Harrison Schwartz
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Sprouts Farmers Market: A New Age For Grocers Has Dawned

Sprouts Farmers Market has surged 470% since I became bullish in 2021, driven by superior management and a bifurcating grocery industry. Despite its high valuation, SFM's strong growth potential and market shift away from middle-market grocers like Kroger and Albertson's continued double-digit sales growth. Projecting its growth into the 2030s, Sprouts may be reasonably valued today, given that its sales are currently far below its expanding total addressable market. Sprouts is far more expensive than Kroger and Albertsons, but is likely undervalued to Costco. Compared to Costco, Sprouts has more recession risk but far superior long-term growth potential. SFM's current valuation appears risky due to potential demand fluctuations and fickle short-term momentum traders. Kobus Louw In 2021, S
Sprouts Farmers Market: A New Age For Grocers Has Dawned

Whirlpool: Betting On A U.S. Manufacturing Recovery

Whirlpool faces potential short-term strains but possible long-term benefits from the Trump administration's efforts to improve US manufacturing activity. Despite recent financial struggles, including high debt and low margins, WHR's valuation reflects its risks, with analysts predicting a margin recovery after 2025. US manufacturing's post-pandemic recession and low home sales are significant challenges, but a supportive regulatory environment could aid Whirlpool's future growth. I cautiously upgrade my view on WHR to mildly bullish. I expect pressures in the short term but see it as a reasonable long-term value investment. simonkr/E+ via Getty Images From 2018 to 2023, the US had a tariff policy on washing machines. The tariff was initially set at 20% for the first 1.2M units and 50% abo
Whirlpool: Betting On A U.S. Manufacturing Recovery

Cameco: Strong Q3 Performance As Kazakh Output Falls Short

Cameco Corporation reported a non-GAAP EPS of -$0.01 and substantial revenue of $721M, up ~25% YoY, with a positive financial outlook and increased dividend. Operational improvements and the reopening of the McArthur River/Key Lake mine boosted the 2024 production outlook despite supply issues in Kazakhstan. The uranium market is supply side-driven; Cameco's long-term contracts and potential supply disruptions in Kazakhstan could keep uranium prices high, improving CCJ's income years from now. If supply conditions in Kazakhstan normalize, as expected, the market seems to be headed back into a glut, pushing uranium back below $60-$70 per pound. Cristian Martin/iStock via Getty Images The uranium (UXA:COM) mining giant Cameco Corporation
Cameco: Strong Q3 Performance As Kazakh Output Falls Short

BND: Trump Victory Could Hurt Bonds; Sweep For Either Side Worse

Trump's Polymarket election odds have a 73% R-squared to the 10-year Treasury rate, indicating that a Trump win would lower high-duration bond prices. A Republican sweep of the House and Senate may exacerbate losses by making deficit spending policies more feasible. However, the same can be argued for a Democrat sweep. My long-term view on high-duration Treasury bonds is decidedly bearish, given the bipartisan consensus against fiscal responsibility and pro-inflationary Fed policies. The bond-Trump correlation may result from foreign investment risk, with China potentially divesting US Treasuries in a trade conflict. The manufacturing economy is in a recession, but the service economy has strengthened, creating a complex outlook for 2025 unemployment. J Studios There is much speculation re
BND: Trump Victory Could Hurt Bonds; Sweep For Either Side Worse

Fannie Mae: Rising Multifamily Vacancies And Inventories Suggest Home Valuation Peak

Fannie Mae and Freddie Mac continue fluctuating with election odds and face immense volatility risk over the coming week. FNMA has been down since June, as Harris's ascent has lowered Trump's odds. Its Q3 results were slightly disappointing and indicated some risk in multifamily. Although the election matters over the short term, I think FNMA's 2030 value is more dependent on the economic trend and whether or not the housing market has a "soft landing." Home valuation and multifamily cap rates are unsustainably high today but were previously supported by low vacancy rates and single-family inventories. With vacancies and inventories rising, I expect housing valuations will decline in 2025-2027. Given high mortgage coverage ratios, FNMA should be safe if they do not fall too quickly. ablokh
Fannie Mae: Rising Multifamily Vacancies And Inventories Suggest Home Valuation Peak

