Category: FINANCE NEWS

Traders and financial professionals work ahead of the closing bell on the floor of the New York Stock Exchange.Drew Angerer | Getty ImagesU.S. stock futures dropped on Sunday night amid fears that a surge in oil prices following an attack in Saudi Arabia could slow down global economic growth.As of 8:18 p.m. ET Sunday, Dow Jones Industrial Average futures were down 168 points, implying a loss of 172.52 points at Monday’s open. S&P 500 and Nasdaq 100 futures were also down. That would be the first decline in 9 days for the Dow, which had climbed back to within 1% from a record on Friday.A decline on Monday would snap an eight-day winning streak for the Dow.West Texas Intermediate futures jumped more than 11% to trade at $61.25 per barrel. The sharp move higher comes after a series of drone strikes on Saturday knocked out about half of Saudi Arabia’s daily crude production.Saudi Aramco, Saudi Arabia’s national oil company, will reportedly try to restore about a third of the country’s production by Monday.President Donald Trump tweeted Sunday before the futures open the U.S. could use oil from its Strategic Petroleum Reserve to keep the market “well-supplied.”Consistently higher oil prices could lead to increasing fuel prices. This would put more pressure on a global economy that is already coping with a slowing manufacturing sector and stubbornly low growth.This “is the largest supply shock ever. The world is dependent on strategic reserves right now and you will see SPR draws,” said Bob Ryan, chief commodities and energy strategist at BCA Research, in a note. “The market could tighten significantly if the outage is indeed weeks and not days.”—CNBC’s Yun Li contributed to this report.Subscribe to CNBC on YouTube.


Source link

Smoke is seen following a fire at Aramco facility in the eastern city of Abqaiq, Saudi Arabia, September 14, 2019.Stringer | ReutersOil prices jumped more than 10% after a coordinated drone attack hit the heart of Saudi Arabia’s oil industry on Saturday, forcing the kingdom to cut its oil output in half.U.S. West Texas Intermediate crude futures popped $6.4, or 11.67%, to $61.23 per barrel. Brent crude futures soared $7.89, or 13.3% to $68.07.Drone strikes attacked an oil processing facility at Abqaiq and the nearby Khurais oil field on Saturday, knocking out 5.7 million barrels of daily crude production or 50% of the kingdom’s oil output. Saudi Aramco, the national oil company, reportedly aims to restore about a third of its crude output, or 2 million barrels by Monday.”While in the short term the direct physical impact on the market might be limited, this should move the market away from its bearish macroeconomic cycle and raise the risk premium in the market as funds reduce their short positions,” said Chris Midgley, global head of analytics, S&P Global Platts.Sunday evening, President Donald Trump said he was authorizing the release of oil from the Strategic Petroleum Reserve to keep the markets “well-supplied.”Abqaiq is the world’s largest oil processing facility and crude oil stabilization plant with a processing capacity of more than 7 million barrels per day. Khurais is the second largest oil field in the country with a capacity to pump around 1.5 million barrels per day. In August, Saudi Arabia produced 9.85 million barrels per day.Yemen’s Houthi rebels claimed responsibility for the attack, saying it was one of their largest attacks ever inside the kingdom. The Houthis have been behind a series of attacks on Saudi pipelines, tankers and other infrastructure in the past few years.Trump also said there is reason to believe the U.S. know the culprit and is “locked and loaded,” while waiting to get the verification from the kingdom.The U.S. has blamed Iran for the drone strikes on those important facilities. Secretary of State Mike Pompeo said in a tweet Saturday Iran has launched an “unprecedented attack on the world’s energy supply.””If the Iranians have been driven to desperate measures from the loss of crude export revenues, an attack on Saudi capacity seems a likely response,” Jason Gammel, energy analyst at Jefferies, said in a note on Sunday. “The risk of wider conflict in the regions, including a Saudi or US response, will likely raise the political risk premium on crude prices by $5-10/bbl.”The latest attack came as Saudi Arabia moves forward to take Saudi Aramco public in a major shakeup of the kingdom’s energy sector. Saudi Aramco President and CEO Amin Nasser said Saturday nobody was hurt in the attacks and work is underway to restore production. Aramco did not immediately respond to CNBC’s request for comment on Sunday.


