[ad_1]
Berkshire Hathaway Sold U.S. Bancorp, Bank of New York Stock. Here’s What It Bought.
[ad_2]
-
Order Reprints
-
Print Article
Tag: Diversified Holding Companies
-
Warren Buffett’s Berkshire Hathaway switched stakes in two banks, and the stocks head in opposite directions
[ad_1]
Warren Buffett’s Berkshire Hathaway Inc. made a change in banking targets for investment, sending two banks’ shares in opposite directions Monday afternoon.
Capital One Financial
COF,
+3.22%
shares rallied more than 5% in after-hours trading while Bank of New York Mellon Corp.
BK,
+1.37%
sold off in the extended session Monday after filings with the Securities and Exchange Commission showed Berkshire
BRK.B,
+0.32%
BRK.A,
+0.96%
switched its position. The quarterly filing showed a new stake of 9.9 million shares in Capital One as Berkshire sold off its 25.1 million-share stake in Bank of New York Mellon.At Berkshire’s annual meeting, Buffett weighed in on recent scares for regional banks.
“In terms of owning banks, events will determine their future and you’ve got politicians involved, you’ve got a whole lot of people who don’t really understand how the system works,” he said.
Other changes included an increased stake in HP Inc.
HPQ,
+2.32% ,
which grew by 16% to about 121 million shares. That growth was part of a combination of the holdings of General Re Corp., which Berkshire has owned since 1998 but had previously reported its holdings separately as part of New England Asset Management Inc.“Beginning with the Form 13F to be filed later today, the holdings of Gen Re will be included in Berkshire’s 13F filing,” Berkshire said in a news release earlier Monday. “The NEAM Form 13F filings will no longer include Gen Re’s holdings but they will continue to include NEAM client holdings where NEAM is acting as an investment manager.”
Other holdings affected by that change included Apple Inc.
AAPL,
-0.29% ,
Bank of America Inc.
BAC,
+2.07%
and Chevron Corp.
CVX,
+0.37% ,
Berkshire said in its news release.Other stocks that Berkshire made moves with during the first three months of the year included the former Restoration Hardware — RH
RH,
+1.89%
shares fell 3% after Berkshire disclosed selling off its 2.4 million stake. Berkshire also officially reported selling of its 8.3 million stake in Taiwan Semiconductor Manufacturing Co.
TSM,
+2.67% .[ad_2]
-
Siemens Energy 2Q Rev EUR8.03B
[ad_1]
By Giulia Petroni
Siemens Energy on Monday said that net loss narrowed in the second quarter and adjusted the outlook for fiscal 2023.
The German energy company said it registered a quarterly loss of 189 million euros ($205.04 million) in the period ended March 31, compared with a loss of EUR256 million in the year earlier.
Revenue came in roughly 24% higher on year at EUR8.03 billion from EUR6.58 billion, while the order intake rose sharply to EUR12.26 billion from EUR7.91 billion in the previous year.
Siemens Energy said strong orders reflect its favorable positioning across markets for energy transition technologies, such as power generation and transmission. Profit though continued to be negatively impacted by supply-chain challenges, the ramp-up of the offshore activities as well as onerous projects at Siemens Gamesa.
Looking at fiscal 2023, the company said it now expects a comparable revenue growth between 10% and 12% from previously between 3% and 7%.
Profit margin before special items is instead seen around the low end of the guidance range of 1% to 3% due to Siemens Gamesa’s poor performance in the first half-year.
Net loss is expected to widen from the prior fiscal year’s level of EUR712 million by up to a low-triple-digit million euro amount.
Write to Giulia Petroni at giulia.petroni@wsj.com
[ad_2]
-
Tesla, Netflix earnings due: Cheaper cars, cheaper content, more workout videos, as ‘earnings recession’ seems likely
[ad_1]
For anyone watching Netflix, the streaming services’ recent moves to cut costs could mean fewer films, lower-budget shows and — depending on your subscription — more ads. For anyone buying a Tesla, its moves to cut prices will make it easier on customers, but harder on profit-seeking investors.
With both companies reporting results this week, Wall Street will get a look at who still wants a Tesla, amid growing competition, and what kind of growth and viewership anyone can expect from Netflix, as it recalibrates its streaming ambitions and focuses more on profitability following years of rapid growth.
Netflix Inc.
