulgaria, tell me that in the 1970s and 1980s, all their friends in Sofia knew about Belene. "We all heard the stories," my mother says.But for the authorities, maintaining official denial was worth murder.In 1969, the celebrated Bulgarian writer Georgi Markov defected to the West, where he wrote about the regime's abuses. In one essay, Markov described traveling on a boat down the Danube and approaching Belene. "I remembered how, feet dangling over the edge of the boat, a youth with a guitar once sang a strange song: Danube, white river, how quiet you flow / Danube, black river, what anguish you know." A view of Persin island. Tsvetomir Nikolaev On a rainy afternoon in London, a man jabbed the tip of his umbrella into Markov's leg. Later, Markov noticed what looked like a small bug bite but didn't think much of it. A few days later he was dead, most likely poisoned by the Bulgarian secret service.Before my visit to Belene, I met Topouzova, the historian, over Zoom to talk about the erasure of the camps in Bulgaria's consciousness. While former generals wrote best-sellers, the owner of a prominent bookstore dismissed any interest in survivors' memoirs - they were "out of fashion," he had told her.It was gaslighting in its purest form. And it showed how we're all so prone to the "just world" fallacy, a phenomenon where if something is too horribly unjust, the human brain just kind of moves on. It's not all that hard to bury inconvenient truths."It turned out that aging men and women with fragmented memories of bygone violence did not make for the faces of change," Topouzova wrote in a recent paper titled "On Silence and History" for the American Historical Association. "The interned were rendered nonexistent - their experiences and memories fated to vanish along with the files." A pile of stonesNations define themselves by their monuments. The memorial in downtown Manhattan demands that we never forget the victims of 9/11. In the past few years, American activists have torn Confederate statues from their perches, signaling a break with the passive acceptance of the history of slavery. Yet grappling with unpleasant history isn't easy. It was only in 2018 when a museum honoring the Black victims of lynching opened in Alabama. The 1619 Project, which posits that the history of the United States is rooted in slavery, has spurred a massive backlash. School districts have banned children's books about Rosa Parks. Vaunted democracies are as likely to try to bury inconvenient truths as former communist states. At an exhibition in Sofia in 2009, Belene survivors look at images of the gulag's victims. Stoyan Nenov/Reuters In Bulgaria, there are monuments everywhere. From the smallest village to Sofia, the heroes of Bulgaria's uprising against the Ottoman Empire are eternalized in stone. In Plovdiv, a giant sculpture overlooks Bulgaria's second-largest city that honors "Alyosha," an everyman Soviet soldier who helped "liberate" Bulgaria in the 1940s - even though many Bulgarians see that period as Soviet imperialism, much like the Ottoman Empire's 500 years of occupation.The victims of Belene and the other camps have no such honor. The Belene foundation does the best it can. They helped organize an art exhibit, where Korozov's pencil drawings were tacked onto the walls of the decaying structures that had been erected to mask evidence of the gulag. A man places photos of famous victims of Soviet policy in front of the Monument to the Soviet Army in Sofia, Bulgaria in 2014. Hristo Vladev/Pacific Press/LightRocket via Getty Images There is one modest monument on the island. It's an abstract stone structure, and you'd have no idea what it was if you didn't already know the history. The original idea was to build a monument that listed the names of all the known internees, something like the Vietnam wall on the Mall in Washington. But the survivors and their families who pooled their resources to build it ran out of money, and no one, including the Bulgarian government, stepped in to help. (The survivors also hoped to open a museum and to recreate the shacks where they were held, but that hasn't happened either.)My grandfather's escape Dzhermanova, the 93-year-old anarchist - and eternal optimist, apparently - has hope that younger people will dig up the buried history.As for my grandfather, his ex-wife (or whoever it was who betrayed him to the authorities) was right that he wanted to escape Bulgaria.After his release from Belene in 1953, that resolve was so much stronger. "After 4 years and three months in the Island of Death, I became determined to go to my real home: America," he explained in his notebooks. The author with her grandfather and grandmother, Tsvetana Tutunjieva. Tana Ganeva As he detailed it, it would take four harrowing attempts. Soon after his release from Belene, he managed to make it into Yugoslavia during a "sabor" - a temporary loosening of borders so family and friends in the two countries could see each other. But he got caught and was thrown into a Yugoslavian jail.From there, he organized an inmate breakout after bribing the guard dog, Jeko, with his dinner. But he and the other prisoners were caught in the woods, and the Yugoslavian authorities gave them up to the Bulgarian authorities in exchange for 10 cows. "They weren't even very good cows - scrawny," he wrote.Several years later, he tried to cross Bulgaria's mountainous border into Greece, but he was caught once again.Finally, he made it into Austria and then Germany by clinging to the underside of a freight train. And then on to California, where he gave his new dog a familiar name: Jeko.Tana Ganeva writes about policing, prisons and criminal justice. She's currently working on a book about escapees from the Soviet bloc. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderSep 25th, 2021

4 Value Picks From the Top-Ranked Life Insurance Industry

Given the Life Insurance industry prospects, undervalued stocks like LNC, ATH, RGA and BHF have the potential of generating better returns than other players. The Zacks Life Insurance industry is housed within the top 21% of the 255 Zacks industries. The industry players are poised to benefit from product redesigning and repricing along with increased automation. It currently carries a Zack Industry Rank #54. The industry’s earnings estimates for the current year have been revised 16.2% upward in a year’s time.The industry that suffered last year due to the pandemic has been gaining pace. The industry has gained 8.8% year to date compared with the Finance sector’s increase of 43.2% and the Zacks S&P 500 composite’s 35.1% rally.Image Source: Zacks Investment ResearchIncreased vaccinations, improving employment and an encouraging economic growth outlook instill confidence in the industry. Economic growth as reflected by GDP increased at an annualized rate of 6.5% for the second quarter.Life insurers are sensitive to interest rates. They invest the premium earned to meet the contractually guaranteed obligations of policyholders. A low rate weighs on income from investment. Thus, insurers are directing their funds into alternative investments like private equity, hedge funds and real estate to navigate the challenges. The rate is expected to remain low until 2023, as indicated in the latest FOMC meeting.The industry players are also refraining from selling long-duration term life insurance. The players are opportunistically moving away from guaranteed savings products toward protection products of unit-linked savings products.The increased adoption of technologies like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing, and robotic process automation aid in seamless underwriting and claims processing, in turn improving operational efficiency.Per a report by IBISWorld, the $886.7-billion U.S. Life Insurance & Annuities Market represents 4.2% growth in 2021. The players are well poised to capitalize on the opportunity, banking on their core strengths. Sales should benefit from increasing demand for protection products.  The industry is currently undervalued compared with the Zacks S&P 500 composite as well as the Zacks Finance sector. The price-to-book (P/B) ratio, the best multiple for valuing insurers because of their unpredictable financial results, is 1.2, lower than the Zacks S&P 500 composite’s 6.9 and the sector’s 3.3. Such a market positioning hints at more room for upside in the coming quarters.Image Source: Zacks Investment ResearchImage Source: Zacks Investment ResearchValue PicksGiven the industry prospects, let’s look at a few stocks that are currently undervalued and have the potential of generating better returns. Our proprietary Value Score makes the daunting task easier.The Value Score helps find attractive value stocks. These value stocks have a long history of showing superior returns. Back-tested results have shown that stocks with a solid Value Score and favorable Zacks Rank generate better returns.With the help of the Zacks Stock Screener, we have selected five life insurance stocks with a favorable Value Score of A or B. Each of these stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.These stocks have also witnessed positive estimate revisions in the past 60 days, reflecting analysts’ confidence in the companies’ operational efficiency. Shares of each of these life insurers have outperformed the industry in a year’s time and are cheaper than the industry average.Image Source: Zacks Investment ResearchBased in Philadelphia, PA, Lincoln National Corporation LNC is a diversified life insurance and investment management company. This diversified life insurance and investment management company is poised to grow on the back of strong performance of the Life Insurance segment. The company has been making changes in its sales mix to emphasize on sales, without a long-term guarantee to improve profitability. Improved economic backdrop and an expanding set of retirement solutions products should drive the Retirement business. The company is prudently managing costs to preserve margins.Shares of the company have gained 120.3% over a year. The stock is currently trading at a 0.6 price to book multiple.Bermuda-based Athene Holding ATH is a provider of insurance and reinsurance retirement products across the United States and Bermuda, and is poised for long-term growth driven by continued focus on organic channels along with a strong relationship with Apollo. The portfolio of capital-efficient products and the addition of reinsurance partners are likely to offer improved retirement solutions. The company expects healthy organic growth to continue in 2021. It also estimates total organic inflows to likely meet or exceed $30 billion in 2021.Strategic buyouts and block reinsurance transactions with several companies should fuel inorganic growth.Shares of the company have gained 105.7% over a year. The stock is currently trading at a 0.61 price to book multiple.Chesterfield, MO-based Reinsurance Group of America RGA is a global provider of traditional life and health reinsurance as well as financial solutions, and is poised to benefit from the changing life reinsurance pricing environment, expanding business in the pension risk transfer market along with disciplined capital management.Significant value embedded in the in-force business is estimated to generate predictable long-term earnings. Reinsurance Group expects longevity insurance to see long-term growth in the Canadian market as it is projected to see steady demand.Shares of the company have gained 19.2% over a year. The stock is currently trading at a 0.56 price to book multiple.Charlotte, NC-based Brighthouse Financial BHF boasts one of the largest providers of annuity and life insurance products in the United States, and is poised to grow on a compelling suite of life and annuity products, individual insurance, and focus on transitioning the business mix to less capital-intensive products.The company remains focused on ramping up new sales of life insurance products and expanding the distribution network, aiming to become a premier player in the industry. It targets total annual annuity sales of more than $8.5 billion and $250 million of total life sales in 2021. Though the company’s Fixed Rate Annuity sales are anticipated to be lower, it projects growth in Shield and Variable Annuities in 2021.Given solid execution of strategies to drive profitability, enhanced financial strength and flexibility, the company targets to pay back $1.5 billion of capital to shareholders by 2021-end.Shares of the company have gained 67.8% over a year. The stock is currently trading at a 0.23 price to book multiple. Time to Invest in Legal Marijuana If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027. After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%. You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.Today, Download Marijuana Moneymakers FREE >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lincoln National Corporation (LNC): Free Stock Analysis Report Reinsurance Group of America, Incorporated (RGA): Free Stock Analysis Report Athene Holding Ltd. (ATH): Free Stock Analysis Report Brighthouse Financial, Inc. (BHF): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 24th, 2021

Here"s Why You Should Hold on to Envestnet (ENV) Stock For Now

Envestnet's (ENV) business model ensures solid asset-based and subscription-based recurring revenue generation capacity. Envestnet, Inc. ENV has an impressive Growth Score of A. This style score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Envestnet’s revenues are expected to register 17.2% growth in 2021 and 12.7% in 2022.Factors That Bode WellEnvestnet’s business model ensures solid asset-based and subscription-based recurring revenue generation capacity. Asset-based recurring revenues of $170 million increased 39% and subscription-based recurring revenues of $113 million were up 7% in the second quarter of 2021.Envestnet, Inc Revenue (TTM) Envestnet, Inc revenue-ttm | Envestnet, Inc QuoteThe company’s technology-enabled services are expected to register handsome growth as trends such as increasing demand for personalized wealth management services and guided advice in a cost-effective manner are creating significant market opportunities.Envestnet continues to focus on technology development to improve operational efficiency, increase market competitiveness, address regulatory demands and cater to client-driven requests for new capabilities. The company’s technology design facilitates significant scalability.Debt Woe StaysEnvestnet's total debt to total capital ratio of 0.48 at the end of the second quarter of 2021 was higher than the industry’s 0.37. A higher debt, as a percentage of total capital, indicates a higher risk of insolvency.Envestnet's cash and cash equivalent balance of $370 million at the end of the quarter was well below the long-term debt level of $846 million. This underscores that the company doesn’t have enough cash to meet this debt burden.Zacks Rank and Stocks to ConsiderEnvestnet currently carries a Zacks Rank #3 (Hold).Some better-ranked stocks in the Zacks Business Services sector are ManpowerGroup MAN, Cross Country Healthcare CCRN and Genpact G, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The long-term expected earnings per share (three to five years) growth rate for ManpowerGroup, Cross Country Healthcare and Genpact is pegged at 24.2%, 9.9% and 14.7%, respectively. Time to Invest in Legal Marijuana If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027. After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%. You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.Today, Download Marijuana Moneymakers FREE >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report ManpowerGroup Inc. (MAN): Free Stock Analysis Report Genpact Limited (G): Free Stock Analysis Report Envestnet, Inc (ENV): Free Stock Analysis Report Cross Country Healthcare, Inc. (CCRN): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 24th, 2021

