Category: Leisure

Cruise Stocks Surge: A Positive Signal for the Travel Sector’s Recovery

Posted on by slightbourne@noblecapitalmarkets.com

Today, the cruise ship industry is seeing remarkable activity in its stocks, with Carnival, Royal Caribbean, and Norwegian Cruise Line experiencing notable surges. This spike follows Norwegian Cruise Line’s announcement of enhanced financial guidance for 2024 and ambitious targets for 2026. The company’s new “Charting The Course” strategy, which includes significant yield growth expectations and improved EBITDA forecasts, has bolstered investor confidence, driving up not only Norwegian’s shares but also those of Carnival and Royal Caribbean.

The surge in these stocks signals a robust recovery for the cruise industry, which was one of the hardest-hit sectors during the COVID-19 pandemic. The current upswing is largely attributed to strong demand and record bookings reported by these companies, reflecting renewed consumer interest in cruise vacations. Additionally, strategic initiatives focusing on long-term financial health and sustainability are positioning these companies for continued growth and stability.

This positive momentum in the cruise sector has broader implications for the travel industry. Companies like Travelzoo, which specializes in travel deals, stand to benefit from the increased promotional activities and consumer interest in cruises. As cruise companies offer more deals to attract customers, platforms like Travelzoo can capitalize by featuring a wider range of cruise packages, driving higher engagement and potentially boosting revenues.

Investors observing these trends should note the underlying factors contributing to the surge. The increased bookings and optimistic financial forecasts indicate a strong recovery trajectory for the cruise industry. Moreover, strategic partnerships and marketing initiatives by cruise lines can enhance consumer reach and operational efficiency, creating a favorable environment for growth.

While the surge in cruise ship stocks is promising, it’s crucial for investors to consider the broader context and potential risks. The recovery is partly dependent on continued consumer confidence and the ability of these companies to manage operational challenges post-pandemic. Additionally, the sustainability initiatives and financial health strategies of these companies will play a significant role in their long-term performance.

In conclusion, the recent activity in cruise ship stocks highlights a positive outlook for the travel sector. Norwegian Cruise Line’s enhanced financial guidance and strategic targets have instilled confidence in the market, benefiting not only the company but also its competitors, Carnival and Royal Caribbean. For investors, understanding the dynamics driving this surge and the potential implications for related companies like Travelzoo can provide valuable insights into the evolving travel industry landscape. As always, it is essential to approach investment decisions with a comprehensive understanding of market trends and potential risks.

Shein Sets Sights on $90 Billion Valuation for Highly Anticipated US IPO

Posted on by slightbourne@noblecapitalmarkets.com

Shein, the Chinese fast fashion juggernaut, is aiming to achieve a massive $80-90 billion valuation in its eventual US stock market debut according to sources familiar with the company’s IPO plans.

The online fashion retailer has quickly become one of the largest in the world on the back of its ultra-fast production cycles and rock bottom pricing. Shein boasts a selection of over 5,000 fashion items with over 1,000 new products added daily. This rapid launch cadence along with AI-driven fashion designs and targeted social media marketing have supercharged Shein’s popularity among Gen Z consumers.

Shein’s meteoric rise has made it one of the most valuable private companies in the world. The company hit a $100 billion valuation in its last funding round in 2021. However, subsequent secondary market trades of Shein shares revealed erosion in its value, with estimates between $50-60 billion earlier this year.

The firm is looking to capitalize on the growth in online shopping with its planned US stock exchange listing. Shein is aiming to raise around $2 billion from public market investors as it continues its quest for global fashion industry dominance.

Shein has not officially confirmed its IPO plans yet, but is said to be targeting the second half of 2023 for its market debut. The timing remains in flux given the recent stock market volatility and economic uncertainty.

Unlike most ecommerce firms, Shein has claimed profitability since its inception. The company boasts strong margins partly derived from minimal advertising spend. Shein instead relies extensively on social media influencers and word-of-mouth among its primarily Gen Z fanbase.

The Chinese company does not disclose its financials publicly, but reportedly generated over $16 billion in sales in 2021. It has also expanded aggressively in Europe, the US and other international markets. Shein’s app was the second most downloaded shopping app globally on iOS last year after Amazon.

However, Shein faces controversies around alleged labor rights violations, plagiarized designs, and environmental concerns related to its fast fashion model. Critics also argue the opacity around its operations and finances warrant closer regulatory scrutiny especially as it plans to go public.

Shein’s US IPO will be a key test of investor appetite for cash-burning technology unicorns in the current market. Chinese companies listing in the US also face tighter regulations now. A number of them have opted instead for Hong Kong and domestic China exchanges more recently.

