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2 Auto Stocks to Buy Today and 1 to Sell, Liquidate or Avoid

2 Auto Stocks to Buy Today and 1 to Sell, Liquidate or Avoid

Following more than two years of pandemic disruptions, the automotive sector has faced supply chain hindrances due to Chinese lockdowns and the Russia-Ukraine war. In addition, the Fed’s interest rate hikes to tame the stubbornly high inflation had a cascading effect on the auto industry. This has resulted in many Americans not planning car purchases this year.

However, with retail sales growth of 3{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} in January, the auto sector performed better than the overall market as sales, excluding motor vehicles and parts, increased by 2.3{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809}, while sales of motor vehicles and parts increased by 5.9{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809}.

Furthermore, soaring gasoline and oil prices are driving demand for Electric Vehicles (EVs), and its growth is being harnessed by favorable government spending that should boost EV adoption and bolster growth in the auto industry. The global EV industry is expected to reach $823.74 billion by 2030, growing at a CAGR of 18.2{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809}.

Given this backdrop, fundamentally strong auto stocks General Motors Company (GM) and Honda Motor Co., Ltd. (HMC) might be solid buys now. However, Lucid Group, Inc. (LCID) might be best avoided due to its weak fundamentals.

Stocks to Buy:

General Motors Company (GM)

GM designs, builds, and sells trucks, crossovers, cars, automobile parts, and accessories in several parts of the world. Its segments are GM North America; GM International; Cruise; and GM Financial.

Recently, GM Defense LLC, a subsidiary of GM, and the Tawazun Council signed a collaborative Memorandum of Understanding (MOU) as the first step toward a formal partnership to develop future products in the areas of advanced mobility and power solutions. Through this collaboration, GM Defense’s reach should expand to defense and government customers in the Middle East.

On February 9, GM and GlobalFoundries Inc. (GFS) announced a strategic, long-term agreement establishing a dedicated capacity corridor exclusively for GM’s chip supply. This agreement is expected to strengthen GM’s supply chain.

On February 1, GM declared a $0.09 per share dividend, payable to common stockholders on March 13, 2023. This reflects the shareholder return ability of the company.

GM’s trailing-12-month net income margin of 6.34{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} is 31.7{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} higher than the 4.81{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} industry average. Its trailing-12-month ROCE of 13.98{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} is 12.1{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} higher than the 12.47{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} industry average.

GM’s revenue came in at $43.11 billion for the fourth quarter that ended December 31, 2022, up 28.4{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year. Its adjusted EBIT increased 33.8{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year to $3.80 billion, while its adjusted EPS came in at $2.12, representing a 57{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} increase year-over-year.

Analysts expect GM’s revenue to increase 12.2{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year to $40.13 billion in the fiscal second quarter ending June 2023. Its EPS is expected to increase by 41.4{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year to $1.61. It surpassed EPS estimates in three of four trailing quarters.

GM has gained 3.6{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} over the past six months to close the last trading session at $41.13. Moreover, it has gained 16.4{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} over the past month.

GM’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

GM has a B grade for Growth, Value, and Sentiment. Within the Auto & Vehicle Manufacturers industry, GM is ranked #19 out of 61 stocks.

Click here for the additional POWR Ratings for GM (Momentum, Stability, and Quality).

Honda Motor Co., Ltd. (HMC)

Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and Life Creation and Other Businesses.

On January 13, LG Energy Solution and HMC announced the formal establishment of a joint venture to produce lithium-ion batteries for electric vehicles produced by HMC. Batteries generated by the venture would ensure the successful launch of HMC EVs in North America and create high-value jobs in Ohio. This should benefit HMC in the near term.

HMC’s trailing-12-month EBITDA margin of 13.80{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} is 24.4{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} higher than the 11.09{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} industry average. Its trailing-12-month levered FCF margin of 8.41{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} is 520.3{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} higher than the 1.36{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} industry average.

HMC’s sales revenue came in at ¥4.44 trillion ($32.95 billion) for the third quarter that ended December 31, 2022, up 20.3{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year. Its operating profit increased 22.2{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year to ¥280.40 billion ($2.08 billion). Moreover, its profit came in at ¥244.60 billion ($1.82 billion), representing a 26.8{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year rise.

Street expects HMC’s revenue to grow 371.6{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year to $125.96 billion for the fiscal year ending March 2023. Its EPS is expected to increase 2.3{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year to $3.27. Moreover, it surpassed revenue consensus in three of the trailing four quarters.

Over the past three months, the stock has gained 9.5{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} to close the last trading session at $25.90. It has gained 8.1{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} over the past month.

It’s no surprise that HMC has an overall A rating, which equates to a Strong Buy in our proprietary rating system.

In addition, it has an A grade for Value and a B for Stability and Quality. HMC is ranked #2 within the same industry.

To see the additional POWR Ratings for HMC, click here (Growth, Momentum, and Sentiment).

Stock to Avoid:

Lucid Group, Inc. (LCID)

LCID is a technology and automotive company that develops EV technologies. It designs, engineers, and builds electric vehicles, EV powertrains, and battery systems.

