The government can be the great influencer in the industry although for the most part government tries to help industry as industry makes it own decisions. Around the world we see climate patterns changing, highly likely due to global warming. Governments have a choice, do nothing and live with the changing climate patterns or try to ensure climate does not change too much where the population lives.
In President Biden he has decided part of the broader plan to fight climate change is to target emissions from cars and trucks. In an an article by David Shepardson and Jeff Mason, President Biden signed an executive order making half of all vehicles sold in 2030 electric. If you ever driven behind an electric vehicle they are the ones without tail pipes.
It is relatively easy to say 50% of vehicles sold should be electric, but the harder part and this is where the government will be helping is the cost to produce the millions of cars and trucks that are sold annually. President Biden has committed funding to the auto producers of GM, Ford and Stellantis (Chrysler).
You may or may not remember, former President Trump disagreed with California Air Pollution standards and wanted to lower them. The Biden administration agrees with the California model and in fact so do the big three auto makers.
Consulting company Alix Partners reported electric vehicles (EV) represent 2% of total global vehicle sales and will be about 24% in 2030. To get there will require billions in charging systems, incentives and changes in factory production. President Biden’s infrastructure bill addresses some of this funding.
Linking to dividend paying stocks, governments are wonderful in announcing big plans, but the execution takes time and money. One of the reasons you buy profitable companies that can pay dividends is they know how to execute to the consumer at a profit. As an investor you can follow the trends and see how companies adapt to government policies.
There are more questions than answers, till the next time – to raising questions.
During the pandemic when people stayed at home, one of the things they did was eat more snack foods which helped profits at Frito-Lay’s owner Pepsi. Revenue was up 20% from the same period a year earlier. When revenues are up, people everywhere in the company want to benefit and there was a strike at one of Frito-Lay’s plants in Topeka, Kansas. The strike went on for 3 weeks and was eventually settled.
What are the concerns for the future? In an article Linda Nazareth examined what could happen at Frito-Lay.
The company Frito-Lay is well known for the sophistication of its operations and during the pandemic it has increased its abilities. Consulting company Gartner Inc puts PepsiCo at No 7 in its ranking of companies with top supply chains. One example of what the chain can do is if chip lovers in one zip code like Cool Ranch Doritos and another zip code likes Nacho Cheese, the company can adjust inventory quickly and everyone is happy.
PepsiCo is teaming up with Robby Technologies that will send a 6 wheel mobile vending machine robot called Snackbot in college and university dorms. The food is ordered from an app.
In June US manufacturing jobs were 12.3 million compared to 12.8 million before the pandemic. Some of the rest may come back but others will be replaced by robots.
A robotics company called Berkshire Grey had an IPO on the Nasdaq and and industrial automation companies such as Rockwell Automation and Eastman Machine Co are reporting brisk orders.
Boston Dynamics as a dancing robot on Twitter, but it has also showcased Stretch which is built for warehouse automation.
Economist Daron Acemoglu of MIT has estimated every automated device replaces 6 human workers, Half move to new jobs, half are retired.
Linking to dividend paying stocks, the supply system is the bottle neck for every company, most of the time it works but when it does not, the partial solution of automation is examined. Every year there are new developments and when robots can work the warehouse, that means there are fewer exceptions for the supply system not to work well. In your investments, how is your company using robots to fix the supply system concerns? The Gartner rankings are below.
There are more questions than answers, till the next time – to raising questions.
Gartner Announces Rankings of the 2021 Supply Chain Top 25
Cisco Systems Retains Top Position; Four New Companies Join Ranking
Gartner, Inc. has released the results from its annual global Supply Chain Top 25, identifying supply chain leaders and highlighting their best practices.
“In our 17th edition of the Supply Chain Top 25 we saw organizations continuing to deal with the effects of COVID-19 on their businesses. Therefore resiliency and agility capabilities became essential to survival,” said Mike Griswold, vice president team manager with the Gartner Supply Chain practice. “Our ranking highlights companies that possess these strategies and other differentiating capabilities.”
