In today’s top stories, recession worries hit metals prices and hedge funds bet against European stocks, while semiconductor stocks show signs of strength. In other news, deglobalisation is seen to be a growing investment theme.
Apple news boosts BYD
Hong Kong-listed shares of BYD [1211.HK] closed just below their 52-week high on Monday on rumours that Apple [AAPL] could tap the electronics components maker for future orders. Bloomberg’s Mark Gurman, who is well connected when it comes to the Cupertino-based company, reported in his weekend newsletter that Apple is set for “one of the most ambitious periods of new products in its history” between the end of 2022 and the first half of 2023.
Metals show signs of cracking
Recession worries are dragging down the price of metals and the sector is on track to record its worst quarter since the 2008 financial crash. While metals have climbed on the back of improving economic activity in China, following the easing of lockdowns at the start of June, the country “won’t be able to single-handedly boost prices back to new highs”, Amelia Xiao Fu, head of commodities strategy at BOCI Global Commodities, told Bloomberg.
Regional supply chain opportunity
The events of the past couple of years have highlighted the challenges and complexities of global supply chains. This is why co-founder of Amberwave Partners Dan Katz believes deglobalisation is a future investment theme. “We’re really looking for companies that have relatively more secure supply chains and more resilient business models,” Katz told Squawk Box Europe, naming phosphate miner The Mosaic Company [MOS] as the one to watch.
Value to be found in chip stocks
Chip stocks have been chewed up amid the broader selloff, leaving them undervalued. The Micron Technology [MU] share price has dropped 39% year-to-date through 24 June to $58.44, but Morgan Stanley analyst Joseph Moore believes it to be “one of the best operating models and broadest portfolios in semis” and has a price target of $81. The stock has seen insider buying recently, according to MarketWatch, which is always a sign of strength.
Hedge funds bet prices will fall further
Hedge funds have endured some major losses in the first half of the year and some are increasing their bets that there could be further pain ahead. According to the Financial Times, Bridgewater Associates has taken 27 short positions, worth a combined €9.8bn, above the 0.5% disclosure threshold in European stocks. Meanwhile, BlackRock’s Alister Hibbert has rejigged his portfolio so bets on falling prices outweigh bets on rising prices.
Bumps in the road for Uber and Lyft
Ride-hailing rivals Uber [UBER] and Lyft [LYFT] are facing a lawsuit in California with drivers accusing them of price-fixing. The case is unlikely to succeed, say experts, but there is a bigger problem facing the companies: a driver supply shortage. Some drivers have opted not to return after the pandemic due to rising gas prices, which is leading to longer wait times for riders.
Cloud stocks’ near-term gloom
The gloom around cloud stock started to lift last week as the Oracle [ORCL] and Twilio [TWLO] share prices climbed from their lowest level in over a year. Yet there could be murky days ahead if slowing revenue growth darkens the near-term horizon. Barclays analyst Ryan MacWilliams believes this could be good for Twilio’s long-term profitability prospects. Alibaba’s [BABA] cloud division is also facing headwinds.
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