NextEra (NYSE:NEE), Southern Company (NYSE:SO), and Entergy (NYSE:ETR) are the three top utility stocks recommended by professional equity analyst Travis Miller, an Energy and Utilities Strategist for Morningstar Research Services.
NextEra (NYSE:NEE) is currently yielding over 2.25%, the Southern Company (NYSE:SO) is yielding 4% and Entergy (NYSE:ETR) has a dividend that yields 3.9% at the current stock price.
Mr. Miller holds a bachelor’s degree in journalism from Northwestern University’s Medill School of Journalism and a master’s degree in business administration from the University of Chicago Booth School of Business, with concentrations in accounting and finance.
In this exclusive 2,071 word interview in the Wall Street Transcript, Travis Miller, Mr. Miller details how growth and income can both be found in the utilities sector.
“The Southeast right now appears to be one of the most constructive areas for utilities.
Within that, NextEra (NYSE:NEE) appears very well positioned to grow, given almost 80% of their earnings come from Florida.
We also like Southern Company (NYSE:SO) and Entergy (NYSE:ETR), both located in the Southeast where you have higher-than-average population growth.
We also see generally lower energy costs in the Southeast. There’s a lot of growth opportunity in that region to expand the clean energy mix…
We think the Northeast is going to be exceptionally challenging, both this winter and going forward for the next few years.
From New York up through New England, there’s a scarcity of natural gas. So we expect much higher energy prices this winter and next summer.
Those states also have very aggressive clean energy goals.
When you put together the high and rising energy costs along with the infrastructure investment that’s needed to meet the clean energy goals, we see some rapid escalation in customer bills that utilities are going to have to manage.”
Nuclear power generation may also be riding the clean energy wave despite the closing of the Yucca Mountain waste disposal site by the adminstration of President Obama.
“Most utilities have some type of nuclear exposure, either owning facilities or distributing power from nearby facilities.
Nuclear is a hotly debated topic in the clean energy industry because arguably it offers the most reliable carbon-free power generation available.
That said, there’s been a lot of concern over the years about safety and about nuclear fuel waste handling.
I think we’ve seen, just in the last year, a big mentality shift as people start to run the numbers in terms of getting to 50%, 60%, even 100% carbon-free power generation mix.
You just can’t do it in a reasonable amount of time without nuclear.
Nuclear is still 20% of the U.S. generation mix and it’s the most reliable source of generation in many areas.
The best example is what’s happened in California over the last few months as the Governor’s office and other energy policy makers reversed PG&E’s (NYSE:PCG) decision to retire the Diablo Canyon nuclear plant.
As policy makers in California ran the numbers about how to get to net zero emissions by 2045, Diablo Canyon became a key part of that equation.”
Two more top picks from Travis Miller beyond NextEra (NYSE:NEE), Southern Company (NYSE:SO), and Entergy (NYSE:ETR) are Edison International (NYSE:EIX) and WEC Energy Group (NYSE:WEC).
“One of our top picks is Edison International (NYSE:EIX), which operates the electric grid in most of Southern California.
The big growth story for Edison is that California is aiming to electrify all of its transportation fleet and all of its buildings within the next 20 years to eliminate carbon emissions across the economy.
California’s net zero emissions goals are much more ambitious than any other state.
There’s general consensus among stakeholders in California that utilities like Edison will be essential to support that clean energy transition in terms of providing the electricity for vehicles and for buildings and also ensuring that the grid is reliable and resilient as more demand for electricity comes onto the system.
For Edison that means a lot of electricity demand growth and a lot of infrastructure growth.
Edison International also has one of the lowest valuation multiples and one of the highest dividend yields in the sector right now.
So we think Edison offers an attractive income source as well.
The market’s biggest concern with Edison is an unresolved liability related to past natural disasters that continue to impact both accounting earnings and cash flow. We don’t expect that to be resolved anytime soon. But their core business continues to perform very well…
we think that WEC Energy Group (NYSE:WEC) is a very attractive company for traditional utility investors looking for income, growth and stability.
WEC operates in Wisconsin primarily, which we consider a highly constructive state. It’s also moving very quickly to diversify its energy mix, in particular, adding renewable energy.
State regulators have been very supportive of WEC’s growth plans in areas like solar and wind.
So we see a lot of growth there and support from regulators to ensure that growth turns into earnings and dividends for investors.
WEC has always had very, very consistent earnings.
Their management team is one of the few that offers a very tight window on earnings guidance for the upcoming year and they regularly meet or exceed that guidance.”
The Morningstar analyst sees some challenges to utility stocks such as NextEra (NYSE:NEE), Southern Company (NYSE:SO), and Entergy (NYSE:ETR).
“I think beyond the clean energy transition, which continues to get support at state and at the federal level, the growth of electric vehicles is really going to be a key trend for utilities over the next five years.
Electric vehicle charging in the homes and businesses is going to shift some of the way energy infrastructure historically has been used for the last century.
That’s going to require some more modernization investments and it’s going to require more infrastructure investments.
It could significantly change the way utilities build and operate the electric grid over the coming decade.
At the federal level, we think most of the policymaking has been done through both the infrastructure bill that was signed last year and the Inflation Reduction Act.
So we don’t see a whole lot of federal policy making changes in the next few years.”
Get the full detail on Morningstar analyst Travis Miller top picks NextEra (NYSE:NEE), Southern Company (NYSE:SO), and Entergy (NYSE:ETR) by reading the entire 2,071 word interview, exclusively in the Wall Street Transcript.
Equity analyst professionals have the attention of investors after the worst year for equity returns in the US since 2008. It pays to pay attention to these analysts that can find pockets of significant return in a chaotic bear market.
Mike Kozak is an Equity Research Analyst and has been covering the Metals & Mining sector since 2007. He joined Cantor Fitzgerald in 2016.
Mr. Kozak holds a BASc degree in Mining & Mineral Process Engineering from the University of British Columbia, and prior to joining the financial services sector, worked in various technical roles for Fording Canadian Coal, Teck Resources, and Barrick Gold.
In December of 2021, Mr. Kozak recommended BHP, the large cap Australian mining company: “BHP (NYSE:BHP) is the world’s largest diversified miner. It has a 12% dividend and is trading around 30% below its highs on the year.”
The stock spun out its oil and gas drilling subsidiary into Woodside Energy giving investors shares in that company as well, a “twofer” in 2022 that has returned large double digit gains on the investment to date.
Phil Skolnick is Managing Director, Equity Research, and Senior Oil & Gas Analyst at Canada’s Eight Capital. He formerly was Managing Director and head of global energy research at Canaccord Genuity.
He singled out InPlay, with a current dividend yield of over 6%, and PetroTal as two small independent oil and gas exploration and production companies as ones investors should buy in early February 2022.
In his February 2022 interview, Ben Nolan noted that natural gas, and specifically liquefied natural gas, would be the key energy input far beyond the short term. Mr. Nolan is a Managing Director in the Transportation sector, covering Shipping and Energy Infrastructure at Stifel Financial Corp.
“…You do have a lot of developing economies, various places around the world — India, Pakistan, Bangladesh, even China — where their power consumption is going up a lot.
They’ve got to figure out how they’re going to meet those demands and the cleanest and, generally, one of the cheapest methods of being able to do that is with natural gas.
Now, it’s not carbon free. So perhaps you could argue that it’s just a bridge fuel, but if it is a bridge fuel, it’s a multi-decade bridge fuel.”
Switching from natural resources to natural sciences, Dr. Kumaraguru Raja is a Senior Biotech Analyst at Brookline Capital Markets.
Previously, he was Vice President, Biotechnology Research at Noble Life Science Partners. He started his equity research career in 2010 as a Senior Associate Analyst on the Citi Research biotechnology team.
Dr. Raja noted in his March 2022 interview that many biotechs had raised enough capital: “…These companies are actually sitting on a lot of cash, which will provide them with a runway for at least one to two years.
And they don’t have to worry about the high cost of capital, at least for the next one or two years.”
Lisa Ellis is a partner and Senior Managing Director at MoffettNathanson LLC. She leads the Payments, Processors, and IT Services business.
In her April 2022 interview, Ms. Ellis touted that most hated of categories, cryptocurrency technology. Her recommendations may be just what the devoted contrarian investor requires.
Haendel Emmanuel St. Juste is Managing Director and Senior REITs Analyst at Mizuho Securities USA LLC.
He joined Mizuho in early 2016, having spent the previous 15 years on Wall Street, with platforms including Morgan Stanley, UBS and Green Street, focused exclusively on the REIT sector.
His May 2022 interview specifies a certain type of real estate investment as the best for our current position in the economic cycle.
“We’re still constructive on REITs, we’re just of the view that you need to be increasingly selective.
There’s more value out there.
We like names and sectors where there is pricing power and ability to offset some of the rising costs, where you are still seeing good demand, and I think we touched on a lot of that with residential and with shopping centers.”
Vijay Kumar is a Senior Managing Director on Evercore ISI’s Healthcare Services & Technology Research Team, primarily focusing on the medical supplies and devices and life science tools subsector.
“Medtronic has had some recent setbacks on the new product pipeline side. And most of it is either about unfortunate timing, or a communication sort of issue.