Nonetheless, the online fashion giant has its sights set firmly on tapping into public markets to fuel its next wave of worldwide expansion. Shein aims to leverage its digital-first model and supply chain agility to continue eating market share from struggling traditional retailers.

If Shein manages to pull off a $90 billion IPO, it would rank as one of the largest US listings ever for a foreign company. The blockbuster offering could set the stage for Shein to disrupt the global fashion hierarchy dominated by H&M, Zara and other legacy incumbents.

Take a look at Vera Bradley, a leading designer of women’s handbags, luggage and other travel items, fashion and home accessories.

MGM Hack Highlights Casino Cyber Risks

Posted on by slightbourne@noblecapitalmarkets.com

Casino and hotel operator MGM Resorts tumbled last week after revealing it was hit by a data breach impacting over 10 million former guests. The hack showcases the cyber risks facing hospitality firms and dragged down related stocks as investors weighed the potential fallout.

MGM shares dropped over 4% following its disclosure of the breach as investors reacted to the cyberattack. The stock slide reflected concerns over potential costs from lawsuits, technical remedies, and reputational damage.

The attack also stoked fears of similar incidents across the broader hospitality sector. Airline, cruise, and casino stocks all declined as analysts noted cyber threats facing the industry. Leisure companies handle vast customer data and suffer from downtime, making them prime hacker targets.

Take a look at Travelzoo, a company providing members with travel, entertainment and lifestyle experiences.

Broader equity markets proved resilient to the MGM incident. But cybersecurity stocks rallied on expectations companies may now invest more in protecting data and systems going forward. Top gainers included cyber firms Palo Alto Networks and CrowdStrike.

The MGM breach follows several recent high-profile hacks of casinos and gaming firms. The frequency of attacks has put the industry on notice. New Nevada regulations now require prompt breach disclosures from casinos. Once inside a network, hackers can often access customer financial data. Small casinos have paid millions in ransoms to regain control of systems.

While the MGM breach didn’t significantly sway major indexes, it highlights the dangers posed by cyber criminals. A larger incident paralyzing critical infrastructure could certainly roil markets. This incident is an important reminder of the growing cyber threats facing corporations and customers alike in today’s digitally connected world.

This Travel Segment Has Taken Investors Far

Posted on by phoffman@channelchek.com

Investors Have Far Fewer Reservations Against Investing in Leisure

Memorial Day Weekend in the U.S. marks the beginning of the travel season. After a few years on hiatus, as a result of Covid-19 restrictions, travel in 2023 is expected to surpass pre-pandemic numbers. While many investors are focused on the debt ceiling, less accommodative monetary policy, and looking for an entry point to invest in AI technology, post-pandemic travel plans are increasing – and the returns of some companies reflect this. One segment of the travel sector has benefitted and provided double-digit YTD stock returns. Below we discuss this segment and the potential for the future.

Travel Booking Stocks

When was the last time you went to an airline website to book a flight with them, or even a hotel for that matter? Most of us now find ourselves on a booking website when we’re planning a vacation. On these platforms, we can compare prices more easily, and if we’d like, add on extras like a car rental. Some even have proprietary package deals.

Technological advancements have created even greater efficiencies among booking and vacation travel package companies. Other positives for growth are pent-up demand, diversified revenue streams, and valuations still considered attractive. These all provide a backdrop and potential for the medium and long-term growth of the travel booking industry.

Source: Koyfin

The chart above is a year-to-date sampling of examples of stocks in this leisure segment that have outperformed the overall market (S&P 500). Below, from weakest performer to strongest, are details of each company’s unique business, market cap, and other interesting investor information:

  •  Expedia (EXPE) is a global travel company that provides a wide range of travel services, including flights, hotels, car rentals, and vacation packages.

This is a large cap stock with a current market cap of $14.33 billion, at $96.85 per share.

The company is headquartered in Seattle, Washington.

  • Booking Holdings (BKNG) is a travel company that owns a number of popular travel brands, including Booking.com, Priceline.com, and Kayak.com.

This is a large-cap stock with a current market cap of $97.61 billion, at $45.41 per share.

The company is headquartered in Norwalk, CT.

  • Allegiant Travel (ALGT) is a leisure travel company that provides travel services and other products to under-served cities in the U.S. This includes flights between vacation destinations. As of February 1, 2023, Allegiant operated a fleet of 122 Airbus A320 series aircraft.

This is a small cap stock with a current market cap of $1.85 billion, at a price of $99.96 per share.

The company is headquartered in Las Vegas, Nevada.