LCID’s trailing-12-month gross profit margin of negative 213.7{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} compares to the 35.33{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} industry average. Its trailing-12-month ROCE of negative 46.49{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} is significantly lower compared to the 12.47{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} industry average.

LCID’s loss from operations widened 38.3{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year to $687.52 million for the third quarter that ended September 30, 2022. Its total costs and expenses increased 77.6{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year to $882.98 million.

LCID’s adjusted EBITDA loss widened 125.7{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year to $552.90 million. Its net loss increased 1.1{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year-over-year to $530.10 million for the same quarter. Its net loss per share attributable to common stockholders came in at $0.40.

For the fourth quarter ending March 2023, LCID’s EPS is expected to come at negative $0.32. Street expects its revenue for the same quarter to come in at $328.60 million. It failed to surpass Street EPS estimates in three of the trailing four quarters.

The stock has declined 40.9{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} over the past year to close the last trading session at $9.90. Moreover, it declined 9.4{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} intraday.

LCID’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.

It has a D grade for Sentiment and an F for Value, Stability, and Quality. Within the same industry, it is ranked #55.

To see the other ratings of LCID for Growth and Momentum, click here.

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GM shares were unchanged in premarket trading Wednesday. Year-to-date, GM has gained 22.27{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809}, versus a 4.36{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} rise in the benchmark S&P 500 index during the same period.

About the Author: Sristi Suman Jayaswal

The stock market dynamics sparked Sristi’s interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy.

Having earned a master’s degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors. More…

More Resources for the Stocks in this Article

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Buy a New Electric Car Now or Wait?

Buy a New Electric Car Now or Wait?

2023 Kia EV6 GT

Quick Facts About Buying an Electric Vehicle Now

If you are teetering on the brink of buying an electric vehicle (EV), you may well be asking yourself if you should buy a new EV now or wait. We understand your hesitation. The faltering economy, exploding interest rates, new and confusing regulations on EV tax credits, and the high price of vehicles in general are only a few of the issues that may give you pause.

Our discussion here focuses on fully electric vehicles drawing all their power from a battery charged by plugging into an outside electric source. This excludes plug-in hybrids (PHEVs) and traditional hybrids (HEVs), which both have and rely on gasoline-fueled engines.

Let’s explore some of the issues we’ve raised, provide a few pros and cons for buying now, and then we’ll tell you what we would do if we were in your shoes.

How Much Does an Electric Car Cost?

2023 Chevrolet Bolt EUV

Today, the average price of an EV in the United States is just above $61,000. Correct, that is luxury-car territory. Of course, it’s an average; therefore, some EVs are priced lower and some higher. However, there are only a handful of electric cars sneaking below $40,000. For example, those below that threshold include (before destination charges) the Chevy Bolt ($26,500), the Nissan Leaf ($28,040), the Hyundai Kona Electric ($33,500), and the Kia Niro EV ($39,550). Most cost much more; consequently, manufacturers have priced electric vehicles beyond the reach of the average consumer.

A few EV manufacturers (Nissan, Chevrolet, and Tesla) have reduced their EV prices. For example, Tesla has dropped the price of its Model 3 by $3,750, and its Model Y by $13,000. Consequently, under the new electric car tax credit rules, they are both now eligible for as much as a $7,500 credit. In other words, overnight the Model Y now can cost as much as $20,500 less than it did in December, 2022.

RELATED: Tesla’s Price Cuts Have Owners Angry, Resale Values Threatened

However, generally, we don’t see EV prices dropping significantly over the next few months

Lack of Variety in Electric Vehicle Models

Despite the volume of new EV models carmakers continue introducing, there still isn’t near the variety of electric car models boasted by gasoline-fueled options. Moreover, if you are brand loyal, the choices narrow even more. For example, brands including Honda, Dodge, Buick, and Infiniti don’t yet offer an EV. However, nearly every car manufacturer has announced plans to produce EVs in the near future.

In other words, the options will increase with time. Consequently, if you can’t find exactly what you want now, you may be able to in a year or two.

RELATED: Concept Electric Cars That Could Make You an EV Convert

Tight Supply in Automotive Market

Name a reason: The microchip shortage, a clogged supply chain, assembly line issues, or whatever else might cause delays, more than a few EVs can take a year or longer from initial deposit to customer delivery. In some cases, the supply simply can’t meet the demand. Therefore, orders pile up and consumers must wait months for the EV of their choice. When or if the supply will catch up with the demand remains to be seen. So many variables are involved, making any sort of sound prediction is virtually impossible. Although logic tells us that at some point, supply will meet demand.

EV Tax Credits You May Consider

If you are adept at deciphering all the rules in the Inflation Reduction Act (or “Build Back Better” plan) that congress passed late last summer, you might successfully negotiate the mishmash of new rules. Then there are the exceptions and timetables for the latest EV tax-credit regulations, and as of this writing, the finalized details are still being hammered out. The ramifications of this new bill are too vast to explain here. We have covered many of the details, as we understand them today, elsewhere and you can check them out in our latest version of our article on tax credits.