Kroger's Potential Future Without Albertsons Is Improving As It Adapts To Bifurcation

Given Albertsons' significant discount to Kroger's merger price, it appears highly unlikely that the deal will be completed. With the FTC's effort to ensure the merger lacks pricing power advantages, I believe KR is better off without the debt-laden company. Kroger may benefit if ACI closes stores or lay-offs employees, as it has suggested as a long-term result of a failed merger. Lower agricultural input costs lift the Company's gross margins, but to improve its market position, it needs to vertically integrate and invest in private-label branding. In the long run, Kroger will likely need significant investment to adapt to consumer bifurcation trends, which benefit wholesale and premium grocers more than those "stuck in the middle." jetcityimage/iStock Editorial via Getty Images Kroger (N
Kroger's Potential Future Without Albertsons Is Improving As It Adapts To Bifurcation

Builders FirstSource: Tuesday Drop May Indicate Trouble To Come For Homebuilding

Builders FirstSource fell by 7% on Tuesday, a week before its Q3 report, potentially reflecting potential investor sentiment shifts and macroeconomic concerns impacting homebuilding demand. With mortgage rates failing to decline and home inventories increasing, there are more signs that builders will pull back on lower new home sales prices. Builders FirstSource risks a significant decline in its profit margins as it loses sales and pricing power if the industry shifts back toward a materials glut. The company has had excellent core growth through accretive acquisitions but faces a potential slowdown with much higher debt and lackluster cash savings. Thomas Bullock/iStock via Getty Images The construction materials company Builders FirstSource, Inc. (NYSE:
Builders FirstSource: Tuesday Drop May Indicate Trouble To Come For Homebuilding

Chevron: A Defensive Value Investment As Oil Drilling Falters Demand Concerns

Summary Gasoline prices are down again due to global demand concerns. The average US retail gas price is $3.3, down from nearly $3.8 in May. This year, energy is the worst-performing sector, as investors view oil as cyclical after 2008 and 2020 despite its historically non-cyclical pattern. The Federal Reserve's surprisingly quick dovish shift and geopolitical should encourage investors to look toward supply side inflation hedges. Chevron's strong balance sheet, low debt-to-equity ratio, and strategic acquisitions position it well for future growth despite its slightly higher valuation. In a recession, Chevron's diversified operations and consistent dividend make it a safer bet, particularly given US drilling activity has already declined due to concerns of a slowdown that may not occur. N
Chevron: A Defensive Value Investment As Oil Drilling Falters Demand Concerns

PulteGroup: Overvalued As Housing Shortage Slows And Home Prices Falter

Summary PulteGroup's high valuation and profit margins are unsustainable due to low home affordability and a fading housing shortage, making it a potential short opportunity. Despite strong recent performance, PulteGroup's backlog and new orders are declining, signaling reduced demand and increased risk exposure. The Federal Reserve's interest rate cuts should not significantly lower mortgage rates, meaning home affordability is unlikely to improve without lower prices. PulteGroup's aggressive investment in new projects amidst economic uncertainty could exacerbate losses if the economy enters a broader recession, though a 2008-repeat is unlikely for numerous reasons. krblokhin The home construction industry faces a strange mix of trends today; some support the market, while others are a gr
PulteGroup: Overvalued As Housing Shortage Slows And Home Prices Falter

Synchrony Financial: Consumer Lending May Meltdown If Unemployment Continues To Rise

Summary Synchrony Financial faces risks from declining consumer credit and a potential economic recession, which should slow loan originations and may increase defaults. Despite slightly elevated delinquency rates, Synchrony's high interest rates provide a cushion, but its high loan-to-deposit ratio and unsecured loans pose risks. Consumer borrowing and spending are slowing, and low personal savings could potentially increase demand for credit and long-term default risks. I am bearish on SYF due to its exposure to negative economic headwinds, which I expect will increase its delinquencies over the coming year. J. Michael Jones A key theme to my outlook is the decline in consumer credit lending associated with potential recession risk. After being calm for most of the 2010s, consumer lendin
Synchrony Financial: Consumer Lending May Meltdown If Unemployment Continues To Rise