Cisco Systems scored the top spot in the ranking for the second consecutive year, followed by Colgate-Palmolive, Johnson & Johnson, Schneider Electric and Nestlé (see Table 1). Four new companies joined this year’s list: Dell Technologies, Pfizer, General Mills, and Bristol Myers Squibb.
“Strong revenue growth, strength in environmental, social and governance (ESG) initiatives, and recognition of leadership in the community opinion polls drove Cisco to the top spot for the second consecutive year,” said Mr. Griswold. “Cisco’s agility helped them prioritize video conferencing and critical infrastructure capabilities for hospitals and vaccine research.”
To recognize sustained supply chain excellence, Gartner introduced the “Masters” category in 2015. To be considered Masters, companies must have attained top-five composite scores for at least seven out of the last 10 years. All of last year’s Masters – Amazon, Apple, P&G, McDonald’s, and Unilever – qualified for the category this year.
“During times of disruption, these companies continue to lead by example and provide advanced lessons for the supply chain community,” Mr. Griswold added. “The Supply Chain Top 25 offer a platform for insights, learning, debate and contributions to the rising influence of supply chain practices on the global economy.”
In the world of investing, there are typically two types of methods to try to determine the future price of shares -value and growth stock. Both look at the fundamentals of the company and then you ask yourself are you paying for growth or value? If you are paying for growth you will pay more than if you are paying for value. The difference is if the company is on the way to profitability and is growing there should be more movement in the stock price upwards and downwards. in the past year, we seen another variable added, is this a meme stock?
Earlier this year, shares in GameStock, AMC and a couple of other stocks soared and then slowly came back down. The reason was connected to WallStreetbets website. Another stock which is now in the same type of valuation consideration is Robinhood.
In an article from Reuters, Robinhood which allows free trading and relatively easy to use app is now a public company. The shares went public with the normal publicity machine behind it, the professionals looking at the company from a fundamental point of view thought it was overvalued and the IPO went down. Then people on WallStreetbets talked about it and there was the ability to buy options and the shares jumped 82% to a high of $85, up from its IPO of $38 a share.
Only a few stocks can be meme stocks and an investor has to ask how does a company which charges no commission to trade make money? While it is wonderful for the investor to buy and sell at no commission where does Robinhood make money? Robinhood hopes to attract deposits, but at the moment it is a very good thing there is a bull market on Wall Street.
Linking to dividend paying stocks, at some point for every company dealing with consumers the issue will be how to make money from each consumer? Robinhood hopes in the future for the customers who make money to buy deposits or fee generating products which will diversify their income stream. When you do your homework, the reason to do it is which companies not to buy and which ones to consider. The result of your homework saves you money and one of the rules of investing is try not to lose money.
There are more questions than answers, till the next time – to raising questions.
When people go to work for a company, there are rules within the company but for many work is work and when they are no longer being paid, the company is important in the background. The company will have interests that do not perfectly lined up with the employees, for example the division between corporate and personal taxes, who should pay and how much? As an individual you think you pay something but not too much, as a corporation, there are departments and consultants to ensure the company pays as little as possible and still be within the law.
In an article by Alexandra Olson of the Associated Press, companies are making decisions about their workforce and vaccinations. In most years, it would be an easy decision because public health is an easy answer, however politics has played a role and the decision for companies is complicated.
There is a portion of the population who do not want to be vaccinated and they are potential customers, on the other hand those who have been vaccinated do not necessarily want to work with those who are not. The other issue is if a company requires vaccinated people, will it cause a labor shortage or will those concerns be enhanced?
Health care companies started the be vaccinated or do not come to work because the health of the patient is the reason for the existence of the company. President Biden has mandated people working for the government need to be vaccinated or be tested twice a year and lose privileges on the job and likely promotions.
Walmart and Amazon have said no to mandatory vaccinations but rely on incentives to be vaccinated, however Walmart said if you work at head office you need to be vaccinated, which is strong signal to managers.
Blackrock, the global investment manager, is allowing only vaccinated workers into the offices but it expects people to work from the office in the near future.
