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Category Archives: New Middle Class

MGM Update: August Macau gaming revenue shrugs off Typhoon Hato

MGM Update: August Macau gaming revenue shrugs off Typhoon Hato

Early this morning the Macau Gaming Inspection and Coordination Bureau reported August gross gaming revenue rose 20.4% year over year, with a month over month dip of just over 1%. While this sequential dip may catch some off guard and could rattle the shares of gaming and resort companies operating in the Chinese city somewhat, as we head into the holiday weekend, let’s remember that as of late Houston was not the only city hit by a natural disaster. Earlier this month, Macau was hammered by the severe Typhoon Hato, which shuttered casinos and resorts for several days.

Adjusting our view for that, the year over year growth in Macau gaming revenue remained impressive in August as the city continues to woo tourists and gamblers, particular VIP gamblers. This was one of the key aspects for the addition of MGM Resorts (MGM) in June to the Tematica Select List as part of our Guilty Pleasure investment theme. With MGM slated to open another Macau based resort in 2018 — the MGM Cotai that will include a spa, theatre, and 1,500 hotel rooms — the company continues to expand its presence in this market. As a reminder, Macau is the only part of China where casino gambling is legal, and odds are China’s rising middle class (a key part of our Rise & Fall of the Middle Class investing theme) is embracing our Guilty Pleasure theme as are tourists to the region.

Being the data junkies we are here at Tematica, we’ll look to the next report on Macau gross gaming revenue due in early October to see how quickly the city shrugs off the effects of Hato. Before then, we’ll get the August Nevada Gaming Revenue Report and that should shed some details on the recent Mayweather-McGregor fight had on Las Vegas, even though it wasn’t a sold out event.

Finally, one quick reminder, on September 8 MGM shares go ex-dividend to reflect the next $0.11 per share dividend, which will be paid on September 15. While the current annualized dividend yield of 1.3% is not the largest, we see the recent decision to pay a quarterly dividend as more indicative of the company’s multi-year strategy.

  • For now, our price target on MGM Resorts (MGM) shares remains $37.
Wedbush upgrade confirms our stance on Starbucks

Wedbush upgrade confirms our stance on Starbucks

Over the weekend, Barron’s published an excerpt from Wedbush’s price target hike and upgrade on Starbuck (SBUX) shares last week. We’ve been patient with the shares during the summer given it’s a seasonally weaker time frame for the company. As the summer comes to an end, we are encouraged by Wedbush’s findings that Starbucks same-store sales are trending better than expected. We attribute this in part to the company’s revamping and expanding its food menu, which is likely driven higher consumer tickets.

As we head into the cooler months, we suspect the demand for hot beverages and food will lead to further sequential improvements in domestic same-store sales. We also see the company’s global same-store sales benefitting from the recent decision to buy the remaining 50% share of its East China business from long-term joint venture partners Uni-President Enterprises and President Chain Store for approximately $1.3 billion in cash. With the agreement, Starbucks will assume 100% ownership of approximately 1,300 Starbucks stores in Shanghai and Jiangsu and Zhejiang Provinces. As part of that announcement, Starbuck reiterated plans to have a total of 5,000 stores in mainland China, the company’s fastest-growing market outside of the U.S.,  by 2021. In our view, this roll-out keeps Starbucks within our Rise & Fall of the Middle Class and Affordable Luxury tailwinds.

  • Our price target on Starbucks (SBUX) shares remains $74.

We are upgrading Starbucks (ticker: SBUX) to Outperform from Neutral. We are increasing the price target to $60 from $57.

Checks indicate U.S. comps tracking in line with expectations. Our recent checks of 5% of U.S. co-owned locations point to same-store-sales (SSS) growth in line with fiscal-fourth-quarter consensus of 3.5%. Mobile order and pay continues to be cited as a meaningful driver with increased frequency. We continue to model 3% for the fiscal fourth quarter, but based on our checks we view a rounded-up 4% U.S. comp as realistic should this trend continue through September.

Source: Starbucks to See Boost From China Acquisition – Barron’s

As earnings shape-up as expected, we reshape the Tematica Select List

As earnings shape-up as expected, we reshape the Tematica Select List

 

We all know that on its own earnings season is as busy a time as it gets. This time around, however, things have been complicated by a wave of merger and acquisition announcements, one of which involved our position in Connected Societycompany AT&T (T). We’ll speak to why we like the transaction and see it as very positive for our AT&T shares below. Outside those merger headlines and commentary, you’ve likely read or seen that as we get further and further into the current earnings season, we are seeing a growing number of disappointments. We’d like to say we’re surprised, but as we’ve shared with you over the last several weeks we’ve been expecting something like this.

We’ve caught some cover fire ourselves, which led to our Special Alert yesterday in which we shed Sherwin Williams (SHW) and Whirlpool Corp. (WHR) — more on that move on page 5. We’ll continue to look for thematic opportunities at better prices in the days and weeks ahead. Now let’s tackle all of what’s already transpired this week…
This week’s issue of Tematica Investing includes:

  • Earnings season for the September quarter is heating up, and it’s as we expected with more than a few disappointments.
  • Over the weekend, Connected Society AT&T (T) announced it would acquire Content is King contender Time Warner (TWX). Despite what appears to be headline resistance to the deal, we like the strategic positioning and rationale that is bringing these two companies together.
  • Following disappointing results for the September quarter with more of the same signaled for the current quarter, we’ve cut both Sherwin Williams (SHW) and Whirlpool Corp. (WHR) from the Tematica Investing Select List.
  • With operating profit expectations reset at Under Armour (UA), we’ve reduced our price target on the shares to $40 from $55. After the sharp drop in the shares due to that expectation reset, our revised target offers 22 percent upside, which has us keeping it on the Tematica Investing Select List with a Buy rating.