  • Travelzoo (TZOO) has a unique business model as it operates as an Internet media company that provides travel, entertainment, and deals from travel and leisure businesses worldwide. Publication products include the Travelzoo Top 20 email newsletter, Travelzoo emails, Travelzoo Network, Travelzoo mobile applications, Jack’s Flight Club website, Jack’s Flight Club mobile applications, and Jack’s Flight Club newsletters.

The year-to-date performance of TZOO is 10x that of the S&P 500.

In a research report dated April 28, 2023, Michael Kupinski, the senior research analyst for media and entertainment, had this to say about Travelzoo, “We believe that there is a disconnect with investors and the improved fundamentals at the company. Near current levels, the TZOO shares appear compelling, trading at 5.3 times Enterprise Value to our 2024 cash flow estimate or below the low end of the company’s 10-year and 15-year average trading ranges.” See the report here.

Current market cap is $133.05 million, at $8.69 per share.

The company is headquartered in New York, NY.

Image: “This Memorial Day weekend could be the busiest at airports since 2005” – AAA Newsroom

Take Away

Travel booking companies are well-positioned to benefit from the recovery of the overall leisure industry. Small cap travel booking companies are often more nimble and innovative than larger companies; this could give them an advantage in the travel booking market.

People are spending more money on travel. Companies like those mentioned above welcome the opening of China, allowing citizens to travel and return. In addition to the overall post-pandemic volume of business, travelers are spending more money on trips than they did before the restrictions.

Paul Hoffman

Managing Editor, Channelchek

Sources

AAA NEWSROOM (5/15/23)

Channelchek/TZOO (April 28, 2023)

Strange Price Movement for AMC and APE – Here’s Why

Posted on by phoffman@channelchek.com
Image: AMC Theatre W. Palm Beach, Fl

AMC and APE Now Have a Most Unusual Combined Stock Chart

AMC Entertainment (AMC – common) took a big hit on Tuesday (April 4), shaving over 20% off its per-share price. At the same time its preferred shares (APE) climbed over 10% as the so-called meme-stock movie-theater company announced it reached a settlement with shareholders over its planned stock conversion. The settlement with the group of mostly institutional shareholders allows management to complete its plan to convert its AMC preferred equity, or APE, units into shares of AMC common stock.

Where are the Arbitrageurs?

After the announcement that the case had been settled, AMC stock dropped, and simultaneously APE units rose to. Arbitrage opportunities may still exist for those that expect the price of the two share types to converge as the conversion moves even closer to reality with final approval still needed.

APE units began trading in August 2022 after management announced a unique dividend that paid each AMC shareholder one APE unit for every common share they owned. The APE shares eventually experienced the market pricing them at a steep discount to the AMC common shares.

The Complaint

At issue in the litigation was the claim that shares would be diluted without offsetting compensation to existing shareholders. It was initiated by a group of mostly large shareholders (think pension funds). The terms of the settlement, announced in a filing by AMC late Monday, will allow common stockholders to receive one share for every 7.5 shares held after the reverse stock split. The payment would represent around 4.4% of AMC’s stock, or 6.9 million shares.

Source: Koyfin

“The settlement provides investors with additional shares in satisfaction of their voting claims, while allowing the company to move forward with its plan to pay down its debt,” plaintiff lawyers from Bernstein Litowitz Berger & Grossmann, Grant & Eisenhofer, Fields Kupka & Shukurov, and Saxena White said in a joint statement.

Management’s Goal

As of the end of 2022, the company owed $4.9 billion in debt. The settlement may allow the company to raise in excess of this amount which could go a long way in helping management reach its goal of ridding itself of debt.

A Word on Price Discrepancy

Arbitrage can occur when the price of preferred units is lower than the price of common shares, even though the ownership level is substantially similar, or if the dividend rate on the preferred units is higher. In these scenarios, an investor can buy the preferred units and sell the common shares short (i.e., borrow the shares and sell them with the hope of buying them back at a lower price in the future), thus profiting from the difference in prices.

As the price movement in the chart above shows, related arb. opportunity pre-announcement are likely to have paid well.

Arbitrage can also occur when the price of common shares is lower than the price of preferred units, even though the shares should trade in parity or the dividend rate on the preferred units is lower. In this scenario, an investor can buy the common shares, sell the preferred units short, and receive a higher return on investment by benefiting from the price difference.

There is not yet “final approval” on AMC’s next step. However, the shares and reverse split are shareholder approved and the settlement clears the way for the final board decision.

Paul Hoffman

Managing Editor, Channelchek

Some “Covid Stocks” are Turning Out to be  “Post-Covid” Plays Too

Posted on by phoffman@channelchek.com
Image: 1800flowers.com

On May 11 the Covid National Emergency Will Be Declared Over – Are You in the Right Stocks?