“The Housing Market Is Almost Frozen" - An Even Bigger Problem Emerges For China

“The Housing Market Is Almost Frozen" - An Even Bigger Problem Emerges For China With Wall Street's fascination with risk associated with Evergrande's default fading fast, and the sellside pumping out charts such as this one showing that the contagion in China junk bond market is unlikely to spillover globally... ... the smartest men in the room are once again missing the forest for the trees because as we explained in detail over the weekend, and again reminded earlier this week... Remember: for China this is not about Evergrande, it's about preserving confidence in the property sector — zerohedge (@zerohedge) September 22, 2021 ... for Beijing the real risk is not whether foreign creditors are impacted - in fact Evergrande's willingness to default on offshore bondholders while preserving operational cash flow and continuing to build homes shows just how much China "cares" about Blackrock's P&L - but how an Evergrande crisis could impact China's massive, $60 trillion, property sector, something which CCB International, the Chinese investment bank, touched on in a recent research note in which it said that Evergrande "contagion risk has spread from financing to land sales, property sales, project deliveries and home prices." And indeed, as the FT reports this morning, some very ominous cracks in China's property market - which according to Goldman is the largest asset class globally - are starting to emerge. In a letter to the Shaoxing municipal government in eastern Zhejiang province, the local office of developer Sunac China appealed for “policy assistance” as it was struggling through what it called a "turning point in China’s real estate industry." "We have never experienced such a radical change in the external environment," Sunac’s Shaoxing office said, pointing to a 60% year-on-year fall in home sales over the summer. "The market is almost frozen," it added in the letter, which was first reported by the Financial Times. “The radical change in policy and environment has seriously disrupted our business and made it very difficult to maintain normal operations.” The sudden, sharp collapse in China's property market is shown in the charts below which reveal that the amount of actual land transactions was not only well below the land supply in recent weeks, an unprecedented divergence, but that volumes were 65% below year-ago levels as potential buyers are suddenly terrified of investing in real estate as the Evergrande fate remains in limbo, with some worried that some of the 65 million empty apartments could hit the market and lead to a crash in property values. While the plunge in transactions is demand-induced, there are also concerns that an Evergrande insolvency and eventual collapse could lead to a supply crunch. As reported earlier, in July a Chinese city halted sales at two Evergrande projects alleging the troubled developer misappropriated funds by only depositing a portion of the proceeds from housing sales into the escrow accounts, according to a local government statement.  To ensure Evergrande doesn’t divert these funds, the housing bureau in Nansha district created an escrow account under its own name this month to take in proceeds from Evergrande homebuyers, cutting off the developer’s direct access to the money. A lack of funds has already led to a construction halt on some unfinished housing properties, sparking social unrest among buyers. In Guangzhou, buyers surrounded a local housing bureau earlier this month to demand Evergrande restart construction. As we discussed over the weekend, one of the most troubling downstream consequences from chaos in the property sector would be social unrest, and as we noted, maintaining social order has always been a key priority for the Communist Party, which has no tolerance for protests of any kind. In Guangzhou, homebuyers surrounded a local housing bureau last week to demand Evergrande restart stalled construction. Disgruntled retail investors have gathered at the companys Shenzhen headquarters for at least three straight days this week, and videos of protests against the developer in other parts of China have been shared widely online. Without a social safety net and with limited places to put their money, Chinese savers have for years been encouraged to buy homes whose prices were only ever supposed to go up (similar to the US before 2007 when even idiots like Ben Bernanke said that the US housing market never goes down). Today, buying a house (or two) is a cultural touchstone. And while housing affordability has become a hot topic in the West, many Chinese are more likely to protest falling home prices than spiking ones. Which brings us to a must read report from Goldman's Kinger Lau published overnight and focusing entirely on China's property sector - instead of just Evergrande - where it addresses a glaring dilemma: Beijing's desire to regulate and deleverage the housing sector even as it keeps property prices rising, a dynamic we summarized concisely earlier this week inside a tweet: Markets used to focus on China's "impossible trinity" but it's time to shift to China's "impossible dilemma": you can't have deleveraging/tightening/"3 red lines" AND rising home prices at the same time. China wants both, will have to pick one — zerohedge (@zerohedge) September 22, 2021 In his must read report (available for professional subscribers in the usual place) Goldman's Lau explains that what is going on with Evergrande, and in fact the turmoil gripping China's broader property sector is largely self-inflicted as "regulatory actions in China Internet have resulted in more than US$1tn market cap loss on the tech sector since mid-Feb, but in the past two weeks, investor focus has shifted to the US$60tn China property market which is linked to ~20% of Chinese GDP and represents 62% of household wealth." Specifically, Goldman notes that more than 400 new property regulations (shown in the appendix) that are largely tightening in nature have been announced ytd to restrain housing market activity, spanning supply, demand, funding, leverage, to price control measures. It is these measures that have contributed to a 14% year-on-year fall in property sales and $90 billion of market-cap losses among developer stocks in 3Q alone. In his attempt to summarize the critical linkages between China's all-important property sector and the broader economy (something we first tried to do back in 2017 in "Why The Fate Of The World Economy Is In The Hands Of China's Housing Bubble"), Goldman first focuses on the immediate catalyst behind the current crisis, which according to the bank has to do with the unprecedented regulatory tightening "in the largest asset class globally." Or, as Goldman puts it succinctly, "Property is everywhere in China" Some explanatory notes on the chart above: The regulatory cycle keeps evolving: The ongoing regulatory tightening cycle, which is unprecedented in terms of its duration, intensity, scope, and velocity (of new regulation announcement) as suggested by our POE regulation proxy, has so far provoked significant concerns among investors in and have resulted in more than US$1tn market cap loss on China Tech. From Tech to Social Sector, and then to Property: According to Centaline, more than 400 new property regulations have been unveiled ytd across the central and local governments to address the issues of rising property prices and imbalanced supply/demand in certain areas, over-reliance on property for economic growth and fiscal revenues, and potential speculation in the real estate market where 22% of property could be vacant and ~60% of recent-year purchases were driven by investment demand. Property market tightening isn’t a new feature in the Chinese policy cycle over the past decade, but the severity of the measures, the scope of tightening, and the determination of policy implementation (e.g. the 3 Red Lines) are arguably unprecedented. China property is big: Almost two years ago, Goldman took a deep dive into the US$40tn Chinese residential housing market and analyzed its impacts on macro and asset markets. Since then, the market has grown to US$60tn in notional value including inventory, likely the largest asset class in the world on current prices. It has also registered Rmb26tn (US$4tn) of home sales with more than 3bn sqm of GFA being sold, almost 3x the size of HK SAR. Additionally, it is well-documented that Chinese households have a strong investment and allocation bias towards real assets for different economic and cultural reasons—as of Aug 2021, property accounted for around 62% of household assets in both the total and net terms, vs. 23% in the US and 36% in Japan, where stocks are the dominant household assets. Property is ubiquitous in China, fundamentally and financially: Goldman economists estimate that the housing sector contributes to around 20% of GDP via direct and indirect channels such as property FAI, property construction supply chain, consumption, and wealth effect. In the financial markets, 15% of aggregate market earnings (i.e. ~US$150bn out of US$1tn in 2020) could be exposed to ‘property demand’ in the extended housing construction-to-sale cycle which typically spans over three years, and that property-related loans (developer loans, mortgages, shadow banking)/ developer bonds represent 35%/23% of banks’ loan books/the outstanding balance of the offshore USD credit (IG + HY) market,respectively. And visually: While a full-blown property crisis would impact virtually every aspect of the Chinese economy, starting with capital markets, shadow banks, and social stability, the most immediate one for global investors is of course, the equity market. Here are Goldman's key observations on this topic: The regulation headwinds have resulted in a noticeable slowdown in property activities in recent months: nationwide property sales have fallen 14% yoy in3Q21 alongside stable prices in the primary market but large declines of transactions in the secondary market; property FAI and new starts have fallend rastically, although completion growth momentum has remained strong largely on favorable base effects. At the macro level, Goldman economists have laid out 3 scenarios to model the contagion impacts from reduced property impulse on macro growth. Overall, they see 2022 GDP growth hit ranging from 1.4% to 4.1% depending on the magnitude/severity of the property market slowdown and the tightening of financial conditions domestically, although their scenario analysis does not take into consideration potential monetary and fiscal policy easing in response to the property market declines. While listed developers only account for 4% of earnings in the aggregate listed universe, the housing market could be linked, directly and indirectly, to ~15% of corporate earnings, and every 10pp growth deceleration in housing activity could reduce profit growth of the housing market by ~2pp, all else equal. Broadly, Goldman lists five key transmission mechanisms along the extended property market food chain: Property developers and management companies (4% of equity market earnings): Developers’ earnings are highly sensitive to the property market fundamentals. However, given the time lag between transaction (pre-sales) and revenue recognition (accrual-based accounting), reported earnings usually lag sales by around 2 years, meaning that their current- and next-year earnings may not fully reflect the latest situation in the physical market. For property management companies, their near-term earnings profile is more sensitive to completions than sales but slowing property sales could dampen their future growth prospect. Financial institutions (54% of equity market earnings): Developer loans and mortgage loans account for 35% of commercial banks’ aggregate loan book. Goldman's banks analysts see the potential for mortgage NPLs to rise (at 0.3% now, 1% increase in mortgage NPL ratio translates into 18.7% drop in net profits per their bear case) although their risk exposures to property-related WMPs have fallen substantially since 2016. For insurers, Goldman's team believes the listed insurers’ exposure to the property sector is low, but the potential indirect wealth effect could pose a bigger fundamental challenge. While not directly linked to the housing market, equity brokers’ earnings cycles have been negatively correlated with property sales, likely reflecting the asset allocation decisions/flows from Chinese households between the two asset classes. Construction (2% of equity market earnings): From new property FAI start to completion, the construction cycle for commodity housing typically lasts 20-30 months in China. It drives demand for construction materials (China is the largest consumer of copper, iron ore and steel), although the focus of materials and their consumption intensity varies in different parts of the cycle. The process also directly impacts construction-related equipment, with excavators, heavy-duty trucks, bulldozers, cranes, and loaders all exhibiting reasonably high demand correlation with land sales. Consumption: (3% of equity market earnings): Whether property purchase is considered consumption (at least for first time buyer) remains an open-ended debate, but the housing market is undoubtedly a key demand driver for a wide range of consumption items, including white goods,consumer durables like furniture equipment, and certain electronic products(e.g. Audio devices and air conditioners). Goldman's study shows that housing completion usually leads the sales and earnings in these sectors by 6-9months. Wealth effect (1% of equity market earnings): At the micro level, capital appreciation (or depreciation) in the housing market could have short-term material impact on discretionary spending given the potential wealth creation from the US$60tn asset market, especially considering the relatively high investment ratios there. Industries that are sensitive to this channel encompass the Autos (luxury), Macau gaming, HK retailers and travel-related companies (before the pandemic), which tend to lag property sales by around two quarters, although these relationships may be also reflective of the broader macro dynamics including liquidity easing. A snapshot of the various top-down impact of the Chinese property cycle on corporate earnings is shown below: In sum, mapping Goldman' base case assumptions on GDP growth and property activities for 2022 onto corporate earnings via these channels,the bank lowers its 2022E EPS growth for MSCI China from 13% to 7%, but as the bank warns "the earnings downside (delta) could be much more significant (-28pp) if their bear cases prevail." And should more companies warn that "the market is almost frozen" as a result of the Evergrande crisis, the bear case is virtually assured. We conclude with Goldman's observations on the contagion risks which according to the bank - and contrary to the market - "are building", even if systemic risks can still be avoided. While the restrictive policies have cooled the market, it has put highly-geared developers, notably Evergrande, in the spotlight as their deleveraging path becomes increasingly challenging. On one hand, Goldman agrees with us, and says that on a standalone basis, Evergrande should not be a serious systemic threat given that its total liability of Rmb1.9tn accounts for 0.6% of China’s outstanding TSF, its bank loans of Rmb572bn represent 0.3% of systemwide loan book, and its market share in nationwide commodity housing sales stood at 4% by 1H21. However, the real risks emerges in the context of the slowing property market: indeed, as in other systemic/crisis episodes, investors are concerned about specific weak links which could spread to the broader system via fundamental and financial channels in the case of disorderly default, and therefore the financial condition tightening risk could be much more significant than the Rmb1.9tn liability would suggest, according to Goldman. How much risk is priced in? This is a popular question from investors but also a difficult one to answer given the fluidity of the situation. However, the following analyses lead Goldman to believe that the market may have priced in some degrees of degradation in macro/corporate fundamentals and possibly policy response from the authorities (i.e. a “muddle-through” scenario), but not a harsh scenario that is systemic and global in nature Episodic analysis: Historical physical property market downturns were short-lived and shallow, but if we focus on episodes where developer equities traded at depressed valuations to proxy for property-related concerns (eg.2H11, early 2015, and late 2018), prevailing NAV discounts of listed developers(-60%) are roughly in-line with those difficult times. At the index level, MSCI China bottomed at around 10-11x fwd P/E and 10% ERP in those periods, vs. 13xand 9% at present respectively. Fair PE targets: The MSCI China index is currently trading on 13x fP/E, having already de-rated from 19.6x at the peak in mid-Feb. Applying Goldman's three scenarios to its top-down macro PE model, the bank estimates that the index fair PE could fall to 12.5x in the base case, and 11.0x in their most bearish case. Correlation analysis: Intra- and inter-sector, and cross-asset correlations with regard to Chinese stocks or developer equities have all risen in the past weeks, albeit from a low base. However, compared with previous cases where concerns related to China regulations or trade relations had spooked global markets (e.g. 2015 FX reform, 2018 US-China trade war), the absolute correlation levels are more benign at present, suggesting a global contagious impact is not fully priced in. In light of all this, the good news is that in Goldman's view systemic risks could still be avoided considering: broad liquidity and risk-appetite indicators such as 7d repo, the onshore funding stress index, as well as the A-share market performance/ turnover suggest that the imminent "minsky moment" remains a narrative but far from a reality; the effective leverage (LTV) for the housing market is low, around 40% to 50% per our Banks team’s estimate; the institutional setup in China where the government has strong control over its banking system makes a market-driven collapse less likely to happen than would otherwise be the case; Losses will be realized by stakeholders associated with highly-geared developers, but the liabilities are relatively transparent and are less widely socialized in the financial markets than in previous global financial crises; the potential economic, social, and financial impacts have been well publicized and discussed, and it appears that the authorities are assessing the situation and starting to take actions; and, economists believe there is potential for the authorities to ease policy to prevent a disorderly default of Evergrande from developing into a crisis leading up to the Sixth Plenum in November. Ultimately, timing will be key to a happy ending: Given the outsized market value of China property, and its intricate linkages to the real economy and the financial markets, deleveraging the property market and improving financial stability - two contradictory concepts - could raise systemic concern if policy actions are pursued too aggressively, or without clear coordination among regulators and communication with the market. Importantly, as market concerns over tail risk and spillovers start to build, there is increasing focus on the narrowing window for policymakers to provide the necessary circuit breakers to ring-fence the (collateral) damages and stop the downward spirals. A key risk from continued delayed action would be a bigger snowball effect and more damage on markets and investor (already strained) confidence in Chinese assets. As such, Goldman expects the market to focus on potential actions that could be pursued, such as a combination of debt restructuring (bank loans, WMP, credits), conditional government involvement in working capital bridges and unfinished property projects, and a coordinated plan to divest and cash in assets. Finally, as promised earlier, here is a summary of the key loosing (green) and tightening (red) policies in China's property market.   Tyler Durden Fri, 09/24/2021 - 13:00.....»»