Source link

Ron Paul is warning negative interest rates will crush the global economy.The former Republican congressman from Texas believes the U.S. won’t be the exception.”We will join the rest of them and go to total negative rates in hopes that that will be the solution,” he told CNBC’s “Futures Now” on Thursday. “We’ve never had as many currencies in negative interest rates. $17 trillion worth of bonds [are] in negative interest rates. It’s never existed before. And, that’s a bubble. So, we’re in the biggest bond bubble in history, and it’s going to burst.”Paul, a former presidential candidate and vocal libertarian known for his economic and stock market bubble warnings, contends the Federal Reserve’s policies are powerless in this environment. He doesn’t believe this week’s Fed meeting will provide any kind of relief and cutting rates will not be the answer.”You can’t predict exactly where the creation of credit goes,” said Paul. “We have a ton of inflation with all that QE [quantitative easing]. And, every time you lower interest rates below market levels and create new credit, that’s a bubble.”Paul has been waving the red flag for years, warning that a once in a lifetime market drop of 50% or more will strike stocks. With bonds yielding negative rates now in focus, he suggests the danger is ballooning to unseen levels. Yet, he’s unsure of the timing of a collapse.”You don’t know this precise time. But you know it can happen,” he said. “How do you sell a bond that pays a negative rate? Who’s going to jump up and down?”Flashback October 2018 But what a difference a year makes.Paul was worried about the other extreme last October — when the benchmark 10-year Treasury note yield rallied to seven year highs and hit 3.26%, creating inflation jitters. “It can be pretty well validated by looking at monetary history that when you inflate the currency, distort interest rates and live beyond your means and spend too much, there has to be an adjustment,” Paul told “Futures Now” last October. “We have the biggest bubble in the history of mankind.”On Friday, the 10-year yield closed at 1.9%, its highest level since August 2.  So, why is Paul still warning an epic bond bubble will burst an create chaos if rates are no longer above 3%?According to Paul, central banks which drastically lower interest rates destroy the pricing mechanism in financial markets.”I don’t think anything even existed coming close to what we’re facing today,” Paul said.Disclaimer


Source link

The investor who ran the world’s largest technology fund during the dot-com boom has a new warning.Paul Meeks predicts a near-term correction will hit tech stocks.”It’s inevitable,” he told CNBC’s “Trading Nation” on Friday. Meeks, who’s now a portfolio manager at Independent Solutions Wealth Management, cites two chief factors for his negative outlook: U.S-China trade war fallout and the economic growth slowdown.”My typical tech company is deeply embedded in a supply chain between the two nations,” said Meeks. “We’ve also started to see a decline in the economic growth rate particularly abroad, less drastic here in the states. But a lot of people don’t realize that tech products and services, whether that be sold to the enterprise or sold to the consumer, you know typically are cyclical.”He expects the tech-heavy Nasdaq, which is up 23% year-to-date, will fall 10%. Despite his pullback warning, Meeks plans to put money to work.”I always have my eye on my favorite tech names, and I look for opportunities to buy them on dips,” he said. Meeks: Sell Apple, Buy SalesforceHowever, Meeks indicates one widely held tech stock that’s been dominating the headlines won’t be on his pullback shopping list: Apple, which is up almost 40% so far this year.He plans to reduce his already underweight Apple position and take profits. According to Meeks, a secular slowdown in smartphones will continue to hurt iPhone sales, despite Apple’s iPhone 11 launch last Tuesday. “I would like to shift out of those names in this kind of environment and try to find some deals in software,” he said.It’s not the first time this year he’s been bearish on Apple. Meeks went negative on the stock on “Trading Nation” in late April. A month after his interview, shares were down more than 13%.  “The one that I like the most particularly as I exit Apple and increase in the software space is Salesforce.com,” he said.Meeks, who already owns Salesforce, is up more than 6% over the past month, but it’s down 3% over the last year.”Something like Salesforce.com, you can get a 100% software business that is growing faster and is much more profitable than anything that Apple is doing,” said Meeks.Disclosure: Paul Meeks holds positions in the stocks discussed.Disclaimer