NFLX,
-2.18% ,
which reports first-quarter results on Tuesday, is trying to crack down on shared accounts, and analysts polled by FactSet see subscriptions coming in well below the average. However, BofA analyst Jessica Reif Ehrlich said that first-quarter results would likely “mark the low point” of the year, “reflecting the initial impact of password sharing efforts in select markets.”Netflix will report as shareholders’ growing influence over the streaming universe raises questions over what shows and films get streamed, and for how long, as Wall Street tries to wring more bottom-line gains from an industry that boomed before and during the pandemic but burned cash and got crowded in the process. Netflix, along with Walt Disney Co.
DIS,
-0.93% ,
have laid off employees, while Warner Brothers Discovery Inc.
WBD,
-1.85%
fuses its streaming holdings together.“We expect Netflix to continue reining in spending, particularly by seeking alternatives to its past practices,” Wedbush analysts Alicia Reese and Michael Pachter wrote in a research note on Thursday. “The company appears to us to be producing fewer feature length films, which we have always viewed as a poor investment, and appears focused on lower cost television content.”
“We are equally encouraged that Netflix is looking at low-cost content like workout videos, which we believe will present a lot of value to subscribers at very low cost,” they added later.
The analysts said that they felt Netflix was well positioned, as other streamers rethink their approach to expansion and financials. And they said Netflix “should be valued as an immensely profitable, slow-growth company.” They also said that Netflix’s decision to launch a cheaper ad-supported option was a “great decision” after growth stalled in the U.S. and Canada and the company’s business in Europe, the Middle East and Africa reaches the saturation point.
For Tesla Inc.
TSLA,
-0.48% ,
which reports results on Wednesday, the focus for investors will be on price-cutting and its impact on margins. Still, Potter, an analyst at Piper Sandler, has said Tesla is on a “warpath” and “maintaining its aggressive approach to pricing,” and said investors “should expect relentless price cuts to continue.”Base prices for Tesla’s Model S and Model X have fallen by around $5,000, MarketWatch has noted, as the electric-vehicle maker tries to stimulate demand. The company is also selling a more affordable Model Y SUV.
“Tesla concerns on pricing and a race to the bottom persisted as general sentiment on the stock is souring given recent price cuts after a brief period of stabilization,” TD Cowen analyst Jeffrey Osborne said in a note.
Tesla will report as the Biden administration tries to take a harder stance on auto pollution. The EPA recently proposed new emissions restrictions intended to hasten electric-vehicle usage, by incrementally curtailing tailpipe emissions each year for vehicle model years 2027 through 2032. However, some analysts said the measures would push prices higher for regular and electric vehicles.
This week in earnings
The first-quarter earnings reporting season will pick up steam in the week ahead, with 60 S&P 500 companies, including six from the Dow Jones Industrial Average
DJIA,
-0.42% ,
reporting quarterly results, according to FactSet. Those companies will report as Wall Street analysts remain pessimistic about results for the quarter, and the prospect of another so-called “earnings recession” in which profits contract for at least two straight quarters.“As of today, the S&P 500 is reporting a year-over-year decline in earnings of -6.5% for the first quarter, which would mark the largest earnings decline reported by the index since Q2 2020 (-31.6%) and the second straight quarter the index has reported a decline in earnings,” FactSet Senior Earnings Analyst John Butters said in a report on Friday.
After investors cheered JPMorgan Chase & Co.’s
JPM,
+7.55%
quarterly results on Friday — despite Silicon Valley Bank’s collapse and broader recession anxieties — other banking giants, like Bank of America Corp.
BAC,
+3.36% ,
Goldman Sachs Group Inc.
GS,
+1.44%
and Morgan Stanley
MS,
+1.19%
report during the week ahead. So does Johnson & Johnson
JNJ,
-0.16% ,
after it agreed to pay as much as $8.9 billion to settle scores of lawsuits alleging that its talc baby powder was linked to cancer. Charles Schwab Corp.
SCHW,
-1.40% ,
United Airlines Holdings Inc.
UAL,
-0.71%
and AT&T Inc.
T,
-0.15%
also report during the week.The calls to put on your calendar
Supply-chain update, anyone? Shipping rates have fallen. Labor tensions have risen. Railroad safety is under scrutiny. Elsewhere in that industry, hedge funders are applying pressure. Memories of 2021’s supply-chain meltdown are still fresh after it led to shipping delays and put the low-work labor that fuels much of that distribution network under a spotlight.
At any rate, trucking and logistics company J.B. Hunt Transportation Services Inc.