However, whether you qualify for up to the $7,500 tax credit (2023) or tax rebate (2024) depends upon your income. For example, the rebates are limited to individuals reporting adjusted gross incomes of $150,000 or less on taxes, $225,000 for those filing as head of household, and $300,000 for joint filers. It also depends on the price of the EV ($55,000 or less for cars and $80,000 or less for trucks and SUVs). Oh, and to qualify, the EV must also be assembled in the United States, Canada, or Mexico. Unless you lease.

Increasing Auto Loan Interest Rates

As the Federal Reserve struggles to bring today’s overheated inflation under control, it is raising its Federal Funds interest rate. This is the rate banks charge one another for short-term loans, and it’s set by a committee of 12 Fed members. The Fed is the central bank of the United States. The federal funds rate is the leading influencer of the prime rate, which is the interest rate banks charge their very best customers when borrowing money.

According to the financial market experts at Bankrate, the fed funds rate in early January of 2023 was 4.5{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809}. A year before, it was 0.25{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809}. Yep, that’s an increase of 4.25{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} year over year. Consequently, the prime rate jumped from 3.25{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} a year ago to 7.5{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} in early January. This pressures all lenders to increase interest rates for all other car loan borrowers across the board.

As a result of higher car prices and interest rates, the average new car payment reached $777 at the end of 2022.

What’s Next?

Cox Automotive Economist Jonathan Smoke sees the Fed raising the Federal Fund Rates even further in the first half of 2023. Cox is the parent company of Kelley Blue Book.

Consequently, auto loan rates will increase further, as well. At that point, the upward trend could be over and maybe even bring a little relief. However, Smoke expects auto loan interest rates to continue to be painfully high through 2023, and into 2024.

Is the Economy in a Recession?

Historically, two consecutive quarters of negative gross domestic product (GDP) have been the definition of a recession. The United States economy certainly met that standard in the first two quarters of 2022. However, it bounced back a bit in the last two quarters of 2022. The arbiter for making the “recession” call, the National Bureau of Economic Research, has yet to do so. Why? Because other economic indicators have remained relatively strong. For example, by government measures, unemployment has remained low, while consumer spending has remained high.

Sadly, there are cracks in some of the other economic indicators. For example, many high-profile employers have announced layoffs. Microsoft (10,000 worldwide), Amazon (18,000 worldwide), Goldman Sachs (3,200), Meta (more than 11,000), and so forth.

Many experts still anticipate the U.S. sliding into a recession in 2023. While the economy is weakening, it’s too soon to say how bad. or for how long, things will get.

Smoke summed up the current economy this way: “The economy’s fundamental issues are 40-year highs in inflation and, as a result, 20-plus year highs in interest rates as the Fed tries to slow the economy to bring inflation down to their 2{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} target.”

Pros and Cons of Buying an Electric Car Now

Person charging EV in the snow

We’ve tried to avoid wading too far into the weeds; however, itemizing the pros and cons of buying an EV now should clarify things a bit more. Remember, these pros and cons aren’t based on whether you should buy an electric car at all. These are based on buying an electric vehicle now rather than waiting a year or more.

Pros

Cons

What Would We Do?

If budgeting was our number one concern, we’d wait a year. We think the supply will increase, transaction prices will go down, and we like the idea of getting the government’s incentive of up to $7,500 upfront on a new vehicle. Even if meeting a budget wasn’t an issue, we like the bigger variety of models another year will bring. It’s a roll of the dice on what the interest rates will do. However, with many models taking several months or a year to arrive after putting down a deposit, you may not avoid an escalating interest rate if it continues rising.

On the other hand, if we were in a position where cost wasn’t a factor and we could wait until filing our income tax to take advantage of tax credits, we might buy now. This is particularly true if we had our eye on a Tesla Model Y or any EV models currently on sale.

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Hong Kong says it’s back open for business. Will the world buy it?

Hong Kong says it’s back open for business. Will the world buy it?


Hong Kong
CNN
 — 

At a glitzy finance summit in Hong Kong this week, the city’s leader triumphantly told a room packed with top Wall Street executives that the Asian hub was back in business. “The worst is behind us,” he declared.

Two days later, tens of thousands of rugby fans descended on the city’s largest stadium for the Hong Kong Sevens, its biggest (and usually booziest) annual sporting event, which had been suspended since 2019 due to political unrest, and, later, Covid-19.

The two high-profile international events sent a clear message: After almost three years of border closures, mandatory quarantines, and restrictions on businesses and social gatherings, Hong Kong was finally reopening.

For much of the pandemic, the semi-autonomous Chinese city maintained some of the region’s most stringent restrictions, including one of the world’s longest mandatory quarantines for international arrivals. With the economy tanking and concerns mounting that Hong Kong was being left behind as the world moved on, the government finally threw open the city’s doors in September and ended formal quarantine to the relief of millions of people.