Source link

SoFi Stadium conceptualizationRachel Reichblum | SoFiFinancial technology start-up Social Finance is putting its name on the most expensive NFL stadium ever built.The company announced a 20-year deal on Sunday to call the new Los Angeles football compound “SoFi Stadium.” The 3-million-square-foot arena, which will be home to both the Rams and the Chargers, is set to open next summer.The San Francisco-based company will become an official partner of both LA football teams, as well as a partner of the performance venue and surrounding entertainment district. SoFi did not disclose how much it paid for the naming rights, but Venues Now and Fox Business, which reported earlier this year that a deal was in discussion, said it was a $400 million price tag.”This is a giant leap toward achieving our company’s mission of helping people get their money right by reaching our members where they are,” said Anthony Noto, SoFi CEO and a former CFO of the NFL, in a press release. “This partnership is the perfect opportunity to drive awareness and trust in the SoFi brand as we continue to grow and reach members on a national level.”It’s common for financial services companies to buy stadium naming rights: Bank of America, J.P. Morgan Chase, CitiGroup and Barclays all have their brands on U.S. sports marquees. But it is rare for a young, venture-capital-backed, private company to put its name on a major sports arena. SoFi will be the only Silicon Valley start-up in the NFL stadium ranks.The Inglewood, California stadium has gained attention for its size — and its price. Los Angeles Rams owner and real estate mogul Stan Kroenke is financing the stadium as a part of his 298-acre sports and entertainment district. The project is expected to cost just under $5 billion, more than double the average cost for a new NFL stadium. The new Raiders stadium, for example, was estimated to cost just under $2 billion.”It was critical for us to find a tech-focused partner who is on the cutting edge and genuinely understands the needs of all of our constituents and who challenges us to think in creative ways to make every visitor to SoFi Stadium and Hollywood Park feel special and at home,” Kroenke said in the press release.The indoor-outdoor facility will host Super Bowl LVI in 2022, the College Football National Championship game in 2023, and the Opening and Closing Ceremonies of the 2028 Olympic Games.SoFi is already well known in the financial technology world, but the new stadium deal will likely put it on the map as a mainstream brand. Its marketing budget has exceeded $200 million in previous years, and the stadium deal would likely be a part of a larger effort to gain name recognition.SoFi started in 2011 with millennial student-loan refinancing. Since then, it has expanded to personal and mortgage loans, mortgage refinances and wealth management services. SoFI has been on a product-launching spree this year. It announced cryptocurrency trading through a partnership with Coinbase, zero-fee So-Fi branded exchange traded funds, and said it plans to debut a credit card later this year. It also rolled out SoFi Money — a cash account with 2.25% APY.While the start-up offers a suite of traditional banking services, it’s not a bank. SoFi partners with WSFS Bank, which handles the federally regulated lending and deposit side. The set up is common among fintech start-ups who don’t have bank charters, and instead focus on building apps and platforms for digitally savvy consumers.Earlier this year, SoFi closed a $500 million funding round led by Qatar Investment Authority that brought the company’s valuation to $4.8 billion. To date, it has raised $2.4 billion from investors including Peter Thiel and SoftBank, according to PitchBook. SoftBank, the Japanese holding company founded and run by billionaire Masayoshi Son, has made headlines in recent weeks for its investments in controversial real estate company WeWork. That start-up has seen its $47 billion valuation challenged as it heads toward an IPO.Noto, Twitter’s former chief operating officer and a former managing director at Goldman Sachs, took over as CEO of SoFi in March 2018. He replaced SoFi founder Mike Cagney, who was ousted amid allegations of sexual harassment.Noto said earlier this year that going public is “not a priority” in 2019. But long-term, he said an IPO remains on the roadmap.