Were there any companies that had lasting benefits from the shutdowns and lockdowns in response to the pandemic? During the first two years of the 2020s, pandemic consumer behavior caused sports equipment makers, communications, ecommerce, and healthcare companies to be favorites of investors. As investors then pivoted and began to look for the “post-covid” trade, many of these high-flyers, including Peleton (PTON), Teledoc (TDOC), Chlorox (CLX) and others, no longer held the advantage they had, and sold off. The focus then turned to energy, leisure, and other segments that had been decimated during forced lockdowns and fear. While some once strong sectors and segments faltered, some ecommerce companies, that were experiencing growth going into the pandemic, received a huge, albeit challenging, boost during the changed economy. The astute ones took the opportunity to grow deeper roots.

Online businesses are one segment where many companies maintained their bulge from the Covid lockdowns. The following insights are largely from a roadshow I attended, supplemented by research by Noble Capital Markets on Channelchek.com. While this isn’t the only ecommerce business that has retained substantial benefits from the pandemic, it is a company that can serve as a template as to what to look for when doing your own fundamental analysis.

Image: Koyfin

1 (800) FLOWERS

Toll free numbers (eight hundred numbers) for decades helped consumers overcome the reluctance to incur long-distance phone charges when needing help ordering from a mail order company. At the same time they saved the company from time-consuming collect calls. Introduced in 1967, it was a win-win technology that was quickly adopted and allowed broader reach.

From very humble beginnings an entrepreneur who still heads the company grew a 14-store flower shop based on Long Island by amassing enough financing to acquire 1-800-FLOWERS (FLWS), an ailing store based in Texas. His company instantly became a national brand through the use of this toll-free technology.

The company today is worth over $621 million and has not forgotten that they are a technology-based retailer. Their product is also not narrowly defined as flowers, but instead gifts for special occasions and people who are special to you. FLWS is a successful online retailer, willing to engage pertinent technology, learn from it, adapt that which works, and commercialize it to maintain a competitive edge in the ecommerce segment. This includes automation which helps offset post-pandemic era wage increases; artificial intelligence, which can help customers customize a notecard with a poem; and of course all that helps online retail build customers.

The pandemic allowed FLOWERS to double the size of its file of customers. On the revenue side, the company went from $1.2 billion in 2019, then quickly grew and peaked at $2.2 billion by March of 2022.  They have been able to keep much of this revenue gain, and it isn’t going backward. This is because the ecommerce trend was already in place, but the pandemic helped accelerate the use and permanent adoption by individuals that are now in the habit of thinking online when it comes to special occasion gifts. This trend continues, even as the overall economy is showing cracks.

The negative for FLOWERS, like other retailers operating during the pandemic period, was grappling with supply chain issues and dramatically higher shipping costs. The cost of having a container shipped has now dropped significantly. FLWS, during the worst period, had worked to keep more than ample inventory of non-perishables since the supply-chain was not reliable. As a result, they are still working off more expensive inventory, which has the effect of a higher cost of goods sold, this shows up on financials as narrower profit margins. The working off of this more expensive inventory and replenishing it with goods with lower shipping costs should serve to expand profit margins going forward, even if revenue remains neutral.

Ecommerce

How might this this apply to other ecommerce companies? Flowers has innovative management that is not afraid to experiment with technology and adapt to their business those which helps save them money or reach more customers. A good way to discern this is by attending industry conferences such as NobleCon19 in December or attending roadshows as I did to meet FLWS management.

 Another characteristic that this company had, that is admirable, is an acceleration of users during the pandemic that may not have otherwise decided to buy online. The company makes good use of this larger root system and stays in touch with the customers using its expanded list, sharing thoughts on other offerings.  

An interesting situation of 1(800)-FLOWERS.com that may exist with others is the changed cost of shipping and inventory. This negative, which is still unwinding, provides a declining cost of goods sold for a period of time. This could translate into higher earnings, depending on other market and business factors – this could get the attention of investors. It’s important to note that once inventories are worked off, margins would stabilize, and lower-cost inventories would no longer contribute to net earnings.

Take Away

Meeting with management, in this case at a road show sponsored by Noble Capital Markets (see calendar here), or at a large investor conference such as NobleCon (Information provided here)  helps provide insight into a company itself, an evaluation of management, plus ideas of what to look for in related companies. I wouldn’t expect CNBC or Bloomberg to spend as much time discussing a $621 million company as they spend on AAPL or MSFT, nor would I expect that the average investor can have breakfast with  Elon Musk of Tesla or Mark Zuckerberg of META, and get to know their plans, their company, and current industry factors that they are challenged with.

