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MAY NEWSLETTER 4
In the week ended May 4, 2018, the number of land rigs drilling for oil in the United States totaled 834, up by nine compared to the previous week and 131 more compared with a total of 703 a year ago. Including 196 other land rigs drilling for natural gas and two listed as miscellaneous, there are a total of 1,032 working rigs in the country, 11 more week over week and up by 155 year over year. The data come from the latest Baker Hughes North American Rotary Rig Count released on Friday afternoon.
West Texas Intermediate (WTI) crude oil for June delivery settled at $68.43 a barrel on Thursday, and it traded up about 1.9% Friday afternoon at $69.71 shortly before regular trading closed. Brent crude for July delivery traded at $74.83 a barrel.
The natural gas rig count rose by one to 196 this week. The count for natural gas rigs is now up by 23 year over year. Natural gas for June delivery traded down less than 0.1% at around $2.73 per million BTUs, down about five cents compared to last Friday.
The rising oil rig count (up by 19 in the past three weeks) combined with higher production from existing wells should be weighing on crude prices, but they continue to rise mainly out of traders’ concern over the possibility that Trump may abandon the multi-nation sanction agreement with Iran. With at least a portion of Iran’s 3.8 million daily barrels removed from global markets, the price of crude could rise by anywhere from $2 to $10 a barrel.
Among the states, Baker Hughes reported that New Mexico added six rigs, Oklahoma and Texas added two each and three states — Alaska, Louisiana and North Dakota — added one each. Colorado lost one rig this week.
In the Permian Basin of west Texas and southeastern New Mexico, the rig count now stands at 461, up by six compared with the previous week’s count. The Eagle Ford Basin in south Texas has 76 rigs in operation, one more than a week ago, and the Williston Basin (Bakken) in North Dakota and Montana now has 57 working rigs, up by one for the week.
Producers added 12 horizontal rigs again this week and the count rose to 913, while offshore drillers reported an unchanged total of 19, one more than last week’s count.
Buffett buys 75 million Apple shares 3 Hours Ago | 02:56
Apple hit a new all-time high Friday, briefly surpassing its previous high of $183.50 — pushed up by news that Warren Buffett's Berkshire Hathaway bought 75 million shares in the first quarter.
The stock is now roughly $20 per share short of a $1 trillion market cap.
Buffett is in Omaha, Nebraska, for the annual Berkshire Hathawayshareholders meeting, and he hasn't been shy about his bull case for Apple.
The legendary investor revealed his company's massive stake in Appleand said obsessing over iPhone X sales in the near term "totally misses the point" on the stock. Buffett's comments drove Apple ahead of the rest of the tech sector and overall market.
The Dow dropped 100 points after the open; tech giants Amazon, Alphabet, Netflix and Facebook all started trading in the red — but Apple was nearly 4 percent up at its peak.
"I don't think he's done. I think the numbers of the investment in Apple are going to go higher and maybe even significantly higher," said David Rolfe, CIO of Wedgewood Partners, which counts Berkshire and Apple as its two largest holdings.
Apple currently accounts for about a quarter of Berkshire's portfolio, Rolfe told CNBC's "Squawk on the Street," but he wouldn't be surprised to see that increase to a third or even half of the portfolio.
Apple CEO Tim Cook said the company is "thrilled" to have Buffett and Berkshire as a major investor.
"On a personal level, I've always greatly admired Warren and have always been grateful for his insight and advice," Cook said in a statement.
Buffett told CNBC he'd been buying a lot of stock in the first quarter, but not across the board. He revealed Berkshire had sold completely out of IBM and said he is not looking to buy General Electric.
He also spoke to broader economic growth and commented on a rare activist move to block the board nominations at building materials company USG.
BUFFETT BUYS 75 MILLION SHARES
More than a third of chief information officers (CIOs) have no interest in deploying any sort of blockchain solution in their organizations. A measly 1% already have invested and deployed a blockchain project and a not-very-impressive 8% are either actively experimenting with or planning soon to deploy a blockchain project.
Adding the 43% of CIOs who say that blockchain is on their radar but that have no current plans to take action to the 34% who have no interest in blockchain brings the total to more than 75% who essentially couldn’t care less about blockchain.
The survey was conducted by Gartner for its 2018 CIO Survey and elicited responses from 3,160 CIOs in 98 countries, representing approximately $13 trillion in revenue/public sector budgets and $277 billion in IT spending.
Gartner Fellow and vice-president, David Furlonger, said:
This year’s Gartner CIO Survey provides factual evidence about the massively hyped state of blockchain adoption and deployment. It is critical to understand what blockchain is and what it is capable of today, compared to how it will transform companies, industries and society tomorrow.
