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Thematic Signals Vol. 7, #1

Hello and welcome to the 7th volume of Thematic Signals!

2023 has only just started but investors are staring down what is likely to be a challenging December quarter earnings season laced with recession fears, structural changes in the economy, across demographics, technology, and consumer behavior all continue to unfold. While some folks continue to think about the world about us as well as investing in terms of sectors, our view remains that this approach is an outdated strategy.

That means, yes, we continue to see flaws with sector-based investing so much so that, yes, we continue to see it as a dead strategy. Part of that is the shoe-horning of companies into categories that don’t necessarily reflect what is really driving their businesses or to use investor lingo, their “alpha.” Another is that when we see the world through our thematic lens, the world around us continues to generate data points and other points of affirmation for our thematic strategies. While the near-term may be volatile for stocks, following those thematic signposts offers a favorable longer-term outlook.

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Thematic Signals #45 Vol.6

Traditionally, data privacy and the safeguarding of digital identity products and services have been lumped within the broader scope of Cybersecurity. Tematica recently launched the Tematica Bita Data Privacy and Digital Identity Index. It is our view that traditional cybersecurity is increasingly focused solely on the protection of large stores of data. Protecting personal privacy and digital identity data is more focused on what is known as Zero-Trust Environments or even passwordless access which help provide ring-fenced protection where humans, devices, and other devices can interact in a much more fluid environment. Bio-Key (BKYI) is an index constituent that we think best exemplifies the direction this emerging branch of cybersecurity is heading.

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Thematic Signals #44 Vol.6

Happy Holidays and Merry Christmas readers! 

While many are busy couch surfing or braving brick & mortar stores to get ready for the coming holidays and gift-giving season, we continue to be overwhelmed with confirming data points for our investment strategies. That said, this week’s Thematic Signals is likely to be the last one of 2022 as team Tematica looks to unplug, chill out, and rest up for the coming year. When we come back stronger than ever, we’ll not only be sharing the latest points that speak to the structural changes our themes have identified, but we’ve got a few more company interviews to share as well. We may even have a new investment theme or two to add to the mix as well.

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Thematic Signals #43, Vol. 6

Hey folks, as you likely suspect we at Tematica do a lot of leg work and deep dives when developing our investment themes and refreshing our thematic mosaic. This means that in addition to scouring financial filings, company presentations, and earnings transcripts, we also chat with company management, thought leaders, and other industry movers and shakers. Those conversations complement the fundamental work we do and refresh the thematic tapestry that underpins our various investment strategies.

It’s no secret that EVs are a hot topic given the interest in Tesla (TSLA), General Motors (GM), Nio (NIO), Blink Charging (BLNK), Rivian (RIVN), and the EV company invested in by Warren Buffett, BYD Company (BYDDY). However, the passenger car and truck market as well as the commercial truck market are only part of the larger shift away from combustion engines. As we see it, there is a larger thematic wave unfolding – a much bigger EV transition that spans bikes, motorcycles, aircraft, and boating as well as ag and construction equipment. In recent months, General Motors (GM) invested in Pure Watercraft, Deere & Co (DE) acquired Kreisel, and Volvo Construction invested in electric hauling solutions.

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Disclosures

This conversation is provided for informational purposes only and is not an offer or solicitation to buy or sell any securities. Tematica Research was compensated by a third party to conduct this interview. The information described herein is taken from sources that we believe to be reliable, but we do not guarantee the accuracy and completeness of such information. Statements made are subject to change and may change without notice. Neither the company presented, nor the sponsoring third-party has reviewed or approved the presented materials. 

Russian Hacking Collective Sandworm Identified as? Hackers.

Russian Hacking Collective Sandworm Identified as? Hackers.

In an attack reminiscent of the Solarwinds hack, The French National Agency for the Security of Information Systems (ANSSI) recently released a report detailing actions taken by Russian hackers “Sandworm” targeting products offered by IT Monitoring system provider Centreon. The company has since responded stating that effected users were using an unsupported freeware version of their product and that no current paying customers were affected.

