In today’s top stories, shares in JD.com and NIO faltered after the SEC warned that the stocks were among 80 companies added to a desilting list. Meanwhile, lithium stocks rallied off the back of earnings beats, strategists weighed in on tech’s downturn, Goldman Sachs named its top picks in Latin America and Cathie Wood joined Elon Musk in criticising passive funds.
SEC sees 80 stocks with delisting risk
The Securities and Exchange Commission added more than 80 companies to a group up for possible delisting if actions aren’t taken to make their financial accounting more transparent. Among the stocks were JD.com [9618.HK] and NIO [NIO], which saw their US-listed shares decline in premarket trading on Thursday. Chinese stocks such as NetEase [9999.HK], Pinduoduo [PDD], Bilibili [9626.HK] and JinkoSolar [JKS] made up the majority of names and will be required to seek out new auditors to comply.
In this week’s episode of Opto Sessions, Guy Ellison, head of UK equity research at Investec, discusses the key characteristics his team looks for when considering investments. These include businesses that are value creating, have a strong management team and companies with the potential for quality growth. He names FTSE 100 stocks Diageo [DGE.L] and AstraZeneca [AZN.L] as his top picks, and expects medium-term upside potential for the UK stock market. Listen now ➔
Elon Musk’s bright idea.
Since the Tesla [TSLA] CEO highlighted the 90% profit margins in lithium businesses at his company’s earnings call last month, stocks have soared. Firms such as Albemarle Corporation [ALB] and Livent Corp [LTHM] both beat earnings expectations this week, sending shares up 11.7% and 33.6%, respectively, as of Wednesday’s close. Robust lithium revenues fuelled the rise in both stocks, with Albemarle’s lithium sales almost doubling.
The founder of Pershing Square Holdings [PSHD] exited his position in the streaming giant after news surfaced that it had lost 2 million subscribers in the second quarter. The firm had bought 3.3 million shares in Netflix [NFLX] for $1.1bn in January. However, amid growing uncertainty surrounding whether the company can claw back its audience, Ackman decided it was the better bet to take the hit.
Has big tech bottomed out?
While tech stocks may be in bear market territory, Jim Paulsen, chief strategist at The Leuthold Group, claims there are few similarities between current conditions and markets at the time of the dotcom crash. In a research note seen by the Financial Times, the strategist highlights the fact that earnings are far more robust compared with the early 2000s and sit 60% above historical levels. Based on this, he doesn’t see the sector collapsing much further.
Goldman Sachs’ Latin America playbook.
After years of underperformance, the Brazilian equity market is one of the best performing on the global stage so far this year. The iShares MSCI Brazil ETF [EWS] has risen more than 17% year-to-date, outpacing the S&P 500’s 9% downturn during the same period. The firm sees stocks such as JBS, VTEX [VTEX], Arco Platform [ARCE], Petrobras [PBR] and Banco de Brasil as having material upside, rating them all a ‘buy’.
The active versus passive debate.
Cathie Wood and Elon Musk both criticised passive investing strategies during a Twitter thread debate on Wednesday. The discussion was instigated by venture capitalist Marc Andreessen, who criticised firms, such as BlackRock [BLK], that had significant shareholder power due to the countless passive vehicles it owned. Musk stated that the rise of passive funds had “gone too far”, with Wood describing it as a “massive miscalculation of capital”.
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