JBHT,
+1.23%
reports on Monday, while railroad giant CSX Corp.
CSX,
+0.13%
reports on Thursday. Both companies report after a drop-off in demand for goods last year, as inflation remolded consumers’ buying habits. They also report after rail workers threatened to strike over what they said were inadequate sick-time policies. More recently, a group representing the terminal operators at the ports of Los Angeles and Long Beach alleged that dockworkers were disrupting daily operations at the two massive import gateways, as the workers’ union and the terminal operators try to work out a contract. The quarterly financial reports and earnings calls will offer a look at what the year ahead has in store.The number to watch
Credit-card transactions, charge-offs: Credit-card providers Discover Financial Services
DFS,
+0.68%
and American Express Co.
AXP,
+0.57%
report Wednesday and Thursday, respectively. The companies will report after Discover took a hit in January after it forecast credit-card net charge-offs — a measure of debt a company doesn’t think it’ll get back — that were worse than what Wall Street expected. Similar to the results from the big banks, the results from American Express and Discover will tells us how much consumers are still spending, and whether more are falling behind on their bills, as recession anxieties prevail.[ad_2]
-
Buffett is buying in Japan. This overseas value-stock fund is also making bets there. Is it a good way to diversify?
[ad_1]
After a long period of underperformance when compared with the U.S. equity market, stocks in other countries are holding their own this year. One way to lower your overall risk with real diversification is to add exposure to an active international management style that doesn’t mirror a broad stock index.
One example is the $2.7 billion Columbia Overseas Value Fund COSZX, which is rated four stars out of five by Morningstar in its Foreign Large Value category. Fred Copper and Daisuke Nomoto co-manage the fund and described…
[ad_2]
-
Coinbase, Newmont, Tilray, Hexo, Virgin Orbit, and More Stock Market Movers
[ad_1]
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/stock-market-movers-8b6c2e7b
[ad_2]
-
U.S. bank stocks end with solid gains as 11 banks pledge $30 billon to First Republic
[ad_1]
U.S. bank stocks ended regular trading with solid gains on Thursday, as banks announced a $30 billion deposit capital infusion for First Republic Bank and as Treasury Secretary Janet Yellen cited the strength of the financial system.
The 11 banks confirmed a report from the Wall Street Journal and others about providing financial support for First Republic Bank FRC.
U.S….
[ad_2]
-
Berkshire Hathaway’s Buy in Truck-Stop Group Pays Off
[ad_1]
Berkshire Hathaway
investors may soon get a read on one of the company’s better deals in the past decade—a 2017 purchase for nearly $3 billion of a 38.6% interest in Pilot Flying J, the country’s leading operator of truck stops.The Berkshire Hathaway (ticker: BRK/A, BRK/B) stake in the company will rise to 80% in the current quarter under the terms of the original agreement reached by CEO Warren Buffett with the founding Haslam family, which will retain the remaining 20% stake.
[ad_2]
-
GE’s Larry Culp Has a Message for Investors
[ad_1]
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/ge-larry-culp-investors-annual-letter-83f4e20b
-
Order Reprints
-
Print Article
[ad_2]
-
Order Reprints
-
Robinhood accidentally sold short on a meme stock and lost $57 million
[ad_1]
Robinhood Markets Inc. accidentally sold short on a small stock as it went on a meme-like ride in December, costing the trading app more than the stock’s current market capitalization, executives disclosed Wednesday.
Cosmos Health Inc.
COSM,
+0.80%
shares nearly tripled and experienced record trading volume more than seven times any previous day on Dec. 16, as online traders looking for heavily shorted companies accused exchanges of not allowing them to sell their shares into the updraft. Robinhood
HOOD,
-0.76%
executives admitted Wednesday that their trading app actually became part of the frenzy, and ended up down $57 million because of it.In an earnings call, Robinhood Chief Executive Vlad Tenev noted a “processing error on a corporate action” that was “really disappointing,” leaving Chief Financial Officer Jason Warnick to spell it out.
“A processing error caused us to sell shares short into the market, and although it was detected quickly, it resulted in a loss of $57 million as we bought back these shares against a rising stock price,” Warnick said.
When Cosmos Health effected a 1-for-25 reverse stock split that Friday morning in December, just hours after announcing its intentions, trading portals did not appear prepared. As MarketWatch reported on the day, TD Ameritrade publicly told Twitter users that the company had not received the newly issued shares to dole out to their clients as the stock spiked. A Charles Schwab Corp.