Yet the underlying fundamentals remain very strong.”
Business development companies or BDCs are a small but high yielding stock sector.
Casey Alexander is a Senior Vice President – Research Analyst with Compass Point Research & Trading, LLC covering business development companies, which he has been following since 2009.
“Barings BDC…is managed by almost a unique team. They operate more in the traditional middle market.
But it’s managed by Barings Asset Management, which has over $300 billion in assets under management.
They manage the general account for their parent company MassMutual.
They have a far more bespoke method of investing and therefore the loans that they invest in, they have less competition for, are able to create better terms, better yields and, in general, a better total return.”
Tore Svanberg is an analyst and managing director at Stifel Financial Corp.
He joined the company with the acquisition of Thomas Weisel Partners LLC in 2010.
He is part of the technology group, covering semiconductors with a focus on analog, connectivity and processor semiconductors.
He has been recognized for his work by The Wall Street Journal’s “Best on the Street” Analyst Survey.
“I think the markets that are perhaps more interesting for semiconductor companies would be automotive. There’s obviously a lot of electronic content growth happening in the automotive market.”
Michael E. Hoffman joined Stifel Financial Corp. in 2014.
Based out of the Baltimore office, Mr. Hoffman is a Managing Director and Group Head of Diversified Industrials Research, covering solid/industrial/medical waste, pest control and specialty distribution.
“In the industrial waste space, the bellwether is Clean Harbors with a very attractive valuation entry point and likely to beat and raise in 2Q22.”
Hartaj Singh is Managing Director and Senior Analyst, Biotechnology at Oppenheimer & Co. His top biotech stock recommendation has returned over 30% since his August interview:
“…We have a “buy” on Gilead.
And we have one of the highest price targets on it.
And it’s just human psychology that if things are not looking good in the outside world, you will generally tend to go to areas or stocks that are safer. So you’ll avoid higher-risk stocks. And in that kind of an environment, the larger caps look very good.”
Richard Safran is Managing Director and an Analyst at Seaport Research Partners.
He is an aerospace and defense equity research analyst and former aerospace engineer and program manager.
He started his professional career working at Northrop Grumman on the B-2 program.
“Russia was a major supplier of titanium to the U.S. aerospace industry and that’s not going to be any more, and aerospace OEMs are now going to have to domestically source titanium and titanium parts.
Well, that goes squarely to ATI.
People are looking for small/mid-cap stocks that are a derivative call on Russia’s invasion of Ukraine and the U.S. industry de-risking from Russia, well then, ATI fits that bill.”
Nikhil Devnani, CFA, is an Analyst at Bernstein covering U.S. Emerging Internet, a variety of marketplaces across e-commerce, food delivery, ridesharing and housing.
Mr. Devnani joined Bernstein in 2016 as Research Associate on U.S. Large-Cap Banks and contributed to the team’s No. 1 ranking by Institutional Investor in 2017 and 2018.
His September 2022 interview has some eye opening recommendations.
“My top stock recommendation is actually outside the world of e-commerce right now. So, it’s Uber.
And why Uber? A couple of things.
One is, I think there’s not a lot of very clean stories in internet and probably in a lot of sectors right now.
But when I think about the relative trends, Uber is benefiting from this tailwind of people moving around again, which continues to take place.”
Mike Polark, CFA, is a Director and Senior Analyst at Wolfe Research, LLC covering the medical device industry.
Mr. Polark joined Wolfe Research after nearly 10 years with Baird.
“In large-cap land, I like Boston Scientific.
I cover a series of these medical device bellwethers, I call them — you know, multi category companies that do a lot of stuff. Boston, for me, has been the Goldilocks option — not too hot, not too cold, just right.
And they’re a leader in minimally invasive medicine, so they have a huge portfolio of minimally invasive solutions for specialties like cardiovascular, urology, oncology, electrophysiology.”
Ralph M. Profiti, CFA, is a Principal focused on Metals & Mining equity research at Eight Capital, covering Senior North American Industrial Metals and Precious Metals companies and commodities.
His November 2022 interview is timely for investors looking to put money to work in 2023.
“In copper, my favorite stock is Freeport (NYSE:FCX). I like Freeport because of its strategic position in the copper peer group as it pertains to, again, having strong balance sheet liquidity. It can have positive free cash flow even at lower copper prices than where we are now.”
Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOG) are the top stock picks from David C. Hartzell Jr., President and CEO of Cornell Capital Management.
He currently serves on The Business Week Alliance/Market Advisory Board and the Barron’s “BIG MONEY” panel of experts.
He is an ex-officio member of the board of directors of the FBI Citizens Academy Foundation; the board of directors of the Chantal Avin Rosin Foundation; the board of directors of the Western New York Innovation and Entrepreneurial Group; The Charles Schwab Technology Advisory Board; The New York Society of Security Analysts; the CFA Institute; Chairman of the board of Clarence Industrial Development Agency, or CIDA; President of the Clarence Chamber of Commerce; and the Chairman of the Erie County Industrial Development Agency, or ECIDA, Leadership council; and is the former Supervisor — Mayor — of Clarence, New York.
“I tend to avoid the newest technology stocks. I learned my lesson back in 2000. Now I buy technology stocks that are a little older like Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOG) or Apple (NASDAQ:AAPL) that have been around a while and have proven themselves, rather than trying to find the latest, greatest 10 baggers, as Peter Lynch would call them.
I tend to be a little more conservative. My clients tend to be a little older and skew a little more conservative. So I’m a little more conservative as well and I buy stocks after they have proven themselves…
Valuations are always high with a Microsoft or a Google or an Apple. But we really sit down and take a look at this. I call them second-generation techs.
First generation would be the stuff that’s on the cutting edge.
Second generation like a Microsoft or Google — something that’s been around for a while and proven itself.
The valuation usually is going to be higher than an old-line industrial and such. But I think the question with every money manager is: Do you want to pay that extra valuation? If the equities in question and their criteria don’t fit our system, we won’t pay for that extra valuation. But, with some stocks we will.
For example, we won’t buy Facebook (NASDAQ:META) even though a lot of managers do. We thought the valuation was just too high. So we definitely reject stocks that other people are buying based on our own internal research…
If you go back to 2000 when we were trying to evaluate tech companies and there were just so many, one of the things I learned is, it’s just so difficult to separate the winners from the losers because every company looks so good on paper.
Their pitch is great, their MBA-toting, Stanford-educated CEO is young, enthusiastic and has a rich, full head of hair.
Their product is the next best thing since sliced bread.
Everybody looks good on paper, but can they cut it in this cut-throat tech world we live in? A lot of times, picking out the winners from losers is almost an impossible task in the technology sector.
It is very, very difficult.”
Facebook (NASDAQ:META) is not the only stock that Mr. Hartzell recommends avoiding. Two stocks that Mr. Hartzell bangs the table for are Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT).
“Let’s use Google, for example.
You get Google and it’s almost like Kleenex.
If you want to find out about something, you go to Google, as does everyone else in the free world.
Google — the search engine — is such a cash machine that allows the rest of Google to experiment in a lot of other tech niches and nooks.
They have a whole slew of products that the public doesn’t even know about that they’ll break out over the next 10 years, kind of like Apple does.
Google is a company we absolutely love for their focus on their core business and their commitment to innovation that will drive profits in the future.
We love Apple for their innovative, consumer friendly, high-quality products.
Everything Apple does, they just do really, really well.
On the other hand, you can buy 100 small tech companies, or 1,000 small tech companies, and you never know which one is going to be productive, or even if the company is going to survive to the next generation.
So, why do I like tech?
I think that with tech you can make a moat that people can try to breach but it can be very, very difficult.
If you look at Google search, Microsoft tried for years to get Bing off the ground and failed miserably. Nobody uses Bing, and everyone’s tried to crack Google’s moat.
But no one’s been able to. Google equals search, period.
So, with tech, your chances of success increase as long as you are the first in, you’re an innovator, you can keep your product fresh and your company is constantly and unremittingly consumer friendly.
You can really dominate your space, unlike a consumer products company that sells napkins and always faces relentless price competition.
Of course, you have to be great, and things change.
So, as a money manager, you have to be willing to move to the new frontier whatever that happens to be.
You need to know who’s dominating their space.
But as long as you stay on top of things, it’s an exciting place to be, much more exciting than value stocks, which is what we originally staked our claim to when we started our company back in 1989.”
The message from Mr. Hartzell is to stay away from Bitcoin but believe in the United States of America.
“First of all, I would say, don’t buy Bitcoin.
I think Bitcoin is air.
If Bitcoin went to zero tomorrow, it really wouldn’t surprise me.
I don’t know why people get involved in that.
I think it’s the whole Robin Hood mentality: get something for nothing — which of course in the stock market never happens. So I would say first of all avoid Bitcoin.
Two, I would say: Don’t be afraid of 2023.
Because if you look at the economy right now, even though you read a lot of gloom and doom and fear, if you’ve talked to anyone who owns a business, the big problem is finding people.
Unemployment is so low.
Most businesses now that have come out of COVID are humming along and are making money and just recently the Federal Reserve said that they haven’t peaked with the raising interest rates, but they’re starting to back off, so the whole hand of the Fed that was on the market is starting to ease and rate increases won’t be as big as they were in 2023.