“We were, we are and we will remain one of the world’s leading financial centers,” vowed Hong Kong leader John Lee at Wednesday’s summit, attended by more than 200 investors from 20 countries. “You can take that to the bank.”

Hong Kong leader John Lee during the Global Financial Leaders Investment Summit on November 2.

Speaking on Friday ahead of the kickoff of the Sevens, Hong Kong Rugby Union CEO Robbie McRobbie hailed the return of the tournament as a “catalyst, watershed,” a symbol that “Hong Kong is still a vibrant, resilient city.”

But experts warn the push to revive Hong Kong, while welcome and long overdue, faces many challenges ahead.

The past few years of isolation, which coincided with an ongoing political crackdown, have taken their toll, they said. Despite what Lee and other leaders insist, the Hong Kong that’s reopening is not the same city the world knew before the pandemic – and the true impact of that change remains to be seen.

Last year, as many destinations reopened to travelers and relaxed restrictions, Hong Kong appeared to be stuck in a different reality.

Restaurants, bars and gyms were frequently forced to shutter or limit their hours. Residential buildings were placed under lockdown for days. At one point, public gatherings were capped at two people. And most residents didn’t leave the city for years, unable or unwilling to spend up to three weeks in hotel quarantine at their own cost upon return.

Businesses were hit hard. The Sevens tournament makes up 95{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} of the Hong Kong Rugby Union’s revenue, so “we’ve had three years of redundancies and cutbacks,” said McRobbie.

Many disillusioned residents chose to leave permanently; this past year, the city recorded its steepest drop in population since records began in 1961. Companies, too, began eyeing other locations – most notably Singapore, Hong Kong’s longtime regional rival.

But Hong Kong authorities, eager to reopen the border with mainland China – which still shows no sign of easing its strict zero-Covid policy that aims to stamp out infections – remained reluctant to loosen restrictions for fear cases would spike and close that door.

Then, a severe outbreak fueled by the highly contagious Omicron variant at the start of the year put an end to Hong Kong’s hope of maintaining zero daily cases.

Under mounting public pressure, the government lifted flight bans with certain countries and shortened hotel quarantine in March – but these small concessions did little to lure people back.

According to media reports in August, some Wall Street banks warned their executives would only attend Wednesday’s finance summit if there was quarantine-free travel – a widely-speculated factor behind the government’s ultimate decision to scrap quarantine.

Finance leaders in the city breathed a sigh of relief at the news.

“We’ve been closed for too long,” said Sebastian Paredes, CEO of Singaporean bank DBS’ Hong Kong operations. “We are beginning to open up following the other parts of the world that have already opened up. And this is a tangible demonstration that Hong Kong is back.”

Attendees at the Global Financial Leaders' Investment Summit in Hong Kong on November 2.

Alicia Garcia-Herrero, chief Asia Pacific Economist of French investment bank Natixis, agreed the week’s dual big events were “a big sign of Hong Kong moving away from Covid restrictions to a new world.”

However, the remaining restrictions pose a competitive disadvantage.

International visitors must take Covid tests for seven straight days after arrival in Hong Kong, and for the first three days are barred from restaurants, bars and gyms. But the testing doesn’t stop there – bars and clubs that don’t serve food require proof of a negative rapid antigen test from all patrons.

A mask mandate – indoors and outdoors – is also in effect, though photos of the finance summit show attendees sitting at tables without face coverings. They included the city’s Financial Secretary Paul Chan, who was declared a “recovered case” by health authorities after testing positive for Covid upon arrival from a trip abroad on Tuesday.

Hong Kong's Financial Secretary Paul Chan makes a speech at the Global Financial Leaders Investment Summit in Hong Kong on November 2, 2022.

These rules are “still largely prohibiting the overseas travel market,” said McRobbie, the Hong Kong rugby chief. Before the pandemic, roughly half the fans at the Sevens came from abroad; this year, that number is “negligible,” he said.

The long stretch of isolation and financial hardship has also created challenges for companies hoping for a comeback. Many people have left the sports and events sectors in the past few years in favor of more stable jobs, leaving the industry short staffed, McRobbie added.

This partial reopening has left the city in an awkward Covid limbo, said Vera Yuen, an economics lecturer at the University of Hong Kong.

“If we want to open up our border with the Mainland China, our restriction is too lenient … so it’s not allowed,” she said. “But then if we want to open ourselves up to the world, we are still too stringent. We are now stuck in between, hoping to see better policies in the future.”

Others also warn of growing political challenges. “Clouds are certainly coming to Hong Kong from different angles,” said banker Garcia-Herrero, pointing to the West’s response to the sweeping national security law Beijing imposed on Hong Kong in 2020.

Under this law, pro-democracy activists have been jailed or exiled, independent newsrooms shut down, and former lawmakers targeted. Meanwhile, authorities have changed school curricula to emphasize Chinese history and culture, and pushed greater economic cooperation in the Greater Bay Area, a national scheme to link China’s southern Guangdong province closer with Hong Kong and Macao.