SCHW,
-0.71%
spokesperson emailed MarketWatch the next week to say that the distributions were all taken care of as of the end of the next business day, a Monday.The stock gains didn’t last through that Monday, though — after reaching as high as $23.84 on the day that Robinhood was apparently buying, they lost it all in after-hours trading and headed even lower after Cosmos Health announced an equity offering.
Shares closed Wednesday at $5.04, which gives Cosmos Health a market cap of about $53 million, according to FactSet — less than Robinhood executives said they lost on the Dec. 16 trades.
Robinhood shares were up in after-hours trading Wednesday after the trading app reported a fourth-quarter miss, but said the company would seek to buy back shares sold to disgraced cryptocurrency-exchange founder Sam Bankman-Fried and executives would forego $500 million in stock compensation. Robinhood stock has declined 21.8% in the past 12 months, as the S&P 500 index
SPX,
-1.11%
has dropped 8.9%.[ad_2]
-
Adani Offshore Investor Has Links to Adani Family
[ad_1]
[ad_2]A short seller’s allegations of fraud by Gautam Adani’s conglomerate center on whether his family wielded influence over Mauritius-based investors
Source link -
3M to Cut 2,500 Manufacturing Jobs >MMM
[ad_1]
By Colin Kellaher
3M Co. on Tuesday said it plans to cut about 2,500 manufacturing jobs around the world, as the conglomerate braces for macroeconomic challenges this year.
The St. Paul, Minn., company said the job cuts, which are based on what it is seeing in its end markets, are needed to align with adjusted production volumes.
3M joins a raft U.S. companies that are slashing staff at the start of the year amid waning demand and weaker revenue.
3M, which has about 95,000 employees according to data from FactSet, said it expects to book a pretax restructuring charge of $75 million to $100 million in the first quarter.
Write to Colin Kellaher at colin.kellaher@wsj.com
[ad_2]
-
Tanking Biotech Stocks Will Mean a Big Year for Deals. Who Could Benefit.
[ad_1]
Nearly two years after biotechnology stocks began to tumble, executives at small and midsize companies in the space are finally accepting that share prices aren’t bouncing back anytime soon.
With reality setting in, it’s a buyer’s market for companies looking for acquisitions and partnerships, according to many of the pharmaceutical and medical technology executives who gathered at this year’s
J.P. Morgan
healthcare investor conference, which wrapped up in San Francisco on Thursday.[ad_2]
-
These 20 stocks were the biggest winners of 2022
[ad_1]
Even during a year in which the S&P 500 index declined 19%, with 72% of its stocks in the red, there were plenty of winners.
Before showing you the list of the best performers in the benchmark index, let’s look at a preview: Here’s how the 11 sectors of the S&P 500
SPX,
-0.25%
performed for the year:Index 2022 price change Forward P/E Forward P/E as of Dec. 31, 2021 Energy 59.0% 9.7 11.1 Utilities -1.4% 18.9 20.4 Consumer Staples -3.2% 21.0 21.8 Health Care -3.6% 17.6 17.2 Industrials -7.1% 18.3 20.8 Financials -12.4% 11.9 14.6 Materials -14.1% 15.8 16.6 Real Estate -28.4% 16.5 24.2 Information Technology -28.9% 20.1 28.1 Consumer Discretionary -37.6% 21.3 33.2 Communication Services -40.4% 14.3 20.8 S&P 500 -19.4% 16.8 21.4 Source: FactSet Maybe you aren’t surprised to see that the energy sector was the only one to increase during 2022. But it might surprise you to see that despite the sector’s weighted price increase of 59%, its forward price-to-earnings ratio declined and remains very low relative to all other sectors.
It might also surprise you that West Texas Intermediate crude oil
CL.1,
+2.69%
gave up most of its gains from earlier in the year:
FactSet
The reason investors are still confident in energy stocks is that oil producers have remained cautious when it comes to capital spending. They don’t want to increase supply enough to cause prices to crash, as they did in the run-up to the summer of 2014, after which prices fell steadily through early 2016, causing bankruptcies and consolidation in the industry.
Now the oil companies are focusing on maintaining supply, raising dividends and buying back shares, as Occidental Petroleum Corp.’s
OXY,
+1.14%
chief executive explained in a recent interview with Matt Peterson. Click here for more about Occidental and the long-term supply/demand outlook for oil.Best-performing S&P 500 stocks of 2022
Here are the 20 stocks in the benchmark index that rose most during 2022, excluding dividends. Proving that there are always exceptions, not all of them are in the energy sector.
