There Is No Free Lunch
Emmanuel Macron won the French election and as a result the Tokyo stock market gained 2.3%. South Korea, which votes for a new president also saw stocks rise. However, the defeat of the right-wing populist Marine Le Pen is viewed as bad news for the US Administration and Wall Street futures are down. Paddy Power Betfair, the Irish bookie firm, is up because it finally managed to set the odds correctly on an election, after losing money with Brexit and Trump. We sold it last year as punters cashed in on votes for Hillary Clinton PDYPF allowed before the actual poll date.
So too are French stocks, off 0.8% because now the untested political newbie will have to figure out how to govern. Particularly afflicted are bank shares. The likelihood that Pres Obama two days after Donald Trump won the election warned his successor against hiring Michael Flynn (as two former national security experts told the New York Times) shows how arrogant The Donald is. I hope the more experienced politician Macron will do better.
Sentidocomun.com.mx reports that an Odebrecht official jailed in Brazil admitted bribing a Pemex executive with $5 mn to win a construction contract in Mexico. A corruption scandal has led to the dismissal of a Politburo member and official at PetroVietnam according to AsiaTimes, the first time a Vietnam apparatchik has been ousted for accepting bribes.
Here in the US, bribery is more subtle. The US Securities & Exchange Commission has gone after the seekingalpha.com website for printing “fake news” articles boosting the prices of about 200 stocks with articles that had been paid for by companies without informing readers of the payments. Other publications which engaged in the same undisclosed paid promotions include Benzinga, TheStreet.com, Investing.com, and Forbes. The articles were published between 2008 and 2014, and generated huge share price gains.
The SEC has charged 3 listed companies, two CEOs, and 9 writers for fraud and hit them with fines of up to $3 mn. Ten other individuals are still in the SEC's sites for stock price manipulation using supposedly independent “free” websites which publish articles for which “writers” were not paid.
The SEC investigation, according to the Financial Times, focused on a stock promotion firm called Lindingo operated by movie actress Milla Bjorn. It orchestrated the publication of 400 articles about 11 listed companies earning at least $1 mn for its owner. Most of the shares promoted were in biotech like ImmunoCellular and CytRX.
We never publish promotional one-sided articles to boost share prices at www.global-investing.com/ We pay our writers and charge our subscribers. There is no such thing as a free lunch.
A warning: robotic computer-run index-tracking exchange-traded funds can be lured into buying pumped-up stocks because their portfolio simplistically tracks an index. Unless human beings look into why there were market moves upward, they may be generated fraudulently. Mechanistic ETFs can be manipulated and lose money for passive investors.
Note also that talkmarkets.com in which I have invested also aims to ban promotional articles and those who “write” them.
*Because Banco Santander (SAN) was used as a proxy for Euroland banks before the French election and rose, SAN suffered a 2.22% price drop after the polling.
Chris Loew writes from Japan about a process of elimination:
*OTC traded Japanese stocks fail to track the market. Buying directly in Japan is hard for US investors. So I will confine myself to listed ADRs.
Nix to the three bank and two financial companies because their loan book and investment quality are hard to fathom. I am also ruling out Fronteo, a specialist in recovering emails for litigation discovery and Sony, as both are losing money.
“I won't recommend speculatively-priced Line Corp and IIJ nor overpriced Kyocera and Canon. Toyota and Honda are both facing cyclical decline and lower sales, and I would rather buy a cyclical stock at the depth of decline than at its start.
“That leaves me with NTT DoCoMo (DCM), the mobile phone spinoff of NTT. It keeps plugging along with reasonable financials, a p/e of 15.3x, a 2.98% yield, and a return on equity of 12x. It faces tough competition from fast-growing Softbank.
“DCM continues to earn reasonable profits and pay down its debt. It recently settled a dispute with India's Tata Sons which requires that it sell its share of their jv for $1.18 bn, part of which will have to be invested in India, [a potential growth market for telecoms]. I expect moderate growth for profits and revenues in the current fiscal year (to Mar. 2018).
“DCM is a boring value stock. But boring companies are too often overlooked.”
I add: Softbank was tipped by Harry Geisel but vetoed by me. Unlike the Japan index, DCM was down and I bought 1:1 ADRs at $24.035 of the big board. Since this is a very liquid stock, as Chris points out, I was not front-running, just testing the market. There is more on Tata and a Japanese leasing firm below.
Healthcare
*Israeli Teva (TEVA) and its Active Biotech Swedish partner reported on Friday after the market closed that their trial of laquinimod as an oral daily treatment for relapsing-remitting multiple sclerosis failed to meet its primary endpoint in phase III trials. The aryl hydrocarbon receptor activator drug is still being tested for another from of MS and Huntington's disease but as fierce pharma website points out, it has heart disease side effects in larger doses. Teva dropped again but Active lost 66%.
*Mazor Robotics (MZOR), also of Israel, gained 6.4% before falling back to $37.9, up only 6%. MZOR coverage was initiated by Ford Equity Research with a hold. Last week several analysts down-rated it because of the share rising. It has a key jv with Mallinkrodt for spinal surgery.