Among the 293 (9%) firms in the short-term planning stage or that already have adopted a blockchain solution, 23% of CIOs say the technology requires the most new skills to implement of any technology area and 18% said that blockchain skills are the most difficult to find.
Furlonger cited possible reasons for the talent shortage:
The challenge for CIOs is not just finding and retaining qualified engineers, but finding enough to accommodate growth in resources as blockchain developments grow. Qualified engineers may be cautious due to the historically libertarian and maverick nature of the blockchain developer community.
Blockchain technology [also] requires understanding of, at a fundamental level, aspects of security, law, value exchange, decentralized governance, process and commercial architectures. It therefore implies that traditional lines of business and organization silos can no longer operate under their historical structures.
Portola Pharmaceuticals Inc. (NASDAQ: PTLA) saw its shares soar on Friday after announcing that it had received an approval from the U.S. Food and Drug Administration (FDA). Specifically, the agency approved Andexxa, the first and only antidote indicated for patients treated with rivaroxaban and apixaban, when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding.
Andexxa received both U.S. Orphan Drug and FDA Breakthrough Therapy designations and was approved under the FDA’s Accelerated Approval pathway based on the change from baseline in anti-Factor Xa activity in healthy volunteers. Continued approval for this indication may be contingent on post-marketing study results to demonstrate an improvement in hemostasis in patients.
The approval of Andexxa is supported by data from two Phase 3 ANNEXA studies. As described in the label, results demonstrated that Andexxa rapidly and significantly reversed the anticoagulant mechanism of rivaroxaban and apixaban.
Stuart J. Connolly, M.D., ANNEXA-4 Executive Committee chairman and professor in the Department of Medicine of the Faculty of Health Sciences at McMaster University in Hamilton, Ontario, commented:
Today’s approval represents a significant step forward in patient care and one that the medical community has been eagerly anticipating. Andexxa’s rapid reversal of the anticoagulating effects of rivaroxaban and apixaban will help clinicians treat life-threatening bleeds, where every minute counts.
Bill Lis, CEO of Portola, added:
We are grateful to the patients who participated in our trials, our clinical trial collaborators, our employees and the FDA for their help in bringing this new drug to market for the benefit of patients with Factor Xa inhibitor-related bleeding. We are proud that Andexxa is a first-in-class medicine discovered in our labs. In addition to Bevyxxa, the first and only anticoagulant approved for extended VTE prevention in acute hospitalized medical patients, Andexxa is our second FDA-approved product with the potential to save lives and have a major impact on global public health. We remain committed to our scientific leadership in the fields of thrombosis and hematologic cancers.
Excluding Friday’s move, Portola had underperformed the broad markets, with its stock down about 15% in the past 52 weeks. In just 2018 alone, the stock was down 30%.
Shares of Portola were last seen up 20% at $40.51, with a consensus analyst price target of $53.50 and a 52-week range of $30.10 to $67.10.
It has happened consistently since the big sell-off in early February. The days of investors buying every dip appears to be over, and in fact, it now seems that every rally is met by a large horde of sellers. While this might be perplexing to investors who have seen incredible first-quarter earnings and an economy that seems much stronger, the reality is we are in the back end of a long market rally.
Given what appears to be a new normal, we decided to screen the Merrill Lynch research database for large, liquid blue chips that are rated Buy and offer a degree of safety as we get close to the slower summer trading months. We found five companies paying dividends much higher than the current Treasury yields, and their shares look like great additions to long-term growth portfolios.
This maker of tobacco products and wine has been hit hard and offers value investors a great entry point. Altria Group Inc. (NYSE: MO) is a top mega-cap consumer discretionary stock to buy on Wall Street, and the company’s Marlboro brand remains one of the most recognizable in the world. Many Wall Street analysts concede that the stock has solid downside support owing to the generous dividend yield, which remains at a huge premium in relation to the 10-year Treasury rate.
Cash flow generation and the return of cash to Altria shareholders remain key facets of the company’s total shareholder return, and the analysts expect support of the strong dividend, which they believe will continue to climb along with strong share repurchase activity. The board also raised the dividend by 8.2% in 2017.
To diversify away from cigarettes and cigars, Altria has expanded its portfolio into new categories like wine, e-cigarettes and a 27% stake in brewer SABMiller.
The company said its earnings for the first quarter rose from the same period of last year. Despite the strong report, the stock was hit hard and traded near a 52-week low.
Altria investors are paid a hefty 4.97% dividend. The Merrill Lynch price target for the shares is $70, and the Wall Street consensus estimate is $70.38. The stock closed Thursday at $56.36 a share.
American Electric Power
This industry leader is a solid dividend payer. American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.3 million customers in 11 states.
The company ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States. It also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.
American Electric Power shareholders are paid a solid 3.61% dividend. Merrill Lynch has a $78 price objective, and the consensus target price was last seen at $72.75. Shares closed on most recently at $69.24 apiece.