The law has been widely criticized by foreign governments and human rights organizations, with the United States sanctioning Lee and other top Hong Kong officials over their role in the crackdown. Hong Kong authorities have repeatedly claimed the law has restored order and stability after the city’s 2019 anti-government, pro-democracy protests.

For the US and the European Union, the national security law and crackdown represent “a change in the rules of the game in what was agreed upon,” said Garcia-Herrero.

These rising tensions could spell trouble for Hong Kong’s trade and diplomatic relationships with other countries. Hong Kong is afforded more freedoms than other Chinese cities, thus has long been seen as a gateway between the mainland and the West – a position that looks increasingly precarious as its civil liberties erode.

“The West would now understand that Hong Kong is not only part of China, but it’s closer to China than before,” said Yuen, the economics lecturer. “The worst scenario is that the West would treat Hong Kong as the same as the mainland China, and then Hong Kong would suffer the kind of sanctions.”

And this drawing closer together is likely to continue. In an effort to stem the brain drain, the government is spending 30 billion Hong Kong dollars ($3.8 billion) to draw in global businesses and fresh talent – which Yuen said is expected to “attract a lot of mainland workers” who may be eager to escape an even more dire job market across the border.

Despite these geopolitical frictions, some argue Hong Kong’s innate advantages will allow a revival – even if the city is heading in a different direction than before.

Asia doesn’t have many other financial centers that can match Hong Kong’s open regulatory environment, low salaries tax and existing financial infrastructure – “therefore, even if the image may be tarnished a little bit, there are not many other places to go,” said Garcia-Herrero.

Yuen echoed this point, saying the city’s proximity to China remains appealing to businesses and investors hoping to tap into the vast and lucrative mainland market.

Travelers in the departure hall at Hong Kong International Airport following the government's scrapping of hotel quarantine, on September 26.

“We can plug into China and sort of maintain the status as having a little bit of autonomy, and (being) different from them, given different Covid policies and (systems of) governance,” she said.

But, both experts acknowledged, the path forward is now fraught with new risks. International businesses may come to Hong Kong, but be warier in how much they invest in the city, keeping in mind the threat of US sanctions and regional conflict.

Today’s Hong Kong is increasingly under Beijing’s control, with China growing more assertive on the world stage as leader Xi Jinping enters a third term in power surrounded by loyalists. Those rising tensions between China and its rivals have caused growing divides “as the world deglobalizes,” said Garcia-Herrero – effects that inevitably spill over into Hong Kong, caught in the middle.

“It will never be, in my opinion, what it used to be in terms of the openness of Hong Kong to both the West and the East,” she said.

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Top Wall Street analysts say buy Caterpillar & Salesforce

Top Wall Street analysts say buy Caterpillar & Salesforce

Jim Umpleby, CEO of Caterpillar Inc.

Adam Jeffery | CNBC

This year has already been a tough one, and 2023 isn’t looking much better, with economic growth expected by the Federal Reserve to come in at just 1.2{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809}. Given this dour outlook, investors will have to carefully choose where to put their money to work.

To choose the right stocks, staying aware of what Wall Street analysts are saying can be of help. Here are five stocks chosen by pros who are at the top of their game, according to TipRanks, which ranks analysts based on their performance records.

related investing news

Analysts name the top 'high conviction' stocks for playing the market turbulence

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Analysts name the top ‘high conviction’ stocks for playing the market turbulence

Caterpillar

Mining equipment manufacturer Caterpillar (CAT) is navigating supply chain snarls and cost pressures like a champion. Cost-saving and pricing actions are helping the company improve its top and bottom lines even when end markets remain volatile.

The North American housing market has slowed considerably, with the ill effects trickling down to construction equipment demand. However, Cowen analyst Matt Elkott thinks that end-markets like housing are expected to show improvement in 2023 and will recover more meaningfully in 2024. (See Caterpillar Stock Chart on TipRanks).

Elkott also expects a late-2023 recovery in revenues once the Biden administration’s infrastructure bill kicks in. Revenue benefits from the bill should also be meaningful in 2024. Additionally, Elkott is optimistic about Caterpillar’s services segment growth.

“Growth in the company’s services revenue is on track to meet the goal of doubling by 2026 to $28B. The new state of global energy insecurity should be supportive of oil & gas CapEx, at least by the privates for now,” the analyst noted.

Elkott has a buy rating and a $225 price target on the stock. He holds the 782nd position among almost 8,000 analysts tracked on TipRanks and has a success rate of 52{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809}. Each of his ratings has garnered average returns of 12.5{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809}.

National Instruments

National Instruments (NATI) has a resilient business of developing automated testing and measurement systems to aid the research and validation of new technologies. Earlier this year, the lockdown in Shanghai and suspension of operations in Russia hurt the company’s business.

Nonetheless, Goldman Sachs analyst Mark Delaney is bullish on the company. (See National Instruments Dividend Date & History on TipRanks).