If you are serious about discovering what’s beyond CNBC, Stocktwits, and Yahoo Finance, I recommend attending a meet-the-management style road show and if you can, an investment conference that showcases industries you are interested in.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.channelchek.com/company/flws

https://www.politico.com/news/2023/01/30/biden-end-covid-health-emergency-may-00080305

https://www.whitehouse.gov/briefing-room/presidential-actions/2023/02/10/notice-on-the-continuation-of-the-national-emergency-concerning-the-coronavirus-disease-2019-covid-19-pandemic-3/

https://www.macrotrends.net/stocks/charts/FLWS/1-800-flowerscom/revenue

Guess the Odds that the NCAA Games Will Attract More Gambling in 2023

Posted on by phoffman@channelchek.com
Image Credit: Fictures (Flickr)

As March Madness Looms, Growth in Legalized Sports Betting May Pose a Threat to College Athletes

March Madness began on March 14, 2023, it’s a sure bet that millions of Americans will be making wagers on the annual college basketball tournament.

The American Gaming Association estimates that in 2022, 45 million people – or more than 17% of American adults – planned to wager US$3.1 billion on the NCAA tournament. That makes it one of the nation’s most popular sports betting events, alongside contests such as the Kentucky Derby and the Super Bowl. By at least one estimate, March Madness is the most popular betting target of all.

While people have been betting on March Madness for years, one difference now is that betting on college sports is legal in many states. This is largely due to a 2018 Supreme Court ruling that cleared the way for each state to decide whether to permit people to gamble on sporting events. Prior to the ruling, legal sports betting was only allowed in Nevada.

Since the ruling, sports betting has grown dramatically. Currently, 36 states allow some form of legalized sports betting. And now, Georgia, Maine and Kentucky are proposing legislation to make sports betting legal.

About two weeks after sports betting became legal in Ohio on Jan. 1, 2023, someone, disappointed by an unexpected loss of the University of Dayton men’s basketball team to Virginia Commonwealth University, made threats and left disparaging messages against Dayton athletes and the coaching staff.

The Ohio case is by no means isolated. In 2019, a Babson College student who was a “prolific sports gambler” was sentenced to 18 months in prison for sending death threats to at least 45 professional and collegiate athletes in 2017.

Faculty members of Miami University’s Institute for Responsible Gaming, Lottery, and Sports are concerned that the increasing prevalence of sports betting could potentially lead to more such incidents, putting more athletes in danger of threats from disgruntled gamblers who blame them for their gambling losses.

The anticipated growth in sports gambling is quite sizable. Analysts estimate the market in the U.S. may reach over US$167 billion by 2029.

Gambling Makes Inroads into Colleges

Concerns over college athletes being targeted by upset gamblers are not new. Players and sports organizations have expressed worry that expanded gambling could lead to harassment and compromise their safety. Such concerns led the nation’s major sports organizations – MLB, NBA, NFL, NHL and NCAA – to sue New Jersey in 2012 over a plan to initiate legal sports betting in that state. They argued that sports betting would make the public think that games were being thrown. Ultimately, the Supreme Court ruled that it was up to states to decide if they wanted to permit legal gambling.

Sports betting has also made inroads into America’s college campuses. Some universities, such as Louisiana State University and Michigan State University, have signed multimillion-dollar deals with casinos or gaming companies to promote gambling on campus.

Athletic conferences are also cashing in on the data related to these games and events. For instance, the Mid-Atlantic Conference signed a lucrative five-year deal in 2022 to provide real-time statistical event data to gambling companies, which then leverage the data to create real-time wager opportunities during sporting events.

As sports betting comes to colleges and universities, it means the schools will inevitably have to deal with some of the negative aspects of gambling. This potentially includes more than just gambling addiction. It could also involve the potential for student-athletes and coaches to become targets of threats, intimidation or bribes to influence the outcome of events.

The risk for addiction on campus is real. According to the National Council on Problem Gambling, over 2 million adults in the U.S. have a “serious” gambling problem, and another 4 million to 6 million may have mild to moderate problems. One report estimates that 6% of college students have a serious gambling problem.

What Can be Done?

Two faculty fellows at Miami University’s Institute for Responsible Gaming, Lottery, and Sport – former Ohio State Senator William Coley and Sharon Custer – recommend that regulators and policymakers work with colleges and universities to reduce the potential harm from the growth in legal gaming. Specifically, they recommend that each state regulatory authority:

  • Develop plans to coordinate between different governmental agencies to ensure that individuals found guilty of violations are sanctioned in other jurisdictions.
  • Dedicate some of the revenue from gaming to develop educational materials and support services for athletes and those around them.
  • Create anonymous tip lines to report threats, intimidation or influence, and fund an independent entity to respond to these reports.
  • Assess and protect athlete privacy. For instance, schools might decline to publish contact information for student-athletes and coaches in public directories.
  • Train athletes and those around them on basic privacy management. For instance, schools might advise athletes to not post on public social media outlets, especially if the post gives away their physical location.

