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December values and 2020 concerns ?3
17:58 04-Dec-19
Clearway has priced
the 9-year "Green Bonds" referenced below at 4.75%, almost 300
basis points above 10-year treasuries today. I see that as mildly
good for the current environment.
Moments ago, CUI also just made an unusual mid-day $5M share repurchase announcement. The market is reacting positively, even though this was foreshadowed in the earnings call. I'm less thrilled, as this reduces cash available for growth. While I appreciate management's avoidance of dilution and the need to avoid de-listing, I suspect its real goal is simply to try to wait out Brexit, rather than do much in the way of new growth.
On 12/4/19 12:39 PM, Esekla wrote:
December always brings some unique trading opportunities, whereas I continue to think the opportunities over the next year are all about energy and telecoms, colored by politics, of course...
As such, I spent a fair amount of time researching the cause of yesterday's 15%+ decline in RESN. As far as I can tell, it's simply some institution or individual with a modest 6-figure share position engaging in tax loss harvesting. That has been extended by a little bit of shorting from individual traders today, which is likely to prove naive, especially if Resonant doesn't have to raise further funds from the market. We could see similar episodes as the year winds down, but I'm inclined to make use of this one, since Resonant's next presentation, a week from today, might just wake up a few Wall St. firms.
Nokia is another telecom that could see further selling, if the market forgets about the very significant tailwinds. However, I don't expect such declines from VOD, as its recovery seems further along and the entire market is alive to the edge computing prospects being prompted by 5G and mobile developments. Since projects like this represent income for Vodafone, but an immediate expense for CenturyLink, it should go without saying that, at current prices, I like VOD better than CTL.
On the energy side, AMSC is also below my $8 minimum fair value and may see similar ongoing pressure. The development to watch in energy is the E.U.'s Green Deal, which includes a Carbon Border Tax, on page 5 of the presentation. I'd imagine the commission will bide its time in a bid to wait out the U.S. election on this one, which will be relevant to Westport, as 2020 is looking like a now or never year. The political divide makes WPRT and AMSC interesting hedges for one another, with AMSC having more long-term potential upside while Westport's management and balance sheet provides an element of safety in combination with a compelling valuation if it can continue capitalizing on more immediate opportunity.
By next week we'll also know how Aramco is trading, but it remains to be seen if the Saudis can hold OPEC+ together. I still think that those who want more stability while straddling the energy transition can find value in Shell. I was a little surprised to see it announcing tenders to move forward on a new Gulf LNG facility, but U.S.-based Energy Transfer is probably the primary proponent of that move, whereas Shell has no commitment at this point. Despite the press, I think straddling is the way go, and Clearway's moves to finance both Carlsbad and renewable growth back me up on that point. I note that CWEN(A) has had similar but short-lived recent volatility both above and below my $18-19 range. Rumor is that PG&E is close to a deal, but my range is unlikely to change the details of its exit from bankruptcy are final.
CUI Global's press release documenting the closing of the sale of its Electromechanical segment makes it sound like it belongs firmly on the energy side of this discussion also. With the stock trading for the value of cash on the balance sheet, it might also represent a value, but I won't be fully convinced until I hear some credible post-Brexit & acquisition operational projections or details.
While nobody is prepared to simply accept China as it is, what is also clear is that the rest of the world is done with blindly following America's lead on technological and environmental security. Energy policy is next and hopefully that will be followed by financial (to the benefit of BGC) and eventually military independence. In the meantime, December still offers some intriguing opportunities for all types of nimble investors who are willing to exercise their own independence, and that applies to CVA in advance of its dividend announcement as much as any other stock mentioned.