Company Ticker Sector Industry 2022 price change Occidental Petroleum Corp. OXY,
+1.14% Energy Oil & Gas Production 117.3% Hess Corp. HES,
+0.68% Energy Oil & Gas Production 91.6% Marathon Petroleum Corp. MPC,
+0.18% Energy Oil Refining/ Marketing 81.9% Exxon Mobil Corp. XOM,
+1.01% Energy Integrated Oil 80.3% Schlumberger Ltd. SLB,
+1.04% Energy Contract Drilling 78.5% APA Corp. APA,
+1.68% Energy Integrated Oil 73.6% Halliburton Co. HAL,
+1.23% Energy Oil & Gas Production 72.1% First Solar Inc. FSLR,
+0.68% Information Technology Semiconductors 71.9% Valero Energy Corp. VLO,
+0.43% Energy Oil Refining/ Marketing 68.9% Marathon Oil Corp. MRO,
+1.08% Energy Oil & Gas Production 64.9% ConocoPhillips COP,
+1.38% Energy Oil & Gas Production 63.5% Steel Dynamics Inc. STLD,
-0.72% Materials Steel 57.4% EQT Corp. EQT,
-0.12% Energy Oil & Gas Production 55.1% Chevron Corp. CVX,
+0.66% Energy Integrated Oil 53.0% McKesson Corp. MCK,
Health Care Medical Distributors 50.9% Cardinal Health Inc. CAH,
-0.46% Health Care Medical Distributors 49.3% EOG Resources Inc. EOG,
+0.69% Energy Oil & Gas Production 45.8% Enphase Energy Inc. ENPH,
-0.20% Information Technology Semiconductors 44.8% Merck & Co. Inc. MRK,
+0.12% Health Care Pharmaceuticals 44.8% Cigna Corp. CI,
+0.19% Health Care Managed Health Care 44.3% Source: FactSet Click on the tickers for more information about the companies.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Don’t Miss: These 20 stocks were the biggest losers of 2022
[ad_2]
-
GE HealthCare Is About to Be Independent. This Is Where the Stock Should Trade.
[ad_1]
To start 2023, investors will have a choice to invest in a brand new $18 billion company with some 50,000 energized employees and a plan to create shareholder value.
To close out 2022, that company—GE HealthCare—is on the road, introducing itself to investors. With each new detail that emerges investors get a better sense of where the new stock should trade.
[ad_2]
-
This fund beats the S&P 500 by using just 75 of its components. Here’s how it works.
[ad_1]
What worked well during the years-long bull market through 2021 — a focus on growth, regardless of price — has ground to a halt this year. The rebirth of the value style of investing — and modest valuations overall — has taken hold.
The approach taken by the Invesco S&P 500 GARP ETF has paid off through both bull and bear markets.
Let’s begin with a 10-year chart comparing total returns with dividends reinvested for the Invesco S&P 500 GARP ETF
SPGP,
+0.67%
and the SPDR S&P 500 ETF Trust
SPY,
+0.78% ,
which tracks the benchmark S&P 500:
FactSet
So far this year, SPGP is down 12%, while SPY is down 16%. But the long-term chart shows significant and consistent outperformance for SPGP, even during the bull market.
The S&P 500 GARP Index
GARP stands for “growth at a reasonable price.” SPGP tracks the S&P 500 GARP Index, which is reconstituted and rebalanced twice a year, on the third Fridays of June and December. The next change occurs Dec. 16.
S&P Dow Jones Indices assigns a growth score to each component of the S&P 500 by averaging the three-year compound annual growth rate (CAGR) for earnings and sales per share.
The top 150 components of the S&P 500 by growth score are eligible for inclusion in the GARP index. Those 150 are ranked by “quality/value composite score,” which is the average of these three ratios:
- Financial leverage — total debt to book value.
- Return on equity — trailing 12 months’ earnings per share divided by book value per share.
- Earnings-to-price — 12 months’ earnings per share divided by the share price.
The top 75 of the 150 by QV rankings are then included in the GARP index and weighted by the growth score, with portfolio weightings ranging from 0.5% to 5%.
There is a weighting limitation of 40% to any one of the 11 S&P sectors.
