Category: Markets

Can Algorithmic Trading Continue to Expand?

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Balanced section.)

The use of algorithmic robots to trade stocks has grown rapidly in recent years.  Algorithmic trading refers to transactions that allow investors to establish specific trading rules that are automatically executed by computer.  A report by Trading Type estimates that the global algorithmic trading market will increase by 11% annually between 2019-2024 reaching a level of $18.8 billion.  Select USA estimates that roughly 75% of shares traded on U.S. stock exchanges come from automatic trading systems.  Once relegated to buy and sell limit orders, algorithmic trading has expanded into data mining algorithms that turn news events into trades in real time.  An increase in news reports with the words “trade tension”, for example, could result in an automatic order to sell U.S. stocks with a large exposure to China.  Is algorithmic trading an investment tool that can allow individual traders to quickly take advantage of market inefficiencies?  Or, does algorithmic trading make the market less stable and in fact create market inefficiencies?

Can Algorithmic Trading Continue to Expand?

(Note: companies that
could be impacted by the content of this article are listed at the base of the
story [desktop version]. This article uses third-party references to provide a
bullish, bearish, and balanced point of view; sources are listed after the
Balanced section.)

The use of algorithmic robots to trade stocks has grown rapidly in recent years.  Algorithmic trading refers to transactions that allow investors to establish specific trading rules that are automatically executed by computer.  A report by Trading Type estimates that the global algorithmic trading market will increase by 11% annually between 2019-2024 reaching a level of $18.8 billion.  Select USA estimates that roughly 75% of shares traded on U.S. stock exchanges come from automatic trading systems.  Once relegated to buy and sell limit orders, algorithmic trading has expanded into data mining algorithms that turn news events into trades in real time.  An increase in news reports with the words “trade tension”, for example, could result in an automatic order to sell U.S. stocks with a large exposure to China.  Is algorithmic trading an investment tool that can allow individual traders to quickly take advantage of market inefficiencies?  Or, does algorithmic trading make the market less stable and in fact create market inefficiencies?

Should investors switch to an underperforming sector?

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bullish, bearish, and balanced point of view; sources are listed after the
Balanced section.)

It’s been a good run for growth sectors and indicators remain favorable, but things can change quickly.

2019 was another good year for the stock market with most major indices (DJIA, SP500, Russell 2000) up 25-30% entering the last week of the year.  Almost all market subsectors reported strong results in response to continued economic strength, lower interest rates, and a lessoning of trade tension.  However, looking at the performance by subsector, there was one clear winner (technology stocks) and one clear loser (energy). 

Technology Select Sector SPDR Fund (XLK):	Up 49.8%
Financial Select Sector SPDR Fund (XLF):	Up 30.7%
Communication Service Select Sector SPDR Fund (XLC):	Up 29.8%
Industrial Select Sector SPDR Fund (XLI):	Up 28.3%
Consumer Discretionary Select Sector SPDR Fund (XLY):	Up 28.0%
Utilities Select Sector SPDR Fund (XLU):	Up 22.5%
Health Care Select Sector SPDR Fund (XLV):	Up 20.6%
Energy Select Sector SOPDR Fund (XLE):	Up 6.6%

As investors turn their attention to 2020, one question remains – will the hot sectors of 2019 continue their dominance (Bull) or is it time for the underperformers to have their day in the sun (Bear).

Cryptocurrency and the Howey Test: Are They Securities?

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Are Cryptocurrencies securities? Should cryptocurrencies be regulated? Why? If so, by whom? These are just some of the questions with which regulators and the cryptocurrency industry are struggling. One of the key drivers behind the success of blockchain is its libertarian, anti-establishment set of beliefs. Fitting in with the regulatory bodies would seem to go against the beliefs upon which the blockchain ecosystem was built. (1) Historically, the so-called Howey Test has been used by the Securities and Exchange Commission (SEC) to determine if something is a security and, therefore, subject to securities regulation. (2) In 1946, the Supreme Court in S.E.C.
v. W.J. Howey Co. stated that “an investment contract for the purposes of the Securities Act mean a contract, transaction, or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.” (3) The SEC has used the Howey test to declare various items as securities, significantly outside the typically stock and bond realm. In fact, Howey involved a Florida citrus grove farmer who was selling portions of the acreage with investors to immediately lease back the acreage to Howey. (2)  Nonetheless, cryptocurrency still lacks a single regulatory body. (3)

Should the SEC Relax Requirements for Accredited Investors?

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In June of 2019, the Securities and Exchange Commission (SEC) issued a concept release asking for comments on ways to simplify, harmonize, and improve the exempt offering framework to promote capital formation and expand investment opportunities while maintaining investor protections.  Under the Securities Act of 1933, every offer and sale of securities must be registered with the SEC unless an exemption from registration is available.  The release addresses concepts applicable to exempt offerings, including accredited investor qualification.  The SEC is interested in whether additional categories should be included as accredited investors, whether financial threshold requirements should be revised, whether alternative sophistication measures should be used to qualify investors as accredited, and whether a broader range of investment opportunities should be made available to non-accredited investors.  While the current framework permits non-accredited investors limited access to unregistered offerings, investments in exempt offerings in which non-accredited investors participated represented less than 1% of investment in all exempt offerings in 2018.  Below we examine the bull and bear arguments for expanding the definition of an accredited investor.

