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Tag: Fossil Fuels

  • A Tesla stock plunge could destroy ‘zombie stocks’ such as GameStop and Peloton, warns equity research firm New Constructs

    A Tesla stock plunge could destroy ‘zombie stocks’ such as GameStop and Peloton, warns equity research firm New Constructs

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    Tesla shares could decline dramatically — and that could mean disaster for a number of stocks that have already seen deep share-price cuts, according to equity research firm New Constructs.

    The research firm, which uses machine learning and natural language processing to parse corporate filings and model economic earnings, called the stocks in danger “zombie stocks,” and defined them as companies with poor business models that are burning cash at an alarming rate and are at risk of seeing their stock decline to $0 per share.

    The research firm estimates there could be some 300 zombie companies across the marketplace.

    “The Federal Reserve’s aggressive rate hikes so far in 2022 have ended the era of free money and exposed a worrisome dynamic throughout capital markets: zombie stocks,” wrote New Constructs CEO David Trainer, in a note.

    See Now: Tesla earnings are coming, but do record deliveries mask a demand problem?

    New Constructs does not define Tesla Inc.
    TSLA,
    +7.01%

    as a “zombie stock,” citing CEO Elon Musk’s ability to raise capital, but does see the electric car manufacturer as a bellwether for the sector. “It shares many of the common characteristics of a zombie stock, such as an outrageous valuation and high cash burn,” wrote Trainer. “We believe Tesla’s unrelenting share price rise over the past three years – where investors completely ignored company fundamentals – inspired the birth of many of today’s zombie stocks.” 

    Tesla reports its third-quarter results after the closing bell on Oct. 19.

    The company’s stock was trading around $220 on Monday, an increase of over 1,000% compared to three years ago. But Trainer feels that Tesla is at risk of falling more than 80% to $25 a share.

    Tesla’s Optimus bot: ‘High school science project’ or robotics game changer?

    Tesla’s stock has fallen 37.6% in 2022, outpacing the S&P 500 Index’s
    SPX,
    +2.65%

    decline of 22.7%.

    “Its valuation remains nosebleed high because the cash flow expectations baked into the stock price are unreasonably optimistic,” Trainer wrote. “Our message to investors is to take profits in Tesla and avoid zombie stocks at all costs.”

    New Constructs recently added cloud-based communication company RingCentral Inc.
    RNG,
    +6.49%

    to its list of “zombie” stocks. Other companies on the list are Freshpet Inc.
    FRPT,
    -2.03%
    ,
     Peloton Interactive Inc.
    PTON,
    +7.04%
    ,
     Carvana Co.
    CVNA,
    +6.30%
    ,
     Snap Inc.
    SNAP,
    +6.01%
    ,
     Beyond Meat Inc.
    BYND,
    +0.64%
    ,
     Rivian Automotive Inc.
    RIVN,
    +6.93%
    ,
     DoorDash Inc.
    DASH,
    +6.15%
    ,
     Shake Shack Inc.
    SHAK,
    +4.01%
    ,
     Chewy Inc.
    CHWY,
    +10.76%
    ,
     Uber Technologies Inc.
    UBER,
    +4.98%
    ,
     Robinhood Markets Inc.
    HOOD,
    +3.24%
    ,
     Tilray Brands Inc.
    TLRY,
    +7.32%
    ,
     Affirm Holdings Inc.
    AFRM,
    +6.72%
    ,
     SunRun Inc.
    RUN,
    +1.70%
    ,
     Blue Apron Holdings Inc.
    APRN,
    +3.26%
    ,
     and meme stocks AMC Entertainment Holdings Inc. 
    AMC,
    +6.00%

    and GameStop Corp.
    GME,
    +5.40%
    .

    See Now: RingCentral added to ‘zombie’ stocks list by equity research firm New Constructs

    “Investors are now fed up with these kinds of companies, especially amid this year’s stock market volatility,” wrote New Constructs’ Trainer. “If investors start to give up on Tesla and take profits on the stock, which is up over 1,000% over the past three years, that spells terrible news for all of the other zombie stocks that don’t have the cash-raising luxury that Tesla has.”  

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  • Obama, Trump Energy Secretaries Agree On Everything Until One Goes Too Far

    Obama, Trump Energy Secretaries Agree On Everything Until One Goes Too Far

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    Two former U.S. energy secretaries agreed on almost everything at a joint appearance Wednesday, including the opportunity to tell Germany ‘I told you so.’

    Trump’s second energy secretary, Dan Brouillette, brought up Germany right off the bat at Columbia University’s Global Energy Summit in New York.

    “We felt very strongly that Germany had become too dependent on one source of gas supplier—i.e., Russia. Gazprom,” said Brouillette, who held several lobbying jobs and congressional staff jobs before helming the Energy Dept. from 2019-21.

    “We tried to make the point. They disagreed with us, and that was their right to do so. But today I’m watching Germany take some very dramatic steps to broaden out their energy supply, if you will, to diversify their portfolio overall.”

    Ernest Moniz, the Nobel-Prize winning physicist who served as President Obama’s second energy secretary from 2013-2017, made sure Brouillette understood that Germany had heard that warning before.

