Following a blowout second-quarter earnings and revenue beat, Advanced Micro Devices (AMD) hiked its full-year forecast, citing an increase in chip demand as the work-from-home trend flourishes around the world. In response, the equity is swimming in bull notes, including an upgrade out of Susquehanna to “positive” from “neutral.” Now, AMD is buzzing with options activity, hitting a record high of $77.19 earlier, and was last seen up 12.6% at $76.14.
Today’s surge has AMD gapping higher for the second time this month alone, and has the stock sporting a brag-worthy 124% year-over-year gain. Supporting the shares on their impressive journey higher is the 100-day moving average.
Looking toward the options pits, volume is soaring. So far today, the chip stock has seen 705,000 call and 313,000 put contracts traded. This volume runs at double the expected rate, and in the 99th percentile of its annual range. Most active looks to be the weekly 7/31 80- and 75-strike calls.
Longer term, the sentiment has been the same. This is per data at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which shows Advanced Micro Devices stock with a 50-day call/put volume ratio of 3.63, ranking in the 99th annual percentile. In other terms, calls have been purchased over puts at a quicker-than-usual clip over the past 10 weeks.
Now looks like an attractive time to trade the semiconductor giant too. In fact, the stock’s Schaeffer’s Volatility Index (SVI) of 60% stands in just the 27th percentile of its annual range, implying that options players are pricing in relatively low volatility expectations at the moment.
BlackRock, Inc. 574.97, +4.27, +0.75%. LMHA. Legg Mason, Inc. 25.76 …
Investors interested in stocks from the Financial – Investment Management sector have probably already heard of Legg Mason (LM) and BlackRock (BLK). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Legg Mason has a Zacks Rank of #2 (Buy), while BlackRock has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LM has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
LM currently has a forward P/E ratio of 17.06, while BLK has a forward P/E of 19.52. We also note that LM has a PEG ratio of 1.49. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate. BLK currently has a PEG ratio of 1.95.
Another notable valuation metric for LM is its P/B ratio of 1.15. Investors use the P/B ratio to look at a stock’s market value versus its book value, which is defined as total assets minus total liabilities. By comparison, BLK has a P/B of 2.66.
These metrics, and several others, help LM earn a Value grade of B, while BLK has been given a Value grade of D.
LM has seen stronger estimate revision activity and sports more attractive valuation metrics than BLK, so it seems like value investors will conclude that LM is the superior option right now.
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As on July 28, 2020, 2U Inc. (NASDAQ: TWOU) started slowly as it slid -3.44% to $41.49. During the day, the stock rose to $43.94 and sunk to $41.225 …
As on July 28, 2020, 2U Inc. (NASDAQ: TWOU) started slowly as it slid -3.44% to $41.49. During the day, the stock rose to $43.94 and sunk to $41.225 before settling in for the price of $42.97 at the close. Taking a more long-term approach, TWOU posted a 52-week range of $11.37-$46.40.
The company of the Consumer Defensive sector’s yearbook sales growth during the past 5- year span was recorded 39.10%. Meanwhile, its Annual Earning per share during the time was -33.40%. Nevertheless, stock’s Earnings Per Share (EPS) this year is -458.10%. This publicly-traded company’s shares outstanding now amounts to $63.63 million, simultaneously with a float of $62.36 million. The organization now has a market capitalization sitting at $2.76 billion. At the time of writing, stock’s 50-day Moving Average stood at $37.65, while the 200-day Moving Average is $26.29.
It is imperative to bring your focus towards the efficiency factor of the conglomerate that has a total of 3749 employees. It has generated 153,286 per worker during the last fiscal year. Meanwhile, its income per employee was -62,743. The stock had 17.34 Receivables turnover and 0.58 Total Asset turnover. For the Profitability, stocks gross margin was +71.78, operating margin was -30.69 and Pretax Margin of -44.39.
2U Inc. (TWOU) Ownership Facts and Figures
Another important factor to analyze is how key investors are playing towards the stock of the Education & Training Services industry. According to the most recent insider trade that took place on Jul 02, this organization’s Chief Executive Officer sold 150,000 shares at the rate of 39.62, making the entire transaction reach 5,943,000 in total value, affecting insider ownership by 403,600. Preceding that transaction, on Jul 01, Company’s Chief Executive Officer sold 150,000 for 38.12, making the whole transaction’s value amount to 5,718,141. This particular insider is now the holder of 553,600 in total.