Destructively minded group has exploited an IT monitoring tool from Centreon.

Source: France ties Russia’s Sandworm to a multiyear hacking spree

Washington State’s Agencies Identified as Cyber Attack Target

Washington State’s Agencies Identified as Cyber Attack Target

In a targeted phishing attack it appears hackers have manged to deploy two known pieces of malware that have proliferated throughout several state agencies. DHS, FBI and MSFT are investigating.

Hackers have launched a sprawling, multifaceted cyber-attack against the state of Washington, according to two people familiar with the matter.

Source: Hackers Have Infiltrated Many of Washington State’s Agencies – Bloomberg

Daily Markets: Markets Feverish Again Over Contagion Fears

Daily Markets: Markets Feverish Again Over Contagion Fears

Yesterday US investors were surprised to see the market suddenly drop around midday, the Dow falling almost 400 points at one point, with no one clear, obvious catalyst. The suspected culprit was a report of new coronavirus cases at a Beijing hospital combined with other reports of the outbreak accelerating outside of China.

The coronavirus is once again front and center for investors today with stocks in Asia closing mostly in the red except for the major Chinese indices on word that the return to work is accelerating in the major foreign trade provides. The Shenzhen Composite gained 1.1% and the Shanghai Composite 0.3%. South Korea, on the other hand, saw its Kospi drop 1.5% after reporting the first confirmed death in the country from COVID-19 on top of having the highest number of people infected with the virus outside of mainland China.

The major European indices were all in the red…

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This Dividend Aristocrat Is Well on Its Way to a ‘Coronation’

This Dividend Aristocrat Is Well on Its Way to a ‘Coronation’

Recently I touched on the several new additions to the S&P Dow Jones Dividend Aristocrats, a group of S&P 500 constituents that have increased their dividends for at least 25 years. Now, I am circling back to the latest dividend payment from an existing Aristocrat: PepsiCo (PEP) .

Widely known for its products that include Pepsi, Lays, Mountain Dew, Doritos, Gatorade, Tropicana, and Aquafina water, the company has been paying consecutive quarterly cash dividends since 1965. Indeed, 2019 marked the company’s 47th consecutive annual dividend increase, which has the company approaching the rarified air of the Dividend Kings. As a reminder, a Dividend King is an S&P 500 company that has increased its dividend for at least 50 consecutive years, an incredible achievement, which explains why there were only 28 such names in 2019.

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Disclosure

Daily Markets: Morgan Stanley (MS) to Buy E-Trade for $13 Billion

Daily Markets: Morgan Stanley (MS) to Buy E-Trade for $13 Billion

The main equity indices closed mostly in the green in Asia today after China cut its 1-year loan prime rate (LPR) by ten basis points and its 5-year by five basis points. This move comes after the People’s Bank of China had earlier cut the rate on $28.65 billion worth of 1-year medium-term lending facility loans to financial institutions from 3.25% to 3.15% on Monday. The rate cut was widely anticipated and is another layer in China’s efforts to limit the economic impact of the coronavirus.

As of yesterday, China’s National Health Commission had reported an additional 114 deaths from COVID-19, and 394 confirmed new cases for a total of 2,118 deaths and 74,576 cases. The number of new cases dropped dramatically, giving investors hope that we may have seen the worst of it, a hope that was furthered by the announcement from Foxconn today that it is cautiously restarting production at its primary plants in China. The Hubei province has asked that work not resume before March 11 – suspension for many firms was previously due to end February 21. South Korea reported 22 new confirmed cases with a potential first death from the virus that remains under investigation.

Shares in Europe were modestly in the red as of midday trading with US futures pointing to a slightly lower open after the Nasdaq Composite and S&P 500 closed at new highs yesterday.

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Disclosures