We traveled recently to Greece and some of the people there said, “Oh you’re Americans.”
They said, “We love to go to America.
We love America.
We have friends there.
We have friends and relatives in Chicago, and we go there to visit.”
It seems that everyone in Greece has an uncle in Chicago.
“We love going to the United States. We love the United States,” they say.
How nice is that? Sometimes, you don’t hear that in the United States — how good a country we have.
People tend to focus on the negative.
But this is still an amazing economy.
It’s an honest government, honest legal system.
If you get pulled over in your car, you don’t have to worry about the police officer shaking you down, like they do in other countries around the world.
Also, you can mail me $10 right now in the U.S., and you know it’s going to get to me.
Other countries, that doesn’t happen.
I know, because my daughter has traveled all over the world, and we have sent her cash.
Sometimes it gets there, sometimes it disappears into the system.
So this is still just a great country and I think people need to realize that and focus on the future.
The future is bright for America. It really is.”
Get the complete interview with David C. Hartzell Jr., President and CEO of Cornell Capital Management, and learn more about his recommendations Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOG), exclusively in the Wall Street Transcript.
Thomas E. Browne, Jr., CFA, is a Portfolio Manager at the Keeley Teton Small and Mid Cap Dividend Value strategies. Mr. Browne previously was a Portfolio Manager at Keeley Asset Management Corp.
He was also a Portfolio Manager for Oppenheimer Capital, SEB Asset Management and Palisade Capital Management.
Prior to that he was a sell-side technology services analyst and was twice recognized in The Wall Street Journal’s Best on the Street survey.
Mr. Browne received a B.B.A. from Notre Dame and an MBA from New York University.
“…We think that aerospace is an interesting area to invest in these days.
The air carriers seem to be doing better.
People want to get out and see other people either for business or personal reasons after being locked down for the last couple of years due to COVID-19. Airbus (OTCMKTS:EADSY) and Boeing (NYSE:BA) have had difficulty delivering planes over the last several years for a variety of reasons.
And so it seems like we’re getting into a shortage of airplanes. With fuel prices where they are, and newer aircraft being much more fuel efficient, this creates demand for new planes.
Air Lease (NYSE:AL) is one way we’re investing in this trend. They are one of the largest aircraft lessors in the world. They will double their fleet over the next five to seven years.
They’re well managed and the stock trades well below the value of the aircraft. We think that one offers a lot of potential as well.”
Daniel L. Kane, CFA, is a managing director of Artisan Partners and a portfolio manager on the U.S. Value team. In this role, he is a portfolio manager for the Artisan Value Equity, U.S. Mid-Cap Value and Value Income Strategies.
“The core Meta family of apps, their core Facebook and Instagram businesses, are healthy — engagement and revenue are growing.
There is a lot of white space for revenue to grow in the future too.
The business faces tough comps from the IDFA headwind related to Apple (NASDAQ:AAPL) changes that are making tracking tougher and putting pressure on advertising revenue.
But we think they’ll come out the other side and continue to grow again.
That core business, we think, is probably worth over $700 billion today. On the other side, there’s the metaverse bet and this is hard to handicap, but the spending is unlikely to be permanent if there isn’t a path to earning an economic return.
Our belief is that based on current expectations in the market, the spending is being capitalized as if it is permanent…
There is no historical precedent where a company has lost over $10 billion per year for a decade building a business.
There will be some resolution to this, we think, in a reasonable time frame. Meaning, we think we have a high percentage of future outcomes on our side.”
John G. Ullman is President and Founder of John G. Ullman & Associates, Inc. Earlier, he was President of USGM Securities, Inc., and at Corning Inc., he worked in financial management. He received a bachelor’s degree in economics from Johns Hopkins University. He received an MBA from the University of Chicago, with a focus in financial management.
“One specific company within the Utility sector that we like and own shares of is Dominion Energy (NYSE:D).
The utility company sold off its midstream assets in 2020 for $8.7 billion, and it also cut its dividends.
It did a little restructuring.
The stock sold off at the time. Generally, investors do not like it when dividends are cut. The midstream assets were sold to Warren Buffett.
It was seen as if Warren Buffett was getting a good deal in terms of value for the assets, but we liked the long-term strategic thinking of management at the time.
We also liked the valuation of the stock price, it having sold off because of these moves. And with that, we increased our position in Dominion Energy.
One of the strategic initiatives that Dominion’s management is taking is investing heavily in the renewable energy sector.
Management plans to spend $37 billion in renewable energy growth capex, so that is capital expenditure in renewable energy projects that will be in offshore wind.
The company plans to spend heavily in the offshore wind sector right off the coast of Virginia, in addition to onshore wind and solar farms.
These initiatives are supported by tax credits, and the company is protected by semi-automatic rate increases.
Therefore, we feel that this utility company is favorable in terms of a risk/reward scenario that would take place. In addition, we think the downside is fairly limited, while the company can grow along with these initiatives.
One other reason why we see the Renewable Energy sector to be favorable is that it is being supported at the state level.
States are now mandating certain renewable energy goals to meet their climate change endeavors.
We view climate change as a long-term problem, and some of these solutions are being tackled by the utility companies themselves.
So, many renewable energy stocks are priced very, very high. We stay away from those. But we found utilities such as Dominion Energy to be a safer way to invest in the renewable energy sector, given the reasonable valuation.
The price of oil and natural gas is high right now; that is another reason to invest in renewable energy, given that it is an alternative source of energy.
But that said, the price of oil and natural gas can come down. It is very volatile, and it is really determined by geopolitical factors, in addition to overall supply/demand.
While climate change is a long-term problem, we see utility companies with their resources being a major player in tackling that problem.
So overall, we like their management’s strategic thinking, their plans, their investments, in addition to the valuation of the stock.”
Get many more money manager interviews for 2023 stock picks and beyond, exclusively in the Wall Street Transcript.
The chance to buy a piece of the Atlanta Braves or New York Knicks through the US stock market is highlighted in these interviews with professional money managers Jonathan Boyar and Sam Coquillard.
Jonathan Boyar is a principal at the Boyar Value Group and Principal Advisor to the MAPFRE AM US Forgotten Value Fund.
He is President of Boyar’s Intrinsic Value Research LLC., an independent research boutique established in 1975 that counts some of the world’s largest sovereign wealth funds, hedge funds, mutual funds and family offices as subscribers.
He is also a Principal of Boyar Asset Management, which has been managing money utilizing a value-oriented strategy since 1983. Mr. Boyar has been interviewed by Barron’s, Welling on Wall Street and GuruFocus and is a frequent guest on both CNBC and Yahoo Finance.
“…One of our favorite names there is a company called Madison Square Garden Sports (NYSE:MSGS), which is in a decent position in the fund. So currently, the weighting is a little less than 3% of the fund. And this kind of typifies the type of investment we do.
Madison Square Garden Sports is controlled by the Dolan family and sells for the “Dolan discount.” And the Dolans are a family that everyone loves to hate. But over time we have made a lot of money investing alongside of them.
The company has an enterprise value of $4.5 billion. And primarily what it owns are the New York Knicks and the Rangers.
The New York Knicks are valued by Forbes at $6.1 billion.
And they’ve generally been conservative in their valuations.
And the Rangers are valued at $2 billion.
So with an enterprise value of $4.5 billion, you’re getting part of the Knicks for free and getting paid to own the Rangers. So it makes absolutely no sense, but people don’t think value will ever be unlocked, and we disagree with that sentiment.
And we’ve been investing alongside the Dolan family for a long period of time. And we made a lot of money when they sold Cablevision to Altice (NYSE:ATUS) for a price that we never thought that we would receive.
And right now the value of sports teams is going up and up. And the best move that the Dolans could have taken or made has been not to sell the teams as they’ve just gone up in value.
The CAGR has been tremendous, but right now private equity is getting very involved in this space. And it wouldn’t surprise us — because the NBA and the NHL now allow private equity firms to take stakes in teams — if a private equity firm or a family office took a 10%, 15%, 20% stake in the Knicks and/or the Rangers to give the Street a value of what it would be worth to an acquirer.
So that’s a name that we like a lot.
We think it’s almost a double from here based on the asset value of the company.
They’re assets that don’t go on sale very often. They are trophy properties. The last time the Knicks and the Rangers went up for sale was in the mid-1990s.
So that’s something we’re excited about.
And it fits another theme of ours which is that rights to live sports are getting more valuable each year. And this is a way to participate in that value creation. And then sports gambling is another way that these teams will make money…
On the theme of sports teams, there’s Liberty Braves (NASDAQ:BATRK), which owns the Atlanta Braves baseball team.
It’s controlled by John Malone, who is a very successful media investor. And we think over the next couple of years, he’s going to sell the team for a lot of money.
And publicly traded sports teams don’t generally stay public for very long if you look at their history. The Atlanta Braves is now trading for around $30.
We think intrinsic value is probably close to $45 or so. And it also owns some valuable real estate. It has a very savvy owner who will sell it at the right price.”
Another professional money manager picking the owner of the Atlanta Braves as an investment oppportunity for 2023 and beyond is Sam Coquillard.