Category: blogSource: zerohedgeSep 24th, 2021

Here"s Why Abercrombie (ANF) Outperforms Its Industry YTD

Abercrombie (ANF) gains from a strong omni-channel presence, consumer demand, digital growth and improved store business. Gross margin expansion and tight expense control are other drivers. Abercrombie & Fitch Co. ANF is one stock that has been resilient in recent months despite the uncertainties in the markets. Shares of this retailer of premium, high-quality casual apparel have been reaping the benefits of its robust digital sales momentum coupled with gross margin expansion and tight expense management. Growth across the United States, which is the company’s largest market, has been a key driver.Abercrombie has been witnessing robust earnings surprise trend, which continued in second-quarter fiscal 2021. The company’s earnings beat the Zacks Consensus Estimate for the fifth straight quarter in second-quarter fiscal 2021. Its earnings and sales also improved year over year, aided by strong consumer demand trends.Consequently, shares of the Zacks Rank #1 (Strong Buy) company have gained 85.2% year to date compared with the industry’s growth of 1.3%. Abercrombie has also comfortably outpaced the Retail-Wholesale sector’s decline of 6.8% and the S&P 500 index’s gain of 17.2% during the same period. Image Source: Zacks Investment Research In the past 30 days, the company’s estimates for fiscal 2021 and 2022 earnings per share have moved up 28.3% and 23.4%, respectively. For fiscal 2021, its earnings estimates are pegged at $4.40 per share, suggesting significant growth from a loss of 73 cents reported in the prior-year quarter.Now let us discuss at length the factors that have been aiding the clothing retailer’s growth.Abercrombie has been benefiting from a strong omni-channel presence so far this year. The company’s strong presence has helped boost results on strong consumer spending trends so far this year. It is making significant progress in expanding the digital and omni-channel capabilities to better engage with consumers. Digital sales contributed about 44% to total sales in second-quarter fiscal 2021. The digital business mainly benefits from the addition of customers in the channel, backed by robust digital marketing efforts.The company remains encouraged with its strong online presence and expects to keep gaining from the platform. It plans to continue investing toward bolstering omni-channel capabilities, including curbside and ship-from-store services. It is also striving to optimize the capacity at its distribution centers to meet increased digital demand. For fiscal 2021, the company expects a capital expenditure of $100 million, whereas it spent $102 in fiscal 2020. About 50% of the capital spending is expected to be used for investments in digital and technology.The company is working to rationalize its store base by reducing the dependence on underperforming tourist-driven locations. As part of its store-optimization plans, Abercrombie plans to reposition larger format flagship locations to smaller omni-channel enabled stores. Consequently, the company permanently closed 137 locations, representing 1.1 million productive gross square feet of its store base in fiscal 2020.Abercrombie’s second-quarter fiscal 2021 top line also benefited from the reopening of stores across all regions, except for EMEA, where restrictions continue. As of Aug 26, 2021, all of the company’s stores were operational. It witnessed improvement in store performance, with global store sales improving 55% year over year in the fiscal second quarter. The company witnessed year-over-year growth despite permanent store closures as well as ongoing restrictions in EMEA.Abercrombie is encouraged by the strong performance in the initial part of third-quarter fiscal 2021, driven by robust back-to-school sales in the United States. For third-quarter fiscal 2021, it anticipates net sales growth of 2-4% from the 2019 reported level of $863 million. It expects the United States to be the largest contributor to sales growth, outpacing the EMEA and APAC regions.It expects the gross margin rate to increase 300 bps in the fiscal third quarter from 60.1% reported in third-quarter fiscal 2019. The company remains cautiously optimistic about its ability to deliver AUR improvements through reduced promotions and clearance activity.For fiscal 2021, Abercrombie envisions net sales growth in the low to mid-single digits, whereas it reported $3.6 billion in fiscal 2019. The gross margin is expected to expand 300 bps, whereas it reported 59.4% in fiscal 2019. Net operating expenses are estimated to decline 3-4% from the fiscal 2019 reported level of $2.07 billion. Based on the expectations, the company predicts the operating margin at 9% for fiscal 2021, which significantly exceeds the company’s 2018 Investor Day target of 5.8%.Other Stocks to ConsiderTillys, Inc. TLYS has a long-term earnings growth rate of 10%. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.The Children’s Place, Inc. PLCE, with a Zacks Rank #1 at present, has a long-term earnings growth rate of 8%.Tapestry, Inc. TPR, also a Zacks Rank #1 stock, has a long-term earnings growth rate of 11.7%. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Abercrombie & Fitch Company (ANF): Free Stock Analysis Report The Childrens Place, Inc. (PLCE): Free Stock Analysis Report Tillys, Inc. (TLYS): Free Stock Analysis Report Tapestry, Inc. (TPR): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksSep 22nd, 2021

Akari Therapeutics Reports Second Quarter 2021 Financial Results and Highlights Recent Clinical Progress

Currently opening sites for Phase III study of nomacopan in bullous pemphigoid (BP). Phase III study of nomacopan in severe pediatric hematopoietic stem cell transplant-related thrombotic microangiopathy (HSCT-TMA) open for enrollment. Evaluating the potential for long-acting PAS-nomacopan as a treatment for dry age-related macular degeneration (AMD). Collaborating with clinical partners to explore potential for treating exacerbations in severe lung diseases where inhaled nomacopan can be potentially delivered directly to the lung. Active pipeline exploring treatment of head trauma with nomacopan and the development of votucalis, a new anti-histamine biopharmaceutical with a similar structure to nomacopan. NEW YORK and LONDON, Sept. 22, 2021 (GLOBE NEWSWIRE) -- Akari Therapeutics, Plc (NASDAQ:AKTX), a late-stage biopharmaceutical company focused on innovative therapeutics to treat orphan autoimmune and inflammatory diseases where complement (C5) and/or leukotriene (LTB4) systems are implicated, today announced its financial results for the second quarter of 2021, as well as recent clinical progress. Akari's two lead programs, in BP and HSCT-TMA, are in Phase III clinical development and have been granted both Orphan Drug and Fast Track designations by the U.S. Food and Drug Administration (FDA). The Company also has earlier stage programs with nomacopan addressing ophthalmology and pulmonary diseases. "We have made progress with our clinical pipeline since the beginning of 2021, and have two orphan disease programs in Phase III clinical development," said Clive Richardson, Chief Executive Officer of Akari Therapeutics. "In parallel we are actively exploring partnering opportunities for disease areas such as those for the eye and the lung, using different routes of administration for nomacopan." Clinical highlights Phase III clinical trial in patients with bullous pemphigoid BP is a severe autoimmune blistering disease of the elderly with no specific approved treatments. The Company is opening sites for a Phase III study of nomacopan for the treatment of BP. The FDA and the European Medicines Agency (EMA) have granted Orphan Drug Designation for nomacopan for the treatment of BP, and the FDA has granted Fast Track designation to nomacopan in BP. Miles Nunn, Ph.D., Chief Scientific Officer of Akari Therapeutics, and Sanjeev Khindri, M.D., Medical Director of Akari Therapeutics, recently presented a poster at the 2021 International Pemphigus & Pemphigoid Foundation (IPPF) Scientific Symposium which outlines the design of the Company's Phase III planned pivotal study of nomacopan in patients with moderate to severe BP. The Company is considering additional opportunities to expand into other dermatological conditions where both complement C5 activation and LTB4 are believed to have key roles in driving the disease pathology including hidradenitis suppurativa (HS) and other pemphigoids. Phase III clinical trial in patients with HSCT-TMA HSCT-TMA is a severe disease in pediatric patients with an estimated 80% mortality rate and no approved treatments. Phase III study in pediatric HSCT-TMA is open for enrollment at sites in the U.S. and Europe, subject to the ongoing impact of COVID-19 related restrictions. Akari has FDA Fast Track and Orphan Drug Designations for pediatric HSCT-TMA patients. Success in pediatric HSCT-TMA would provide opportunities to expand into adult HSCT-TMA and related TMA-like diseases where complement and LTB4 are believed to have important roles such as atypical hemolytic uremic syndrome, systemic lupus erythematosus and anti-phospholipid syndrome. Long term data Our first PNH patient has now been treated with nomacopan for over five years. Over 35 cumulative patient years of long-term treatment data shows the drug is well tolerated with a marked clinical effect such that 79% of formerly transfusion dependent patients became transfusion independent. OTHER CLINICAL PROGRAMS Akari Therapeutics is also pursuing other earlier stage programs that are primarily focused on large disease areas with high unmet need. For these programs we are using alternative formulations of nomacopan (topical, nebulized or long acting), which provides an opportunity for separate partnering options. Ophthalmology program Ongoing PK studies with PAS-nomacopan, an engineered form of nomacopan with an extended half-life, to estimate injection interval in the back of the eye are ongoing, with data expected by the end of 2021. Recent publications (Eskandarpour et al 2020 and 2021) support a potential therapeutic role for PAS-nomacopan in sight threatening retinal diseases given its inhibition of both complement and VEGF via LTB4. This unique combination may be particularly relevant to dry AMD where complement is a key treatment target and VEGF inhibition may prevent the risk of conversion to wet AMD where VEGF inhibitors are the primary treatment. A recent publication (Sanchez-Tabernero et al 2021) highlights that nomacopan delivered topically in Part A of a Phase I/II study in patients with atopic keratoconjunctivitis had a positive safety profile and was well tolerated. Part B of the study confirmed these findings. The Company is currently exploring options for a Phase II study in the front of the eye. To maximize the potential of nomacopan in the ophthalmology setting, Akari is exploring opportunities to collaborate with partners to accelerate the development of these ophthalmology programs. Lung program Learning from the viral induced mechanisms of COVID-19 pneumonia that involve terminal complement pathway and LTB4 dysregulations we are exploring the development of nomacopan in severe asthma to reduce the use of systemic steroids, and hospital admissions.  This remains an area of unmet medical need where respiratory viral infection still triggers life threatening exacerbations across a range of inflammatory lung conditions. Proposed publication of the Akari sponsored observational study and role of nomacopan in COVID-19 patients is in preparation. Initiation of further studies is subject to optimizing patient selection to align with the findings of the review. Trauma The role of both C5 and LTB4 has been implicated in trauma and Akari is exploring both blast injury and hemorrhagic shock with the USAISR. In addition, a separate new collaborative study in traumatic brain injury and subarachnoid hemorrhage is being initiated. Histamine inhibitor Votucalis is a new histamine inhibitor with a similar structure to nomacopan but a distinct and unique mode of action by binding directly to histamine and thereby preventing the activation of all four histamine G-protein coupled receptors. Ongoing work in collaboration with Durham and Newcastle Universities in the UK is focused on using votucalis to expand the Company's existing dermatology franchise in atopic dermatitis and pain management. In both cases initial skin penetration data indicates a potential opportunity for topical delivery. Second Quarter 2021 Financial Results As of June 30, 2021, the Company had cash of approximately $3.8 million, compared to cash of approximately $14.1 million at December 31, 2020. Following the end of the second quarter, Akari closed a private placement of approximately $12.3 million in gross proceeds by issuing approximately 7.9 million ADSs. Furthermore, Akari received approximately $3 million in annual R&D tax credits from the UK tax authorities. In June 2020, Akari entered into a securities purchase agreement with Aspire Capital Fund, LLC (Aspire Capital) whereby Aspire Capital is committed to purchase up to an aggregate of $30.0 million of the Company's ADSs. During the six months ended June 30, 2021, the Company sold to Aspire Capital ordinary shares for gross proceeds of $2.0 million. As of June 30, 2021, $22.0 million of the original purchase commitment remains available. Research and development expenses for the second quarter 2021 were approximately $2.2 million, as compared to approximately $3.0 million in the same quarter the prior year. This decrease in expenses was primarily due to lower expenses incurred for clinical trials during the year. General and administrative expenses for the second quarter 2021 were approximately $2.1 million, as compared to approximately $2.9 million in the same quarter the prior year. The decrease was primarily due to a one-time non-cash financing expense related to the 2020 Purchase Agreement with Aspire Capital. For the second quarter 2021, total other expense was approximately $16,000 as compared to total other expense of approximately $1.5 million in the second quarter of 2020. This change was primarily due to the accounting reclassification of warrant liabilities to shareholders' equity as of December 2020. Net loss for the second quarter 2021 was approximately $4.3 million, as compared to approximately $7.4 million for the period of 2020. This decrease was primarily due to the aforementioned lower research and development expenses as well as lower total other expense. About Akari Therapeutics Akari is a biopharmaceutical company focused on developing inhibitors of acute and chronic inflammation, specifically for the treatment of rare and orphan diseases, in particular those where the complement (C5) or leukotriene (LTB4) systems, or both complement and leukotrienes together, play a primary role in disease progression. Akari's lead drug candidate, nomacopan (formerly known as Coversin), is a C5 complement inhibitor that also independently and specifically inhibits leukotriene B4 (LTB4) activity. Nomacopan is currently being clinically evaluated in four areas: bullous pemphigoid (BP), thrombotic microangiopathy (TMA), as well as programs in the eye and lung. Cautionary Note Regarding Forward-Looking Statements Certain statements in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance upon the Company's forward-looking statements. Except as required by law, the Company undertakes No obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this press release. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control. Such risks and uncertainties for our company include, but are not limited to: needs for additional capital to fund our operations, our ability to continue as a going concern; uncertainties of cash flows and inability to meet working capital needs; an inability or delay in obtaining required regulatory approvals for Nomacopan and any other product candidates, which may result in unexpected cost expenditures; our ability to obtain orphan drug designation in additional indications; risks inherent in drug development in general; uncertainties in obtaining successful clinical results for Nomacopan and any other product candidates and unexpected costs that may result therefrom; difficulties enrolling patients in our clinical trials; our ability to enter into collaborative, licensing, and other commercial relationships and on terms commercially reasonable to us; failure to realize any value of nomacopan and any other product candidates developed and being developed in light of inherent risks and difficulties involved in successfully bringing product candidates to market; inability to develop new product candidates and support existing product candidates; the approval by the U.S. Food and Drug Administration (FDA) and European Medicines Agency (EMA) and any other similar foreign regulatory authorities of other competing or superior products brought to market; risks resulting from unforeseen side effects; risk that the market for nomacopan may not be as large as expected; risks associated with the impact of the COVID-19 pandemic; inability to obtain, maintain and enforce patents and other intellectual property rights or the unexpected costs associated with such enforcement or litigation; inability to obtain and maintain commercial manufacturing arrangements with third party manufacturers or establish commercial scale manufacturing capabilities; the inability to timely source adequate supply of our active pharmaceutical ingredients from third party manufacturers on whom the company depends; unexpected cost increases and pricing pressures and risks and other risk factors detailed in our public filings with the U.S. Securities and Exchange Commission (SEC), including our most recently filed Annual Report on Form 20-F filed with the SEC. Except as otherwise noted, these forward-looking statements speak only as of the date of this press release and we undertake no obligation to update or revise any of these statements to reflect events or circumstances occurring after this press release. We caution investors not to place considerable reliance on the forward-looking statements contained in this press release.     AKARI THERAPEUTICS, Plc   CONDENSED CONSOLIDATED BALANCE SHEETSAs of June 30, 2021 and December 31, 2020(in U.S. dollars, except share data)                    .....»»