You can click below to download the full report.
downalod-pdf

Chris Versace
Chief Investment Officer
Tematica Research, LLC

Anyone else smell something?

Anyone else smell something?

The smell we’re talking about is not the market — although frankly, we are finally seeing suspicions over the state of the global economy are finally catching up with revenue and earnings expectations.

No, the smell we’re talking about comes in the form of International Flavors & Fragrances (IFF), which we are adding to the Tematica Select Investment List today. We like the company’s flavors and fragrances business, which touches so many facets of daily life in both developed economies and, increasingly, in emerging markets. We also like management’s rising dividend policy, with an annualized $2.24 per share this year, up from $1.00 per share in 2010.
This week’s issue of Tematica Investing includes:

  • We are heading into the thick of earnings season this week and as expected it’s looking rather spotty with some upside surprises and a growing number of disappointments. We’ll continue to be cautious, looking for opportunities to either scale into existing positions or add new ones.
  • We are promoting shares of International Flavors & Fragrances (IFF) to the Tematica Investing Select List with a $145 price target. We will hold off setting a protective stop loss as we move deeper into September quarter earnings, preferring to improve our cost basis should the opportunity present itself.
  • To make room for IFF shares, we are closing out our position in the Consumer Discretionary SPDR ETF (XLY).
  • Updates – We’ve got a ton of them this week, including Amazon (AMZN), Costco Wholesale (COST), Under Armour (UA), Universal Display (OLED) and several others.

You can click below to download the full report.
downalod-pdf

 

Adding a splash of color to Rise & Fall of Middle Class

Adding a splash of color to Rise & Fall of Middle Class

Welcome to another weekly issue of the Weekly Tematica Investing. It’s been a wild week of market moves, earnings reports and economic data all at once.

In addition to my regular visits with the Charles Payne on his Making Money with Charles Payne show on Fox Business, I had an opportunity to sit down with the folks at Boom-Bust on RT (the new home of The Larry King Show) to dig deep into our thematic-driven approach and discuss why most investors are investing wrong. That of course is NOT the case with us!

You can click on the image below to watch the whole interview.

In this week’s Tematica Investing:

  • Closing the books on July, the Tematica Select List had a number of positions that handily outperformed the S&P 500, which rose 3.6% for the month. Read More >>
  • We are issuing a Buy rating paint and coatings company Sherwin Williams (SHW) with a $350 price target as we add a splash of color to our Rise & Fall of the Middle Class investing theme. This is a new position and we are holding off with a protective stop loss for now. Read More >>
  • Updates, Updates, Updates – Recapping earnings from Alphabet (GOOGL), Amazon (AMZN), PetMeds Express (PETS) and Under Armour (UA). Read More >>
  • Housekeeping! – Here’s what we’re watching when Physicians Realty Trust (DOC) and Walt Disney (DIS) report quarterly earnings. Read More >>

You can click below to download the full report.
downalod-pdf

Turn off the music, close up the bar and call it a night

Turn off the music, close up the bar and call it a night

While the “bad news is good news” move in the market over the last few days is decidedly more enjoyable than those gut-wrenching market falls of late, it’s like a party that goes on for too long; at some point someone has to turn off the music, close up the bar and call it a night.
We’ve already seen some warning signs that it might be time to head out before things get awkward in the form of negative earnings pre-announcements for several companies.

 

In this week’s issue of Tematica Insights:

  • With the September ISM Manufacturing Survey out, what does it mean for inflation and any potential Fed action on rates later this year.
  • Is this a good time to jump on buying opportunities with all the negative earnings pre-announcements coming out?
  • China’s adoption of Western diet demonstrates how thematics can play-out in society.
  • Tematica Select List company Skyworks ([stock_quote symbol=”SWKS”]) makes a move, which has adds an interesting wrinkle to our Connected Society thematic.

Download Monday Morning Kickoff

 

 

Companies Mentioned
  • Alcoa (AA)
  • Amazon.com (AMZN)
  • American Airlines (AAL)
  • Apple Inc. (AAPL)
  • Bank of America (BAC)
  • Caterpillar (CAT)
  • Chegg Inc. (CHGG)
  • ConAgra (CAG)
  • Corning Inc. (GLW)
  • Dunkin’ Brands (DNKN)
  • DuPont (DD)
  • FedEx (FDX)
  • Hewlett Packard (HPQ)
  • Illumina (ILMN)
  • Immersion Corp. (IMMR)
  • Kimco Realty (KIM)
  • Lifelock (LOCK)
  • Merk & Co. (MRK)
  • Netflix (NFLX)
  • Nu Skin (NUS)
  • Palo Alto Networks (PANW)
  • PayPal (PYPL)
  • PMC-Sierra (PMCS)
  • Skyworks Solutions (SWKS)
  • Starbucks Inc. (SBUX)
  • Swift Transportation (SWFT)
  • Synaptics Inc. (SYNA)
  • Taiwan Semiconductor (TSM)
  • The Container Store (TCS)
  • U.S. Global Jets ETF (JETS)
  • United Natural Foods (UNFI)
  • Verizon Communications (VZ)
  • Wal-Mart (WMT)
  • Walt Disney (DIS)
  • Whole Foods Market (WFM) Xylem, Inc (XYL)
  • Yum! Brands (YUM)