The NCAA or athletic conferences could lead the development of resources, policies and sanctions that serve to educate, protect and support student-athletes and others around them who work at the schools for which they play. This will require significant investment to be comprehensive and effective.

This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of, Jason W. Osborne, Professor of Statistics, Institute for Responsible Gaming, Lottery, and Sport, Miami University.

Grab Your Popcorn, AMC ‘APE’ Conversion Gets Shareholder Vote

Posted on by phoffman@channelchek.com
Image Credit: CNBC (YouTube)

Will Adam Aron CEO of AMC Win the Long Awaited Battle?

Management of AMC Entertainment Holdings ($AMC) is holding the long-awaited special meeting at noon Eastern time, Tuesday, March 14. At this meeting, shareholders will vote the peculiar $APE shares that were paid out as a dividend to shareholders. The dividend shares that were announced with the message “Today we Pounce” from the CEO Adam Aron created quite a stir – they seemed to have been designed to root out fraudulent shares and challenge any naked shorts of the AMC common shares.

The shareholders’ opportunity is a decision of whether or not to increase the firm’s stock authorization and convert AMC Preferred Equity Units (ticker: APE) into AMC common shares ($AMC). It will also vote on a 10-for-1 reverse stock split that would only take place if the APE measure passes.

AMC management won an endorsement from the proxy firm Institutional Shareholder Services (ISS) for the reverse stock split and preferred stock conversion. Institutional Shareholder Services is a market intelligence and influence proxy voting firm, its endorsement increases the odds of management having their wish.

If approved, it would represent an important career win for AMC’s Aron, who has become a superhero of sorts to the meme stock investors that helped the firm through the pandemic. He has shown himself to be able to stay one step ahead of those that would profit if AMC stock falters. Some stockholders supporting the measure take this as a fight between weak and strong and good and evil where prevailing is the only option.

 In 2020 AMC Theatres lost $4.6 billion in sales due to Covid-related lockdowns and low attendance. Some powerful investors had shorted shares, many small investors grouped together and purchased the stock in droves, this created unexpected problems for the institutional short sellers that had large trades betting against AMC’s survival.

These investors caused the stock price to increase which allowed AMC to raise cash and survive and thrive.

The APE units, which represent one hundredth of a preferred share, have the same voting power of common shares.

Not all AMC shareholders are as supportive. Some are suing the company, arguing the APE sales decimated the voting power of common shareholders who might oppose increasing the firm’s share authorization.

Aron said during the fourth-quarter earnings call that if the vote falls short, the company could be forced to sell more APE shares at lower prices than a combined AMC share. On the same call he credited selling stock with helping the firm survive the lockdowns.

“We wouldn’t be blocked from raising capital, but we’d be raising capital on much less attractive terms,” Aron said. “It would cost more dilution to the stock that is entirely 100% preventable if a majority of our shareholders vote yes.”

The company has provided this link for livestreaming the March 14 meeting.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.sec.gov/Archives/edgar/data/1411579/000110465922092397/tm2223780d1_ex99-1.htm

https://variety.com/2021/film/news/amc-theatres-4-6-billion-loss-covid-1234927642/

https://investor.amctheatres.com/corporate-overview/default.aspx

https://www.barrons.com/articles/amc-ape-stock-price-shareholder-meeting-f412434d

The Fed Still Has a Long Way to Go To Reel in Wage Inflation

Posted on by phoffman@channelchek.com
Image Credit: Andrew Hudson (Flickr)

Employers Added 263,000 Jobs in November, How this Impacts Future Fed Decisions

There were many more jobs created and filled in the U.S. during November than expected. This may, on the surface, seem like a good thing for the economy, markets, and job seekers. But any expectation that the Fed is past the tipping point and is winning in the battle against conditions that increase prices will have to be curbed for a while.

The number of new hires points to unmet demand in filling positions, and the increase in wages directly adds to the cost of goods sold. Unmet high labor demand is inflationary and part of why the Fed is clear that it is not done.

Fed Chair Powell spoke last Wednesday in a lengthy address outlining the challenges that face the Fed and the avenues it is most likely to take. There is nothing in the strong November jobs report that alters what Powell has said. In fact, it may underscore the resiliency of the economy that the Fed is looking to temper. If you weren’t of the belief that the Fed would push Fed Funds beyond 5%, there is evidence that the Fed may need three 0.50% increases or more before it steps back.