Category: earningsSource: benzingaSep 22nd, 2021

Citi"s new head of diversity wants to shake up Wall Street: "What gets measured gets achieved"

In the premier installment of The Equity Talk, Insider spoke with Citi executive Erika Irish Brown about her top priorities for the rest of 2021. Samantha Lee/Insider Erika Irish Brown, Citi's head of DEI, wants every manager at the firm to embrace inclusion. Bloomberg Insider presents the first installment of The Equity Talk, a new series with executives on DEI. Citi hired former Goldman executive Erika Irish Brown to lead its diversity and inclusion strategy. Brown shared how she wants to change the financial giant and her goals for the next three months. See more stories on Insider's business page. For over a decade, Erika Irish Brown abided by a mantra during her time working on Wall Street: "What gets measured gets achieved." Now, in her recently assumed role as the head of diversity, equity, and inclusion at Citi, she's applying that same philosophy to drive results. "DEI is not a 'nice to have.' It's a 'need to have,' and it's important we reframe the conversation to be about the value it brings to the business bottom line," she told Insider. "I think we have to get beyond justifying that business case and get on to actually executing and demonstrating that business value."Hired in June, Brown is one of a handful of executives driving Citi's billion-dollar investment to help bridge the racial wealth gap and increase economic mobility for people of color in the United States. She's also working on the firm's goal to increase the representation of women in leadership positions to 40% by the end of 2021, up from 37% in 2018, and to increase Black leadership to 8% in the same timeframe, up from 6% in 2018. Brown said the firm was on track to achieve these goals. She and Citi CEO Jane Fraser, the first woman to lead a major US bank and an outspoken advocate for inclusion, meet regularly to discuss the future of the firm - and the country. Before spearheading Citi's diversity efforts, Brown worked as a DEI executive at large financial institutions such as Bank of America, Bloomberg, and Goldman Sachs. She left investment banking in 2009 to "be an agent for change" and diversify the financial sector, she said.For the debut of The Equity Talk, Brown discussed how she's measuring the effect of DEI at the $142 billion firm and her optimistic outlook on 2022. This interview has been edited and condensed. How has your experience working in finance influenced the way you approach DEI? My passion for DEI while I was an investment banker is what led me to make the transition. At the time, there weren't many, if any, DEI roles on Wall Street, and I wanted to be an agent for change to help drive the conversation forward on important issues like representation, pay equity, and inclusivity. This wasn't territory that was explored before, and by being in a DEI role and also being a Black woman myself, I knew I could make an impact.Before joining Citi, you helped Goldman introduce the "One Million Black Women" initiative, in which the bank vowed to invest $10 billion to address racial biases. What do you think will be the legacy of this initiative? Why was this important to you?In my DEI roles, I've always tried to connect the dots between racial-equity, commercial, and human-capital initiatives that drive or make the business case for diversity. And that holds true at Citi, where I have an opportunity to help connect the dots across all our racial-equity work happening within the organization and outside the organization, including our Action for Racial Equity initiative - Citi's $1 billion commitment to help close the racial wealth gap and increase economic mobility in the US. There is so much work across our industry to advance racial equity, and I'm inspired by the commitments that have been made by multiple firms. I look forward to supporting progress on Citi's goals specifically in the years ahead.You took the helm as the global head of DEI in June. What was one of the first things that you did in your new role?I've spent this period of time - two short months - listening; meeting our people; understanding the strategies in place, the book of work that exists across the firm globally; and really taking stock in all the work that we're already doing and starting to process in terms of how to approach the future. So the future in building a strong global team is really strengthening that inextricable link between talent and diversity for this firm globally.You joined Citi in a really interesting time for DEI leaders. There's a lot of pressure. There's a lot of accountability happening, but there's also a lot of support from leaders. How do you feel about this? I'm excited. Our Action for Racial Equity is a huge initiative and an opportunity to engage with leaders and initiatives across the firm. I was an investment banker for 15 years, and I've been in the diversity, equity, and inclusion space now for 15 years. I've always brought that commercial approach to my work. I've always seen the business value and the opportunity to leverage diversity as a competitive advantage to source deals differently, to invest differently, to expand into different marketplaces. There's real opportunity through diversity, including who we buy from, who we do business with, how we support and invest in the communities that we serve. I see all of that at Citi right now. Now, it's a matter of how we connect all those dots and show that collective impact and bring it all to bear. I think the benefits of the work that we're doing can be quite powerful - not just to Citi or the communities that we serve, but globally.Do you think that managers are starting to see that business case for DEI, that DEI is a business imperative?I think there is more awareness than ever of the so-called business case for diversity, equity, and inclusion. There's no shortage of research out there that really demonstrates bottom-line returns through diversity, equity, and inclusion from credible organizations like McKinsey or Catalyst. You need effective, inclusive managers and leaders in order to bring all of that talent to bear fruit for the firm. So joint accountability and talented people and effective management and leadership are what will move the firm forward. But it takes time, and you want it to be sustainable.Citi's CEO Jane Fraser, the first woman to lead a major bank, is an outspoken advocate of DEI. What does it mean to you to have that buy-in from your CEO? For any diversity and inclusion effort, it has to start at the top. And that's absolutely an important part. If you don't have that executive-leader sponsorship, it makes a job that's already difficult more difficult. At the same time, a diversity and inclusion initiative doesn't happen because everybody at the top says it's going to happen, right? You need to have full buy-in throughout the firm. I think the more you have an open dialogue around diversity, equity, and inclusion, the more people realize that it's part of their own role, too. There's accountability for everyone. What's your vision for the future? My vision is always on how to continue to drive Citi as the best place to work for the best people, to drive shareholder value and move forward toward equity. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderSep 22nd, 2021

"Many People Will Be Arrested" - Evergrande Lured Retail Investors Into Billions Of "Wealth Management Products" With Gucci Bags, Dyson Air Purifiers

