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Stocks were indicated higher on Thursday after regulators watered down the notion that China would stop buying U.S. debt. The bull market is now less than two months shy of nine years old, and the trend that keeps on working is to buy pullbacks. Now investors are looking at how to position themselves for 2018 and beyond with tax reform and accelerated earnings and GDP growth driving the interest. Those same investors are also looking for new ideas.
24/7 Wall St. reviews dozens of analyst research reports each day of the week to find new investing and trading ideas for investors and traders alike. Some of the daily analyst reports and research reports cover stocks to buy, and some cover stocks to sell or to avoid.
Additional color and commentary have been added on most of these daily analyst calls. Consensus analyst price targets mentioned and other valuation metrics are from the Thomson Reuters sell-side research service.
These were the top analyst upgrades, downgrades and other research calls from Thursday, January 10, 2018.
Akamai Technologies Inc. (NASDAQ: AKAM) was downgraded to Underweight from Sector Weight with a $51 price target (versus a $66.32 prior close) at KeyBanc Capital Markets. The firm has warned that a recently speculated takeover looks unlikely for Akamai.
American Water Works Co. Inc. (NYSE: AWK) was downgraded to Neutral from Buy with a $91 price objective (versus an $85.70 close) at Merrill Lynch.
Appian Corp. (NASDAQ: APPN) was downgraded to Underweight from Equal Weight at Morgan Stanley. Appian closed up 8.5% at $34.57 on Wednesday but was indicated down 2% at $33.85 on Thursday.
Avangrid Inc. (NYSE: AGR) was started with a Buy rating and assigned a $60 price target (versus a $47.99 close) at Goldman Sachs.
Azul S.A. (NYSE: AZUL) was started as Buy with a $34 price objective (versus a $24.78 close) at Merrill Lynch
Barclays PLC (NYSE: BCS) was downgraded to Underperform from Market Perform at Keefe Bruyette & Woods. Its American depositary shares closed down almost 0.5% at $10.86 on Wednesday and were indicated down 2.2% at $10.62 on Thursday.
Chevron Corp. (NYSE: CVX) was raised to Outperform from Market Perform and the price target was raised to $140 from $120 (versus a $128.66 close) at BMO Capital Markets. The stock was indicated up 0.25% at $129.00 on Thursday, above its 52-week high of $128.94. Wells Fargo also raised its target on Chevron to $129 from $117.
Citrix Systems Inc. (NASDAQ: CTXS) was downgraded to Market Perform from Outperform at Cowen, but the firm raised its price target to $93 from $90. This was a valuation call after Citrix closed at $90.82 on Wednesday, versus a consensus target price of $87.50.
Core Laboratories N.V. (NYSE: CLB) was downgraded to Hold from Buy with a $109 price target (versus a $116.30 close) at Deutsche Bank.
Duke Energy Corp. (NYSE: DUK) was downgraded to Neutral from Buy with an $88 price target (versus an $80.11 close) at Goldman Sachs
LATEST ANALYSTS VIEWS
PRICE OF CRUDE DECLINING
If you have been watching the financial media of late, chances are high that you have had more than enough about bitcoin and cryptocurrencies shoved into your ear. Whether bitcoin and other cryptocurrencies are a store of a value or are developing currencies remains up for debate, but the interest in gold by the investing community and by central banks in need of hard assets remains high.
The World Gold Council has reported that gold-backed exchange traded funds (ETFs) added some 197.5 tonnes of gold to their holdings in 2017. That is a gain of 8.4% from 2016. In December alone, the tally of global gold-backed ETFs increased their gold holdings by 5.3 tonnes to 2,363.
While much of the interest in gold-back ETFs is global, the reality is that SPDR Gold Shares (NYSEARCA: GLD) and iShares Gold Trust (NYSEARCA: IAU) have more gold than what the World Gold Council represented as the other eight of the top 10 gold ETFs with inflows in 2017.