Samuel C. Coquillard is Managing Director at Pacific Global Investment Management Company.
Immediately prior to joining Pacific Global in 2006, Mr. Coquillard was a Senior Vice President of Chelsea Management Company, an investment advisory firm.
Previously, he was a First Vice President of Merrill Lynch; Senior Vice President at Chase H&Q; and Vice President, Institutional Sales, at Wertheim Schroder & Co. He received a B.A. degree from the University of Southern California.
“A name that we’ve been involved with for a long time is Liberty Braves (NASDAQ:BATRK).
Liberty Braves is a tracking stock, but that’s changing.
Liberty Braves represents Liberty Media’s interest in the Atlanta Braves baseball team and the surrounding real estate development, which is referred to as The Battery Atlanta.
And in November of this year, Liberty Media announced that it would split off Atlanta Braves and The Battery Atlanta into a separately traded public company via a redemptive split. The transaction will be completed by the end of the first half of 2023.
So basically, what’s happening here is Liberty Media, which has had this tracking stock Liberty Braves, will redeem its existing Braves common share stock in exchange for shares of the newly formed company, which will be called Atlanta Braves Holdings Inc.
We think it adds to the likelihood that the Atlanta Braves baseball franchise will be sold.
We think the decision to isolate the value of the baseball franchise, by converting the shares from a tracking stock into its own stock via the redemptive split, is very positive.
Chairman John C. Malone and Liberty Media have a very successful history of unlocking shareholder value by way of financial engineering; we think it’s going to be another example of that going forward.
This one is interesting. There are very few publicly traded major league teams in the United States.
There’s the Knicks and the Rangers, which are part of Madison Square Sports (NYSE:MSGS). And right now, we have the Atlanta Braves.
And so, you have these companies that are very precious; there aren’t many of them around, as everyone knows. And when there is a transaction, I think people are usually surprised by the price that buyers are willing to pay for these assets.
When we look at the Atlanta Braves, the trailing 12-month revenues for the Atlanta Braves Group was $637 million.
And on an enterprise value basis, if you strip out the debt and the equity that’s associated with The Battery Atlanta, the adjusted enterprise value for the Atlanta Braves is about $1.7 billion, which is roughly the same as the current market capitalization.
So, right now, the Atlanta Braves trades at under three times enterprise value to revenue.
The most recent transaction in professional sports was at nine times revenue for the Denver Broncos, quite a difference there.
And the last major league baseball team that sold was the New York Mets. That was about two years ago in a transaction that was about seven times revenue, significantly more than what we understand the Braves are valued at right now.
We believe that a potential transaction for the Braves might prove to be superior compared to the Mets. So if we look at the $2.4 billion purchase of the New York Mets, based on a 2019 report in Forbes, the New York Mets generated about $302 million in revenue. That’s net of stadium revenues used to pay down debt.
Based on the 162-game season, the New York Mets were generating $1.864 million per game translating into an acquiring multiple of seven times revenue. According to Forbes, in the 2021 Major League baseball season, the Atlanta Braves Group generated $443 million of revenues net of debt service. And based on a 162-game season, the Atlanta Braves generated $2.734 million per game.
So, even though the Braves are generating 47% more revenue than in the Mets’ 2019 season, prior to the acquisition, the Braves trade for under three times enterprise value to sales, whereas the New York Mets were acquired for roughly seven times sales.
Obviously, we believe that’s a significant gap.
And the fact that it becomes a pure play on the Atlanta Braves means that that gap in valuation will likely be rectified by a sale.
So the bottom line is we get very interested when we see things like this. The redemptive split and the spinoff of the Braves into an asset-backed stock is something we’d hoped might happen.
We’re not particularly surprised, however, as Liberty and John Malone are incredibly good at this sort of thing.
We think, within a reasonable amount of time, notwithstanding tax considerations, MLB approval and things of that nature, that the company could very well be sold — and then the shareholders of Atlanta Braves could do very well.”
Get the complete details in the complete interviews from these two professional money managers, and many more, exclusively in the Wall Street Transcript.
Medical device stocks are a very heterogeneous sector.
Mike Polark, CFA, is a Director and Senior Analyst at Wolfe Research, LLC covering the medical device industry. Mr. Polark joined Wolfe Research after nearly 10 years with Baird.
In this 2,870 word interview, exclusively in the Wall Street Transcript this month. Mr. Polark details his top picks and reasoning behind them.
“In the worst of the pandemic, surgical procedure volumes were net negatively impacted. There were fewer surgeries done.
There were fewer physician office visits done. So let me put it this way, this group was not a COVID beneficiary defined at the highest level — COVID created a headwind.
And so that was very much the story of 2020 and even some of 2021.
I think we’re obviously beyond the acute phase of COVID and now we’re kind of in a COVID endemic world and COVID is still creating some challenges.
They’re less severe than they were.
But it’s still a struggle for hospitals and health care providers.
And so, yes, I think the other way to frame it is — if you were in 2019 and we’re pre COVID, and you were projecting surgical procedure volumes in 2022 or 2023 and then you go to look where we are now with COVID, we’re below where you would have thought we’d be, where you would have thought we’d been in 2019.
So we’re still underperforming as a consequence of the pandemic. And I don’t think there’s an overnight fix; it’s not going to catch up all of a sudden even if the patient demand is there.
And I think the reason it might struggle to catch up is because of the supply side — the providers that help the hospitals, the physician offices, they just don’t have enough bandwidth to allow all this potential pent-up demand to come back all of a sudden. And so it can be smoother sailing from here for sure, versus what we’ve had the last couple years, but a lot of folks like to talk about the backlog or the pent-up demand for health care services of all types because of COVID.
And I conceptually believe that it’s there, but I also don’t believe it can all of a sudden come back because of these supply constraints.”
Inflation is also a concern for medical device stocks as well as COVID-19.
“…Inflation, certainly it’s a consideration, a headwind, that companies are working through at the highest level.
It seems to be more acute in companies that make equipment versus interventional products. But I think the impacts are broad, and I think what these companies are attempting to do, and this includes the biggest of the med device companies, like Medtronic (NYSE:MDT) and Boston Scientific (NYSE:BSX) and Abbott (NYSE:ABT) that I follow, historically they have not captured price increases.
Historically their model was pricing each year flat to down a little bit. And that seemed to work for their business when the CPI was +2 or +3. CPI is now +5, 6, 7, 8.
And pricing flat to down is no longer supportive of their overall business goals. And so they are attempting to, again, at the highest level, at the portfolio level, to reorient and start to advocate for some modest price increases where appropriate.
And so I think, you can only turn the aircraft carrier so fast; it’s slow to develop. But the goal is that if historically, pre COVID, your pricing was -1 or -2 at the enterprise level, today, I’m sensing they kind of want it to be +1 or +2, given where CPI is to cover their costs. And so that’s how the industry is responding to clearly increased costs that they’re facing.”
Innovation in automation is essential to the medical device stock sector.
“Robot-assisted surgery is a major development — all sorts of ways to advance minimally invasive surgical procedures continue to get adopted.
So robots are a piece of that.
But there are other tools and techniques in cardiovascular medicine that can further minimize the exposure for patients, the amount of time they stay in the hospital.
You think about a procedure like TAVR — transcatheter aortic valve replacement — a huge home run for the industry broadly.
The standard of care 10 years ago was surgical aortic valve replacement, which is an open-chest procedure. And if you can avoid stopping a heart and opening the chest you would, and TAVR came along and allowed all sorts of aortic valves to get replaced without that intense intervention.
Same for coronary angioplasty.
So this is a catheter-based technique to clear out blocked coronary arteries.
The alternative is coronary artery bypass grafting, which is an open-chest procedure.
So, open-chest procedures still have their role in the field, they’re still used, but you’re seeing interventional cardiology, these catheter-based techniques where you access the heart from a blood vessel in the leg, are continuing to ramp in popularity and adoption.”
Further medical device innovation is in the close tracking of bodily functions.
“A different trend is smart sensors. Think about wearables defined broadly — certainly you’re seeing wearables play a bigger and bigger role in health care, both in the hospital setting and outside the hospital setting.
Certainly the consumer wearables ecosystem is massive, but when I talk about wearables, I’m focused on companies with FDA clearances, medical-grade wearables, and you’re seeing these devices really increase in popularity and use.
And I think the long-term vision is more of this, and more ways to watch patients, monitor patients outside the hospital, especially patients with chronic conditions.
And then you see wearables really change the paradigm in diseases like diabetes management — the continuous glucose monitor, patch-based insulin pumps — with huge benefits to patients and their daily living. And you’re really seeing companies that sell those devices have huge surges in their revenue performance.”
One medical device stock that fits this thesis is Masimo.
“I like Masimo (NASDAQ:MASI). It’s a mid-cap stock — $7 billion, 8 billion in market cap.
It’s a smart sensor company.
They have leading market share in the hospital for certain vital signs monitoring of respiratory vital signs.
So they’re the global leader in hospital-based pulse oximetry.
And they have some interesting opportunities outside the hospital in the home, to help hospitals and health care systems watch patients more closely.
The stock has come down a lot this year.