*GlaxoSmithKline (GSK) reported that its asthma drug Relvar Ellipta (called Breo Ellipta in the US) controlled patient outcomes better than usual care meds in the Salford Lung Study of clinical results from open-label treatment by GP's in Britain. Some 4,233 patients were enrolled in a randomized trial against either another combination of a cortico-steroid with a long-action beta agonist, or the steroid alone. GSK's drug combines fluticasone furoate, and inhaled cortico-steroid and vilanterol, a long-action beta agonist, in a single inhaler made by Innoviva (INVA-Q).
GSK drug improved control by 71% vs only 56% with the standard treatment, which was statistically significant. The adverse side effects were almost identical. The point of the study was to show that asthma control can be handled by a general practitioner rather than a specialist if the patient is acclimated to Relvar already. The study was funded by the Manchester universities around Salford and the National Health Service as well as GSK.
*Along with its Basel hometown competition Novartis, Roche (RHHBY). (via its Venture Partners arm) invested in rare disease research firm Vivet Therpauetics, a French private firm backed by licenses from two Spanish research centers and the Massachusetts Eye & Ear Infirmary of Boston. Vivet's first target is Wilson disease, a genetic disorder caused by defective liver cell encoding of the ATB7B protein, which affects about 25,000 patients in Europe and the US. Its research into vectors also addressing other genetic liver diseases and citrullinemia type 1 using adeno-associated virus. RHHBY.
*Stada Artzneimittel STADF rose another 0.8%.
*Three posters on the effect of filgotinib in Crohn's disease were presented by Galapagos, GLPG of Belgium, which we exited 14 months ago after our former biotech maven left the firm. The papers were delivered at the Digestive Disease Week gathering in Chicago. It did a secondary offering in April which raised about $350 mn but we still sold too soon, before its deal with Gilead.
Mining Stocks
*In Canada trading Orocobre of Australia is up another 2.2% on lithium love. OROCF mines lithium in Argentina. However SQM, Sociedade Quimica y Miniera de Chile, is down ~1%,
*Barrick Gold (ABX) which faces hefty fines for cyanide pollution from its Veladero mine in Argentina which resulted from a failure by ABX to meet a deadline to replace pipes after two earlier spills. ABX common stock was sold in the run-up to this case but we still own its US$-denominated bonds.
*Cameco (CCJ) is up 2.1% after Thomson-Reuters did a modestly favorable write-up on uranium mining.
Miscellaneous
*Algonquin Power & Utilities will report Thursday and the stock is upwardly mobile, perhaps because of insider trading. The cross-border Canadian stock yields 4.9%. It won a buy recommendation this morning from The Investment Reporter which cited its renewable hydro, wind, thermal, and solar power generation facilities and sustainable utility distribution network.
AQN is making green by going green.
*Brazilian Cosan declared a dividend of $0.0755598/ADR which goes ex-div May 11. The final amount in US$s may be subject to change before the CZZ payout date of May 29.
*Tencent Holdings (TCTZF) rose in Hong Kong but was down on Wall Street. Joining TCTZF in the negative column here is its South Africa parent, Naspers, NPSNY.
*Grupo Bimbo is back in the black, at $2.56, after it won a recommendation in Mexico. Other Mexican stocks are down.
*Tata Motors (TTM) fell nearly 3% in Asia trading on fear of Brexit, and because, omitted in what Abhimanyu wrote last week, its April Jaguar-Landrover results while good against other US car-makers, were in fact lower by 2.3% from sales in April 2016.
*Standard Life was rated bullish with a target price of GBX 425 by www.investorsintelligence.com, the UK chartists with which we trade ideas. It closed last week at GBX 380 and its ADR at $20.21, up 6.4%. Its yield is 4.7% so there is no rush to sell. Its future merger partner Aberdeen Asset Management hopes to take advantage of SLFPY's US relationship with John Hancock. But Martin Gilbert, to become co-CEO of the combo also says that they may eventually team up with a larger US company in future years.
*Bonus stock Ormat Technologies shares worth $627 mn or 22.1% will be acquired by its controlling shareholders, FIMI and Bronicki family interests of Israel, in order to transfer these to Orix, the listed Japanese financial company NYSE-IX (8591 in Tokyo), a future strategic geothermal partner for the Israelis. The price to be paid is $57, what the stock commanded on the day the deal closed, May 5, with no premium, unfair to public shareholders like us. Given that the deal will not close until the autumn, US legal eagles may object to the terms of the deal. The Japanese leasing firm was one of the shares Chris Loew rejected because its investment are hard to quantify.
Funds
*Kennedy Wilson Europe Real Estate (KWEIF) revealed that another key shareholder, Invesco, wrote calls on its 111,500 shares, thereby closing a long position. KWEIF is being merged into NYSE-KW, its US parent, which competes on the US market with Invesco.
*Canadian General Investment (CGRIF) was up 9.11% hitting US$16.92+. Like many Canadian closed-end funds it trades at a huge discount from NAV, why it is an easy way to make money up north.
*A day before the country's election Korea Fund gained 2.43%.
Disclosure: None.