Source link

Talk about a bitcoin bull case.The digital currency is headed to new record highs, says Tom Lee, co-founder, managing director and head of research at Fundstrat Global Advisors — but there’s a catch some cryptocurrency investors may not be expecting.”Bitcoin has kind of stalled recently because the macro outlook has stalled. I think, in a world without trend, bitcoin doesn’t go up,” Lee said Thursday on CNBC’s “Fast Money.” “The next big catalyst, I think, is a decisive breakout in the equity markets, because I think once equities break to an all-time high, bitcoin becomes a risk-on asset.”In other words, according to Lee, as stocks go, so goes bitcoin — at least for now.”If markets make a new all-time high and we see central banks still supportive, it’s kind of good for liquidity, so there’s … liquidity going into bitcoin,” Lee said. “More importantly, if there’s an interest in acquiring some volatility, that’s where you’re going to see people buying bitcoin.”With Lee expecting the S&P 500 to climb to 3,125 or higher by year-end, that could mean a major rally is in the cards for the increasingly volatile digital currency. Bitcoin reached an all-time high of $20,089 in late 2017, according to CoinBase.”[The S&P’s] all-time high is around 3,025,” which it reached earlier this year, Lee said. “I think we’re going to surpass that soon and it would be bullish for bitcoin.”Lee’s theory is built in part on the historical ties between bitcoin and the equity markets. In the 10 years since bitcoin’s launch, the best years for the S&P have coincided with best years for bitcoin, he said.”Bitcoin does best when the S&P’s up more than 15%,” Lee said Thursday. “Bitcoin may be ambidextrous [in] that it works well in a risk-on world, but as you start to get nervous, then you treat it like digital gold.”The last several months have brought about “neither environment,” leaving bitcoin’s fate in the hands of uncertain investors, the strategist said.”It was a market that looked like it was on the precipice, it looked like it could fall, but it never did, and I think [being] stuck in that trend was bad for bitcoin,” he said.But before all this occurs, BKCM founder and CEO Brian Kelly expects investors to get a once-in-a-generation chance to buy the popular cryptocurrency, he said in the same “Fast Money” segment.”I think you’re going to have a massive buying opportunity here,” Kelly said. “We may have already seen it in the [$]9000s, … but there is too much money coming into this market. You’re going to have an opportunity to have a generational buy in bitcoin sometime, I would say, in the next six months.”Bitcoin fell by nearly 2% on Friday to just above $10,210, according to CoinBase.Disclaimer