This remains a top Wall Street energy pick and is on the US 1 list at Merrill Lynch. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
Recently, Exxon announced estimated first-quarter 2018 earnings of $4.7 billion, or $1.09 per share assuming dilution, compared with $4.0 billion a year earlier. Cash flow from operations and asset sales was $10 billion, including proceeds associated with asset sales of $1.4 billion.
In addition, Exxon has raised the dividend by $0.05 per share to $0.82. That now translates to a nifty 4.3% dividend. During the quarter, the corporation distributed $3.3 billion in dividends to shareholders. Capital and exploration expenditures were $4.9 billion, up 17 percent from the prior year.
The $100 Merrill Lynch price objective is well above the $85.98 consensus target price. The stock closed trading at $76.54 on Thursday.
Kraft Heinz Co. (NYSE: KHC) was formed in July of 2015 via the merger of H.J. Heinz and Kraft Foods. The company is the leading global food company, with $29 billion of annual revenues generated by well-known brands such as Kraft, Heinz, Oscar Meyer and Maxwell House.
The company is the third largest food and beverage manufacturer in North America, and it derives 76% of revenues from that market and 24% from International. The company’s many brands also include ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.
Shareholders of Kraft Heinz are paid a 4.55% dividend. Merrill Lynch has set its price target at $85. The posted consensus target is $73.82. and the shares were last seen trading at $54.95.24/7 Wall St.
5 Stocks to Buy as Record Huge Permian Basin Well Generates Excitement
Simon Property Group Inc. (NYSE: SPG) invests in the real estate markets across the globe. It engages in investment, ownership, management and development of properties. It primarily invests in regional malls, premium outlets and community/lifestyle centers to create its portfolio.
Through its subsidiary partnership, it owns or has an interest in about 230 properties in the United States and Asia. The company also has a 28.9% interest in Klepierre, a European REIT with over 260 shopping centers in 13 countries.
Despite the increasingly difficult retail environment, analysts remain positive on this REIT giant, believing that the solid competitive position of Simon Property should still lead to about 4.5% to 5.0% funds from operations per share annual growth over the next three years.
One key driver of growth will include the more than $1.0 billion in development/redevelopment planned over the next few years. Merrill Lynch also feels that the company’s high-quality portfolio is weathering the retail storm better than most.
Shareholders are paid a 4.75% distribution. The Merrill Lynch price target is $190. The consensus price target is $184.86, and the shares ended trading on Thursday at $159.0
SLOW TO GROW
RIG COUNT UP 9
Alibaba Group Holding Ltd. (NYSE: BABA) reported fiscal fourth-quarter and full-year 2018 results before markets opened Friday. The China-based internet giant reported adjusted diluted earnings per American depositary share (ADS) of $0.91 on revenues of $9.87 billion. That compares to earnings per ADS of $0.69 and revenues of $6.09 billion in the same period a year ago. Fourth-quarter results also compare to the consensus estimates for earnings of $0.86 per ADS on revenues of $9.27 billion.
One ADS is equal to one ordinary share, and the exchange rate used is based on 6.2726 yuan per dollar.
For the full year, Alibaba reported earnings per ADS of $5.24 and revenues of $39.9 billion. In the prior year, the company reported earnings of $3.70 per ADS and revenues of $24.98 billion. Analysts were looking for $5.20 per ADS and $38.95 billion.
The number of annual active buyers on Alibaba’s retail marketplaces totaled 552 million at the end of the fourth quarter, up by 98 million (21.5%) year over year. Monthly mobile active users rose from 507 million last year to 617 million (up 21.7%) at the end of March. The company’s core commerce revenues rose by 60% year over year, the cloud-computing segment revenues rose by 101%, digital media and entertainment segment revenues rose 33% and other revenues increased by 10%.
The company’s chief financial officer, Maggie Wu, said:
Looking ahead to fiscal 2019, we expect overall revenue growth above 60%, reflecting our confidence in our core business as well as positive momentum in new businesses. We expect our new growth initiatives will drive long-term, sustainable value for our customers and partners and increase our total addressable market.
Alibaba did not provide a detailed forecast in its press release. Analysts expect earnings per ADS of $1.40 on revenues of $11.65 billion in the company’s first fiscal quarter of 2019. For the full fiscal year ending next March, consensus estimates call for earnings per ADS of $6.54 on revenues of $54.48 billion. That estimate is well short of the 60% growth Wu is predicting — about $9 billion short.
Alibaba’s ADSs traded up around 2% in Friday’s premarket session, at $186.12 in a 52-week range of $114.00 to $206.20. The consensus 12-month price target was $217.63 per ADS before this morning’s announcement. The high price target estimate is $257.51.24/7 Wall St.
STOCK GOING UP