2U Inc. (TWOU) Earnings and Revenue Records
If we go through the results of last quarter, which was made public on 3/30/2020, the company posted -$0.33 earnings per share (EPS) for the quarter, besting the agreed prediction (set at -$0.43) by $0.1. This company achieved a net margin of -40.93 while generating a return on equity of -33.22. Wall Street market experts anticipate that the next fiscal year will bring earnings of -0.31 per share during the current fiscal year.
2U Inc.’s EPS decrease for this current 12-month fiscal period is -458.10% and is forecasted to reach -0.75 in the upcoming year. Considering the longer run, market analysts have predicted that Company’s EPS will increase by 25.00% through the next 5 years, which can be compared against the -33.40% growth it accomplished over the previous five years trading on the market.
2U Inc. (NASDAQ: TWOU) Trading Performance Indicators
Let’s observe the current performance indicators for 2U Inc. (TWOU). It’s Quick Ratio in the last reported quarter now stands at 1.40. The Stock has managed to achieve an average true range (ATR) of 2.12. Another valuable indicator worth pondering is a publicly-traded company’s price to sales ratio for trailing twelve months, which is currently 4.40.
In the same vein, TWOU’s Diluted EPS (Earnings per Share) trailing twelve months is recorded -4.34, a figure that is expected to reach -0.39 in the next quarter, and analysts are predicting that it will be -0.75 at the market close of one year from today.
Technical Analysis of 2U Inc. (TWOU)
Through scrutinizing the latest numbers posted by the [2U Inc., TWOU], it can be observed that its last 5-days Average volume of 1.2 million was lower the volume of 1.69 million, it posted the year before. During the previous 9 days, stock’s Stochastic %D was recorded 33.12% While, its Average True Range was 2.14.
Raw Stochastic average of 2U Inc. (TWOU) in the period of the previous 100 days is set at 85.93%, which indicates a major rise in contrast to 37.05% during the last 2-weeks. If we go through the volatility metrics of the stock, In the past 14-days, Company’s historic volatility was 50.47% that was lower than 72.99% volatility it exhibited in the past 100-days period.
High-profile stumbles — like the 20% loss for Renaissance Technologies‘ institutional fund — show the exceptional mayhem wrought by the pandemic.
(Bloomberg) — Quant strategies designed to zig when markets zag are getting thrashed by extreme stock swings in a year that should have proved their shining moment.
These market-neutral funds keep lagging other alternative strategies, while Eurekahedge data this month showed they’re already reeling from $2 billion of outflows in 2020.
Not only did they largely fail to live up to their promise in the historic equity selloff, the ferocious rebound is confounding their risk models with its unprecedented whiplash.
After years of disappointment, the investing style — which combines long and short bets to buck the overall market direction — ranks among the least popular breed of hedge fund in a Barclays Capital Solutions survey.
All this is intensifying a debate on whether now is just the time to revamp this systematic cohort. Making risk indicators more flexible and adding short-term signals to guide allocations are among the fixes put forward by the likes of Franklin Templeton and Jupiter Asset Management.
“Some of the things people are traditionally focused on didn’t provide the returns they were expecting,” said Brian Meloon, managing director for research at Campbell & Company, citing the underperformance of short bets this year.
While the nuts and bolts of their strategies may vary, a few generalizations are possible. As fundamental signals failed to predict the right winners and losers in a pandemic market, even having a short book was not enough to make up for losses in the long leg.
With more rigid risk controls, many funds were also forced to deleverage at the height of the selloff, leaving them unprepared for the subsequent rebound.
All that means market-neutral funds have dropped nearly 5% this year to lag a flat performance among hedge funds overall, Hedge Fund Research data show. Some have shuttered entirely. High-profile stumbles — like the 20% loss for Renaissance Technologies’ institutional fund — show the exceptional mayhem wrought by the pandemic.
At Los Angeles Capital Management, Chief Investment Officer Hal Reynolds saw the mania up close. Some of the signals his quant model usually used to predict stock behavior stopped working in the grip of the selloff, so the firm built a Covid factor to track how different shares are exposed to the virus.
The team discovered that while value shares are increasingly sensitive to the pandemic, growth shares are becoming less so — reinforcing their bias toward the latter ever since.
“The megacap tech companies that are really driving the digital economy, they’re benefiting from the crisis,” said Reynolds.