Gold was last seen down over $3 per ounce at $1,315.00, only marginally higher than where it ended in 2017. According to Coinbase, a top crypto-exchange and price tracking site, the bitcoin was last seen trading at $14,507, compared with about $13,500 right at the end of 2017. The difference here remains the volatility, with gold having a narrow range and bitcoin having a range in the last week alone of $14,382 to $17,083. That would be akin to gold having a range of $200 or more in that short a time.
According to the World Gold Council, European funds captured a whopping 75% of global inflows in 2017. This was a gain of 148.6 tonnes of gold. In dollar terms, it’s about $5.8 billion that was added to their holdings.
In the United States, the iShares Gold Trust and SPDR Gold Shares collectively accumulated 62.6 tonnes. That accounted for about 28% of the global net inflows, and it comes to a tally of about $2.9 billion. In December, the iShares Gold Trust added 2.1 tonnes while the SPDR Gold Shares had outflows of roughly 2.0 tonnes.
Then there is the relatively new approach of currency-hedged gold ETFs. The World Gold Council showed that these had some of the strongest growth during 2017. The council’s report said:
db Physical Gold British-pound-hedged and euro-hedged funds grew 463% and 65% respectively. ETFS GBP Daily Hedged Physical Gold grew 119%, adding 2.5t. At the fund level, Asian listed funds accounted for 54% of global net outflows. Huaan Yifu Gold ETF, listed in China, had the most outflows globally, losing 5.5t (US$231mn, 25% AUM).
You may have noticed that Asia has not been mentioned. It turns out that Asian-listed funds accounted for 54% of global net outflows in gold. They had a drawdown of 12.9 tonnes.
SPDR Gold Shares closed out 2017 at $123.65, and on Tuesday morning it was down about $1.00 at $124.30. The iShares Gold Trust ended 2017 at $12.51 but was last seen down 0.9% on the day at $12.58
The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning, showing that U.S. commercial crude inventories decreased by 4.9 million barrels last week, maintaining a total U.S. commercial crude inventory of 419.5 million barrels. The commercial crude inventory remained in the middle of the average range for this time of year.
Tuesday evening the American Petroleum Institute (API) reported that crude inventories fell by about 11.2 million barrels in the week ending January 5. Gasoline inventories rose by 4.3 million barrels and distillate stockpiles rose by about 4.7 million barrels. For the same period, analysts polled had consensus estimates for a decrease of 3.89 million barrels in crude inventories, a rise of about 2.65 million barrels in gasoline and an increase of 1.46 million barrels in distillate stockpiles.
Total gasoline inventories increased by 4.1 million barrels last week, according to the EIA, and have moved near the top of the five-year average range. U.S. refineries produced about 9.5 million barrels of gasoline a day last week, down by about 200,000 a day compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged about 9.1 million barrels a day for the past four weeks, up about 2.5% compared with the same period a year ago.
Before the EIA report, benchmark West Texas Intermediate (WTI) crude for February delivery traded up about 0.6% at around $63.35 a barrel, and it moved down to around $63.10 after the report’s release, before returning to $63.25 minutes later. WTI settled at $62.96 on Wednesday and opened at $63.41 Wednesday morning. The 52-week range on February futures is $43.76 to $63.67, and the high was posted this morning.
As crude oil prices have crept above $60 a barrel, exploration and production companies have felt less need to hedge future production against falling crude price. Analysts at RBC Capital Markets said in late December that at least 60% of 2018 U.S. crude production was hedged. As crude prices go up, hedging cost producers money because they have to sell at lower than market prices.
Several large producers, include Continental Resources, Anadarko and EOG Resources, have few or no hedged barrels. As long as prices continue to rise, these drillers will be able to glean every available dollar.
Companies that have invested more heavily may lag behind. Cowen identified a few of these in a report from Bloomberg: Concho Resources, Lonestar Resources, Oasis Petroleum and QEP Resources.