B. Riley: Survival Potential Uncertain, But Valuation Is Now Reasonable

Summary B. Riley faces immense risks due to significant debt maturities, weak consumer brands, and a tarnished reputation that may harm its advisory business. Despite a 67% stock plummet, short interest remains high, indicating market skepticism about its survival and potential for a short squeeze. The company's future hinges on asset sales, creditor leniency, and potential take-private offers, making its equity value highly speculative. Given its seemingly binary prospects and the potential for significant upside, if liquidity risks are mitigated, I now have a neutral outlook on RILY. Reputation matters in investment banking, meaning B. Riley may struggle with keeping its key clients and employees. J Studios In July, I published "
B. Riley: Survival Potential Uncertain, But Valuation Is Now Reasonable

BND: Bonds Are Rising Again, But They Face 2 Key Risks

Summary BND's short-term outlook is positive due to lower inflation expectations and a potential end to or reduction in QT activity. Key bond risks include potential oil price spikes from geopolitical tensions and rising corporate credit risk during stock market crashes. In the long term, BND is not ideal due to concerns about US government debt, which makes its debt unpayable without chronically elevated inflation. I expect a repeat of 2020-2022 when inflation declined in the short term but was eventually pushed to a new high as the Federal Reserve overstimulated. Speculators may take advantage of BND's current rally, but may not want to hold the ETF for too long. NoDerog/E+ via Getty Images The medium and long-term bond markets have reacted well to economic data indicating a slowdown. I'
BND: Bonds Are Rising Again, But They Face 2 Key Risks

Diamondback Energy: Increased Geopolitical Tensions Raise Free Cash Flow Outlook

Summary Diamondback Energy is poised for growth, supported by its merger with Endeavor, which will enhance its position in the Permian Basin. The oil market remains range-bound, but geopolitical tensions and low US supply growth could drive prices higher, benefiting FANG's free cash flow. FANG's valuation is almost reasonable compared to peers, with potential upside from higher oil prices and increased production capacity post-merger. US oil producers like FANG offer a hedge against geopolitical risks and inflation, making them a strategic addition to portfolios. Pla2na The energy market has been among the few to be eerily quiet in 2024. While stocks face heightened volatility and gold surges to consecutive all-time highs, crude oil remains stuck in the ~$70 to ~$80 range since the end of
Diamondback Energy: Increased Geopolitical Tensions Raise Free Cash Flow Outlook

Cracker Barrel: Losing The Shrinking 'Middle-Middle' Customer Base

Summary The restaurant industry faces pressures from the declining middle class, which affects middle-income family restaurants like Cracker Barrel. These restaurants have struggled with rising costs and declining traffic. Cracker Barrel's high operating overhead and attempts to modernize may alienate its core demographic, risking further financial instability and potential equity dilution. Despite positive cash from operations, Cracker Barrel's liquidity issues and high operating costs suggest it may need to raise capital or close stores. The company's future hinges on economic conditions and middle-income spending; if income trends are negative by 2025, it may be a "value trap." sanfel The restaurant industry is facing significant pressures from the bifurcation of consumer spending. This
Cracker Barrel: Losing The Shrinking 'Middle-Middle' Customer Base

American Airlines: 2025 Refinancing Risks Grow As Air Travel Demand Peaks

Summary American Airlines stock has declined by 35% since March, while short interest on it has risen to 12.7%, indicating hedge funds or speculators may be betting on continued declines. AAL's financial stability is at risk due to high debt, declining profitability, and a potential decline in airline demand. To me, this makes it the least solvent US airline after Spirit. I expect AAL's operating margins to continue to slide, with recession risks potentially exacerbating negative headwinds in 2025. American Airlines' refinancing risks appear high, with over $4B in current LT debt maturities and negative free cash flow. AAL's stability will likely depend on Federal Reserve stimulus, with significant rate cuts potentially necessary to carry it through its refinancing pressures. FangXiaNuo In
American Airlines: 2025 Refinancing Risks Grow As Air Travel Demand Peaks