Addressing concentration risk
The benchmark S&P 500 Index
SPX,
+0.75%
is weighted by market capitalization, which means it is more heavily concentrated than you might expect — success is rewarded, with rising stocks more heavily weighted over time.That can backfire during a bear market, with Amazon.com Inc.
AMZN,
+2.14%
down 47% and Tesla Inc.
TSLA,
-0.34%
down 51% this year, to name two prominent examples.Looking at the SPDR S&P 500 ETF Trust
SPY,
+0.78% ,
which is the first and largest exchange traded fund and tracks the benchmark index by holding all of its components, six companies (Apple Inc.
AAPL,
+1.21% ,
Microsoft Corp.
MSFT,
+1.24% ,
Amazon, both common share classes of Alphabet Inc.
GOOGL,
-1.30%
GOOG,
-1.26%
and Berkshire Hathaway Inc.
BRK.B,
+0.06%
) make up 19.2% of the portfolio.That percentage has come down this year, but a lot of risk remains concentrated in a handful of companies. (Apple alone makes up 6.4% of the SPY portfolio. Tesla is now the ninth-largest holding, making up 1.4% of the portfolio.)
One way to address high concentration in an index fund is to use an equal-weighted approach, which Mark Hulbert recently discussed.
For the Invesco S&P 500 GARP ETF, the underlying index’s selection methodology has resulted in much less portfolio concentration than we see in SPY, with the top five holdings making up 10.9% of the portfolio.
Here are the 10 largest holdings of SPGP:
Company Ticker Share of portfolio Regeneron Pharmaceuticals, Inc. REGN,
+0.15% 2.49% Cigna Corporation CI,
+0.39% 2.26% Everest Re Group, Ltd. RE,
+0.24% 2.21% Vertex Pharmaceuticals Incorporated VRTX,
+1.18% 1.98% D.R. Horton, Inc. DHI,
-0.39% 1.97% Expeditors International of Washington, Inc. EXPD,
+0.23% 1.96% Incyte Corporation INCY,
+0.10% 1.92% Goldman Sachs Group, Inc. GS,
-0.51% 1.83% Ebay Inc. EBAY,
+1.67% 1.81% Pfizer Inc. PFE,
+3.07% 1.73% Source: FactSet Click on the tickers for more information about any company, ETF or index in this article.
You should also read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.
Don’t miss: 10 Dividend Aristocrat stocks expected by analysts to rise up to 54% in 2023
[ad_2]
-
20 dividend stocks with high yields that have become more attractive right now
[ad_1]
Income-seeking investors are looking at an opportunity to scoop up shares of real estate investment trusts. Stocks in that asset class have become more attractive as prices have fallen and cash flow is improving.
Below is a broad screen of REITs that have high dividend yields and are also expected to generate enough excess cash in 2023 to enable increases in dividend payouts.
REIT prices may turn a corner in 2023
REITs distribute most of their income to shareholders to maintain their tax-advantaged status. But the group is cyclical, with pressure on share prices when interest rates rise, as they have this year at an unprecedented scale. A slowing growth rate for the group may have also placed a drag on the stocks.
And now, with talk that the Federal Reserve may begin to temper its cycle of interest-rate increases, we may be nearing the time when REIT prices rise in anticipation of an eventual decline in interest rates. The market always looks ahead, which means long-term investors who have been waiting on the sidelines to buy higher-yielding income-oriented investments may have to make a move soon.
During an interview on Nov 28, James Bullard, president of the Federal Reserve Bank of St. Louis and a member of the Federal Open Market Committee, discussed the central bank’s cycle of interest-rate increases meant to reduce inflation.
When asked about the potential timing of the Fed’s “terminal rate” (the peak federal funds rate for this cycle), Bullard said: “Generally speaking, I have advocated that sooner is better, that you do want to get to the right level of the policy rate for the current data and the current situation.”
Fed’s Bullard says in MarketWatch interview that markets are underpricing the chance of still-higher rates
In August we published this guide to investing in REITs for income. Since the data for that article was pulled on Aug. 24, the S&P 500
SPX,
-0.29%
has declined 4% (despite a 10% rally from its 2022 closing low on Oct. 12), but the benchmark index’s real estate sector has declined 13%.REITs can be placed broadly into two categories. Mortgage REITs lend money to commercial or residential borrowers and/or invest in mortgage-backed securities, while equity REITs own property and lease it out.
