LTP Notes 011: New Home Sales Drop, Semiconductor Sales $1T By 2030, Global Nickel Production, and Others
Some investing notes that may help you gain insights or make long-term decisions.
Previous Publication:
Content:
🏠 New Home Sales Drop
🦅 Foreign Capital Invested In the US
🛢️ US Oil Production Breaks Records
🚀 Semiconductor Sales $1T By 2030
🍿 Netflix vs Disney
🌐 Global Nickel Production
↗️ EPS Estimates By Size
🪙 Interest Rates And Small-Caps
📈 ROIC Importance
🏠 New Home Sales Drop
Sales of new homes dropped by 17.3% MoM in October, the sharpest decline since 2013, to the lowest level in 2 years.
Why is this important? A big drop in new home sales can hurt the economy. When fewer homes are sold, companies that build homes make less money. This can lead to job cuts in construction and related industries, like furniture and appliances. If people lose jobs, they may spend less, slowing down the economy even more. It can mean lower profits for businesses and falling stock prices, especially in real estate and construction-related companies.
🦅 Foreign Capital Invested In the US
The U.S. gets more foreign investment in its securities than the next 12 largest economies together. This shows how much trust global investors have in the U.S. market - means that the U.S. economy is seen as safer and more stable. The U.S. depends a lot on this foreign money to keep markets strong.
Stocks and ETFs to watch: VTI (Vanguard Total Stock Market Index Fund ETF), VOO (Vanguard S&P 500 ETF), VXUS (Vanguard Total International Stock Index Fund ETF).
🛢️ US Oil Production Breaks Records
The U.S. has hit a new all-time high in crude oil production, reaching 13.4 million barrels per day. This growth highlights the resilience of the energy sector and the role of drilling technologies. With rising production, the U.S. strengthens its position as a global energy leader, reducing reliance on imports and impacting global oil prices.
This surge could boost opportunities in oil-related stocks and ETFs. Energy giants and infrastructure companies may see increased profits, while higher supply might put pressure on oil prices, affecting producers differently.
Pay attention to SLB and HAL.
Stocks and ETFs to watch: XLE (The Energy Select Sector SPDR Fund ETF), OIH (VanEck Oil Services ETF), CVX, XOM, SLB, HAL.
🚀 Semiconductor Sales $1T By 2030
AI is transforming the semiconductor market. By 2030, global semiconductor sales are projected to exceed $1 trillion, driven by massive investments in AI and high-performance computing. It's estimated that AI-related computing alone will account for over 40% of demand, with rapid growth in data centers, edge computing, and IoT applications.
This booming market signals huge opportunities for chipmakers and technology innovators. As AI adoption accelerates, semiconductor companies at the forefront of this trend could see significant gains.
Related Publication:
Stocks and ETFs to watch: ASML, NVDA, AMD, TSM, INTC, SOXX (iShares Semiconductor ETF), SMH (VanEck Semiconductor ETF).
🍿 Netflix vs Disney
Disney’s 2024 streaming goal was ambitious - 260 million paid subscribers. Reality check? They reached only 159 million, falling far short of expectations. Meanwhile, Netflix continues to dominate with 282 million subscribers, 1.7 times more than Disney.
What’s surprising? Disney spends twice as much on content, paid up to $35.8 billion in 2024 compared to Netflix’s $16 billion. Yet, Netflix seems to make more of its content count.
Stocks to watch: DIS, NFLX.
🌐 Global Nickel Production
Indonesia is the world’s largest nickel producer, making up 50% of global production. Nickel is very important for the green energy shift because it’s used in electric vehicle (EV) batteries, stainless steel, wind turbines, and solar panels. EV batteries especially need nickel to last longer and store more energy.
Indonesia’s success comes from big investments by China in smelting and processing factories. As the demand for EVs and renewable energy grows, the need for nickel will keep increasing, making it one of the most valuable resources in the green transition.
Stocks and ETFs to watch: Stocks and ETFs to watch: INCO.JK (PT Vale Indonesia Tbk), ANTM.JK (PT Aneka Tambang Tbk), NIKL (Sprott Nickel Miners ETF).
↗️ EPS Estimates By Size
EPS forecasts for major US equity indices - the S&P 500, S&P 400, and Russell 2000. It shows a dramatic turnaround expected in mid and small-cap earnings, with analysts projecting a significant rise in the coming years.
ETFs to watch: IWM (iShares Russell 2000 ETF), VO (Vanguard Mid-Cap ETF), VB (Vanguard Small-Cap ETF).
🪙 Interest Rates And Small-Caps
Look at the previous chart - Russell 2000 dropped the most (-11%). This chart is a good addition, it compares the interest expense as a percentage of total debt for the Russell 2000 and S&P 500. Small-cap Russell 2000 companies historically pay a higher interest burden, spiking during rate hikes.
The Russell 2000 interest ratio of 7.1% is well above the 4.2% for the S&P 500, indicating small-caps are more sensitive to rising rates. This can disproportionately impact their profitability.
ETFs to watch: IJR (iShares Core S&P Small-Cap ETF), IWM (iShares Russell 2000 ETF), VB (Vanguard Small-Cap ETF).
📈 ROIC Importance
‘Over the long term, it’s hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you’re not going to make much difference than a 6% return – even if you originally bought it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you’ll end up with a fine result.’ - Charlie Munger.
Stocks to watch: NVDA, MSFT, AAPL, GOOGL, META, TSM, WMT, V, NVO, MA, COST, HD, NFLX, MRK, ADBE, ACN, QCOM, AMAT, LRCX.
My premium analysis of the CCaaS market leader currently trading below its 10-year average valuation, is available for patrons.
This is not a financial or investing recommendation. It is solely for educational purposes.