National Instruments operates in industry-specific business units (BU’s), which are dependent on secular trends, and a BU portfolio that is exposed to macroeconomic factors. Now, the company is focusing on achieving its target of bringing in at least 74{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} of its revenue from its industry-specific BU’s by 2025. This transition is expected to make the company more resilient to market cycles in the coming years.

Strong uptrends in emerging technologies like ADAS (Advanced Driver Assistance Systems), electric vehicles and 5G make Delaney believe that the company can withstand an economic slowdown better than many, “as parts of its business are tied to secularly growing end markets” that have defensive characteristics.

The analyst has a buy rating on NATI stock with a price target of $49.

Delaney, who is ranked No. 765 among nearly 8,000 analysts ranked on TipRanks, has had success with 56{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} of his ratings. An average of 9.8{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} returns were generated on each of his ratings.

Plug Power

Hydrogen fuel cell developer Plug Power (PLUG) is one of the top beneficiaries of the Inflation Reduction Act (IRA), which was signed into law last month. According to the law, a $3 per kg production tax credit will be provided to developers producing green hydrogen (hydrogen produced with electrolyzers sourced from clean energy).

H.C. Wainwright analyst Amit Dayal thinks the IRA helps taxpayers in the hydrogen industry “to stack credits and allow for transfer of hydrogen-related tax credits.” To this end, Plug Power has already entered several partnerships with major companies, including Amazon (AMZN), to supply green hydrogen and electrolyzers, and Dayal expects more such deals to be signed in 2023. (See Plug Power Blogger Opinions & Sentiment on TipRanks).

“We believe the IRA should be supportive to Plug’s target of building out its green hydrogen generation network to 70 tons per day (TPD) production by the end of 2022, 500TPD in North America by 2025 and 1,000TPD globally by 2028,” noted Dayal.

Dayal is also eager for Plug Power to begin scaling and absorbing its early upfront investment costs, as this would boost its near-term financial performance by improving operating costs and margins. The analyst expects the company to generate operating profits in 2025.

“We believe that the company should be able to grow its gross margins from negative levels today to 15.7{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} in 2023 and subsequently reach approximately 35.0{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} by 2030 as revenues continue to rise,” projected Dayal.

Interestingly, Dayal is a five-star rated analyst on TipRanks, and is ranked No. 27 among almost 8,000 analysts tracked on the platform. About 42{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} of his ratings have been successful and have generated 44.9{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} average returns per instance.

Salesforce

As its ticker symbol suggests, Salesforce (CRM) is a customer relationship management software giant, which is benefiting from the growing digitalization of industries. The company last week provided an upbeat medium-term revenue and margin forecast, which pulled more investors to its shares.

Expansion of the company’s addressable market, geographic spread and customer base are key growth catalysts that are helping it navigate the pessimism around tech stocks with finesse. (See Salesforce Stock Investors on TipRanks).

Monness Crespi Hardt analyst Brian White predicted that the current headwinds, including recession-related concerns, inflationary pressures and growing geopolitical issues, will keep Salesforce from realizing its full growth potential over the next 12-18 months.

Still, White is one of the Salesforce bulls, who hold strong convictions about the company’s longer-term prospects. Although White acknowledged the problems that might come with a recession (which looks almost impossible to avoid, as of now), he said that Salesforce is “uniquely positioned” to benefit from accelerated digital transformation in the long run.

“Salesforce has demonstrated an ability to navigate turbulent times better than most software companies, a testament to relentless innovation, acquisitions, excellent execution, and strong secular trends,” White said.

The analyst reiterated his buy rating on Salesforce. He has a price target of $215. White holds a rank of 484 among nearly 8,000 analysts tracked on TipRanks. Fifty-seven percent of his ratings have been profitable, with each generating average returns of 10.4{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809}.

Adobe

Adobe (ADBE)recently disappointed investors with an earnings miss, and its recent signing of a deal to acquire collaborative product design platform Figma for a whopping $20 billion baffled investors. Adobe’s price targets were slashed and the company was even downgraded by a few.

Still, Goldman Sachs analyst Kash Rangan decided to go against the tide and reiterate his Buy rating on the stock with a price target of $540. “We see Adobe investing in a market transition that can access a wide TAM and drive growth acceleration,” said Rangan, speaking about the prospects of the Figma acquisition. (See Adobe Hedge Fund Trading Activity on TipRanks).

Expressing faith in the company’s decision, the analyst recalled how Adobe’s 2005 acquisition of Macromedia and its business model transition of 2011 expanded its growth potential manifold.

Moreover, drawing comparisons with other major acquisitions, Rangan noted that Figma’s integration into Adobe would bring on board more developers, expanding its market opportunity just like LinkedIn and Github increased Microsoft’s (MSFT).

“Based on the level of innovation Adobe has brought to each strategic transaction it has made, we believe it can expand Figma’s $16.5bn TAM,” observed Rangan, who is ranked 769th among about 8,000 analysts on TipRanks.

The analyst has 55{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} profitable ratings, with each rating having garnered 7.1{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} average returns.