They’ve done an acquisition, that’s a little confusing, but that’s created an opportunity in valuation, and I’ve advocated for a sum of the parts approach to this stock.
And I don’t think you’re paying up too much for a really high-quality core business at this point. So you’re getting it, relative to this company’s 10-year history, you’re getting the opportunity to invest in the core business at a below-average multiple.”
One recognizable medical device sector stock that is not high on Mr. Polark’s list is Abbott.
“I have an “underperform” rating on Abbott Laboratories.
Abbott is a very large company, they do a lot of stuff, they have some great brands — Abbott a good company.
I just think right now it feels like a potentially bad stock.
And the primary issue for me, or the primary concern for me, is that the last two years, they have had a surge in profit from COVID testing. They sell rapid tests like BinaxNOW here in the U.S. and obviously that’s taken off.
So when you look at the last two years of financial performance, it looks really good and differentiated versus other med techs through the pandemic, but it seemingly was driven predominantly by the COVID testing, and we’re coming down from the COVID testing mountain top.
And I think we’ve seen the peak there.
And I just worry, as the next year or two unfolds, as we enter a new normal or a new era of COVID with maybe less testing generally — obviously, we’re seeing the molecular testing go way down and I worry that the rapid testing might see a similar decline.
It creates a tough dynamic for their income statement to manage through that huge pop which is then kind of deflating.
I do a lot of work around, what is the business earning otherwise.
And I just think that number is maybe not as high as some folks think, and using an average valuation has gotten me a stock price that’s been consistently a bit below where it’s traded.
So it’s not a table pounder, but I do think as 2023 unfolds, this whole COVID testing tide going out will be more visible in the numbers, and I just worry that it’ll result in a little bit of a further reset of the stock price.
So that’s one that I’m kind of differentially cautious on.”
Vijay Kumar is a Senior Managing Director on Evercore ISI’s Healthcare Services & Technology Research Team, primarily focusing on the medical supplies and devices and life science tools subsector.
Dr. Kumar’s research expertise spans the diagnostic, medical equipment, medical supplies and life science tools subgroups. In this June 10, 2022 2,430 word interview, Dr. Kumar reveals some mid year medical device stock recommendations that have come to fruition.
“Medtronic has had some recent setbacks on the new product pipeline side. And most of it is either about unfortunate timing, or a communication sort of issue.
Yet the underlying fundamentals remain very strong.
We see three key products for Medtronic, positioned to help the stock.
They recently launched their surgical robot, a soft tissue surgical robot, in Europe. It’s doing extremely well.
And they will start their U.S. IDE trial — clinical trials shortly. We do expect an approval in calendar 2023, and we think the prospects for surgical robotics for Medtronic are very bright.
However, they did get a recent warning letter issued within diabetes.
So they were expecting a new product approval called the 780G, which is now under a question mark, given the warning letter. We think the issues that the FDA has raised, they were all legacy issues — it has nothing to do with the new product.
Within the clinical superiority of the new product, 780G makes a case for approval.
So if 780G were to be approved, that’s a positive.
And there is a pivotal trial readout coming out in the back half of this year, which is a renal denervation trial for resistant hypertension.
So if we do get a positive readout in the trial, that opens up a new multibillion dollar opportunity.
If you have these clinical pipelines, it’s a very healthy balance sheet. We think management has done a good job, and a changing culture within all these elements make for Medtronic to outperform.”
Innovation in medical device sector stocks always provides upside.
“Medtronic would be the one with renal denervation.
This resistant hypertension is a massive opportunity globally.
And these are patients with systolic blood pressure of above 165 millimeters of mercury, and not responding to three or four medications.
So there’s no option for them.
So these patients are on three or four different pills and those regimen cocktails need to be changed regularly to see what sticks. And there’s nothing else that could be done.
And multiple trials have shown lowering blood pressure is correlated with the huge clinical and economic value to the system over time.
And that’s where renal denervation comes in.
How the therapy works is, you first ablate the sympathetic nerves around the renal artery. And those sympathetic nerves have a feedback loop when they’re activated, and they can cause constriction of blood vessels.
When blood vessels constrict, that raises the blood pressure.
So in this therapy when you ablate the nerves, that feedback loop is cut.
So you may not have the increase in blood pressure because blood vessels now relax, and you get an immediate drop off in blood pressure.
So what makes this therapy really cool is, one, its novel; it’s completely greenfield.
No one has looked at this kind of therapy.
And two, once you get this procedure, it’s seen as a permanent therapy.
You could perhaps even reduce the number of drugs that people take over time. So it makes it quite exciting.
And we’re expecting the pivotal trials readout later this year, perhaps in Q4.”
Get more insight into these and many other medical device sector stocks, only in the Wall Street Transcript.
Elizabeth Levy, CFA, is the Head of ESG Strategy at Trillium Asset Management, Lead Portfolio Manager on Trillium’s ESG Core Equity strategy, and a Portfolio Manager on Trillium’s ESG Small/Mid Cap Core and Large Cap Core strategies.
Elizabeth Levy has an answer to questions about ESG investing.
“As Head of ESG Strategy, she is responsible for leading the development and oversight of the implementation of ESG-related policies and initiatives across all investment strategies.
With regards to the first question about ESG in general, it depends on how you define ESG. I would contend that there is no such thing as ESG investing.
There’s investing that uses ESG data, and there is investing to drive a positive impact, but environmental, social and government investing on its own doesn’t exist.
It’s really what your intention is and what you’re trying to do, and that might sound a little bit like splitting hairs, but I think it’s quite important.
The second part of your question: Is this a fad? I would say absolutely not, for two reasons. One, right now, we’re living with 1.2 to 1.5 degrees of changed climate already.
We all lived through the last few months; the variety of physical weather challenges around the world has been incredibly severe — and this is just the beginning. So to invest without considering what’s coming, I think, would be silly.
Why would you not consider what is likely to happen in the future? That is literally our job as analysts and portfolio managers. So I think that continuing to use this type of information is going to, of course, be core to any financial analyst job.
But then on the flip side of that, I would say that a lot of the growth of ESG investing has been because people, investors, really care about these environmental and social issues, in particular.
As I said, we’re all living with the same changing climate.
We’ve all lived through the events, for example in the U.S. in 2020, that really showed some of the social divisions and racial divisions in our country, and I think it’s not a coincidence how much growth we’ve seen in sustainable, responsible, impact investing since then — and it’s because people really care about these issues and people really want to align their investing with their beliefs, their attitudes, their values.
So I don’t see this trend ending anytime soon, because these are issues that are really important, and not just to Americans, we’re seeing it all around the world.”
Elizabeth Levy explains the Trillium process for ESG investing.
“At Trillium, we really take a holistic approach to integrating ESG right into our investment process. It’s not an afterthought or an add-on, or a simple screen.
We see real value in considering E, S and G topics right in our investment process.
So that might mean that we do some thematic top-down consideration when we’re looking for a secular growth theme, for example, and we also do a lot of stock-specific bottom-up work.
So in practice, there’s several different components to our ESG process, because it is so integrated.
We do have a quantitative process that compares companies within their industry to look at the E, S and G topics that are most material to that business model, and that helps us set our investment universe.
And then once our analysts have narrowed in on a target company, we roll up our sleeves and do a deep dive and really get to know the sustainability profile of the individual company that we’re investing in.
All of this work is done collaboratively between our ESG team as well as our fundamental research analyst team, so it’s not something that happens at the end.
All of our fundamental analysts are focused on a specific sector, they understand the environment, social and governance challenges within the particular industries they’re looking at, so we really think it’s holistically integrated into the full process from the beginning all the way through portfolio construction.”
One of the top picks from Elizabeth Levy is First Solar (NASDAQ:FSLR).
“One example I can give you is one of our very long-term holdings, a company called First Solar (NASDAQ:FSLR).
They are a domestic U.S. manufacturer of solar photovoltaic panels for use primarily in utility scale solar power projects, one of the leading solar manufacturers in the U.S.
They have a differentiated technology that allows them to provide utility scale panels at a lower cost than many of their competitors.
We like that they are domestic, and that the current regulatory context, with the new Inflation Reduction Act that was passed this summer, will provide some tax benefits to them as well as policy credits.
We have long admired their strong balance sheet, which is not something that has historically been common throughout the renewable energy industry.
And, we really like that they have a focus on end-of-life responsibility for recycling their solar panels.
As I mentioned, we’ve owned this stock for a number of years, and shareholder advocacy is very important to us.
Last year, we filed a shareholder proposal asking the company for enhanced policies and practices around board diversity.
We actually got a greater than 90% vote on that resolution, which is fantastic. And even better, over the summer, the company added its first woman of color to the board.
So we really think this is a great example of a company that we’ve owned for many years, that we’ve continued to work with, and that fits both our financial as well as our secular growth themes, and has been a good holding for us over a number of years.”
The lack of clarity about ESG investing is an issue for Elizabeth Levy of Trillium:
“I just told you that I don’t think “ESG investing” exists, but there are lots of products out there, including the one that I run, that have ESG in the name, because it’s trying to signify to clients what it is that we do.
