Virtu+BGC, Xebec & AES progress, little for the American economy ?3

10:26 10-Aug-20

Virtu's latest executive changes makes the theory on Virtu tying up with BGC which was discussed on Friday look a little less far fetched, as Sean Galvin returns to Virtu to take on the CFO role, after recently serving as BGC's Chief Accounting Officer.  I see the severe post-earnings drop in VIRT as symptomatic of others betting beyond their means on the stand out earnings results, and Big Money taking advantage of that.  That constitutes an opportunity for more disciplined investors, and I look for recovery as we approach the dividend along the catalysts mentioned in the earnings report.

Ahead of its earnings call tomorrow, Xebec has announced its role in a pilot project to reduce greenhouse gas emissions by capturing the CO2 produced from natural gas usage.  While heating is a big source of carbon dioxide in the city and may have a role to play there, I see this as a transitional step that will create its own problems if it were to see broad adoption.   XBC/XEBEF were initially up a little more this morning, and I'm still happy to hold the shares, but not to chase them.  I don't see the shares really taking off until shale completely collapses, and the powers that be still have other moves to made beforehand.

Any remaining WPRT investors should take note as well.  The big beat last week was due to one time insurance recovery from the $10M recall.  Although management pointed out that by 2030, 40% the entire natural gas fleet could be powered by biomethane, it's looking more and more like only heavy duty natural gas trucks would still be in service by that point, if any.  Most other transportation is clearly going electric.

In support of that viewpoint, AES Corp. negotiated the the early termination of a coal-fired plant in Chile, which will allow for $200M of additional renewable investment in the country.  I think AES shares overpriced at $17 are a symbol of the market gradually rotating away from technology and toward defensive stocks.

All this comes as the market continues to shrug off increasing tensions with China, and the White House attempting to circumvent a dysfunctional Congress, with limited effect.  China tension extends throughout Asia as well, but I think that real world action will be limited to saber rattling as I see every indication that China can continue to achieve its goals through technological and industrial espionage instead.  Let's hope I'm right.