Linking to dividend paying stocks, corporations and individuals often have competing interests and that is the way it should be. In the past, the corporate interests was the party or person who helped the corporate interest but public health is different and decisions are made for the interests of the people who work and are customers of the company.
There are more questions than answers, till the next time – to raising questions.
If you can remember in March a firm from Hong Kong lost over $10 billion because it was leveraged more than it should be. The company used the firms of Credit Suisse, Nomura Securities, Morgan Stanley and Goldman Sachs to leverage the returns and for a while it worked very well. Then the market changed, the stocks Archegos focused on went down and the big investment banks started selling stocks to meet margin calls. Archegos did not have the capital to wait it out and the investment banks lost money. Credit Suisse seemingly lost the most money and the management report has been issued on why Credit Suisse lost money.
In article by Brenna Hughes Neghaiwi of Reuters the report said a lackadaisical attitude toward risk and a lack of accountabliltiy were to blame for Credit Suisse $5.5 billion loss.
The independent assessment wrote the losses were the result of a fundamental failure of management and control’s in Credit Suisse Investment Bank particularly in the Prime Services business. The business was focused on maximizing short-term profits and failed to rein in and enabled Archegos’ voracious risk-taking.
The bank responded that it would put risk management at the heart of our decision-making processes.
Besides the losses, the bank has taken action against 23 staff with 9 let go and a total of $70 in bonuses taken back.
New Chairman Antonio Horta-Osorio is trying to turn the page after a swathe of investigations, executive changes, executive changes and divisional reshuffles. Management is promising to unveil a strategic overhaul by year end. Credit Suisse appointed Goldman Sachs partner David Wildermuth as the new chief risk officer.
Linking to dividend paying stocks, in the investment banking world credit is given and loans are repaid and bonuses made. The important part of the equation is loans are repaid, there is always an issue can the client repay the loans. The risk officer’s position is one of the most important in the bank, if there is lack of people saying no, traders will trade for the highest short term profits and biggest bonuses. The risk officer is suppose to be a check on trading. For a profitable company, look who says no to projects but ensures the company makes money on yearly basis.
There are more questions than answers, till the next time – to raising questions.
The giants of the mining industry roam the world for commercially ore bodies and one of the largest mining companies is Rio Tinto. The global mining company with head offices in London, UK and Melbourne, Australia mines iron ore, copper, aluminum and specialty minerals.
In an article from Reuters, Rio Tinto is spending $2.4 billion to build and mine a lithium processing plant in Serbia. The reason for Serbia is the Rio Tinto has found an economically way to extract lithium from jadarite, a mineral that is found in one Serbian valley.
The first production is for 2026 and Sinead Kaufman, Chief Executive of Rio’s mineral division said the mine will be the largest in Europe for at least 10 years. The European companies of BMW, Volkswagen, Tesla have not given committed orders but they are showing lots of interest.
Rio plans a material increase in research and development beyond the $240 million it spends a year. Jared Osborne, general manager of the R&D facility said. The company is presently working to make aluminum carbon free and processes to produce green steel.
Linking to dividend paying stocks, companies which make a profit can have a longer time frame to understand and react to the market. In this example Rio Tinto is using its skills in mining, has an active R&D department and needs to try to have a 5 year outlook abut mining to produce an expected mineral in demand in the future. Part of the reason you want to own profitable companies is the expected long term horizon they should have and are investing in to ensure the company is profitable in the years to come.
There are more questions than answers, till the next time – to raising questions.
When COVID struck and governments around the world closed their borders for public health, the airline industry which had seen greater and greater numbers of people travelling was was basically shut down. Now that vaccinating levels are increasing, people are willing to travel again and demand for aircraft is up. Airlines have to look to the future to have the correct sized plane at the correct terminal on the correct dates and it is a complex business. With increased demand, Airbus which has benefited from Boeing’s troubles wishes to increase production of its planes. That can be seen as a good thing for Airbus, but what about the supplier chain?
In an article by Tim Hepher of Reuters, the business model of Airbus is different than the business model of its supply chain. For example engines, similar to passenger vehicles, fuel efficiency improves every year and that can and does mean significant cost savings to the airlines. Generally as costs go down, profits go up. Airbus gets paid on delivery of new jets, allowing them to absorb fixed costs fairly quickly.