The pressure on share prices can be greater for mortgage REITs, because the mortgage-lending business slows as interest rates rise. In this article we are focusing on equity REITs.
Industry numbers
The National Association of Real Estate Investment Trusts (Nareit) reported that third-quarter funds from operations (FFO) for U.S.-listed equity REITs were up 14% from a year earlier. To put that number in context, the year-over-year growth rate of quarterly FFO has been slowing — it was 35% a year ago. And the third-quarter FFO increase compares to a 23% increase in earnings per share for the S&P 500 from a year earlier, according to FactSet.
The NAREIT report breaks out numbers for 12 categories of equity REITs, and there is great variance in the growth numbers, as you can see here.
FFO is a non-GAAP measure that is commonly used to gauge REITs’ capacity for paying dividends. It adds amortization and depreciation (noncash items) back to earnings, while excluding gains on the sale of property. Adjusted funds from operations (AFFO) goes further, netting out expected capital expenditures to maintain the quality of property investments.
The slowing FFO growth numbers point to the importance of looking at REITs individually, to see if expected cash flow is sufficient to cover dividend payments.
Screen of high-yielding equity REITs
For 2022 through Nov. 28, the S&P 500 has declined 17%, while the real estate sector has fallen 27%, excluding dividends.
Over the very long term, through interest-rate cycles and the liquidity-driven bull market that ended this year, equity REITs have fared well, with an average annual return of 9.3% for 20 years, compared to an average return of 9.6% for the S&P 500, both with dividends reinvested, according to FactSet.
This performance might surprise some investors, when considering the REITs’ income focus and the S&P 500’s heavy weighting for rapidly growing technology companies.
For a broad screen of equity REITs, we began with the Russell 3000 Index
RUA,
-0.04% ,
which represents 98% of U.S. companies by market capitalization.We then narrowed the list to 119 equity REITs that are followed by at least five analysts covered by FactSet for which AFFO estimates are available.
If we divide the expected 2023 AFFO by the current share price, we have an estimated AFFO yield, which can be compared with the current dividend yield to see if there is expected “headroom” for dividend increases.
For example, if we look at Vornado Realty Trust
VNO,
+1.03% ,
the current dividend yield is 8.56%. Based on the consensus 2023 AFFO estimate among analysts polled by FactSet, the expected AFFO yield is only 7.25%. This doesn’t mean that Vornado will cut its dividend and it doesn’t even mean the company won’t raise its payout next year. But it might make it less likely to do so.Among the 119 equity REITs, 104 have expected 2023 AFFO headroom of at least 1.00%.
Here are the 20 equity REITs from our screen with the highest current dividend yields that have at least 1% expected AFFO headroom:
Company Ticker Dividend yield Estimated 2023 AFFO yield Estimated “headroom” Market cap. ($mil) Main concentration Brandywine Realty Trust BDN,
+2.12% 11.52% 12.82% 1.30% $1,132 Offices Sabra Health Care REIT Inc. SBRA,
+2.41% 9.70% 12.04% 2.34% $2,857 Health care Medical Properties Trust Inc. MPW,
+2.53% 9.18% 11.46% 2.29% $7,559 Health care SL Green Realty Corp. SLG,
+2.25% 9.16% 10.43% 1.28% $2,619 Offices Hudson Pacific Properties Inc. HPP,
+1.41% 9.12% 12.69% 3.57% $1,546 Offices Omega Healthcare Investors Inc. OHI,
+1.23% 9.05% 10.13% 1.08% $6,936 Health care Global Medical REIT Inc. GMRE,
+2.55% 8.75% 10.59% 1.84% $629 Health care Uniti Group Inc. UNIT,
+0.55% 8.30% 25.00% 16.70% $1,715 Communications infrastructure EPR Properties EPR,
+0.86% 8.19% 12.24% 4.05% $3,023 Leisure properties CTO Realty Growth Inc. CTO,
+2.22% 7.51% 9.34% 1.83% $381 Retail Highwoods Properties Inc. HIW,
+0.99% 6.95% 8.82% 1.86% $3,025 Offices National Health Investors Inc. NHI,
+2.59% 6.75% 8.32% 1.57% $2,313 Senior housing Douglas Emmett Inc. DEI,
+0.87% 6.74% 10.30% 3.55% $2,920 Offices Outfront Media Inc. OUT,
+0.89% 6.68% 11.74% 5.06% $2,950 Billboards Spirit Realty Capital Inc. SRC,
+1.15% 6.62% 9.07% 2.45% $5,595 Retail Broadstone Net Lease Inc. BNL,
-0.30% 6.61% 8.70% 2.08% $2,879 Industial Armada Hoffler Properties Inc. AHH,
+0.00% 6.38% 7.78% 1.41% $807 Offices Innovative Industrial Properties Inc. IIPR,
+1.42% 6.24% 7.53% 1.29% $3,226 Health care Simon Property Group Inc. SPG,
+1.03% 6.22% 9.55% 3.33% $37,847 Retail LTC Properties Inc. LTC,
+1.42% 5.99% 7.60% 1.60% $1,541 Senior housing Source: FactSet Click on the tickers for more about each company. You should read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.