I think that the challenge for us as practitioners in responsible or sustainable or impact or ESG investing, whatever you want to call it, is being clear about what it is we are providing to clients, and making sure that clients understand what they’re getting in our products.
Because I think a lot of the challenges, the pushback to this type of investing that’s been out there, has been from folks not understanding exactly what the intention behind the product was.
So I think for all of us, continuing to be clear about what we’re doing is both an opportunity and a challenge at this point.”
Agnico is the top pick from gold stock analyst Ralph M. Profiti, CFA, a Principal focused on Metals & Mining equity research at Eight Capital, covering Senior North American Industrial Metals and Precious Metals companies and commodities.
His previous experience including gold stock analysis was as a key member of the Global Metals & Mining Equity Research Teams at Credit Suisse and Deutsche Bank, covering North American Industrial Metals & Precious Metals equities in Toronto and New York, as well as Corporate Banking at Royal Bank of Canada.
His perspective on gold stocks in 2023 is enlightening.
“A lot of management teams are thinking, I would probably say the consensus is, another 5% year-over-year inflation on unit mined costs in 2023.
I think that’s something that’s probably going to get flushed out of management commentary when guidance comes out for 2023, with Q4 2022 results.
The other thing is that companies are responding to these inflationary pressures by managing their mine plans more strategically. So, for example, there’s less waste stripping.
There’s more high-grading going on.
These proactive ways of searching for margin are actually going to help the metal price.
Because what it actually does when a company sacrifices quantity and goes for quality is that it has the embedded feature of taking metal out of the market, and that’s actually positive for metal prices.
So I think that there are some proactive moves being done by managements to combat inflation that are actually to their benefit in 2023 and to the benefit of metal prices.
And then the last thing I’ll say is, I think that there’s a common theme emerging that the true nature of value creation in mining — at least over the next three to five years — is going to be through exploration as opposed to M&A.
M&A now has become much more difficult, because not only have valuations declined in terms of multiples contracting, but what you’re also seeing is a divergence of managements willing to sell at such low stock prices.
I think that’s delaying any M&A cycle. And when that happens, I think management teams will focus more on exploration, and that is actually a much better way to create net asset value per share.”
The top gold stock pick from Ralph Profiti is Agnico Eagle (NYSE:AEM).
“My top pick in the gold space is Agnico Eagle (NYSE:AEM), and I like Agnico because of its dominance in terms of its jurisdictional profile.
Agnico operates 12 mines across five regions in four countries — Canada, Australia, Finland, Mexico. My valuation methodology places a premium on a successful track record, on building operational consistency, strong governance practices, and dedicated track records in solid, safe mining jurisdictions, and that’s what Agnico gives you relative to its peers.
In addition, the pro forma Agnico production, which is 3.6 million to 3.8 million ounces a year, that to me is a real sweet spot in the gold mining space, where you’re large enough to attract generalist investors into the shareholder base, but nimble enough that you can create value through exploration, advanced stage development projects, and new discoveries.
I think that Agnico is an enviable position of having great jurisdictions, the ability to move the needle on strategic initiatives, and having a strong balance sheet as well — $2 billion in undrawn credit facilities goes a long way in being able to protect any downside risks that I think the gold market might give us.”
There are gold stocks like Agnico Eagle (NYSE:AEM) and then there are gold stocks like Solitario (NYSE:XPL).
Christopher E. Herald has been a Director of Solitario since August 1992.
He has also served as Chief Executive Officer since June 1999 and President since August 1993.
Previously, Mr. Herald served as a Director of the former Crown Resources since April 1989, as Chief Executive Officer of Crown since June of 1999, President of Crown since November 1990, and was Executive Vice President of Crown from January 1990 to November 1990.
Prior to joining Crown, Mr. Herald was a Senior Geologist with Echo Bay Mines and Anaconda Minerals. He currently serves as non-executive Chairman of Viva Gold Corp. Mr. Herald received an M.S. in Geology from the Colorado School of Mines and a B.S. in Geology from the University of Notre Dame.
His gold stock management experience is elite.
“…About two years ago, after focusing on zinc for a number of years, we decided to go back into the gold space.
And about a year and a half ago, we were presented with this very early-stage project called Golden Crest in South Dakota.
It was a project that didn’t have any drilling on it, it only had a couple hundred surface samples taken, and we looked at it and just really loved what we were looking at there.
We decided to take a flier on it, picked it up, leased this 4,000-acre property from a private company, and that was the start of what I think is one of the most exciting gold plays in North America today, our Golden Crest property.”
The enthusiasm for this gold stock opportunity is infectious.
“It’s in South Dakota, and when we first started mentioning this to our shareholders and the people that may be potential shareholders, they’d say, “What are you doing in South Dakota? Is there gold there?”
The fact of the matter is, South Dakota hosted the single most important underground gold mine ever discovered in the United States, and it was called the Homestake Mine.
It produced 42 million ounces of gold.
At gold’s high, that’s an $80 billion gold deposit that was mined over a 120-year timeframe from the late 1880s. It closed around 2000.
The Homestake mine was phenomenal.
It was owned for almost its entire history by the Homestake Mining Company. And I can tell you, the industry, including ourselves, thought if there was any other gold in the Homestake area, Homestake Mining Company would have found it.
That was our perception, and I’ve talked to a lot of people in the industry and that was their perception.
But when we were presented this new property, it was only about six miles west of the largest underground gold mine in the country.
At first we thought, “Is there really going to be something there?” We started working there, and we started finding gold all over the surface, and the more we looked, the more we found, and the bigger our land position got.
We started with 4,000 acres. A couple months later, we were at 8,000 acres. Six months later, we were at 15,000 acres.
And as we stand today, we’re over 28,000 acres that we control.
And we’re not staking moose pasture, we’re staking areas that have gold on surface.
Our geologic team, including myself — I’m a geologist also — we’ve been looking for gold for 40 years, and I can tell you on this property we’ve found the most gold on surface of any property in the history of our exploration efforts.
It is phenomenal.
We shake our heads at this, because we always assumed that Homestake Mining had found everything, and nothing could be further from the truth.
In fact, if I can give one example, one area that we call Downpour we started sampling about a year ago, and we got some good gold numbers right from surface — and those were right along a Forest Service road.
We went back three times.
We’d get our gold assay results from our first round; we went back and did more sampling.
We got those assay results; we went back and did more. We did it basically four times, and it kept getting bigger.
Finally, we dug trenches, and right now we have five trenches.
They’re right in the middle of a Forest Service road.
I mean, people have been driving over this road for 50 or 60 years.
One of the trenches has 27 meters of 15 grams gold.
If you’re not in the gold industry, 15 grams gold, that’s half an ounce per ton gold.
And the nearest mine to this, the Wharf Mine, which is close to the Homestake Mine, but it’s an open pit mined by Coeur Mining, the average grade that they’re mining there is less than one gram, but we’re finding 15 times that right at surface.
Trench number two had 30 meters of 8.5 grams.
Phenomenal numbers that we had never seen.
And our team has discovered over 5 million ounces of gold on early-stage projects — we’re good at this.
This, by far, is the best project we’ve ever worked on.
We have other trenches not quite as good, but still, for the start of a project, almost unheard of: Nine meters of 2.6 grams, 12 meters of half a gram.
I think we had 12 meters of something like another 15 grams. And we have a series of these types of gold systems scattered over this 28,000-acre property.
For us, I can tell you it is the most exciting property we’ve worked on.”
Get all the detail by reading the entire 3,995 word interview with gold stock CEO Christoher Herald of Solitario (XPL), exclusively in the Wall Street Transcript and more on Agnico Eagle (AEM) in the 2,625 word interview with Ralph M. Profiti, of Eight Capital.
Dividend paying stock investor Ronald Chan founded Chartwell Capital in 2007 and currently serves as Chief Investment Officer and Co-Portfolio Manager. As CIO, he steers the firm’s investment strategy. As Co-Portfolio Manager, he oversees stock selection and portfolio allocation.
A frequent contributor to Bloomberg Opinion and Financial Times Chinese, Mr. Chan is an adjunct professor for the MBA program at The Hong Kong University of Science and Technology and the author of two books: Behind the Berkshire Hathaway Curtain: Lessons from Warren Buffett’s Top Business Leaders in 2010, and The Value Investors: Lessons from the World’s Top Fund Managers in 2012 and 2021 (second edition).
Mr. Chan served as a member of the Listing Committee Panel of The Stock Exchange of Hong Kong Limited from 2016 to 2022. Since his appointment in 2018 by the Hong Kong Trade Development Council, he has served as a member of the Greater Bay Area Committee: Smart City and Digital Connectivity Task Force.
Since 2019, he has served as an Independent Non-Executive Director for Powerlong Commercial Management Holdings Ltd. He has also been an international committee member of the Hong Kong M+ Museum and a founding member of the Hong Kong Biotech Development Council of the Hong Kong Science and Technology Park since 2020.
Mr. Chan has been the Vice President of the Education Development Foundation Association in Hong Kong since 2005. Mr. Chan graduated with Bachelor of Science degrees in Finance and Accounting from the Stern School of Business at New York University and is currently the President of the NYU Hong Kong Alumni Club and the Vice President of the Pan-Asia Alumni Committee.