Tuesday, December 10, 2019

1-800-Flowers.com (FLWS)

Flowers At A Discount

1-800-FLOWERS.COM, Inc. is the leading provider of gourmet and floral gifts for all occasions. For nearly 40 years, 1-800-FLOWERS® has been helping deliver smiles for customers with gifts for every occasion, including fresh flowers, premium, gift-quality fruits and other gourmet items from Harry & David®, popcorn and specialty treats from The Popcorn Factory®; cookies and baked gifts from Cheryl’s®; premium chocolates and confections from Fannie May®; gift baskets and towers from 1-800-Baskets.com®; premium English muffins and other breakfast treats from Wolferman’s; carved fresh fruit arrangements from FruitBouquets.com; and top quality steaks and chops from Stock Yards®. The Company’s BloomNet® international floral wire service provides a broad range of quality products and value-added services designed to help professional florists grow their businesses profitably.

Michael Kupinski, Director of Research, Noble Capital Markets, Inc.

Refer to full report for price target, fundamental analysis and rating.

Notes from a recent Midwest marketing trip. This report highlights notes from investor meetings in the Midwest with William Shea, Treasurer and CFO, and Joe Pititto, Sr. VP of Investor Relations and Corporate Communications.

Giving some gains back? Investors seem to try to grapple with the recent 39% pullback in the shares from an April high. The pullback follows an 86% increase in the shares from December 2018 to…

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This Company Sponored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Should Online Retailers Open Neighborhood Shops?

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E-commerce shopping has experienced a steady increase in customer count and online sales each year since before the turn of the millennium. All U.S. Retail sales now add to $5.4 trillion in economic activity. Currently, 11.2% of these sales are from online purchases. Despite digital retailers being able to attract more sales each year, there is a growing trend from “clicks to bricks.” Stores that have historically existed only as cyber shops are now appearing on Main Street, complete with signage, stock clerks, and in most cases, cashiers. Internet retail is still a disruptive technology, does it make sense for successful online stores to also develop a presence as a more traditional retail outlet?

Taking Stock of Index Funds

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Recently, Morningstar reported that US stock index funds and exchanged traded funds (ETFs) now hold more assets than the traditional actively managed funds, with passive funds making up 50.2% of the US stock mutual fund pie, while actively managed funds made up 49.8%. (1) This uncharted territory has intensified the calls from some very astute investors, including such names as Carl Icahn, Bill Ackman, Seth Klarman, and Michael Burry, that there is an “index fund bubble” that will not end well for investors. The “Big Three” index fund managers include Vanguard with a 51% share of the market, BlackRock with 21%, and State Street Global with 9%. With fees for index funds approaching zero in some cases, it is unlikely new competitors will reduce this concentration.

Sins of Omission

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With growing interest in socially responsible investing and corporate awareness of environmental, social, and governance (ESG) issues, should investors shun corporations that are branded “sin” stocks? Typically associated with the alcohol, tobacco, gaming, and firearms industries, the number of sin stocks appears to be growing as investors weigh environmental, human rights, political positions, and other issues into their investment decisions. Should investors be more concerned about earning appropriate risk-adjusted returns rather than making moral judgments? For investors willing to indulge in a little vice, we examine the bull and bear case for four sectors generally left out of socially responsible portfolios.

Waning Stock Buybacks: Should Investors be Worried?

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On April 3^rd, Channelchek posted an article entitled “Stock Buybacks: Good, Evil, or Maybe Something In Between?” highlighting not only the significant rise in buybacks, but also the increasing concerns voiced by various parties regarding stock buybacks. Now, in a note to clients, Goldman Sachs recently warned that corporate buybacks are “plummeting” and it could have a big impact on the market. (1) According to the investment bank, in the second quarter of 2019 the S&P 500 share buybacks totaled $161 billion, about 18% less than the first quarter. Year-to-date, buybacks are down some 17%. For 2019, Goldman Sachs estimates total buybacks will drop 15% to $710 billion, with an additional 5% decline in 2020. (1) Assuming Goldman’s forecast is accurate, should investors be concerned? 

Show Me the Money: Should College Athletes Play for Pay?

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On September 30^th, California Governor Gavin Newsom signed into law Senate Bill 206, the so-called “Fair Pay to Play Act.” The law allows college athletes to receive compensation for use of their name, image, or likeness; to hire agents; and to be paid for endorsements. The law goes into effect January 1, 2023. This bill is against current NCAA rules, which ban players from receiving any compensation aside from scholarships. Under existing NCAA rules, athletes cannot execute any endorsement deals or accept payment for use of their images. Notably, however, SB 206 would still prohibit schools from paying athletes. Since Governor Newsom’s signing, lawmakers in 11 other states, as well as at least one US Congressman, have proposed similar legislation.

Developing a Research Driven Approach: an Investment Bank’s Perspective Webinar Noble Capital Markets and OTC Markets Group invite you to watch this webinar discussing the importance of third-party research. Learn why establishing a dialogue with your investment community holds a significant purpose and how to achieve your company’s mission through institutional-quality research. Key Topics: The new capital markets environment for micro-caps – following the European model Corporate messaging – delivered with passion but without promotion Avoiding the quid pro quo in a sell-side research/investment banking relationship Why it’s become increasingly difficult to attract Wall Street analysts Misperceptions of company sponsored research

Who Is to Blame for the Weak Manufacturing Number and the Market Crash?

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The stock market declined 800 points or 3% in the first two days of the fourth quarter. The decline follows a report that the ISM US manufacturing purchasing managers’ index declined to the lowest level in ten years. President Trump blamed the Fed for the disappointing numbers pointing to a strong dollar as a reason for decreased exports. Other pundits point to the trade war with China and the uncertainty that has created as the cause for trade issues. Is the market decline due to political issues that could be reversed (bull case), or is it due to more endemic causes that could drag the market down even further (bear case)?