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The simple and complicated story behind Buffett’s massive oil buy: Morning Brief

The simple and complicated story behind Buffett’s massive oil buy: Morning Brief

As the previous E.F. Hutton business claimed: When Warren Buffett talks, they say people today listen.

But when Buffett talked about Occidental Petroleum (OXY) at Berkshire Hathaway’s (BRK-A) once-a-year assembly on April 30th, how many seriously heard what the Oracle of Omaha was declaring?

If everyone skipped that portion, traders aren’t tuning out now, as Berkshire owns virtually 20{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} of the enterprise.

Buffett’s expense in Occidental Petroleum is both of those easy and challenging.

Very simple: “What [Occidental CEO] Vicki Hollub was expressing produced nothing but sense,” Buffett informed shareholders previously this yr. “And I determined that it was a good place to set Berkshire’s money.”

Elementary, my expensive Buffett. Strolling his communicate, Buffett has been acquiring Occidental shares seemingly each and every working day.

Buffett's Berkshire Hathaway has purchased shares of Occidental Petroleum at a rapid pace over the last several months. (Source: Markets Insider/SEC Filings)

Buffett’s Berkshire Hathaway has acquired shares of Occidental Petroleum at a swift tempo about the last a number of months. (Resource: Marketplaces Insider/SEC Filings)

There is a far more sophisticated tale while, with head-spinning backstory that goes again a long time for Buffett and many years for Occidental.

Oxy Pete, as the company is recognized, was founded 102 many years in the past in California. Smaller sized than the entirely-integrated 7 Sisters — BP, Shell, Chevron, Gulf, Texaco, Exxon, and Mobil — Oxy appreciated an outsized status in large portion mainly because of the company’s patriarch, Armand Hammer, enterprise CEO from 1957 right until 1990.

Vibrant does not begin to describe Hammer.

Friends with myriad global leaders, Hammer was termed “Lenin’s picked out capitalist,” because of to his deep romance with Russia. Hammer opened up Libya and locked horns with Qaddafi. He attempted to buy Church & Dwight, operator of Arm & Hammer baking soda, because the title of that product or service was virtually eponymous. Hammer was a good collector of art, made illegal campaign contributions to Richard Nixon, and actor, Armie Hammer, is his fantastic-grandson.

Armand Hammer et son jet privé avant son départ du Bourget le 28 mars 1977, France. (Photo by Bertrand LAFORET/Gamma-Rapho via Getty Images)

Armand Hammer in France circa 1977. (Picture by Bertrand LAFORET/Gamma-Rapho by way of Getty Photographs)

“Occidental made its title in the late 1950s as an intercontinental, independent seeking for chances drilling and manufacturing oil,” suggests College of Iowa professor Tyler Priest. “Hammer was a enormous hazard taker not only in carrying out bargains with foreign governments, but in mergers and acquisitions.”

Oxy today, although, is a considerably cry from what it was during Hammer’s time.

CEO Vicki Hollub is a mineral engineer who worked her way up through the enterprise after coming on board when Oxy purchased Towns Service in 1982. Domestic oil and gasoline creation now accounts for 83{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} of its organization and with $29 billion in yearly earnings, Oxy is by this rely the 43rd major oil producer in the environment and the 11th most significant in the U.S.

Oxy has a major stake in the Permian basin, in section because of to its acquisition of Anadarko in 2019, which is when Buffett entered the photograph.

That year, Oxy built a hostile bid for Anadarko, which experienced presently agreed to be acquired by Chevron (CVX).

Oxy went on the prowl for funding and the story Buffett informed CNBC goes as follows: “I received a connect with in the center of the afternoon from Brian Moynihan, the CEO of Bank of America. And he explained that they ended up involved in funding the Occidental deal, and that the Occidental people would like to communicate to me.”

Buffett agreed to give Hollub $10 billion in money in trade for favored inventory and warrants providing Berkshire a 10{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} stake in Oxy. Buffett stated at the time the guess was primarily a guess on a growing price of oil. A wager that would be interrupted by the pandemic.

Soon after the COVID-19 pandemic swept the world, crude oil prices crashed. (And famously went negative in the spring of 2020.) Occidental’s inventory fell to $10, no doubt paining Buffett.

As part of his most well-liked inventory investment decision, Buffett was acquiring dividends of widespread stock in Occidental. Which, in the second quarter of 2020, Buffett sold in entire.

Buffett’s sale only produced matters worse for Hollub, and by the tumble of 2020 the stock had dropped under $9. But as the worldwide economic climate and oil sector recovered, so far too did Oxy’s stock, which climbed all the way again up to about $40 by early this calendar year. And Buffett’s consider on Oxy appeared to change once more.

As Buffett advised shareholders at this year’s annual conference, points modified when Buffett read through Oxy’s earnings call for the fourth quarter of 2021 alongside with its yearly report.

“Vicki Hollub was expressing what the company experienced been by way of, and where by it was now, and what they planned to do with the money,” Buffett told shareholders earlier this yr. As noted at the commence of this piece, these were being the remarks that designed “almost nothing but sense.”