Background

The Fed Chair and other Fed officials have reiterated in recent days that they are likely to lift rates and hold them at levels high enough to slow economic activity and hiring to bring inflation down from 40-year highs.

The just-released employment report for November was expected to come in far below the level reported. Digging even deeper into the numbers, it showed continued rampant hiring and elevated wage growth. The Fed had been hoping to keep a wage-price spiral at bay and get ahead of the supply-demand issues pushing wages and prices up.  

The November Unemployment Report

The headline number showed that employers added 263,000 jobs in November while the unemployment rate held steady at 3.7%. But the revised wage data in Friday’s release could concern Fed officials because it points to an acceleration in pay gains in recent months. For the three months that ended in November, average hourly earnings rose at a 5.8% annualized rate. This is a surprising increase from an initially reported 3.9% annualized rate for the three months that ended in October. Economists had expected the U.S. economy had gained 200,000 jobs last month.

At the same time, senior Fed officials have made sure it is no surprise if they lessen the size of rate increases in coming meetings. The next FOMC is the Dec. 13-14 meeting; the Fed is expected to move 0.50% rather than another 0.75%.

Most major stock market indices have traded lower, taking a bearish tone from the report and signs the Fed still is a little behind in its effort to squelch inflation-feeding activity.

Of interest to investors, the sectors with the most job gains were the leisure and hospitality and healthcare industries, both of which had been hard hit during the pandemic, and in government, where employment levels are still 2% below where they stood in February 2020.

Take Away

“To be clear, strong wage growth is a good thing,” Powell said this week. “But for wage growth to be sustainable, it needs to be consistent with 2% inflation.”

The accelerated pace of job growth in November, coupled with upwardly revised October statistics, makes clear to the markets the persistent challenge facing the Federal Reserve. The central bank has repeated that it needs to see some slack in the labor market in order for inflation to fall. This could come from reduced labor demand or increased labor supply, or both.

Choices Presented to Voters on Ballots are Presented to Investors as Opportunities

Posted on by phoffman@channelchek.com
Image Credit: Joe Shlabotnik (Flickr)

The Consequences of this Year’s Voting Should Create Opportunity for Investors

Once inconceivable in most voting districts throughout the U.S., ballots across the country this year will ask voters to decide on gambling measures, drug laws, and extra taxes based on defined demographics. While this is of interest to investors as it shows how trends are forming or continuing and can point to more potential for growth. Of the 130 ballot measures being decided upon on Tuesday, many will alter spending patterns and bolster industries.

What’s Being Decided Upon

Each year a number of states, including Maryland and Arkansas, are asking voters to decide upon legalizing recreational marijuana. Fully five states could move toward ending the use of involuntary prison labor. Nebraska and Nevada are asking voters if they should increase the minimum wage statewide. Gambling, firearms, and immigration are also the subject of state-level referendums.

A proposition in California would legalize online sports betting in that large potential market. Gaming companies, including DraftKings (DKNG) and FanDuel (DUEL) have poured nearly $160 million into the measure. It is not expected to pass, if it does, the news may cause a rally in these and other online gambling companies. Over $375 million has been spent by supporters and those against this measure.

Also being decided by California’s voters is a proposition that would raise taxes on personal incomes of $2 million or more. The revenue would be set aside to fund the state’s electric-vehicle production and help prevent wildfires. This is a very contentious measure that pit many from the same political party against each other.

In general environmental groups and companies perceived to benefit from a quicker evolving EV infrastructure support the “yes” campaign. Governor Newsom, and the California Teachers Association, a powerful state union, have joined business groups to oppose the measure, saying it would benefit a select number of large corporations as they transition to electric vehicles.

Recreational weed in Maryland? The pollsters seem to think it stands a good chance of passing. There are four other states (Arkansas, Missouri, North Dakota and South Dakota) where recreational cannabis is also on the ballot, those outcomes won’t be known until after the votes are counted.

To date, 19 states and the District of Columbia have legalized the adult recreational use of marijuana. Colorado could become the second state behind Oregon to legalize the personal use of psilocybin, the active ingredient in psychedelic mushrooms and other plant-based hallucinogens.

Massachusetts voters get to decide if they raise their income taxes by 4% if they have personal incomes of $1 million or more. This would leave the total rate for that bracket to 9%. Should this pass and bring in additional funds, they are earmarked for education and transportation.

Voters in five states will weigh whether to explicitly outlaw involuntary servitude as part of the punishment for a crime. Alabama, Louisiana, Oregon, Tennessee, and Vermont will all consider these questions on the topic; there is a growing movement to change the 13th Amendment so it no longer allows slavery as a form of criminal punishment. This could potentially benefit the industry in these states.