However on the engines supplier side, their business model has two aspects – building engines and servicing engines. If they are building more engines for more planes, the likelihood is some older aircraft will be retired and go to the desert or the engine companies will make less money on servicing older engines where profit margins are high, according to Teal Group analyst Richard Aboulafia.
The large aircraft engine producers are CFM – a GE-Safra venture, and Pratt & Whitney. All their CEOs have expressed concerned over the expanded production and the fact that many planes were not flying during the pandemic. They could come back into service so the engine companies could service them.
Another trend which affects airlines is from governments around the world want airlines to reduce their emissions and newer planes helps them accomplish that goal.
Linking to dividend paying companies, when you are investing part of your research is to understand how the company makes money or its business model. Understanding the business model allows you to have a reasonable idea of how the company makes money or which margins it can control or have influence on and when the company would not make money.
There are more questions than answers, till the next time – to raising questions.
On Wall Street and most other streets, money talks. If you watch CNBC and other shows about the stock market, when they interview do, the person’s name, position and AUM are identified. The AUM is the assets under management, in theory the greater the number the higher influence the person has. In reality, the larger the fund, the more it functions similar to an index fund. Most fund managers have 30 stocks, not all of them will be beat the market or index but a few should. The ones under a billion under assets can be more easily be identified as actively funded.
In an article from Reuters, the Institutional Investors Group on Climate Change, have given notice to companies around the world that they had better have a climate change plan and equally important how is to be implemented. The 53 asset management companies include: UBS Asset Management, DWS, Legal & General Investment Management (many of them are based in Europe). The asset managers own stock and besides making a profit, companies are expected to have active climate reduction plans.
Linking to dividend paying stocks, at the Annual General Meetings we saw large asset managers vote for Board Members who represent climate change in the big energy companies. The statement from the Institutional Investors takes the step beyond the energy companies to the rest of the market. Institutional Investors tend to be the pension funds, retirement funds, or funds with a very long term focus, if a company does not have an active climate reduction plan, the Board Members will be changed.
There are more questions than answers, till the next time – to raising questions.
In all markets and new changes, there is opportunities to be made and there are also people who know how the system works to move your money from your pocket to their pocket. Thanks to Tesla’s success there are many other companies that report to offer the same thing and in an capitalist economy that is a good thing. Unfortunately some of the offering will fail, some will partially succeed and some will be bought by the dominate players in the industry. Electric cars are coming, we all know that because governments around the world are mandating the large auto companies to produce electric vehicles by 2030, how we get to 2030 is a different issue.
If you think about the start of electricity there were 2 pioneers who seemingly had the biggest impact Tomas Edison and Nikola Tesla. Edison won the commercialization of electricity and Edison Power is named after him. Nikola Tesla was not written about in the history books until Elon Musk founded Tesla,
In an article by Jonathan Stempel and Ben Klayman of Reuters, the Manhatten DA charged Trevor Milton the billionaire founder and CEO of Nikola with defrauding investors by lying to them about the electric and hydrogen powered truck maker.
The closest the Nikola One ever came to driving was when the company engineers rolled a protype down a hill so it could be filmed for a commercial. In the meantime, all the press releases were to hype the stock and let Mr. Milton sell at a higher price.
Short seller Hindenburg Research wrote a report that labeled the company a fraud, and GM which was contracted to supply batteries and buy a 11% stake in the company has since left that relationship with no equity stake.
Linking to dividend paying stocks, it is wonderful to get excited about new developments, they are the life blood of the economy. It is wonderful to hear people discuss the new opportunity, but it something else to actually have sales and make a profit. If you ever watch the TV show Shark Tank, the question the Sharks ask is do you have sales. Is someone willing to buy what you are selling? With dividend producing stocks the answer is yes and they are consistent and year over year. You can ask your dividend paying companies how would the great opportunity fit into their company? if the answer is not yet, then look at different alternatives.
There are more questions than answers, till the next time – to raising questions.