Ian Heslop’s team at Jupiter is also studying better ways to run the value factor and looking at less standard factors and shorter-term signals. Alternative data that are specific to particular stock sectors look promising too, he added.
“If you have a material amount of fundamental underpinnings to your portfolios then you’d be getting quite a few of these stocks wrong,” said Heslop, head of global systematic equities. His $1.5 billion market-neutral fund is down 3.4% this year.
This need for a Covid factor attests to just how little use fundamental indicators like profit margins and valuations are in unprecedented times. It suggests there are benefits in making trading rules more flexible for an industry that has traditionally touted the long-term benefits of all-weather strategies.
The pandemic is intensifying a long-term performance problem. While hedge funds should not, by definition, be directly compared to a benchmark, a nearly 200% gain in the S&P 500 over the past decade has undoubtedly boosted pressure on an industry that looks ineffective next to it.
Market-neutral funds have performed even worse than their peers including macro and long-short funds since 2010, HFR data show.
One issue is that quants are more likely to use fixed volatility levels to manage their leverage. That caused many to miss this year’s rebound after getting thrashed in the market rout.
“These losses triggered further deleveraging in these funds, causing many of them to be under-invested for the recovery,” said Justin McEntee, who oversees such strategies at a Franklin Templeton unit allocating to hedge funds.
Those who have fared better were more flexible with risk, used the options market to capitalize on spiking volatility and quickly modeled a new factor to minimize their exposure to Covid-19, according to McEntee.
Some quants are hopeful the wild swings have left behind a litany of dislocations they can now exploit. But the gut-wrenching stock moves in recent months are still largely stopping market-neutral strategies from taking high levels of risk.
“Our models are not thinking about a day or a week, we’re looking at a year,” said Reynolds at Los Angeles Capital.
Buffett follows a value investing strategy that is an adaptation of Benjamin Graham’s approach. His investment strategy of discipline, patience and value consistently outperforms the market and his moves are followed by thousands of investors worldwide. He seeks to acquire great companies trading at a discount to their intrinsic value, and to hold them for a long time. He will only invest in businesses that he understands, and always insists on a margin of safety.
Buffett first bought into Bank of America in 2011 as the company was struggling to recover from the 2008 financial crisis. With the purchase of 50,000 preferred shares, he was able to secure himself a 6% dividend and warrants to purchase 700 million common shares.
These shares were guaranteed at a price of $7.14 until 2021. Within 24 hours of the purchase, Buffett was already looking at profits upwards of $1 billion by activating those warrants. However, the Oracle of Omaha is not one to make rash decisions.
Watching his money grow, Buffett sat on the preferred shares until 2017, when Bank of America passed its annual stress test with the Federal Reserve. This allowed the company to up the annual dividend to 48 cents per share, which exceeded what Buffett was making via his preferred shares.
According to CNBC, Buffett netted approximately $12 billion with the acquisition of the 700 million shares he had access to as shares were trading at $24.58. Since the original acquisition of common shares in 2017, Buffett has continued to add to his holding.
As previously reported, Buffett added 6.12% to his holding between the end of the first quarter and July 22, with the purchase of 56.65 million shares. These shares were acquired at an average price of $23.99.
July 27 saw Buffett further boost his holding in Bank of America with the addition of 16.42 million shares. The shares were purchased at an average price of $24.22, up 23 cents per share since his purchases last week. Overall, the purchase represented a 1.67% increase in the holding and a 0.23% impact on the portfolio. GuruFocus estimates the total gain on the holding at -4.37%
Bank of America
Bank of America is one of the largest financial institutions in the United States, with more than $2.3 trillion in assets. It is organized into four major segments: consumer banking, global wealth and investment management, global banking and global markets.
Bank of America’s consumer-facing lines of business include its network of branches and deposit-gathering operations, home mortgage lending, vehicle lending, credit and debit cards and small-business services.
On July 28, the stock was trading at $24.14 per share with a market cap of $209.15 billion. Since 2018, the shares have been trading below intrinsic value according to the Peter Lynch chart.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 4 out of 10 and a valuation rank of 5 out of 10. The company has significantly cut back on debt since 2011 and the cash-to-debt ratio of 1.06 places it just below the industry median. In recent years, cash flows and income have been on the rise.
At the end of the first quarter, the portfolio contained 50 stocks and was valued at $175.53 billion. By weight, the portfolio is most heavily invested in the technology (37.01%), financial services (37.00%) and consumer defensive (15.74%) sectors.