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the S&P 500 Index (SNPINDEX: ^ SPX) gained 9.1 points, or just under 0.3%, on Monday. This marks another relatively calm day for the index, which represents about 80% of the entire US market cap.
Notable winners today included General Motors (NYSE: GM), as stocks closed 7.5% higher after an analyst continued to bang the drum on GM’s electric vehicle business split; and Newmont Goldcorp (NYSE: NEM), the only gold mining stock in the S&P 500, up 7% following the announcement Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) bought shares of Barrick Gold last quarter. Actions of NVIDIA (NASDAQ: NVDA) also gained nearly 7% after comments from an analyst.
On the downside, airline and cruise stocks were among the biggest losers. Actions of American Airlines Group, United Airlines, and Carnival fell 5%, leading their sub-sectors down.
And while Buffett’s purchase of Barrick Gold pushed up Newmont, Berkshire’s decision to offload all of its common stock from Occidental Petroleum (NYSE: OXY) and cut its participation in Wells fargo (NYSE: WFC) 25% last quarter, other investors also sold their shares today.
Image source: Getty Images.
Analyst: GM’s EV business would be worth billions as a standalone company
General Motors has invested significant resources in its electric vehicle business, and these investments have provided the company with a growing collection of attractive technologies and vehicles that it will bring to market in the years to come. . The question many investors ask themselves is what value the EV business will create for shareholders; there is certainly reason to wonder if this is the case so far.
In recent weeks, Deutsche Bank analyst Emmanuel Rosner has made it clear that he believes General Motors should turn its electric vehicle business into a stand-alone company. Rosner estimates that its EV business could be worth as much as $ 95 billion, based on the strong ramp-up and extreme valuations of autonomous EV / hydrogen start-ups like Nikola, which is still at least a year after having a commercially available vehicle, and You’re here, which has become the world’s most valuable automotive company.
Rosner’s most important point is that a spin-off would allow the company to leverage capital cheaply through stock offerings, while GM shareholders, who would likely have a stake in the split-up company, alone would benefit from the market’s revaluation of EV activity. . GM executives don’t seem so excited to make the move. Not only would this have negative implications for GM today, but it would also strip the entire future of the company if electric vehicles were no longer part of its core business.
Buffett buys gold stock: Berkshire’s stunning move and sales that weren’t so surprising
Warren Buffett has never shied away from voicing his opinion on gold as an investment. In short, he is not a fan and pointed out that gold is not a “productive asset” which has made it an underperforming investment compared to companies which can increase their profits over time. . Much of its value is sustained (or wiped out) by speculators, and its utility value for industrial or consumer products is limited.
Due to this negative story on the metal itself, many people were stunned to learn that Barrick Gold joined Berkshire’s portfolio last quarter as the conglomerate bought 21 million shares. What is Buffett thinking? I think it’s important to note that he made fun of gold as an investment for decades, but has not been as negative against gold companies. On the contrary, Barrick Gold has a number of features that Buffett loves, including a high margin of safety in its balance sheet and production costs that allow it to make money even if gold prices drop sharply.
On the other side of the ledger, Berkshire sold the common stock of besieged oil giant Occidental Petroleum in the quarter, shares it started racking up in the second half of 2019. Needless to say, this investment did not materialize. well done for Berkshire:
OXY data by YCharts.
Berkshire still owns preferred shares of Oxy, which it bought to help the company finance its acquisition of Anadarko Petroleum. Ironically, if Oxy is not able to survive without going through bankruptcy, the acquisition of Anadarko will be the reason. The deal was widely viewed as grossly overvalued and added billions of dollars in high interest charges just before the worst oil crash in history.
Berkshire has also sold over 60% of its stake in JPMorgan Chase (NYSE: JPM), all his Goldman Sachs (NYSE: GS) shares, and more than 25% of its investment in Wells fargo (NYSE: WFC), one of Berkshire’s oldest investments. The economic impact of the coronavirus pandemic has hit banks particularly hard. Shares of all three are down 19% to 55% from 2020 highs, as their earnings have soared as loan losses rise:
JPM data by YCharts.
Upgrade raises NVIDIA
Graphics chip giant NVIDIA has been a terrific investment so far this year, and Wall Street analysts expect the good times to continue. With the release of the company’s earnings report, several analysts raised their expectations and price targets today, pushing stocks higher. Monday’s move means NVIDIA’s stock has more than doubled in 2020 and has risen 210% in the past 12 months.
Cruise, airline stocks drop due to travel worries
While weekend air passenger traffic was again relatively strong from lows in late March and April, travel remains far, well below pre-coronavirus levels. In addition, there is a risk that the recovery we have seen will start to lose momentum. According to an Associated Press report, most Americans still don’t feel safe to fly, and the reality on the ground is that most airlines don’t have the capital to survive long term in today’s environment. .
Joining American and United in today’s sale was Alaska Air Group, Southwest Airlines, and Delta Airlines, down by more than 3%, as well as the stock of cruise passengers Norwegian Cruise Line Holdings. All of them have come across these concerns about the ongoing struggles for the travel industry.
Future revenues
It’s a big week for profits, with discount sales and home improvement giants expected to report results. Home Depot, Walmart, Advance Auto Parts, and Kohl’s report Tuesday, while Lowe’s, TJX companies, and Target are set for Wednesday. Discount retailer and competitor of TJX Companies Ross Stores reports Thursday.
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