De S&P 500 index (SNPINDEX: ^ SPX) received 9.1 points on Monday, or just below 0.3%. This marks another relatively quiet day for the index, which makes up about 80% of the total capitalization of U.S. markets.
Notable winners recorded today General Motors (NYSE: GM), as shares closed 7.5% after an analyst continued to drum up spinning GM’s electric car company; en Newmont Goldcorp (NYSE: EASY), the only S&P 500s gold mining, 7% up after the news that Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) bought shares of Barrick Gold last quarter. Shares of NVIDIA (NASDAQ: NVDA) also won nearly 7% according to an analyst’s comments.
On the downside, airline shares and cruise stocks were some of the biggest losers. Shares of American Airlines Group, United Airlines, en Carnival fell 5%, making their subsectors lower.
And while Buffett’s purchase of Barrick Gold sent Newmont higher, Berkshire decided to divest all of its common stock of Occidental Petroleum (NYSE: OXY) and cut in his stake Wells Fargo (NYSE: WFC) over the last four years with 25%, other investors today also sold their shares.
Image Source: Getty Images.
Analyst: GM’s EV company would be worth billions as a stand-alone company
General Motors has invested significant resources in its electric car business, and those investments have provided the company with a growing collection of technology and engaging cars that it will bring to the market in the coming years. The question that many investors have is how much value will the EV company create for shareholders; There is certainly reason to question whether it has been done so far.
In recent weeks, Deutsche Bank analyst Emmanuel Rosner has made it clear that he thinks General Motors should spin its electric car business into a stand-alone company. Rosner estimates that his EV company could be worth as much as $ 95 billion, based on the sharp rise and extreme ratings of stand-alone EV / hydrogen start-ups such as Nikola, who is still at least one year old from having a commercially available car, and Tesla, which has become the most valuable automotive company on earth.
Rosner’s biggest point is that a spinoff would allow the company to tap cheaper capital through stock offerings, while GM shareholders, who would likely gain an interest in the spun-off company, would benefit from a re-evaluation of the EV company on the market. GM executives do not seem so excited to take this step. Not only would it have negative consequences for GM today, but it would also radiate the entire future of the company if EVs were no longer part of their core business.
Buffett buys a gold supply: the beautiful move of Berkshire, and some sales that were not so surprising
Warren Buffett has never been ashamed of his opinion on gold as an investment. In short, he is not a fan, and has pointed out that gold is not a “productive asset”, which has made it an underperforming investment compared to companies that can grow their earnings over time. Much of its value is discarded (or discarded) by speculators, and its usefulness to value for industrial as well as consumer products is limited.
Because of this history of being negative on the metal itself, many people were stunned to learn that Barrick Gold joined the Berkshire portfolio last year, with the conglomerate buying 21 million shares. What does Buffett think? I think it’s important to note that he mocked gold as an investment for decades, but has been almost not so negative against gold companies. On the contrary, Barrick Gold has a number of characteristics that Buffett likes, including a strong margin of safety in its balance sheet, and production costs that can make the money worthwhile, even if gold prices fall sharply.
On the other side of the ledger, Berkshire sold the shares of beleagured oil giant Occidental Petroleum in the quarter, shares it began accumulating in the second half of 2019. Needless to say, this investment did not go well for Berkshire:
OXY data provided by YCharts.
Berkshire still owns preferred shares of Oxy, which bought it to help the company finance the purchase of Anadarko Petroleum. Ironically, if Oxy is unable to survive without going through bankruptcy, the purchase of Anadarko will be the reason. The deal was for the most part considered wildly valued, adding billions added to high interest spending right before the worst oil crash in history.
Berkshire also sold more than 60% of its stake in JPMorgan Chase (NYSE: JPM), all of them Goldman Sachs (NYSE: GS) shares, and more than 25% of its investment in Wells Fargo (NYSE: WFC), one of Berkshire’s longest held investments. The economic impact of the coronavirus pandemic has hit banks particularly hard. Shares of the three are down between 19% and 55% from the 2020 high, as their income craters increase as loan losses increase:
JPM data by YCharts.
Upgrade moves NVIDIA higher
NVIDIA graphics chip giant NVIDIA has been a wonderful investment so far this year, and Wall Street analysts expect the good times to continue. With the company’s forthcoming reporting, multiple analysts today have raised their expectations and price targets, sending shares higher. Monday’s move means NVIDIA’s stock has more than doubled by 2020, and has risen an unbelievable 210% in the past 12 months.
Cruise, airline shares fall on travel concerns
While weekend weekend traffic was relatively strong compared to the lowlands at the end of March and April, travel remains far, far below pre-coronavirus levels. Moreover, there is a risk that the recovery we saw may begin to lose wind. According to a report by the Associated Press, most Americans do not yet feel safe flying, and the reality is that most airlines do not have the capital to survive long-term in today’s environment.
Participating in American and United in today’s sales was Alaska Air Group, Southwest Airlines, en Delta Air Lines, down more than 3%, along with cruise line stock Norwegian Cruise Line Holdings. All fell on these concerns about the ongoing struggle for the travel industry.
Earnings are rising
It’s an important week for earnings, with discount retail and home improvement giants planning to release results. Home Depot, Walmart, Advance Auto Parts, en Kohl’s report on Tuesday, meanwhile Lowe’s, TJX Companies, en Purpose are set for Wednesday. Discount retailer and competitor of TJX Companies Ross Stores reports on Thursday.