"Many People Will Be Arrested" - Evergrande Lured Retail Investors Into Billions Of "Wealth Management Products" With Gucci Bags, Dyson Air Purifiers In our post detailing how Evergrande became a "too big to fail" anchor of China's shadow banking system, we noted that a key missing piece in the company's funding was selling wealth management products  - i.e., unregulated "shadow banking" products - to outside investors, as well as its own employees and their families, promising returns up to 13%. It is these WMP investors that are currently besieging the company's offices across the country in hopes of getting some of their principal back, and which include everyone from paint suppliers to decoration and construction companies. To them, Evergrande owes more than 800 billion yuan ($124 billion) due within one year, while it has only a 10th of that amount of cash on hand. It will have even less once the now officially defaulted company makes priority payments to its banks and creditors. Expanding on this striking funding source, Reuters today writes that lured by the promise of yields as high as 12, "tens of thousands of investors bought wealth management products" through China Evergrande, a transaction which was softened by gifts such as Dyson air purifiers and Gucci bags, not to mention the guarantee of China’s top-selling developer, a guarantee which we now know was worthless. And now, many investors fear they may never get their investments back after the cash-strapped property developer recently stopped repaying some investors and set off global alarm bells over its massive debt. Some have been protesting at Evergrande offices, refusing to accept the company’s plan to provide payment with discounted apartments, offices, stores and parking units, which it began to implement on Saturday. “I bought from the property managers after seeing the ad in the elevator, as I trusted Evergrande for being a Fortune Global 500 company,” said the owner of an Evergrande property in the conglomerate’s home province of Guangdong surnamed Du. “It’s immoral of Evergrande not to pay my hard-earned money back,” said the investor, who had put 650,000 yuan ($100,533) into Evergrande wealth management products (WMPs) last year at an interest rate of more than 7%. That investor is about to learn that in addition to return, there is also risk, a concept almost forgotten in today's world where central banks and authoritarian governments do everything to preserve the "wealth effect" and avoid social unrest resulting from stock price crashes. According to a sales manager of Evergrande Wealth, launched in 2016 as a peer-to-peer (P2) online lending platform that originally was used to fund its property project, more than 80,000 people – including employees, their families and friends as well as owners of Evergrande properties - bought WMPs that raised more than 100 billion yuan in the past five years. Of these investments, some 40 billion yuan are still outstanding, and will likely never be repaid. Last week, Evergrande revealed that even Ding Yumei, the wife of billionaire founder Hui Ka Yan, had bought $3 million of the company’s investment products in a show of support. As the FT adds, Evergrande financial advisers marketed the products widely, including to homeowners in its apartment blocks, while its managers persuaded subordinates to invest, the executives of Evergrande’s wealth management division said. The publication adds that one executive - who spoke during a meeting with angry investors who went to the company’s Shenzhen headquarters to try to get their money back - suggested the products were too high risk for ordinary retail investors and should not have been offered to them. Of course, it is way too late now. "My parents put the bulk of their savings, which is Rmb200,000 and not a lot by Evergrande’s standard, into its [wealth management products],” said the daughter of one investor who asked to be identified by her surname Xu. She said an Evergrande financial adviser stationed in an apartment tower built by the company in central China had persuaded her mother to invest. “They wouldn’t have trusted Evergrande’s wealth products had they not bought the developer’s apartment,” she said. “All they wanted was to ease the financial pressure from buying expensive cancer drugs [for Xu’s mother], nothing else.” Last week, Xu was one of hundreds of people who travelled to Evergrande’s Shenzhen headquarters in hopes of recovering their investment. One investor named Rosy Chen and her husband, an Evergrande employee, invested Rmb100,000 this year in a product with an advertised 11.5 per cent annual return on the urging of one of his superiors. The cash went to “supplement” the working capital of a company called Hubei Gangdun Materials, according to the investment contract. Hundreds of home buyers, retail investors and Evergrande contractors converged on the property group’s Shenzhen headquarters last week seeking repayment. Photo: AFP/Getty “At first we waited, but when we saw we were among the only families in the whole [Evergrande] division not to buy in, we decided to invest too,” said Chen. “We believed Evergrande wouldn’t cheat its own employees.” Remarkably, this hit to Chinese investors and resulting social unrest, comes as a time when China's Xi has launched a renewed pursuit of core Marxism with his "Common prosperity" initiative, which also coincides with China’s years-long effort to deleverage its economy, which has pushed companies to resort to off-balance sheet investments in search of funding. It's why we said recently that what is happening to Evergrande is a symptom of China's great deleveraging campaign, which however for a country with 350% debt/GDP is doomed to fail. The funniest thing about the whole Evergrande fiasco is that it's due to China pretending it can reduce its debt without a crash. Guys, ain't happening: at least the US accepts this and has adopted the idiocy that is MMT to justify perpetual debt increase until it all blows up pic.twitter.com/xdw4F7CTQV — zerohedge (@zerohedge) September 20, 2021 Incidentally China has only itself to blame for the Evergrande crisis. Having allowed unprecedented debt growth for much of the past decade, last year Beijing capped debt levels of property developers last year as part of its "three red lines" policy which limited how much debt growth various tiers of developers can engage in. As a result, the most indebted players like Evergrande - feeling even more pressure to find new sources of capital to ease mounting liquidity stress - ended up moving to the unregulated "shadow banking" market, and turned to employees, suppliers and clients for cash through commercial paper, trust and wealth management products. Evergrande Wealth started to sell WMPs to individuals in 2019 after a regulatory crackdown led to a collapse of the P2P lending sector, said the sales manager and another Evergrande employee who bought the WMPs. To attract investors, the sales manager offered gifts such as Dyson air purifiers and Gucci handbags to each person who bought more than 3 million yuan of WMPs during a Christmas promotion last year. A product leaflet provided by the sales manager seen by Reuters showed the WMPs are categorized as fixed-income products suitable for “conservative investors seeking steady returns”. It was anything but. In an interview with local media, one Evergrande financial adviser said the products were a type of “supply chain finance”. While the money from retail investors may in years past have gone to its suppliers, the Evergrande executives in Shenzhen receiving retail investors said this was no longer the case. Asked about Hubei Gangdun, one of the executives of Evergrande’s wealth management division said that it was just a shell company. “Proceeds from the WMPs have been used to bridge various funding gaps faced by the parent company,” the executive said. “There is no need to thoroughly examine where the money actually went. “Some WMP proceeds were used to repay previous products but sales plummeted, making it difficult for the business model to continue,” he admitted. "Many people . . . might be arrested for financial fraud if investors don’t get paid off,” he said. “Our products were not for everyone. But our grassroots salespeople didn’t consider this when making their sales pitches and they targeted everyone in order to meet their own sales targets.” Translation: Evergrande used not just Ponzi instruments, but unregulated Ponzi instruments, which are now worth nothing. In two products sold last November, a construction company in Qingdao was looking to raise up to 10 million yuan with annualized yield of 7% in one and 20 million yuan with yields ranging from 7.8% to 9.5%, depending on the investment size, in another. Minimum investments were 100,000 yuan and 300,000 yuan, respectively. According to the sale manager, to make its products especially attractive, Evergrande offered additional yield up to 1.8% to certain investors, which would push returns to above 11% for a 12-month investment, an interest rate which in a world of zero rates, indicates funding stress if nothing else. Proceeds were to be used for Qingdao Lvye International Construction Co’s working capital, the documents showed. Repayment would either come from the issuer’s income or from Evergrande Internet Information Service (Shenzhen) Co, a subsidiary that runs Evergrande Wealth and promises to cover the principal and interest if an issuer fails to repay, the prospectus said. The sales manager said the Qingdao company was working on Evergrande projects and would use the payment from Evergrande upon completion to repay investors. “It’s a de-facto Evergrande product,” he said. Other highly leveraged Chinese conglomerates including HNA Group, which declared bankruptcy early this year, and China Baoneng have used similar products. It was the overreliance of China's giant conglomerates on shadow banking - among others - that prompted us back all the way back in 2018 to predict that after HNA and Anbang, Evergrande would fail next. Anbang first, then HNA, Evergrande and Dalian Wanda — zerohedge (@zerohedge) February 23, 2018 Earlier this week, Evergrande said that six senior executives would face “severe punishment” for securing early redemptions on investment products after retail investors were told that they would not be repaid on time. Another big question is whether Evergrande ever included the 40 billion yuan of WMPs among the liabilities on its balance sheet; as the FT notes, the answer "remains unclear." “We expect part of it should be included in the total liabilities . . . however, there was no detailed disclosure in its financial statement, so it is difficult to verify,” said Cedric Lai, a senior credit analyst at Moody’s Investors Service. Nigel Stevenson of GMT Research agreed it was unclear how Evergrande accounted for the WMPs. “Once the lid is lifted on its financials, it’s possible more horrors will be discovered,” he said. In a petition to various government bodies, a group of WMP investors in Guangdong accused Evergrande of inappropriately using money that should have gone to the issuers to fund its own projects, and not sufficiently disclosing the risks. They also complained that they were misled by the stature of its chairman, Hui Ka-yan, noting that he was seated prominently during a 2019 celebration of the 70th anniversary of the founding of the People’s Republic of China. “The investors trusted Evergrande and bought Evergrande’s WMPs out of our love for and faith in the Party and government,” they wrote. Tyler Durden Tue, 09/21/2021 - 11:10.....»»

Category: blogSource: zerohedgeSep 21st, 2021

"The Most Dangerous Form Of Portfolio Greenwashing": French Study Shows Climate ETFs "Undermine" Fight Against Global Warming

"The Most Dangerous Form Of Portfolio Greenwashing": French Study Shows Climate ETFs "Undermine" Fight Against Global Warming Our readers know that there aren't many people out there who have been more critical of "ESG" investing than we have. That's why you can officially color us not surprised that so-called "Climate Change ETFs" are actually undermining and are counterintuitive to the fight against global warming. ETFs that move with “low carbon”, “climate change” or “Paris-aligned” indices "alocate little of their money to the greenest companies and habitually increase the weighting of companies whose environmental performance is deteriorating," according to a new report from FT. We're shocked. Shocked, we tell you. The conclusion was brought to light by French business school Edhec, who recently penned a paper called Doing Good or Feeling Good? Detecting Greenwashing in Climate Investing. The paper's co-author, Felix Goltz, said: “Since considerable investment is necessary to ensure electrification of the economy and decarbonisation of electricity, underfunding of this sector in climate-aligned benchmarks, which can correspond to a reduction in capital allocation of up to 91 per cent, would constitute the most dangerous form of portfolio greenwashing,” Goltz continued: “The key issue is not how to restrict investment in these industries, but rather, how to make sure that these industries invest in technology that allows them to produce needed goods and services with minimum release of greenhouse gases.” And, of course, the revelation comes as record flows pour into any ETF that has "green" or "ESG" in its name with little or no thought involved. The study found that 35% of companies that have worsening environmental performance have been rewarded in weighting. This number rises to 41% of stocks with deteriorating carbon intensity, the report notes. Goltz argued: “This number should be zero. This inconsistency between climate performance and weights in investors’ portfolios removes any credibility from the engagement actions that investors conduct with these same companies.” Goltz says the lack of "common sense rules" to prevent weighting changes like these was to blame: “Climate strategies, just like business-as-usual strategies, are mostly influenced by the market capitalisation of stocks. The climate score plays second fiddle at best.” “This demonstrates the dominance that these indices have in the investment management industry. [Climate funds] can reflect the current structure of cap-weighted indices but that’s not necessarily aligned with climate change objectives.” “The recent ESG scramble within the fund industry to meet the somewhat vague definitions of Article 8 and Article 9 [the sustainable classes of funds within the EU’s SFDR] has inevitably tempted many asset managers to reach into their make-up bag and apply the green lipstick a little too liberally across their ranges," said Kenneth Lamont, senior fund analyst for passive strategies at Morningstar. Recall, just days ago we wrote about funds simply rebranding as ESG and watching the inflows pour in. Just last year alone, 25 funds were rebranded as sustainable, according to data from Morningstar.  The Wall Street Journal pointed out three examples last week: The American Century Fundamental Equity Fund is now the Sustainable Equity Fund, the USAA World Growth Fund is the USAA Sustainable World Fund and the Putnam Multi-Cap Growth Fund is now the Putnam Sustainable Leaders Fund. “You have big fund companies with an inventory of funds, a lot of which aren’t really attracting assets anymore, saying ‘OK, here’s this new investment trend happening; what do we do,'" said Morningstar Head of Sustainability Research Jon Hale.  35 of 64 rebranded funds since 2013 "were suffering from investor withdrawals in the three years before they went green". Once the rebranding was complete, 13 funds saw investors put cash back into the funds.  Meanwhile, funds like the USAA Sustainable World Fund holds more than $100 million worth of 47 fossil fuel companies. The Sustainable World Fund holds shares of mining companies like Rio Tinto, the report noted. Mannik S. Dhillon, president of VictoryShares & Solutions, an investment adviser for USAA, told the WSJ:  “We believe incorporating ESG considerations into a portfolio should be an input under a larger mosaic of considerations any manager evaluates to achieve a well-balanced, diversified portfolio.” The American Century Investment’s Fundamental Equity Fund was also seeing outflows for years before it rebranded in 2016. Since then, it has brought in $1.7 billion.  Tyler Durden Tue, 09/21/2021 - 09:15.....»»

Category: blogSource: zerohedgeSep 21st, 2021

Thinking of Investing in a Green Fund? Many Don’t Live Up to Their Promises, a New Report Claims

Green investment funds are proliferating—and so is the dubious practice of "greenwashing" The number of green investment funds is skyrocketing, but many are investing in companies that aren’t aligned with the goals of the Paris Agreement. That’s according to a report published on Aug. 27 by InfluenceMap. The London-based climate change think tank accused the majority of green funds of falling short. InfluenceMap assessed 723 equity funds—with over $330 billion in total net assets—marketed using environmental, social and governance (ESG) claims and climate-related key words. It concluded that more than half of the climate-themed funds, which describe themselves with phrases like “low carbon,” “energy transition,” and “clean energy,” fall short of the vision laid out in the Paris treaty. Adopted in 2015, the pact calls on countries to do their best to reduce emissions to keep global temperatures to less than 2°C above pre-industrial levels—and preferably no more than 1.5°C—in the hopes of avoiding the worst consequences of climate change. [time-brightcove not-tgx=”true”] More than 70% of the funds with broader ESG goals are also misaligned with global climate targets, according to the think tank. Such funds take ethical criteria into account besides environmental factors. As well as the greenhouse gas emissions of a company, for example, they might also consider how it treats its employees and the diversity of its board. Read More: The Latest IPCC Report Says We’re Probably Going to Pass the 1.5°C Climate Threshold. What’s Next? The report looked at company shares that asset managers held in their portfolios and considered how compatible the planned operations of those companies were with limiting warming to below 2°C (for example, by assessing how many electric, hybrid and internal combustion engines an automotive company might produce). It found a large discrepancy between them. “There exists a wide variability in the market and the InfluenceMap report shines a bright light on that lack of ESG standardization,” says Nina Seega, the research director for sustainable finance at the Cambridge Institute for Sustainability Leadership. The report also alleged shortcomings in the ESG funds of some of the world’s largest asset managers, including UBS Group AG and BlackRock, Inc., whose CEO Larry Fink has promised to put sustainability at the core of how the company invests. It claimed some climate-themed funds had holdings in the fossil-fuel industry, including a BlackRock “fossil fuel screened” fund, and a State Street Corporation “fossil fuel reserves free” fund, which held shares in Marathon Petroleum and Phillips 66—”two of the world’s most egregious fossil fuel lobbying companies preventing policy-based climate action, according to InfluenceMap’s research on corporate lobbying on climate change policy.” This latest analysis adds to a chorus of concerns over “greenwashing”—the practice of claiming spurious environmental benefits—as worry over climate change intensifies . Assets in ESG funds soared to over $1.7 trillion in 2020, according to the industry tracker Morningstar. A report published by the Economist in May found that some of the world’s biggest ESG funds are “stuffed full of polluters and sin stocks.” U.S. and German authorities launched an investigation last month into Deutsche Bank AG’s asset-management arm DWS Group, after a former executive alleged that the firm overstated the environmental credentials of some of its products. (DWS Group rejected the allegations). BlackRock’s former CIO of sustainable investing, Tariq Fancy, accused the financial world of greenwashing in a March op-ed in USA Today. “In truth, sustainable investing boils down to little more than marketing hype, PR spin and disingenuous promises from the investment community,” he said. A BlackRock spokesperson told TIME that the InfluenceMap analysis contained “gaps” and did not include several of its funds, including the Paris-aligned Climate ETFs. BlackRock has also “developed a wide variety of sustainable strategies that support clients in achieving their investing goals, including strategies that reduce exposure to fossil fuels to strategies that that incorporate climate alignment,” the spokesperson said via email. Olivia Offner, a spokesperson for State Street, said: “To meet differing investor needs and risk profiles, we offer a range of ESG strategies, including funds aligned to the Paris Agreement, and funds that meet climate objectives in other ways.” InfluenceMap acknowledged that some funds were outside the scope of its research, and said it only assessed funds within certain parameters set out in the report. Scrutiny of green funds is increasing The global asset management industry stands at more than $100 trillion, and many of the world’s largest asset managers have set climate targets: 128 asset managers with $43 trillion in assets have signed the Net Zero Asset Managers initiative, committing to supporting the goal of net zero emissions by 2050 or sooner. “ESG funds can make a really meaningful impact by reallocating capital away from companies that refuse to be part of the transition to the net zero economy,” says Nick Robins, a professor in practice for sustainable finance at the London School of Economics (LSE). “Using the investor voice to press for change in business practices and policy frameworks is crucial so that we get the system change we need.” Daan Van Acker, the analyst at InfluenceMap who wrote the report, says that he believes there should be a more consistent approach to branding and the marketing language of ESG funds. “It can be quite difficult for investors to accurately be able to analyze whether a fund corresponds to their investment goals,” he says. Regulators across the world are already cracking down. The European Union implemented an ambitious rule in March. Known as the Sustainable Finance Disclosure Regulation (SFDR), it seeks to enhance transparency on just how sustainable financial products actually are. Read More: A Climate Solution Lies Deep Under the Ocean—But Accessing It Could Have Huge Environmental Costs Europe is ahead of the U.S. and Asia in its regulation, but authorities elsewhere are also making changes. Hong Kong’s financial regulator is enhancing disclosure requirements for ESG funds, and the U.S. Securities and Exchange Commission (SEC) formed a task force early this year to investigate potential misconduct related to companies’ sustainability claims. “Many funds these days brand themselves as green, sustainable, low-carbon, and so on,” SEC Chairman Gary Gensler said on Sept. 1 in a speech delivered to the European Parliament Committee on Economic and Monetary Affairs. “I’ve directed staff to review current practices and consider recommendations about whether fund managers should disclose the criteria and underlying data they use to market themselves as such.” Despite the challenges, experts say that the proliferation of green funds is a good thing. “I do think greenwashing is prevalent in the fund industry,” says Dragon Tang, a professor of finance at the University of Hong Kong’s Business School. “Most fund managers cannot just become ESG experts overnight. Many of them are also not truly committed to long-term environmental and social benefits,” But he adds: “While I think it is paramount to guard against greenwashing, I am glad to see the current wave of support for ESG. Some funds may intend to greenwash, but then they may change and really do go green.”.....»»