The list includes each REIT’s main property investment type. However, many REITs are highly diversified. The simplified categories on the table may not cover all of their investment properties.
Knowing what a REIT invests in is part of the research you should do on your own before buying any individual stock. For arbitrary examples, some investors may wish to steer clear of exposure to certain areas of retail or hotels, or they may favor health-care properties.
Largest REITs
Several of the REITs that passed the screen have relatively small market capitalizations. You might be curious to see how the most widely held REITs fared in the screen. So here’s another list of the 20 largest U.S. REITs among the 119 that passed the first cut, sorted by market cap as of Nov. 28:
Company Ticker Dividend yield Estimated 2023 AFFO yield Estimated “headroom” Market cap. ($mil) Main concentration Prologis Inc. PLD,
+1.63% 2.84% 4.36% 1.52% $102,886 Warehouses and logistics American Tower Corp. AMT,
+0.75% 2.66% 4.82% 2.16% $99,593 Communications infrastructure Equinix Inc. EQIX,
+0.80% 1.87% 4.79% 2.91% $61,317 Data centers Crown Castle Inc. CCI,
+0.93% 4.55% 5.42% 0.86% $59,553 Wireless Infrastructure Public Storage PSA,
+0.19% 2.77% 5.35% 2.57% $50,680 Self-storage Realty Income Corp. O,
+0.72% 4.82% 6.46% 1.64% $38,720 Retail Simon Property Group Inc. SPG,
+1.03% 6.22% 9.55% 3.33% $37,847 Retail VICI Properties Inc. VICI,
+0.81% 4.69% 6.21% 1.52% $32,013 Leisure properties SBA Communications Corp. Class A SBAC,
+0.27% 0.97% 4.33% 3.36% $31,662 Communications infrastructure Welltower Inc. WELL,
+3.06% 3.66% 4.76% 1.10% $31,489 Health care Digital Realty Trust Inc. DLR,
+0.63% 4.54% 6.18% 1.64% $30,903 Data centers Alexandria Real Estate Equities Inc. ARE,
+1.49% 3.17% 4.87% 1.70% $24,451 Offices AvalonBay Communities Inc. AVB,
+0.98% 3.78% 5.69% 1.90% $23,513 Multifamily residential Equity Residential EQR,
+1.46% 4.02% 5.36% 1.34% $23,503 Multifamily residential Extra Space Storage Inc. EXR,
+0.31% 3.93% 5.83% 1.90% $20,430 Self-storage Invitation Homes Inc. INVH,
+2.15% 2.84% 5.12% 2.28% $18,948 Single-family residental Mid-America Apartment Communities Inc. MAA,
+1.83% 3.16% 5.18% 2.02% $18,260 Multifamily residential Ventas Inc. VTR,
+2.22% 4.07% 5.95% 1.88% $17,660 Senior housing Sun Communities Inc. SUI,
+2.12% 2.51% 4.81% 2.30% $17,346 Multifamily residential Source: FactSet Simon Property Group Inc.
SPG,
+1.03%
is the only REIT to make both lists.[ad_2]
-
Buffett’s Likely Successor Buys $68 Million of Berkshire Stock
[ad_1]
Berkshire Hathaway
Vice Chairman Greg Abel, the likely successor to CEO Warren Buffett, bought about $68 million of the company’s shares last Thursday in what appears to be his first purchases of Berkshire stock since he assumed the position in 2018.In several Form 4 filings Monday with the Securities and Exchange Commission, Abel disclosed that he purchased 168 Berkshire Hathaway (ticker: BRK/A, BRK/B) Class A shares through the Gregory Abel Revocable Trust on behalf of his wife, children, and other family members.
[ad_2]