Source link

David Solomon, chief executive officer of Goldman Sachs, speaks during the Milken Institute Global Conference in Beverly Hills, April 29, 2019.Patrick T. Fallon | Bloomberg | Getty ImagesThe biggest banks on Wall Street are increasingly betting on their potential competition.So far this year, major U.S. banks have participated in two dozen financial technology, or fintech, equity deals, according to a recent report by CB Insights. This is tracking to be on par with last year — which saw a 180% increase in bank investments from a year earlier.Goldman Sachs and Citigroup — which both have venture capital investment arms — are the two most active of the major banks, followed by J.P. Morgan at number three. Morgan Stanley, Wells Fargo, Bank of America, and PNC Financial Services Group have also backed at least five financial technology startups since 2012, according to CB Insights.Chris Brendler, senior director of fintech research at the data firm, said there are two key incentives driving the equity investments: Banks can form strategic partnerships with the start-ups to use their technology, and much like venture capital does, they profit down the road if these investments take off.The equity investments are a way to “future proof,” according to CB Insights. Banks are looking to diversify as their main profit engines get squeezed by falling interest rates, and new fintech options like Square, PayPal, Wealthfront, Betterment, Robinhood debut many of the same services with zero fees.Where they’re spendingThe top investment area for banks was payments and settlements, which includes companies like Square, Marqeta and Klarna. The payments category has seen equity funding rounds from at least three banks — including Square’s $717 million in total disclosed funding from Goldman Sachs, J.P. Morgan Chase, Morgan Stanley, Barclays Capital, and Silicon Valley Bank, according to CB Insights.Capital markets was the second most popular investment area for banks, followed by data analytics. Blockchain — long a corporate hype word — was 7th on the list, right behind wealth management.Banks’ strategies aren’t all the same though. Citi has backed four blockchain start-ups, three capital markets and three payments start-ups in the past two years. Goldman Sachs has most active and the broadest, according to CB Insights’ Brendler.In the past two years, Goldman has invested in real estate, data analytics, and payments — all of which “align” with its digital consumer arm, Marcus, according to CB Insights. The bank invested in Even Financial last year, a platform that helps funnel customers directly to banks’ product offerings. Marcus uses Even’s platform for lead generation.”The question is still whether fintechs are friends or foes — and if they have the ability to gain market share from banks,” said Mike Mayo, senior bank analyst at Wells Fargo. “On the friend side of that, they have the ability to help banks with technology.”‘Acqui-hires’To build out Marcus, Goldman’s consumer arm, the bank completed a string of M&A deals. It targeted consumer fintechs to acquire engineering and product teams that it folded into Marcus. These so-called ‘acqui-hires’ included Clarity Money, Final, Bond Street and brought in more than 60 consumer fintech-focused employees, according to CB Insights.”Acquiring digital talent has been a top priority for all banks as they strive to become more tech oriented,” CB Insights said. “For Marcus, Goldman has been able to accelerate this process by acquiring strong outside talent, and integrating them into its existing team.”Goldman also notably partnered with Silicon Valley through a new credit card with Apple. The Apple Card hinges on the tech giant’s mobile payment and digital wallet service.’Silicon Valley is coming’While J.P. Morgan doesn’t have a dedicated venture capital arm, it’s still placing bets and has been especially focused on scaling its payments business. CEO Jamie Dimon has been vocal about his interest in tech. In 2015, he warned that “Silicon Valley is coming,” thanks to “hundreds of startups with a lot of brains and money working on various alternatives to traditional banking.”Earlier this year, company bought medical payments technology firm InstaMed to push into the $3.5 trillion market for U.S. health-care spending. The deal, worth more than $500 million, was the lender’s largest takeover since Bear Stearns in 2008. The bank also bought WePay, a competitor to PayPal and Stripe, for roughly $400 million at the end of 2017. J.P. Morgan announced on Monday that it was rolling out free same-day deposits to customers of its WePay platform who have bank accounts with the firm. It has also gone the partnership route, working with fintech firms like OnDeck, and has used its own engineers to build solutions like the brokerage app YouInvest.J.P. Morgan is developing a “new fintech campus” for more than 1,000 employees in Palo Alto, California. WePay and its more than 275 employees are moving from the company’s office in nearby Redwood City to the Palo Alto campus.Tina Hsiao, WePay’s operating chief, said the start-up had originally talked to J.P. Morgan about partnering but that “evolved,” and an acquisition “made a lot of sense.” As part of the deal, Dimon committed to doubling the size of WePay’s engineering team.”This is helping them diversify the overall business,” Hsiao told CNBC in a phone interview. “We fit a certain product set, and can underpin all of J.P. Morgan’s small business merchant payments, which could be a big future revenue generator.”She said as part of the deal, bankers have started asking WePay employees about fintech and how to recruit and hire engineers. From a tech and education perspective, she said it was “a bit of a reverse acquisition.”Banks lending businessesMeanwhile, falling interest rates are threatening business at these Wall Street powerhouses. Lower rates impact net interest income, a main profit engine. During recent earnings calls, Bank of America, Wells Fargo and J.P. Morgan executives all warned of the impact if the Federal Reserve were to continue lowering rates.Bank analyst Dick Bove, who joined Odeon Capital Group earlier this year, said bank profits should still hold up despite falling Fed Funds rates. Bove is less convinced that bets on fintech will immediately impact banks’ bottom lines, but said Wall Street will continue to look to its smaller competitors for ideas.”Banks often find an area of technology that is superior to what they currently use — they either mimic, or they buy the company that does it,” Bove said.Wells Fargo’s Mike Mayo said even if banks wanted to, regulation might prevent them from leaning too heavily on venture capital. The Volcker Rule, one post-financial-crisis reform, limits some banks from making speculative venture capital investments. And some are just wary after Dot Com bubble failures, Mayo said.”There were lessons learned two decades ago when the banking industry had a mixed record on venture capital investments,” he said. “Today, some of that is restricted to ensure that banks stick to their knitting.”What fintechs can do that’s superior, according to Bove, is isolate small areas and customer bases, resulting in “tremendous amounts” of valuable transaction data. Bove predicts more M&A ahead, especially in the event of a recession or a capital shortage.”Many of these fintech companies will die, unless they’re lucky enough to be sold to a bank,” he said.— CNBC’s Hugh Son contributed reporting.