Category: topSource: timeSep 21st, 2021

AutoZone 4th Quarter Same Store Sales Increase 4.3%; 4th Quarter EPS Increases to $35.72; Annual Sales of $14.6 Billion

MEMPHIS, Tenn., Sept. 21, 2021 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE:AZO) today reported net sales of $4.9 billion for its fourth quarter (16 weeks) ended August 28, 2021, an increase of 8.1% from the fourth quarter of fiscal 2020 (16 weeks). Domestic same store sales, or sales for stores open at least one year, increased 4.3% for the quarter. "Our strong sales and earnings this quarter are a testament to our AutoZoners' ongoing commitment to going the extra mile for our customers. Our retail business performed very well this quarter ending with virtually flat same store sales on top of last year's historic growth of over 20%.  And, our commercial business growth continues to be exceptionally strong at 21.2%. The investments we are making continue to strengthen our competitive positioning in all the sectors and markets we compete. We are optimistic about our growth prospects heading into our new fiscal year," said Bill Rhodes, Chairman, President and Chief Executive Officer. For the quarter, gross profit, as a percentage of sales, was 52.3%, a decrease of 82 basis points versus the prior year. The decrease in gross margin was primarily driven by the initiatives to accelerate growth in our Commercial business. Operating expenses, as a percentage of sales, was 31.0% versus 30.7% last year. Our expense growth was primarily driven by higher payroll to support our sales and customer service initiatives, partially offset by a decrease in pandemic related expenses. In addition, we are investing in   technology to underpin our growth initiatives and we are seeing higher wage costs in our stores and distribution centers. Operating profit increased 2.6% to $1.0 billion. Net income for the quarter increased 6.1% over the same period last year to $785.8 million, while diluted earnings per share increased 15.5% to $35.72 from $30.93 in the year-ago quarter. For the fiscal year ended August 28, 2021, sales were $14.6 billion, an increase of 15.8% from the prior year, while domestic same store sales were up 13.6%. Gross profit, as a percentage of sales, was 52.8% versus 53.6%. The decrease in gross margin was primarily attributable to the initiatives to accelerate growth in our Commercial business. Operating expenses, as a percentage of sales, were 32.6% versus 34.5%. The reduction in operating expenses as a percent of sales was driven by strong sales growth and a decrease in pandemic related expenses. For fiscal 2021, net income increased 25.2% to $2.2 billion and diluted earnings per share increased 32.3% to $95.19 from $71.93. Return on invested capital finished at 41.0%. Under its share repurchase program, AutoZone repurchased 592 thousand shares of its common stock for $900 million during the fourth quarter, at an average price of $1,519 per share. For the fiscal year, the Company repurchased 2.6 million shares of its common stock for $3.4 billion, at an average price of $1,303 per share. At year end, the Company had $417.6 million remaining under its current share repurchase authorization. The Company's inventory increased 3.7% over the same period last year, driven by new stores and improved product assortment. Inventory per store was $686 thousand versus $683 thousand last year and $701 thousand last quarter. Net inventory, defined as merchandise inventories less accounts payable, on a per store basis, was negative $203 thousand versus negative $104 thousand last year and negative $167 thousand last quarter."While the COVID-19 pandemic continues to impact our customers' and AutoZoners' lives, our primary focus remains everyone's health and well-being. We will continue to help wherever we can to make our stores the best and safest place to shop for everyone's automotive needs. We remain committed to helping our AutoZoners during these difficult times. As always, we will take nothing for granted while striving for continued sales growth in fiscal 2022. As we continue to prudently invest capital in our business, we remain committed to our long-term, disciplined, approach of increasing operating earnings and cash flow while utilizing our balance sheet effectively," said Rhodes. During the quarter ended August 28, 2021, AutoZone opened 76 new stores in the U.S., 29 stores in Mexico and five stores in Brazil. At our fiscal year end, the Company had 6,051 stores in the U.S., 664 in Mexico and 52 in Brazil for a total store count of 6,767. AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the Americas. Each AutoZone store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. Many stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also have commercial programs in all stores in Mexico and Brazil. AutoZone also sells the ALLDATA brand diagnostic and repair software through www.alldata.com. Additionally, we sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com and our commercial customers can make purchases through www.autozonepro.com. We also provide product information on our Duralast branded products through www.duralastparts.com. AutoZone does not derive revenue from automotive repair or installation. AutoZone will host a conference call this morning, Tuesday, September 21, 2021, beginning at 10:00 a.m. (EDT) to discuss its fourth quarter results. This call is being web cast and can be accessed, along with supporting slides, at AutoZone's website at www.autozone.com and clicking on Investor Relations. Investors may also listen to the call by dialing (877) 407-8031. In addition, a telephone replay will be available by dialing (877) 481-4010 through October 19, 2021,11:59 pm (EDT). This release includes certain financial information not derived in accordance with generally accepted accounting principles ("GAAP"). These non-GAAP measures include adjustments to reflect return on invested capital, adjusted debt and adjusted debt to EBITDAR. The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it indicates more clearly the Company's comparative year-to-year operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP. Management targets the Company's capital structure in order to maintain its investment grade credit ratings. The Company believes this is important information for the management of its debt levels and share repurchases. We have included a reconciliation of this additional information to the most comparable GAAP measures in the accompanying reconciliation tables. Certain statements contained in this press release constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically use words such as "believe," "anticipate," "should," "intend," "plan," "will," "expect," "estimate," "project," "positioned," "strategy," "seek," "may," "could," and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: product demand; energy prices; weather; competition; credit market conditions; cash flows; access to available and feasible financing; future stock repurchases; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; risks associated with self-insurance; war and the prospect of war, including terrorist activity; the impact of public health issues, such as the ongoing global coronavirus pandemic; inflation; the ability to hire, train and retain qualified employees; construction delays; the compromising of confidentiality, availability or integrity of information, including cyber-attacks; historic growth rate sustainability; downgrade of our credit ratings; damages to our reputation; challenges in international markets; failure or interruption of our information technology systems; origin and raw material costs of suppliers; disruption in our supply chain; impact of tariffs; anticipated impact of new accounting standards; and business interruptions. Certain of these risks and uncertainties are discussed in more detail in the "Risk Factors" section contained in Item 1A under Part 1 of the Company's Annual Report on Form 10-K for the year ended August 29, 2020, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those contemplated by such forward-looking statements, and events described above and in the "Risk Factors" could materially and adversely affect our business. However, it should be understood that it is not possible to identify or predict all such risks and other factors that could affect these forward-looking statements. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Contact Information:Financial: Brian Campbell at (901) 495-7005, brian.campbell@autozone.comMedia: David McKinney at (901) 495-7951, david.mckinney@autozone.com     AutoZone's 4th Quarter Highlights - Fiscal 2021   Condensed Consolidated Statements of Operations 4th Quarter, FY2021 (in thousands, except per share data)     GAAP Results     16 Weeks Ended   16 Weeks Ended     August 28, 2021   August 29, 2020(2)           Net sales   $ 4,913,484     $ 4,545,968   Cost of sales     2,345,646       2,132,993   Gross profit     2,567,838       2,412,975   Operating, SG&A expenses     1,523,808       1,394,930   Operating profit (EBIT)     1,044,030       1,018,045   Interest expense, net     58,119       65,638   Income before taxes     985,911       952,407   Income taxes(1)     200,140       211,950   Net income   $ 785,771     $ 740,457   Net income per share:           Basic   $ 36.72     $ 31.67     Diluted   $ 35.72     $ 30.93   Weighted average shares outstanding:           Basic     21,400       23,383     Diluted     22,000       23,942                 (1)The sixteen weeks ended August 28, 2021 and the comparable prior year period include $21.2M and $3.3M in tax benefits from stock option exercises, respectively (2)The sixteen weeks ended August 29, 2020 was negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $10.7M (pre-tax)     Fiscal Year 2021         (in thousands, except per share data)                 GAAP Results         52 Weeks Ended   52 Weeks Ended         August 28, 2021(2)   August 29, 2020(2)               Net sales   $ 14,629,585     $ 12,631,967   Cost of sales     6,911,800       5,861,214   Gross profit     7,717,785       6,770,753   Operating, SG&A expenses     4,773,258       4,353,074   Operating profit (EBIT)     2,944,527       2,417,679   Interest expense, net     195,337       201,165   Income before taxes     2,749,190       2,216,514   Income taxes(1)     578,876       483,542   Net income   $ 2,170,314     $ 1,732,972   Net income per share:           Basic   $ 97.60     $ 73.62     Diluted   $ 95.19     $ 71.93   Weighted average shares outstanding:           Basic     22,237       23,540     Diluted     22,799       24,093      (1)The 52 weeks ended August 28, 2021 and the comparable prior year period include $56.4M and $20.9M in tax benefits from stock option exercises, respectively (2)The 52 weeks ended August 28, 2021 and the comparable prior year period were negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $43.0M (pre-tax) and $83.9M (pre-tax), respectively     Selected Balance Sheet Information         (in thousands)                 August 28, 2021   August 29, 2020               Cash and cash equivalents   $ 1,171,335     $ 1,750,815   Merchandise inventories     4,639,813       4,473,282   Current assets     6,415,303       6,811,872   Property and equipment, net     4,856,891       4,509,221   Operating lease right-of-use assets     2,718,712       2,581,677   Total assets     14,516,199       14,423,872   Accounts payable     6,013,924       5,156,324   Current liabilities     7,369,754       6,283,091   Operating lease liabilities, less current portion     2,632,842       2,501,560   Total debt     5,269,820       5,513,371   Stockholders' deficit     (1,797,536 )     (877,977 ) Working capital     (954,451 )     528,781                 AutoZone's 4th Quarter Highlights - Fiscal 2021                                     Condensed Consolidated Statements of Operations                                         Adjusted Debt / EBITDAR                 (in thousands, except adjusted debt to EBITDAR ratio)   Trailing 4 Quarters                   August 28, 2021   August 29, 2020         Net income    $ 2,170,314     $ 1,732,972           Add:  Interest expense     195,337       201,165                     Income tax expense     578,876       483,542           EBIT       2,944,527       2,417,679                             .....»»