Week over week, U.S. crude oil exports fell by 460,000 barrels a day last week, and U.S. production decreased by 290,000 barrels a day to 9.49 million a day. Exports averaged 1.015 million barrels a day last week and have a cumulative daily average for the year of 1.015 million barrels a day, a 40% increase over the year-ago export total.
Distillate inventories increased by a 4.3 million barrels last week and remain in the middle of the average range for this time of year. Distillate product supplied averaged about 3.9 million barrels a day for the past four weeks, up by 6.8% compared with the same period last year. Distillate production averaged 5.3 million barrels a day last week, down about 300,000 compared to the prior week’s production.
For the past week, crude imports averaged about 7.7 million barrels a day, down by 308,000 compared with the previous week. Refineries were running at 95.3% of capacity, with daily input averaging 17.3 million barrels a day, about 285,000 less than the previous week’s average. Exports of refined products rose by 660,000 barrels a day last week to 5.13 million.
According to AAA, the current national average pump price per gallon of regular gasoline is $2.494, up about a penny from $2.485 a week ago and up about three cents per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.361 on average in the United States.
Here is a look at how share prices for two blue-chip stocks and two exchange traded funds reacted to this latest report.
Exxon Mobil Corp. (NYSE: XOM) traded down about 0.1%, at $86.68 in a 52-week range of $76.05 to $87.41. Over the past 12 months, Exxon stock has traded up about 0.8%.
Chevron Corp. (NYSE: CVX) traded up about 0.2%, at $128.07 in a 52-week range of $102.55 to $128.94. As of last night’s close, Chevron shares are trading up about 11.4% over the past year.
The United States Oil ETF (NYSEARCA: USO) traded up about 0.8%, at $12.67 in a 52-week range of $8.65 to $12.68. The high was posted today.
The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded down about 0.3%, at $28.08 in a 52-week range of $21.70 to $35.20.
JANUARY NEWSLETTER 4
IPHONE BAD FOR CHILDREN
Two large Apple Inc. (NASDAQ: AAPL) shareholders wrote to the company to express concern that smartphone use, particularly iPhone use, could be bad for child and teenage development. In the letter to Apple, they requested support for further study of the issue.
The letter was sent from JANA Partners and the California State Teachers’ Retirement System and was sent to Apple’s board. The two investors claim to own about $2 billion in Apple shares. Apple’s market cap is close to $800 billion.
In part, the letter read:
… we have reviewed the evidence and we believe there is a clear need for Apple to offer parents more choices and tools to help them ensure that young consumers are using your products in an optimal manner.
The studies reviewed included ones from Center on Media and Child Health and the University of Alberta, UCLA, and the American Psychological Association. The research indicated that overuse of digital products, social media and “personal devices” can cause distractions, high risk of depression and suicide, and sleep deprivation.
Among the suggestions to combat the issues, according to the two investment firms, Apple should:
Expert Committee: Convening a committee of experts including child development specialists (we would recommend Dr. Rich and Professor Twenge be included) to help study this issue and monitor ongoing developments in technology, including how such developments are integrated into the lives of children and teenagers.
Research: Partnering with these and other experts and offering your vast information resources to assist additional research efforts.
New Tools and Options: Based on the best available research, enhancing mobile device software so that parents (if they wish) can implement changes so that their child or teenager is not being handed the same phone as a 40-year old, just as most products are made safer for younger users. For example, the initial setup menu could be expanded so that, just as users choose a language and time zone, parents can enter the age of the user and be given age-appropriate setup options based on the best available research including limiting screen time, restricting use to certain hours, reducing the available number of social media sites, setting up parental monitoring, and many other options.
Education: Explaining to parents why Apple is offering additional choices and the research that went into them, to help parents make more informed decisions.
Reporting: Hiring or assigning a high-level executive to monitor this issue and issuing annual progress reports, just as Apple does for environmental and supply chain issues.
GOLD & BITCOIN COMPETING