Source link

Bank of America Merrill Lynch is changing the way it looks at small caps.The firm’s senior U.S. equity strategist Jill Carey Hall is turning bullish on the troubled group.But her new call comes with a catch: Investors need a ten year time horizon to see solid profits.”If you look at the valuation of small caps, they’ve certainly come down relative to large [caps],” she said Thursday on CNBC’s’ “Futures Now.”Despite her fresh optimism, Hall is discouraging medium and shorter-term investors from buying small caps because they’re still facing challenges. She points out macro indicators such as ISM U.S. manufacturing PMI haven’t bottomed yet. “Small caps are still in an earnings recession right now,” said Hall.She questions whether Wall Street is warming up to the battered stocks too quickly. “Expectations for next year look quite aggressive,” said Hall. “Analysts are still forecasting that small caps go from seeing flattish earnings growth this year to somewhere between 15 and 20% earnings growth next year, and the guidance has still been pretty weak.”The Russell 2000 , which consists of small caps, just completed its best week since Dec. 9, 2016. The index has jumped almost 5% over the past five sessions and is now up 17% so far this year. However, it’s still off more than 9% from its all-time high hit in the summer of 2018.Yet, Hall reiterates a bullish tide should lift the stocks.”The relative multiple of the Russell 2000 versus the Russell 1000 is now at its lowest levels in 17 years,” Hall said. “While valuations aren’t usually that predictive of a measure over the short-term, they do tend to matter a lot if you’re a long-term investor.”Disclaimer


Source link

A trader wipes his eyes as he watches stock prices at the New York Stock Exchange in New York.Don Emmert | AFP | Getty ImagesOil prices could jump as much as $10 per barrel after a number of drone strikes hit the center of Saudi Arabia’s oil industry, reportedly forcing the kingdom to cut its oil output in half.Ten drones attacked an oil processing facility at Abqaiq and the nearby Khurais oil field on Saturday, reportedly causing a loss of almost five million barrels of crude production a day or about 5% of the world’s daily oil production. Although it’s still too early to tell the extent of the damage and how long the facilities will be shut down, oil analysts and traders told CNBC the impact on the commodity’s price could be double digit.”This is a big deal,” said Andrew Lipow, president of Lipow Oil Associates. “Fearing the worst, I expect that the market will open up $5 to $10 per barrel on Sunday evening. This is 12 to 25 cents per gallon for gasoline.”Kevin Book, head of research at Clearview Energy, said the price impact will depend on the repair time which can take weeks to months.”Our baseline assumptions, which incorporate public assessments of strategic petroleum reserve capacity and OPEC spare capacity, imply a net shortfall of ~1 MM bbl/d, or at least a ~$6/bbl premium to the ~$60 Brent close,” Book said in a note. “Exclusive of this supply offset, and assuming a three-week shutdown, our models imply ~$10/bbl of upside.”U.S. West Texas Intermediate (WTI) crude futures settled 0.4% lower at $54.85 on Friday, and Brent crude futures traded 0.2% lower at $60.25 per barrel.Yemen’s Houthi rebels have claimed responsibility for the attack, one of their largest attacks ever inside the kingdom. The Houthis have been behind a series of attacks on Saudi pipelines, tankers and other infrastructure in the past few years as tensions rise among Iran and the U.S. and partners like Saudi Arabia.”Assuming damage light, the next big question is where the drones came from,” said Bob McNally, president at Rapidan Energy Group. “If Iraq, then oil will go up more than a few dollars. And if Abqaiq kills talks of easing sanctions and the discussion turns to retaliation and escalation, I think oil could easily trade higher by $10 or more.”