Category: earningsSource: benzingaSep 21st, 2021

Market Still Has Seller

Market Still Has Seller Hi all, Dan Laboe here covering for Jim on his final day of vacation. He will be back in action and well-rested to provide you with his usual enthralling market commentary on Monday. Today I'm going to take a look at the market action, some of the reasoning behind this pullback (and why it's a good thing) and examine some of our portfolios activity today. We've Got Sellers The bulls and the bears are battling it out at critical support levels. The Nasdaq 100 and the S&P 500 broke through their respective 50-day moving average after testing them several times throughout morning trading. Towards the end of day, we saw a rotation out of the tech-driven Nasdaq 100. Investors pulled more profits from its biggest winners with Apple (AAPL) and Amazon (AMZN), leading the index down, illustrating daily losses of 1.5% and 2%, respectively. Investors are rotating these profits into some of the cyclical sectors that have underperformed in 2020, with banks, utilities, and industrials keeping the S&P 500 buoyant today. This market pullback (which began on September 3rd) was catalyzed by the split surge from Apple (AAPL) and Tesla (TSLA). Both of these stocks saw huge capital gains into their respective stock splits on August 31st. Retail investors flooded into these shares on the implication that they are "cheaper," when in reality, AAPL & TSLA have never been more expensive on a valuation basis. Both the Nasdaq 100 and the S&P 500 surged to the most overbought levels since January of 2018, on a relative strength index (aka RSI) basis, which can be seen in both charts above. The markets quickly corrected as institutional investors & traders stepped in and blew some of the retail investor driven froth off the top. The largest pullbacks naturally came from the most parabolic stocks. With new sellers in the market, analysts speculate that a further correction could be on the horizon after 6 months of record gains driven by dtech. The impending November election is also bound to bring volatility with it. Still, market optimism remains strong, with interest rates being pushed to virtually 0 for years to come. Jerome Powell and his dovish band of Governors vow to let inflation run for the economy's benefit. Analysts can now discount (denominator) the future earnings (numerator) of innovation-driven companies – who are expected to have massive payouts years in the future – at a much lower rate, making these enterprises more valuable today than ever before. The massive valuation push in tech is justified, but to what extent? How much more do tech stocks have to run in 2020? With sellers beginning to show their colors in the market, it looks like investors may be ready for a profit rotation out of secular tech and into underperforming cyclical sectors, which are beginning to recover with the rapidly convalescing economy. I am bullish about equities in the next decade, and 2020 has been an invigorating start to the roaring 20s. Still, I am apprehensive about what the rest of 2020 has instore for us.  This correction is a good thing for savvy investors as it is providing ripening opportunities every percent the stock market falls. This slight stock retreat is preventing a much greater and more dangerous capitulation-driven selloff that could have occurred if the markets continued to drive upward unchecked.   Do not panic if the equity markets are to plunge further, as this will be the time to capitalize and pick off your favorite stocks at a discount. Remember what the legendary Warren Buffett said: "Be fearful when others are greedy and greedy when others are fearful." Portfolio Highlights We had some robust winners today despite the nearly sideways trading. CROX, VSTO, QDEL, and HWM all drove daily returns in excess of 5%. Crocs (CROX) in the Counterstrike Portfolio was today's biggest winner, gaining 7.6% after management provided healthy Q3 guidance in anticipation of its presentation at the CL King & Associates' 18th Annual Best Ideas Conference on Wednesday. Income Investor: Perhaps the most essential of all businesses during this pandemic is the grocery store, so it makes sense why supermarket giant Kroger (KR) just reported a stronger-than-expected second-quarter report. The company beat on both the top and bottom lines with digital sales soaring 127% from last year. It also offered a forecast for the second half of the year, which is rather rare these days. Maddy added the stock back on March 10th. Take a look at the editor's complete commentary for more specifics on KR's report. Have a great weekend! Dan Laboe Recommendations from Zacks' Private Portfolios: Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' private recommendation services. If you would like to follow our Buy and Sell signals in real time, we've made a special arrangement for readers of this website. Starting today you can see all the recommendations from all of Zacks' portfolios absolutely free for 7 days. Our services cover everything from value stocks and momentum trades to insider buying and positive earnings surprises (which we've predicted with an astonishing 80%+ accuracy). Click here to "test drive" Zacks Ultimate for FREE >>  Zacks Investment Research.....»»

Category: topSource: zacksSep 21st, 2021

Record-Setting Run Continues Despite Low Volume

Record-Setting Run Continues Despite Low Volume We saw another low volume, slow grind higher on Wednesday, but the small advances still kept the market on its record-setting pace as investors prepare for the beginning of the virtual Jackson Hole Economic Symposium. “The market didn’t even feel like it was open today, but we still managed to grind out a positive session,” said Jeremy Mullin in Counterstrike. “This is Christmas Eve or day after Thanksgiving volumes so you can get why I’m poking fun at the inactivity.” The S&P was the “big” winner today with a gain of 0.22% to 4496.19, while the NASDAQ spent its second session above 15K by advancing 0.15% (or about 22 points) to 15,041.86. Each of these indices now have five-day winning streaks. Furthermore, the S&P has closed at record highs in the past two sessions, while the NASDAQ has done so in the past three. The Dow is on a nice four-day run of its own after rising 0.11% (or nearly 40 points) to 35,405.50, or about 0.6% away from making its own new high that was set just a week-and-a-half ago. The index got a little roughed up after last Wednesday’s Fed minutes from its July meeting, which saw several members warm up to changing the monetary policy. And those minutes are why people are biting their fingernails over the virtual Jackson Hole meeting, which starts tomorrow. Will some sort of taper timeline be announced on Friday when Fed Chair Jerome Powell makes his remarks? Investors know its on the horizon, but don’t want a change to come too soon while the delta variant is still having an impact.   In other news on Wednesday, the latest retailer to make noise in the market was DICK’S Sporting Goods (DKS), which rose 13.3% after a strong second quarter report. EPS beat the Zacks Consensus Estimate by more than 81%, while revenue jumped over 20% year over year and also topped expectations. And after the bell today, salesforce.com (CRM) also reported strong quarterly results with a positive earnings surprise of more than 62%. Shares of this CRM software giant are up more than 2.6% after hours, as of this writing. Today's Portfolio Highlights: Home Run Investor: A lot of people used the shutdown to go back to school, which explains why Stride (LRN) had such a great financial performance throughout the pandemic. LRN is a career learning business that has beaten the Zacks Consensus Estimate for the past seven consecutive quarters with an average surprise of 69% over the past four. And analysts expect this success to continue. Rising earnings estimates have made LRN a Zacks Rank #1 (Strong Buy). Even with topline growth of 47% in its most recent quarter, the company still trades at 16x forward earnings. With net margins moving higher and growth expected to continue, Brian wouldn’t be surprised if LRN runs to $50 before the end of the year. Read the complete commentary for more on this new addition. ETF Investor: With $55 billion earmarked for water in the infrastructure bill, Neena saw a good time to invest in this “precious commodity with a limited supply”. On Wednesday, the editor added Invesco Water Resources ETF (PHO), which is the most popular water ETF with $1.97 billion in assets and a reasonable expense ratio of 60 basis points. Needless to say, PHO invests in companies focused on conserving and purifying water. The editor also decided to sell the Global X Telemedicine & Digital Health ETF (EDOC) for a slight loss after lagging in the portfolio for a while. Read the full write-up for more. Commodity Innovators: Three names were added on this busy Wednesday, including two from agriculture and one from energy. Lindsay Corp. (LNN) is a Zacks Rank #2 (Buy) that’s focused on water management and road infrastructure, but it’s the former business that Jeremy is most interested in. The irrigation segment helped the company post a 32% earnings beat most recently and has the editor thinking of new highs before the end of the year. Speaking of crops, the portfolio also picked up Teucrium Corn ETF (CORN) because corn futures are showing resilience under the 200-day and should be strong heading into winter. Finally, it may be weird to think about the colder months during a heatwave, but natural gas has been soaring and may hit highs set back in 2018. The editor added exposure through ProShares Ultra Bloomberg Natural Gas (BOIL), which moves 2X the daily move of natural gas. LNN and CORN are seen as long terms, while BOIL is a short term. Read the full write-up for more. Surprise Trader: This earnings season has seen several strong retail reports, including DICK’S Sporting Goods (DKS) today. Dave is feeling much more comfortable in the space and added Abercrombie & Fitch (ANF) on Wednesday. This Zacks Rank #1 (Strong Buy) apparel company reports before the bell tomorrow. It topped the Zacks Consensus Estimate in each of the last four quarters and has a positive Earnings ESP of 4.93% for tomorrow’s release. ANF was added today with a 12.5% allocation, while Tapestry (TPR) was sold. The complete commentary has more on today’s action. By the way, DKS was the best performer among all ZU names on Wednesday by climbing 13.3% after a strong second-quarter report.   TAZR Trader: The portfolio took advantage of some pullbacks and added more to Square (SQ) and Advanced Micro Devices (AMD) on Wednesday. SQ is a “monster of fintech” that’s trading at just 6 times sales expected to grow 98% this year. And its expected to top $21 billion next year. AMD is still undervalued compared to NVIDIA (NVDA) and should be able ride the coattails of that graphics chipmaker as investors scramble to buy it. AMD is up 33.7% in the portfolio since being added in June, while SQ rose 31.4% since March. (By the way, NVDA is the portfolio’s biggest winner at the moment with an 84.8% surge since March 2020.) Kevin also sold ProShares UltraPro Short QQQ ETF (SQQQ) today. Read the full write-up for more on all of today’s moves. Headline Trader: "Money managers scampered out of fixed-income and into reopening stocks, causing yields to breakout. At the same time, capital is flowing back into recovery plays in travel & leisure, banks, energy, and industrials, which had experienced soft performance in the past few summer months. "This trend has been playing out since the beginning of the week, as market participants position for the awaited monetary tightening policy change, which some believe could occur as soon as Friday. "I don't see an asset paring plan being disclosed in Friday's virtual post-Jackson Hole press conference. Just the fact that this over 4-decade old economic tradition is still being held virtually is evidence that the pandemic still impacts our society. I surmise a tapering timeline to be laid out in next month's FOMC meeting (Sept. 21-22), following what should be another healthy monthly jobs report for August. The Fed's asset purchases should slow before the year is up." -- Dan Laboe All the Best, Jim Giaquinto Recommendations from Zacks' Private Portfolios: Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' private recommendation services. If you would like to follow our Buy and Sell signals in real time, we've made a special arrangement for readers of this website. Starting today you can see all the recommendations from all of Zacks' portfolios absolutely free for 7 days. Our services cover everything from value stocks and momentum trades to insider buying and positive earnings surprises (which we've predicted with an astonishing 80%+ accuracy). Click here to "test drive" Zacks Ultimate for FREE >>  Zacks Investment Research.....»»