Sprouts Farmers Market: Valuation Concerns Rising, But Growth And Stability Match Momentum

Summary Sprouts has seen significant growth over the past three years, with extremely high momentum over the past six months. Sprouts benefits from consumer trends favoring low-cost or high-cost outlets, which gives it a widening market share as the "middle" middle-class shrinks. Despite a strong balance sheet and business model, Sprouts may face recession risks and potential pricing pressure on non-essential goods, though that may be offset by competitors' closure risks. The company's valuation is much higher than when I first became bullish in 2021; however, its growth trajectory makes it likely cheaper than COST. At its current price, it may be best to wait for a correction before taking a bullish position in SFM. SDI Productions Three years ago, I published a very bullish outlook on th
Sprouts Farmers Market: Valuation Concerns Rising, But Growth And Stability Match Momentum

AMC Entertainment: Weakening Consumer Demand May Be Final Nail In Coffin

Summary AMC Entertainment's financial position remains precarious, with negative working capital and higher interest rates following the refinancing deal. Consumer trends and reduced spending capacity pose risks to AMC's revenue recovery and operating income, potentially leading to further declines. Despite debt refinancing reducing immediate bankruptcy risks, the high interest rates and dilutive terms may lead to an inevitable failure of AMC's equity. AMC remains dependent upon equity investor hope. Should its market capitalization rise, it may raise enough capital to deleverage. Should it fall, its ability to raise capital will too. AMC's key balance sheet risks are now extended to 2029, but they may be pushed forward if its operating income remains negative. Marti157900 Going
AMC Entertainment: Weakening Consumer Demand May Be Final Nail In Coffin

Rio Tinto: Iron Ore Glut Will Accelerate By Year-End, Potentially Halving EBITDA

Summary Rio Tinto has lost ~14% of its value since January, while the S&P 500 has risen by 20%, stemming from a sharp decline in iron prices. I expect China's iron ore demand to continue to plummet along with its property sector, potentially leading to a permanent 15-25% decline in global iron demand. Rio Tinto's exposure to China is exacerbated by its significant Australian iron ore mining, which has supported China's property development bubble. The coming glut in iron ore may push the commodity down into the $60 range, dramatically reducing Rio Tinto's overall EBITDA. Copper and aluminum are also negatively exposed to this trend, but they have closer ties to manufacturing demand, which may face a more transitory decline due to a global economic slowdown. Abstract Aerial Art/DigitalV
Rio Tinto: Iron Ore Glut Will Accelerate By Year-End, Potentially Halving EBITDA

Brinker International: Sales Growth May Prove Transitory As Consumer Restaurant Spending Slows

Summary The full-service dining industry was under profit margin and demand pressures before 2020 but has been dramatically exacerbated. Brinker International may indirectly benefit from economic strains as it gains market share from closing independent restaurants and, more recently, competing chains. That trend has resulted in same-store sales growth that I expect will prove transitory as slowing consumer demand spreads into the "middle-class" restaurant market. Although Brinker's valuation is not excessive, it is relatively high if we assume a decline in revenue and potential margin pressures due to economic turbulence. EAT's short interest level of 19% indicates ample negative speculation on the stock, which may not be warranted if economic conditions stabilize. sanfel One of the more
Brinker International: Sales Growth May Prove Transitory As Consumer Restaurant Spending Slows

COPX: Gold To Copper Ratio Signals Greater Trouble Ahead For Miners

Summary Copper prices surged earlier in the year, but have since reversed gains as China's copper inventories slipped from extreme highs. Rising copper mining costs may offset post-2020 gains in copper, depending on economic and political risk in Latin America. China's efforts to bolster copper stockpiles may have pulled future demand forward, potentially leading to a sharp decline in imports later this year. It may be unlikely that electric vehicle demand will rise enough to increase copper consumption, or EVs will continue to require so much copper. The rising gold-to-copper ratio may indicate a global decline in manufacturing activity. shells1 Last year, I published "COPX: The Copp
COPX: Gold To Copper Ratio Signals Greater Trouble Ahead For Miners

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