He is also a member of the Board of Trustees at Malvern College in Hong Kong and at Worcester Academy in Massachusetts.
“The news headlines seem extremely frightening, and I can understand why people are scared about investing in our region.
Being local, however, we are having the best time of our lives because we are investing in companies that are trading at multiples and valuations that we haven’t seen for the past 25 years.
We are fetching all this low hanging fruit with really high dividend yields. These are companies with dividend yields of over 10% and with sustainable income streams.”
‘As I mentioned, we are investing in the Greater Bay Area of China. This is a region with a population of 86 million people with a GDP of $1.9 trillion.
This means that the economy in the Greater Bay Area is already larger than Spain, Australia, and close to Italy. Most economists predict that in 10 years’ time, the GDP of the Greater Bay Area will grow to $3.7 trillion to $4 trillion, which will surpass France, the U.K., or even Germany.
So I’m betting on the economic growth in this area, with a very high population and good demographics.
For example, we invest in a telecom company that is based in Macau. As you know, Macau operates a lot of casinos. It’s like the Las Vegas of China.
It has a population of only 800,000 people, a very small city.
The main operator in the telecom business is a company called CITIC Telecom (HKG:1883). This company pays an 8.5% dividend yield, trades at relatively attractive multiples.
From a top-down angle, this company is affected because of the COVID policy.
Normally it serves millions and millions of customers from all over the world visiting local casino facilities. But in the past two years, this city has no customers, and the company has had to streamline itself, and it still managed to pay an 8.5% dividend yield to investors.
As this lockdown COVID policy will eventually change, imagine when visitors can return to Macau. Roaming fees will see exponential growth. So for now, we keep buying this stock and let the magic of compounding based on its high dividend yield work its magic.”
Dividend paying stocks are not the investing only focus for Mr. Chan.
“ESG is very important nowadays, especially for Hong Kong listed companies.
In fact, I used to sit on the Listing Committee at the Hong Kong Stock Exchange, and I was part of the committee that steered the ESG policy.
Being at the forefront of ESG, I can assure investors that Hong Kong has one of the best standards in terms of ESG reporting.
The company I just mentioned, CITIC Telecom, which is a listed company in Hong Kong, must comply with all the ESG standards that the exchange set forth. What I can see is that corporate governance has improved dramatically over the past five to seven years with companies being more transparent.
As a fund manager myself, corporate transparency is important certainly, and while we have to ensure that all of our companies comply with the “E,” one thing that I am at the forefront of pushing is how do we improve on the “S.” These days we can’t just think about shareholder value, but also stakeholder value.
In terms of Ukraine and the war, certainly it’s frightening.
No one wants to see war.
In Hong Kong, or in Asia, we are relatively stable in terms of the currency, in terms of inflation, and in terms of how the war affects our region.
Since we don’t have a lot of trades with Ukraine, and many Hong Kong companies don’t have much exposure in Russia, we are not that affected.”
Another dividend paying stock investor, Thomas E. Browne, Jr., CFA, is a Portfolio Manager at the Keeley Teton Small and Mid Cap Dividend Value strategies.
Mr. Browne previously was a Portfolio Manager at Keeley Asset Management Corp.
He was also a Portfolio Manager for Oppenheimer Capital, SEB Asset Management and Palisade Capital Management.
Prior to that he was a sell-side technology services analyst and was twice recognized in The Wall Street Journal’s Best on the Street survey. Mr. Browne received a B.B.A. from Notre Dame and an MBA from New York University.
“At Keeley Teton, we manage small- and mid-cap value strategies with a focus on what we believe are misunderstood or underappreciated areas of that market. Our overall view is that in order to outperform over time, you have to do something different than what other people are doing. And so, we found a couple of different niches that we focus on.
We have two distinct strategies.
One focuses on companies undergoing significant corporate change, so events like emerging from bankruptcy or companies being spun off from larger companies or sometimes companies dividing themselves into two relatively similar parts.
Other areas in that genre are companies that are undergoing conversions to REITs.
We’ve invested in companies that have a franchise business model and sell their company-owned stores to use the proceeds to buy back stock and shrink the capital base.
A lot of different things with the common theme that they’re difficult to understand. By putting a bit of effort into it, you can create a very differentiated opinion about the future of the firm.
That’s one group of strategies that we manage.
The other group of strategies we manage is dividend strategies. We focus on these in the Keeley Small Cap Dividend Value Fund and the Keeley Mid Cap Dividend Value Fund.
Both focus on small- and mid-cap companies that pay dividends.
This is an area we got into about 12, 13 years ago because, one, it was a bit different from our restructuring strategies.
Secondly, it was very much aligned with what we’re already doing — i.e., focusing on small- and mid-cap companies.
And thirdly, and most importantly, dividend-paying stocks have historically produced good risk-adjusted returns.
They tend to produce better-than-average returns over time with less-than-average risk. And that’s kind of the holy grail in the investment business.”
Dividend paying stocks are the bread and butter investing strategy for Mr. Browne.
“Most of the money we manage is actually invested in the dividend strategies.
I think that a lot of smaller-cap investors don’t appreciate dividends. Very few actually look for them within companies.
And I think that some small-cap investors don’t really want to see them.
After all, if a company is small and it’s got nothing better to do with the cash than to give it back to shareholders, why would I want to invest in that? That would be the negative case.
Our view on dividends is that dividends tell you three important things about a company.
Number one is it tells you that the company can, and at least the management team believes that it can, sustain the free cash flow that it’s generating because ultimately sustainable free cash flow is the source of your dividends.
Secondly, because they have made this long-term financial commitment, we think that companies that pay dividends are more likely to be more disciplined about other ways in which they allocate capital via buybacks.
They may be more price sensitive about how they buy back stock or make acquisitions.
The bar gets raised if they know they have to pay their dividend. And so a dividend can help discipline capital allocation.
And then the third thing that dividend tells you is that the management team and the board understand who owns the company because they’re focused on returning capital to the owners.
If you think about those three things, sustainable free cash flow, more attention to the leverage, and acknowledgement of who owns the companies, those are a pretty good starting place to make an investment.
If you compare that to the perception, to the view that small-cap companies that pay dividends are not interesting, we think that difference is what is interesting to us.”
Dividend paying stocks the Mr. Browne currently owns have some interesting characteristics.
“For example, one of our longtime investments that we still have is a company called Marriott Vacations Worldwide (NYSE:VAC).
Marriott Vacations Worldwide is the timeshare business which was within Marriott International (NASDAQ:MAR), one of the largest hotel companies in the world.
When that business spun out in 2011, the shares given to the Marriott shareholders were a very small percentage of the value of Marriott. And so typically, when that happens, the Marriott shareholders simply are not interested in holding this other company. It’s new.
They don’t necessarily know it all that well.
At the time, the timeshare business was perceived as being a less interesting business in the hotel business. Also, the large-cap managers who owned Marriott didn’t have much interest in holding a small-cap company. And so, the stock generally falls pretty sharply after the spinoff, which gives us an opportunity to do our homework and make the investment.
Also, the information is incomplete. So you have to do your homework and really get to know the business. We have to understand the business.
I would say companies do a lot better job of presenting spinoffs these days than they used to, but we still see opportunities in that theme.”
Get the complete details on all the dividend paying stocks that these two portfolio managers own and recommend, only in the Wall Street Transcript.
A Republican dominated or Democratic dominated government has immediate implications on the stock picks in your portfolio depending on the results of next week’s elections.
Mark Boggett is the CEO of Seraphim Space Manager LLP and manager of the Seraphim Space Investment Trust PLC (LON:SSIT), which includes a portfolio of over 20 world-leading SpaceTech companies. Mr. Boggett is a pioneer in SpaceTech investment having co-founded the Seraphim Space Fund and invested into a portfolio which includes three companies that have achieved billion-dollar valuations.
In this 2,331 word interview, Mr. Boggett discusses a politically interesting portfolio pick.
Tracking commercial trade flow data in real time is a prime concern of hedge fund operators looking for an edge. In a Republican dominated US government, the hedge funds will have ample capital to pursue this important information.
“Spire Global (NYSE:SPIR)is a good example. One of the things that Spire is doing is they’re able to track all of the vessels across all the oceans in real time to calculate patterns of trading activity. This enables them to generate insights on food security and, specifically, how the impacts on trade flows as a consequence of the war in Ukraine.
By identifying individual ships, Spire can determine what the cargo of those ships is carrying. So they’re able to understand what’s happening to the supplies of wheat and grain and maize and all of these products and can understand how global activity within food is being disrupted by the ongoing conflict.
Spire was one of the first space companies we invested in through our venture fund back in 2016. It’s now listed on the New York Stock exchange after going through a SPAC merger.
The company has a constellation of micro satellites, typically the size of a shoebox, with around 150 operational in space today. These satellites have three payloads: they collect weather data, track every ship across every ocean, as well as tracking commercial airlines in flight.
They are showing rapid year-on-year growth — with more than 100% per annum — and their revenues are in excess of $80 million ARR with the underlying business growing very positively.”
Another of Mr. Boggett’s portfolio holdings is a competitor to the space based business of Elon Musk.