Category: topSource: zacksSep 21st, 2021

How Evergrande Became Too Big To Fail And Why Beijing Will Have To Bail It Out

How Evergrande Became Too Big To Fail And Why Beijing Will Have To Bail It Out While the world is obsessing with the fate of Evergrande, and more importantly when, or if, Beijing will bail it out, another just as interesting question is how did the company many call "China's Lehman" get to the point of no return and become a global systematic risk. For a fascinating look into how we got here, we turn our readers' attention to a recent article from Caixin titled "How Evergrande Could Turn Into ‘China’s Lehman Brothers'," and which provides one of the most comprehensive insights into why Beijing will have to, even if it is kicking and screaming, bail out Evergrande which, at its core, is just one giant shadow-banking black box whose time has finally run out. * * * For the past two months, hundreds of people have been gathering at the 43-floor Zhuoyue Houhai Center in Shenzhen, where China Evergrande Group’s headquarters occupy 20 floors. They held banners demanding repayment of overdue loans and financial products. Police with riot shields had to be on site to keep things under control. The demonstrators are construction workers at the property developer’s housing projects, suppliers providing construction materials and investors in the company’s wealth management products (WMPs). From paint suppliers to decoration and construction companies, Evergrande owes more than 800 billion yuan ($124 billion) due within one year, while it has only a 10th of that amount of cash on hand. As of the end of June, Evergrande had nearly 2 trillion yuan ($309 billion) of debts on its books, plus an unknown amount of off-books debt. The property giant is on the verge of a dramatic debt restructuring or even bankruptcy, many institutions believe. A bankruptcy would amount to a financial tsunami, or as some analysts put it, “China’s Lehman Brothers.” The venerable American investment bank’s 2008 collapse helped trigger a global financial crisis. Certainly Evergrande, one of China’s three biggest developers, has a giant footprint in China. Unfinished residential buildings at Evergrande Oasis, a housing complex developed by Evergrande Group, in Luoyang, China September 16, 2021 Its liabilities are equivalent to about 2% of China’s GDP. It has more than 200,000 employees, who themselves and many of their families have invested billions of yuan in the company’s WMPs. The company has more than 800 projects under construction, more than half of them halted due to its cash crunch. There are thousands of upstream and downstream companies that rely on Evergrande for business, creating more than 3.8 million jobs every year. Like many of China’s “too big to fail” conglomerates, Evergrande’s crisis has fueled speculation over whether the government will step in for a rescue. Several state-owned enterprises, including Shenzhen Talents Housing Group Co. Ltd. and Shenzhen Investment Ltd., both controlled by the Shenzhen State-owned Assets Supervision and Administration Commission (SASAC), are in talks with Evergrande on its Shenzhen projects, according to people close to the talks. But so far, no deals have been reached. In a statement last week, Evergrande denied rumors that it will go bankrupt. While the developer faces unprecedented difficulties, it is fulfilling its responsibilities and is doing everything possible to restore normal operations and protect the legitimate rights and interests of customers, according to a statement on its website. The company hired financial advisers to explore “all feasible solutions” to ease its cash crunch, warning that there’s no guarantee the company will meet its financial obligations. It has repeatedly signaled that it will sell equity and assets including but not limited to investment properties, hotels and other properties and attract investors to increase the equity of Evergrande and its affiliates. Growth on borrowed money Over the years, Evergrande has faced liquidity pressure several times, but every time it dodged the bullet. This time, the crisis of cash flow and trust is unprecedented. Evergrande shares in Hong Kong plummeted to a 10-year low. Its onshore bonds fell to what investors call defaulted bond level. All three global credit rating companies and one domestic rating company have downgraded Evergrande’s debt. For many years, Chinese developers were driven by the “three carriages” — high turnover, high gross profit and high leverage. Developers use borrowed money to acquire land, collect presale cash before projects even start, and then borrow more money to invest in new projects. In 2018, Evergrande reported record profit of 72 billion yuan, more than double the previous year’s net. But behind that, it spent more than 100 billion yuan a year on interest. Even in good years, the company usually had negative operating cash flow, with not enough cash on hand to cover short-term loans due within a year with and presale revenue not enough to pay suppliers. In addition to borrowing from banks, Evergrande also borrows from executives and employees. When developers seek funds from banks, lenders often require personal investments from the developers’ executives as a risk-control measure, a former employee at Evergrande’s asset management department told Caixin. “At times like this, Evergrande would have an internal fund-raising campaign,” the manager said. “Either the executives would pay out of their own pockets, or they would set a goal for each division.” One crowdfunding product issued to executives was called “Chaoshoubao,” which means “super return treasure.” In 2017, Evergrande tried to obtain project financing from state-owned China Citic Bank in Shenzhen, which required personal investment from Evergrande’s executives. The company then issued Chaoshoubao to employees, promising 25% annual interest and redemption of principal and interest within two years. The minimum investment was 3 million yuan. China Citic Bank eventually agreed to provide 40 billion yuan of acquisition funds to Evergrande. In 2020, Chen Xuying, former vice president of China Citic Bank and head of the bank’s Shenzhen branch from 2012 to 2018, was sentenced to 12 years in prison for accepting bribes after issuing loans. A senior executive at Evergrande said he personally invested 1.5 million yuan and mobilized his subordinates to invest 1.5 million yuan into Chaoshoubao. Some employees would even borrow money to invest in the product because the 25% return was much higher than loan rates. When the Chaoshoubao was due for redemption in 2019, the company asked employees who bought the product to agree to a one-year extension for repayment. Then in 2020, the company asked for another one-year extension. One investor said buyers received an annualized return of 4% to 5% in the last four years, far below the 25% promised return. When Evergrande’s cash flow crisis was exposed, the company chose to repay principal only to current executives. From late August to early September, the company repaid current executives and employees about 2 billion yuan but still owed 200 million yuan to former employees, including Ren Zeping, former chief economist of Evergrande who joined Soochow Securities Co. in March. Evergrande’s wealth division also sells WMPs to the public. Most of these WMPs offer a return of 5% to 10%, with a minimum investment of 100,000 yuan, the former employee at Evergrande’s asset management department said. As the return is higher than WMPs typically sold at banks, many of Evergrande’s employees bought them and persuaded their families and friends to invest, an employee said. Usually, a 20 million yuan WMP could be sold out within five days, the employee said. The company also sells WMPs to construction partners. Evergrande would require construction companies to buy WMPs whenever it needed to pay them, a former employee at Evergrande’s construction division told Caixin. “If the construction companies are owed 1 million or 2 million yuan, we would ask them to buy 100,000–200,000 yuan of WMPs, or about 10% of their receivables,” the former employee said. Although it was not mandatory for construction companies to buy WMPs, they often would do so for the sake of maintaining a good relationship with Evergrande, the former employee said. In addition, Evergrande property owners were also buyers of the company’s WMPs. About 40 billion yuan of the WMPs are now due. “It is difficult for Evergrande to make all of the repayments at once at this moment,” said Du Liang, general manager of Evergrande’s wealth division. Evergrande initially proposed to impose lengthy repayment delays, with investments of 100,000 yuan and above to be repaid in five years. After heated protests by investors, the company tweaked its plan last week, offering three options. Investors can accept cash installments, purchase Evergrande’s properties in any city at a discount, or waive investors’ payables on residential units they have purchased. Some investors opposed the “property for debt” option, as many projects of Evergrande have been halted and there is a risk of unfinished projects in the future. “The proposals are insincere,” a petition signed by some Guangdong investors said. “It’s like buying nonperforming assets with a premium.” The petition urged the government to freeze Evergrande’s accounts and assets and demanded cash repayment of all principal and interest. Some investors chose to accept the payment scheme proposed by Evergrande. They selected Evergrande projects located in hot cities in the hope of making up for losses by resale in the future. As Evergrande owed large amounts to construction companies, more than 500 of Evergrande’s 800-plus projects across the country are now halted. The company has at least several hundred thousand units that have been presold and not delivered. It needs at least 100 billion yuan to complete construction and deliver the units, Caixin learned. Whether and how to repay WMP investors or deliver housing is Evergrande’s dilemma. Debt to construction partners and suppliers In August, the construction company that was contracted to build Evergrande’s Taicang cultural tourism city in Nantong, Jiangsu province, announced the halt of the project due to bills unpaid by Evergrande. The company, Jiangsu Nantong Sanjian Construction Group Co. Ltd., said it put 500 million yuan of its own funds into the project and Evergrande paid it less than 290 million yuan. Sanjian has other construction contracts with Evergrande and its subsidiaries. As of September, Evergrande owes the Nantong company about 20 billion yuan. As of August 2020, Evergrande had 8,441 upstream and downstream companies it was working with. If the flow of Evergrande cash stops, the normal operation of these companies will be disrupted, and some would even face the risk of bankruptcy. In Ezhou, Hubei province, five of Evergrande’s projects have been halted for more than a month, and it owes contractors about 500 million yuan. “Housing delivery involves not only hundreds of thousands of families, but also local social stability,” a banker said. The housing authorities in Guangdong province are coordinating with Evergrande and its construction partners, trying to resume construction, the banker said. Evergrande relies heavily on commercial paper to pay construction partners and suppliers. Among payments it made to Sanjian, only 8% was in cash and the rest in commercial paper. Initially, the commercial paper borrowings were mostly six-month notes with annualized interest rates of 15%–16%. Now most carry interest rates of more than 20%. Holders of such commercial paper can sell the notes at a discount to raise cash. In 2017–18, the discount rate on Evergrande paper could reach 15%–20%. Since May 2021, the few Evergrande notes that could still be sold have been discounted as much as 55%, according to a person familiar with such transactions. For small and medium-sized suppliers, holding a large amount of overdue Evergrande notes is a burden too heavy to bear. In recent months, a number of suppliers sued Evergrande for breach of contract but often settled the cases. A lawyer who represented Evergrande in related cases told Caixin that many plaintiffs chose to negotiate with Evergrande while fighting in court. Evergrande also offered a “property for debt” option to its commercial paper holders. The company said it’s in talks with suppliers and construction contractors to delay payment or offset debt with properties. From July 1 to Aug. 27, Evergrande sold properties to suppliers and contractors to offset a total of 25 billion yuan of debt. Selling assets, but not land Meanwhile, Evergrande has been offloading its assets to raise cash. Its biggest assets are its land reserves. As of June 30, it had 778 land reserve projects with a total planned floor area of 214 million square meters and an original value of 456.8 billion yuan. Additionally, it has 146 urban redevelopment projects. In the past three months, Evergrande has been in talks with China Overseas Land and Investment Ltd., China Vanke Co. Ltd. and China Jinmao Holdings Group Ltd. for possible asset sales. Shenzhen and Guangzhou SASACs have arranged for several state-owned enterprises to conduct due diligence on Evergrande’s urban redevelopment projects, a person close to the matter said. Evergrande has approached every possible buyer in the market, the person said. However, no deals have been reached. Several real estate developers that have been in contact with Evergrande told Caixin that while some of Evergrande’s projects look good on the surface, there are complex creditors’ rights that make them difficult to dispose of. Some potential buyers have said they could consider a debt-assumption acquisition, but Evergrande was reluctant to sell at a loss, Caixin learned. At an emergency staff meeting Sept. 10, the wealth management general manager Du said in a speech that most of Evergrande’s land reserve is not for sale, reflecting the position of his boss, founder and Chairman Xu Jiayin. “In China, land reserves are the most valuable assets,” Du said. “This is Evergrande’s biggest asset and last resort. “For example, for a land parcel, Evergrande’s acquisition cost is 1 billion yuan, and the land itself is worth 2 billion yuan, but the buyer may only offer 300 million yuan,” Du said. “If we sold at a loss, we would have no capital to revive.” For his part, Xu maintained that Evergrande could repay all its debts and recover as long as it turns land into houses and sells them. But even if Evergrande can quickly sell its houses, the revenue would be far from enough to pay down debt. The chance that Evergrande won’t be able to pay interest due in the third quarter is 99.99%, estimated by a banker whose employer has billions of yuan of exposure to the company. As of the end of June, Evergrande had total assets of 2.38 trillion yuan and total liabilities of 1.97 trillion yuan. Of the nearly 2 trillion yuan of debt, interest-bearing debt was 571.7 billion yuan, down about 145 billion yuan from the end of 2020. The decrease in interest-bearing debt was mostly achieved by deferred payables to suppliers. In addition to the 571.7 billion yuan of interest-bearing debt on its books, it’s not a secret that developers like Evergrande have huge off-balance sheet debt. But the amount at Evergrande is not known. In the early stage of projects, developers need to invest a lot of money, which could significantly increase the debt on the balance sheet. Companies often place these debts off their balance sheet through a variety of means. After the pre-sale of the project, or even after the cash flow of the project turns positive, these debts would be consolidated into the balance sheet in the form of equity transfer, according to a property industry insider. For example, 40 billion yuan of acquisition funds Evergrande obtained from China Citic Bank were invested in multiple projects. Among them, 10.7 billion yuan was used by Shenzhen Liangyang Industrial Co. Ltd. to acquire Shenzhen Duoji Investment Co. Ltd. As Evergrande doesn’t have an equity relationship with the two companies, this item was not required to be consolidated into Evergrande’s financial statement. Evergrande used leveraged funds to acquire equities in 10 projects, and none of them were included in its financial statement, the prospectus of its Chaoshoubao shows. Evergrande has sold equity in subsidiaries to strategic investors and promised to buy back the stakes if certain milestones can’t be reached in the future. Such equity sales are actually a form of borrowing, too. In March, Evergrande sold a stake in its online home and car sales platform Fangchebao for HK$16.4 billion ($2.1 billion) in advance of a planned U.S. share sale by the unit. If the online sales unit doesn’t complete an initial public offering on Nasdaq or any other stock exchange within 12 months after the completion of the stake sale, the unit is required to repurchase the shares at a 15% premium. Evergrande’s hidden debts also include unpaid payments to acquire equities. Dozens of small property companies have sued Evergrande demanding cancellation of their equity sales agreements with the company because Evergrande failed to pay them. They are Evergrande’s partners in local development projects. Evergrande usually paid them 30% down for equities but declined to pay the rest even after the project was completed, according to the lawsuits. A plaintiff’s lawyer told Caixin that Evergrande’s project subsidiaries don’t want to go sour with local partners, but they have no money to pay as sales from the projects have been transferred to the parent company. A total of 49 of Evergrande’s wholly owned local subsidiaries have been sued since April, according to Tianyancha, a database of publicly available corporate information. Evergrande also owes land transfer fees to some local governments. Some 20 Evergrande affiliates have not yet made payments to the city government of Lanzhou, the capital of Northwest China’s Gansu province, according to a list of 41 such firms issued in July by the city’s natural resources department. A potential default by Evergrande could spread to markets outside China as it has huge, high-interest offshore bonds. Some of its offshore bonds carry interest rates as high as 15%, a person close to the Hong Kong capital market said. UBS estimates that $19 billion of Evergrande’s liabilities are made up of outstanding offshore bonds. Evergrande has been frantically selling properties at discounts this year. In late May, it offered certain homebuyers 30% to 40% off if they paid entirely in cash. In the first half, the company reported 356 billion yuan of contracted sales, slightly higher than 349 billion yuan for the same period last year. Average selling prices in the first six months declined 11.2%. Meanwhile, payables increased 14.7% to 951 billion yuan, and sales and marketing expenses increased 30% to 17.8 billion yuan. In response to the market environment, the company increased sales commissions and marketing expenses, the company said. Compared with its competitors, Evergrande has higher capital and human costs but lower selling prices, an industry participant said. “How can it make money?” the person said. The developer reported a 29% slide in profit for the first half. Its 10.5 billion yuan of profit mainly reflected an 18.5 billion yuan gain from the sale of some shares and marked-to-market holding in internet unit Henten Networks. It reported a loss in its core property business of 4 billion yuan. Evergrande’s extremely high debt ratio, high financing cost and repeated delays in payments to suppliers, partners and local government show that its liquidity has always been tight, but on the other hand, the fact that it has survived years under this model indicates that it has always been able to generate money, a veteran investor said. Now everyone is watching whether it can dodge the bullet once again. Tyler Durden Mon, 09/20/2021 - 22:00.....»»

Category: blogSource: zerohedgeSep 21st, 2021

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