So Buffett instructed Mark Millard, who executes Buffett’s inventory trades at Berkshire Hathaway, to begin obtaining. “And in two months,” Buffett stated, “he buys 14{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} out of 60{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} [of Occidental’s shares that ended up fantastic.”

This spring and summer, Buffett extra to his place and now owns 19.4{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} of Oxy, just underneath the 20{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} threshold that would need Occidental’s outcomes to be consolidated within Berkshire’s quarterly figures.

In accordance to details from the people at Small business Insider, Buffett’s weighted average value comes out to about $53 per share. On Friday, Occidental shut at $61.06.

So: What’s Buffett’s endgame? Will he purchase all of Oxy? Who knows.

Berkshire and Occidental declined comment.

It could be that Buffett, who constantly appreciates a firm with a strong return on equity (ROE), likes the occupation Hollub has performed at Oxy, which returned 16{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} on its fairness last calendar year and is tracking to 30{cfdf3f5372635aeb15fd3e2aecc7cb5d7150695e02bd72e0a44f1581164ad809} this 12 months, according to details from Benefit Line.

Really should you invest in Oxy? All over again, who is familiar with.

Your just take on local weather modify could possibly notify your selection. Absolutely sure Oxy is having ways to offset carbon, but you never buy an ice product shop if you consider strongly in dieting.

“If you happen to be damaging on carbon centered fuels, Oxy is most likely not the one particular,” claims marketplace analyst and trader Bob Iaccino, who owns the stock.

As for getting it just because Buffett owns, Iaccino has a choose there too.

“I wouldn’t purchase some thing since Warren Buffett did,” Iaccino suggests. “And I would not obtain anything because Warren Buffett did not.”

Once more: easy and complex.

This write-up was showcased in a Saturday version of the Early morning Brief on July 23, 2022. Get the Early morning Temporary sent straight to your inbox every single Monday to Friday by 6:30 a.m. ET. Subscribe

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The Answer to Whether You Should Buy a New or Used Car Today

The Answer to Whether You Should Buy a New or Used Car Today

A Basic…But Important…Car Purchasing Concern

When it will come to shopping for a auto right now, there is a whole lot of confusion about whether you must buy new or utilized. While it may well look like a basic question, it is basically a quite critical a person to inquire even though weighing the execs and disadvantages to make absolutely sure you are receiving the greatest worth.

That is the message guiding a recent Your Advocate Alliance YouTube channel movie wherever car or truck obtaining gurus go in excess of some of the primary factors you should be considering about right now ahead of deciding on irrespective of whether to get new or employed.

In accordance to the hosts of the movie, the response to this dilemma does fluctuate some owing to the mad pricing we are looking at not just in new motor vehicles, but a lot of older made use of models with upwards of 100,000 miles or a lot more on their odometers.

Connected write-up: Buyer Studies Utilized Motor vehicle Decide Finds From $40,000 to $7,000

What is the Regular Price tag of a New Auto Appropriate Now

Appropriate now, when looking at a brand-new non-luxurious motor vehicle, the typical rate is $42,509. Whilst this kind of pricing is earlier mentioned a lot of motor vehicle shoppers’ budgets, there are various excellent explanations why in the extended operate you may want to look at likely around-price range purchasing new somewhat than getting used.

Similar write-up: Purchaser Stories on How to Evaluate a Employed Vehicle’s Correct Price

For instance, a single consideration pointed out by the hosts is that you have to seem at the predicted depreciation price of a new vehicle in comparison to that of a made use of car, following the expected motor vehicle disaster is envisioned to conclude in hopefully the following 2-3 many years. In other text, that higher priced used motor vehicle right now could wind up just about worthless in comparison in the close to potential.

What Precise Makes Cost These days
So, what is that new car likely to price tag you? To assistance you have some concept of what you are hunting at and finding that sweet location for your funds, listed here is a summarized listing of what designs inside of a variety of tends to make are going for on normal nowadays:

Stellantis: $53,212
Jeep: Close to $50,000 or far more
Dodge: $48,333
Chrysler Pacifica minivan: $47,654
Alpha Romeo: Over $50,000
Fiat 500X: $31,164
Ford: $49,528
Ford F-Collection: $62,267
GM: $50,854
Chevy Suburban: $70,681
Chevy Tahoe: $67,563
Chevy Trax: $25,433
Toyota: $40,036
Nissan: $34,681
Honda: $36,824
Hyundai: $35,988

The Solution In general

The hosts level out that ideal now if you can pick out just one of the sub-$40K makes shown over—at their MSRP or reduced—then obtaining new tends to make extra feeling appropriate now for getting the best worth for your greenback. Shopping for the far more-expensive will make listed…not so a lot.

For much more in depth information and facts, right here is the movie in its entirety that is really recommended looking at if you are in the market place for purchasing a new or applied vehicle correct now.

Ought to I Purchase New or Utilized? What’s the Greater Worth Appropriate Now?