“One of my favorite holdings is a company called AST (NASDAQ:ASTS) which now trades on the NASDAQ. The company has created a technology solution that enables them to put cell towers into space. They can provide satellite connection from space to any mobile phone without any hardware or software adjustment to the phone.
That is game-changing because while half of the world today is 5G, half of the world is still on 0G.
AST is seeking to address the imbalance. If people in developing countries can suddenly have access to connectivity from a very, very low-cost smartphone, it’s going to have a global impact, enabling access to education, health care and business opportunities.
The company has recently partnered with Vodafone (NASDAQ:VOD) to provide roaming service to their customers through the AST global.
Furthermore, they have already signed contracts with eight other mobile network operators providing roaming access to billions of end customers.
The company is now looking to build out their initial constellation to provide cell tower coverage to the equatorial region — an area with the lowest mobile phone density. It is these important developing economies where AST is going to be able to have the biggest impact.
They have just launched their first commercial satellite to demonstrate this technology working at a commercial scale. This is a really exciting business and one that will provide connectivity to the parts of the world that can’t connect today.”
Pedro Marcal is Director of Equities and High Yield at Aquila Group of Funds, and the Lead Portfolio Manager for Aquila Opportunity Growth Fund.
Mr. Marcal has more than 27 years of investment industry experience. Previously, he was founder and owner of Maccabee, LLC from 2012 to September 2021.
Mr. Marcal was also a Director in the Equities Group and mutual fund portfolio manager at Foresters Investment Management Co. from 2018 to 2019, where he managed Foresters’ global equities mutual fund and co-managed its U.S. equity analyst and trading teams.
He also held portfolio management responsibilities with Fred Alger Management, Inc. and Allianz Global Investors.
Mr. Marcal has a bachelor of arts in economics from University of California, San Diego, and an MBA from University of California at Los Angeles, Anderson School of Business.
In this 2,650 word interview, Pedro Marcal identifies a portfolio position that may benefit politically. Solar powered electricity has become seen as a Democratic Party agenda item.
“There are other attractive beneficiaries of the electrification trend. Electrification requires batteries, and batteries require lithium. We anticipate strong demand for lithium products as demand for batteries increases as part of the electric vehicle transition.
Lithium Americas Corp. (NYSE:LAC) mines, produces and supplies lithium with permits to open up the largest lithium mine in the United States at Thacker Pass in Nevada. LAC is an idea of analyst Steven Yang, who covers industrials, materials and other sectors for the team.
On a recent trip, my co-Portfolio Manager, John McPeake, and I went to Thacker Pass to see the mine site and toured the research center in Reno, where they’re running a scaled-down version of the lithium extraction and processing facility they plan to build.
Thacker Pass will be the largest lithium mine in development in the United States.
Lithium Americas has received all permit approvals from the Nevada division of the Environmental Protection Agency — EPA — and the federal Bureau of Land Management to develop a lithium mine. It is in the early stages of loan approval from the Department of Energy.
We believe the mine at Thacker Pass, if developed as anticipated, provides LAC with a massive resource advantage, which provides a huge moat around its business.
Furthermore, President Biden’s Inflation Reduction Act may benefit LAC in two ways.
One, expanded tax credits for energy-efficient commercial buildings, new energy-efficient homes, and electric vehicle charging infrastructure. Energy infrastructure includes battery technologies and production.
And two, a “make it in America” provision, which focuses on American-made equipment for clean energy production.
While lithium metal is early in the stage of battery manufacturing, having a U.S. domestic supply of lithium is expected to benefit LAC.
We feel the market is underappreciating the difficulty of acquiring federal and state permitting, with appeals processes and large capital investments for both mining and processing that’s required.”
David Swartz is an equity analyst in the consumer sector research group for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.
He covers consumer-focused companies in retail and apparel. Before joining Morningstar in 2018, Mr. Swartz worked as a money manager and equity analyst for a family office in the Seattle area.
He also worked as an analyst and fund manager for three equity hedge funds in the San Francisco Bay Area.
Mr. Swartz holds a bachelor’s degree in economics from the University of California at Berkeley and a master’s degree in economics from Yale University. He also holds a certificate in finance (investment management specialization) from UC Berkeley Extension.
Luxury brands are also often associated with a Republican dominated government that avoids taxing wealth. In this 2,290 word interview, an equity analyst identifies luxury goods that will benefit.
“I have a lot of companies right now that I think are quite undervalued. Some that I would highlight as being undervalued would be Tapestry (NYSE:TPR), which is the parent company of Coach and Kate Spade. Tapestry just had an analyst event this morning, and it was quite positive.
I think the stock is very inexpensive, trading at a low p/e and with plenty of cash flow. I think the handbag category, which Tapestry is highly exposed to, is quite healthy. And also, wealthier consumers that shop its brands are also doing better. So I think luxury companies or close-to-luxury companies are looking strong. And Tapestry is one that I would highlight.
Another one that I will highlight in the same category would be Capri (NYSE:CPRI), which is the parent company of Versace and Michael Kors. Capri also has high exposure to handbags. It’s also had a good year. And I think demand for its products is strong. Versace has been growing and has become profitable. Capri is also an inexpensive stock. And I think it’s also one that’s worth a look.
Others that I think are inexpensive would be some retailers that have had a difficult year this year, but their stocks are down quite a bit. And that would include Nordstrom (NYSE:JWN), which has had kind of a difficult year, but is well off its high and I think it’s quite inexpensive. And I think as luxury shopping recovers, I think Nordstrom would be in pretty good shape.
And another one to consider would be Kohl’s (NYSE:KSS), which went through a sales process this year which did not result in a sale, and the stock right now is trading way below the potential sale prices that were discussed. And I think it is quite inexpensive. Kohl’s owns considerable real estate, which it may actually be selling soon for as much as $2 billion.
Another to consider might be Nike. Nike’s been affected by the troubles in China this year with COVID lockdowns, but I think its China business will recover.
It might take some time, but I think it will recover.
And Nike, I think, is inexpensive and typically it’s worth owning over the long term based on its historical performance. Similarly, Adidas has had a difficult year, and its CEO is actually leaving next year and its stock price is probably as cheap as it’s been in some years after it’s been down about 50% this year. And so, that’d be another one that I would highlight.”
A Democratic led government in DC will continue to support the existing government of Ukraine from Russian aggression.
A contuation of that conflict, dependent on US supplied funding, will also increast the resolve of the European Union to rapidly replace future energy flows from the Russian supplied NordStream system to alternatives.
Pavel Molchanov is Managing Director, Renewable Energy and Clean Technology, for Raymond James & Associates, Inc.
He joined the firm in 2003 and has been part of the energy research team ever since. He became an analyst in 2006, the year he initiated coverage on the renewable energy/clean technology sector.
In this role, he covers all aspects of sustainability-themed technologies, including solar, wind, biofuels, electric vehicles, hydrogen, power storage, grid modernization, water technology, and more.
Within the energy research team, he also writes about the broader topics of geopolitical and regulatory issues, climate change, and ESG investing. He has been recognized in the StarMine Top Analyst survey, the Forbes Blue Chip Analyst survey, and The Wall Street Journal Best on the Street survey.
He graduated cum laude from Duke University in 2003 with a bachelor of science degree in economics, with high distinction.
In the broader community, he is a member of the Board of Visitors at the University of North Carolina’s Institute for the Environment; a member of the Advisory Board at Cool Effect, an environmental project funding charity; and the founder of the Molchanov Sustainability Internship Program at the Royal Institute of International Affairs in London.
In this 1,906 word interview, the Raymond James analyst proposes some stocks that may benefit.
“A company that is uniquely well positioned in the context of Europe’s energy security urgency is ADS-TEC Energy (NASDAQ:ADSE).
This is a German company, and 72% of its revenue came from Germany last year, but it is listed on the NASDAQ. ADS-TEC Energy provides ultra-fast charging equipment. This is the leading edge of electric vehicle charging technology.
For Europe to become less dependent on Russian oil without buying even more from the Middle East, the solution needs to be electric mobility.
As it stands, almost 25% of the new vehicles sold in Europe are electric. Within three years, that will probably be close to 50%. So that means Europe needs more and more charging infrastructure.
ADS-TEC Energy is one of the few public companies that is directly tied to that infrastructure buildout. This is a small-cap, very-high-growth company.
For people that are looking for something a little bit larger, I would point to Bloom Energy (NYSE:BE).
It is the world’s largest provider of stationary fuel cells, which are used in data centers, hospitals, and office buildings to generate clean electricity on site. The electricity can be from natural gas or from hydrogen, in which case, there is zero CO2 emissions.
Also, Bloom will soon be launching its electrolyzer product. The electrolyzer is literally the inverse of a fuel cell. Instead of using hydrogen to generate electricity, an electrolyzer takes electricity and water and makes hydrogen.
This is very relevant in the context of disentangling Europe from Russian energy, because a portion of the Russian natural gas is used to make hydrogen. An electrolyzer enables the production of hydrogen without natural gas. Green hydrogen is a nascent, fast-growing market, and Bloom is about to enter it.”
Election proof your portfolio with these recommendations, and many more, exclusively at the Wall Street Transcript.