On immigration, Ohio voters are considering whether to ban all local governments from allowing noncitizens to vote. San Francisco and New York have passed laws allowing noncitizens to vote for local offices and ballot measures. These face legal challenges.

Elsewhere, ballot measures will ask voters whether to extend certain benefits to immigrants in the country illegally, including the ability to obtain a driver’s license in Massachusetts and pay in-state college tuition in Arizona.

Take Away

They say elections have consequences. As various states elect to adopt or deny changes in the running of their state, investors may be able to position themselves to benefit from trends, changes, and additional funds being made available.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.wlwt.com/article/election-results-2022-ohio-kentucky-indiana-senate-governor/41781051

https://www.wsj.com/articles/midterm-elections-2022-results-ballot-measures-referenda-11667864143

https://www.wcvb.com/article/voter-information-massachusetts-election-2022-midterm/41890411

https://www.cnbc.com/2022/11/04/draftkings-shares-tumble-after-monthly-users-fall-short-of-estimates.html

Is Leisure the Overlooked Market Sector?

Posted on by phoffman@channelchek.com
Image Credit: Asad Photo Maldives (Pexels)

Travelers Gonna Travel!– Travel & Leisure Sector May Ignore the Recession

Economic activity in the U.S. contracted during the first half of the year. At the same time, inflation is running at 40-year highs. Investors looking to keep their money productive with reduced risk have focused on consumer staples and companies providing necessary services where demand isn’t impacted much by price. This is what experienced investors do when the economy falters. But this economy seems a bit different than previous periods of shrinking economic activity and rising prices. Jobs are still plentiful, and one industry, with a lot of pent-up demand leftover from the pandemic, is gearing up to exceed all expectations. That sector is leisure. We take a look below at the potential strength in the industry, where opportunities may be found, and how you could reduce timing risk with stocks on your shopping list.

Current State

More than half of Americans see leisure travel as a budget priority right now; in fact, 62% of Americans took at least one overnight trip between mid-May and mid-August. This is according to the latest The State of the American Traveler report compiled by Destination Analysis. Consumers continue to prioritize experiences over alternatives in their budget. As the U.S. Moves out of Fall and into the colder months, it appears the trend will continue. Chuck Artillio is co-owner of SinglesSki.com, winter-oriented travel, and leisure company. He told Channelchek, “Last year at this time, business was robust, yet bookings, as we stand now for the coming season, are already up over 100%.” Artillio added, “I’ve never seen anything like this before.”

The Destination Analysis survey also expects industrywide strength in demand for travel and leisure services in the last quarter of the year. The results show Fall and early Winter trip expectations are high. Over a quarter of Americans expect to take a trip in either October (26.6%), November (24.8%) or December (28.4%). This is up from June when 20% said they expected to take a trip in the fourth quarter of 2022.

Source: US Global Investors

The survey indicates that typical holiday travel includes visiting friends & family as the top driver for late year. However, second on the list of purposes for travel is the desire to return to a destination, followed by general atmosphere, and food & cuisine.

Source: US Global Investors

The survey produced hard data that showed Americans continue to prioritize having fun and relaxation when traveling. This, of course, can mean different things to different people. The majority said being in a quiet/peaceful location (82.5%) followed by beach time (69.7%), chilling-out poolside (67.3%), enjoying culinary experiences (65.6%), and luxury hotel experiences (60.4%).

Do Expectations Provide Opportunities?

An industry research report published this week titled, Entertainment & Leisure Industry Report: Ideas For Your Investing Shopping List, contains some ideas for interested investors. The authors of the leisure industry report include Michael Kupinski, Director of Research at Noble Capital Markets. Overall, Kupinski and Noble’s research associates find the current state of the economy as one that provides a “discount rack” of stocks that can weather a further downturn and may be the first to rise as the recovery seems imminent. He provides information and careful analysis on some stocks that he believes have favorable attributes, go here for in-depth details of these companies.

The analysts suggest investors develop a shopping list and concede that recognizing a turning point in market direction is the “hard part.” But they have suggestions for that as well. These include nibbling at the targets on your list to scale in over a period of time. This averaging in to stocks on your shopping list will lower the risk of picking one day to pile in, which may turn out to be bad timing.

Take Away

Down markets bring opportunity. They always have, and there is no reason to believe this time will be different. Finding sectors with promise, as the travel and leisure sector is now showing, then diving into research to select those in the sector with the most promise, followed by a decision to average in to the market, is one recognized way to put yourself in a position to benefit from the current “discount rack” that many stocks now seem to be on.

Paul Hoffman

Managing Editor, Channelchek