Source link

Traders work at the Bolsa de Mercadorias e Futuros, Brazilian Mercantile and Futures Exchange (BM&F), in Sao Paulo, Brazil.Marcos Issas | Bloomberg | Getty ImagesInvesting in Latin America’s equity markets can be scary, but Luiz Maria Ribiero has cracked a winning formula.Ribiero manages the DWS Latin America Equity fund (SLARX), which has been on a tear this year. The fund is up nearly 23% in 2019. The 5-star rated fund has also outperformed its benchmark, the MSCI EM Latin America index, by about 13 percentage points.The fund’s strong performance comes during a volatile time for Latin American equities. Brazil, Mexico and Argentina — the three biggest markets in Latin America — have faced wild swings amid political and economic uncertainty. Despite all this, Ribiero’s approach to Latin America’s volatile markets has handsomely rewarded the fund’s investors.”The way we manage the fund, I think is quite different from most of our competitors in the sense we are really bottom-up,” Ribiero said. “We see ourselves as stock pickers and the country allocation is really a consequence of the companies we find at a certain point in time.”Banco Inter, a commercial bank based in Belo Horizonte, Brazil, is the fund’s biggest holding with a 10.5% portfolio weight. The stock has been on fire this year, surging more than 180%.The fund also owns Natura Cosmeticos — a cosmetics company in Sao Paulo — and Magazine Luiza, one of the largest retailers in Brazil. The two stocks account for 11.2% of the portfolio’s $325 million in assets under management. Both Natura and Luiza are up more than 50%.Outside of Brazil, the fund owns MercadoLibre, an e-commerce company based in Argentina. MercadoLibre has a portfolio weight of 5.09% in Ribiero’s fund. The stock has nearly doubled in 2019.Ribiero said he and his team don’t try to cover everything in Latin America. Instead, they aim for “a very concentrated, high-conviction portfolio.” The DWS Latin America Equity fund owns 46 stocks in total, according to Morningstar.”Most of the time, what we find is mispriced growth,” he said. “I think we have a different view on the level of growth for those companies and the sustainability of growth for them as well. Due to that, we come up with a different valuation than what the market is pricing in. That’s how we build positions with high convictions.”Ribiero’s stock picks have had a banner year and have led to strong investor returns. The broader Latin American stock market has been far more turbulent in 2019.The iShares Latin America 40 exchange-traded fund (ILF) is up nearly 5% this year after jumping around 16% earlier in 2019. The ETF has also had 87 trading days with moves of at least 1%, FactSet data shows. By comparison, the iShares MSCI Emerging Markets ETF (EEM) has posted 57 moves of that magnitude this year. The S&P 500 has also closed up or down at least 1% in 32 occasions year to date.Argentina’s Merval index is down 0.4% for 2019 — after surging as much as 50.3% — following market-friendly President Mauricio Macri’s loss in a primary election in August. The Merval dropped 37% on Aug. 12 following the election. Earlier this month, Argentina imposed currency controls to stem the country’s downward economic spiral.In Mexico, investors grapple with the new administration’s optimistic growth expectations. Last week, President Andres Manuel Lopez Obrador’s administration sent the Mexican Congress a budget plan that assumes the economy will grow between 1.5% and 2% in 2020. However, Dirk Willer, head of emerging market strategy at Citi Research, thinks this is outlook is too rosy since it assumes a sharp increase in oil production.Brazil’s stock market has been buffeted with volatility bouts as the country tries to reform its pension system. So far this year, the Bovespa index has posted 69 moves of at least 1%.”We believe that markets are efficient in the long run, but in the short run they are quite inefficient, especially in a place like Latin America where volatility is sometimes very high,” Ribiero said. “That short-term volatility actually creates opportunity for stock pickers, especially in the region.”Subscribe to CNBC on YouTube.


Source link