    “Along the lines of what Dan said, in fact, the rather stern lectures to our German colleagues about the bad hygiene of their energy security situation predated your administration,” Moniz said.

    “I can recall the heavy perspiration of the German ambassador in my office, for example. So this has been a consistent theme across administrations that the German situation just wasn’t healthy, and unfortunately it’s come back to bite them and all of us frankly.”

    Germany famously shut down its nuclear reactors after the 2011 Fukushima Disaster and invested heavily in renewables, which helped make solar-photovoltaic the cheapest energy technology for the world. But Germany counted on Russian natural gas as a bridge fuel for the transition. Since Russia invaded Ukraine, Germany and the rest of Europe have seen that supply squeezed, threatened, and sabotaged. Energy prices have soared globally, but particularly in Europe.

    According to Moniz, Germany did an excellent job envisioning a clean-energy economy in 2050, but a poor job managing the 30-year transition to arrive there, which—he agreed with Brouillette—will require traditional fuels, such as fossil fuels and nuclear.

    Trump’s lobbyist and Obama’s physicist agreed on most things: on the need for a diverse portfolio of energy sources, on the recognition that energy security and environmental security go hand in hand, on the collective responsibility among nations to manage energy security, and on almost everything else:

    Brouillette: “We don’t disagree as much as you might think. Ernie was instrumental in creating the export of LNG (liquified natural gas) and creating those policies that allowed us to produce more here in the United States. It created a global market for U.S. natural gas.”

    Moniz: “It’s true that we did most of the approval of licenses for export.”

    But then Brouillette crossed a bridge too far:

    Brouillette: “As we think about transition I don’t think we should think about it as one fuel source completely replacing the other.

    “If you think about human nature, if you think about humanity from whatever time period that you want, the transition has never been from one type of fuel to another…. The transition, if you will, has always been from less energy to more energy. That’s been the transition of humankind, that’s where we need to continue to go, and yes within the portfolio sometimes things will change. We’ll use less coal than we did, say, 50 years ago, as part of the portfolio, but it will always be additive. We will always be adding more energy, because that’s what society needs. It’s what economies grow on. It’s what populations are going to demand.”

    Moniz: “I’m sorry. I’m going to have to now finally disagree with my colleague. The additive comment has got to be parsed by level of development of economies. So the industrialized world, yeah, we may have some increase in energy use, but not material, the way that you were describing, all the new fuels being additive.

    “And in fact, that’s another reason why in the industrialized world we are facing a more difficult challenge in the sense that there’s going to have to be a lot of displacement of incumbent fuels and technologies going forward.”

    MORE FROM FORBESDid Europe Move To Renewables Too Fast, Too Slow Or Just Right?

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    Jeff McMahon, Senior Contributor

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  • 21 dividend stocks yielding 5% or more of companies that will produce plenty of cash in 2023

    21 dividend stocks yielding 5% or more of companies that will produce plenty of cash in 2023

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    When the stock market has jumped two days in a row, as it has now, it is easy to become complacent.

    But the Federal Reserve isn’t finished raising interest rates, and recession talk abounds. Stock investors aren’t out of the woods yet. That can make dividend stocks attractive if the yields are high and the companies produce more cash flow than they need to cover the payouts.

    Below is a list of 21 stocks drawn from the S&P Composite 1500 Index
    SP1500,
    +3.12%

    that appear to fit the bill. The S&P Composite 1500 is made up of the S&P 500
    SPX,
    +3.06%
    ,
    the S&P 400 Mid Cap Index
    MID,
    +3.18%

    and the S&P Small Cap 600 Index
    SML,
    +3.80%
    .

    The purpose of the list is to provide a starting point for further research. These stocks may be appropriate for you if you are looking for income, but you should do your own assessment to form your own opinion about a company’s ability to remain competitive over the next decade.

    Cash flow is key

    One way to measure a company’s ability to pay dividends is to look at its free cash flow yield. Free cash flow is remaining cash flow after planned capital expenditures. This money can be used to pay for dividends, buy back shares (which can raise earnings and cash flow per share), or fund acquisitions, organic expansion or for other corporate purposes.

    If we divide a company’s estimated annual free cash flow per share by its current share price, we have its estimated free cash flow yield. If we compare the free cash flow yield to the current dividend yield, we may see “headroom” for cash to be deployed in ways that can benefit shareholders.

    For this screen, we began with the S&P Composite 1500, then narrowed the list as follows:

    • Dividend yield of at least 5.00%.

    • Consensus free cash flow estimate available for calendar 2023, among at least five analysts polled by FactSet. We used calendar-year estimates, even though fiscal years for many companies don’t match the calendar.

    • Estimated 2023 free cash flow yield of at least double the current dividend yield.

    For real-estate investment trusts, dividend-paying ability is measured by funds from operations (FFO), a non-GAAP figure that adds depreciation and amortization back to earnings. Adjusted funds from operations (AFFO) takes this a step further, subtracting cash expected to be used to maintain properties. So for the two REITs on the list, the FCF yield column makes use of AFFO.

    For many companies in the financial sector, especially banks and insurers, free cash flow figures aren’t available, so the screen made use of earnings-per-share estimates. These are generally considered to run close to actual cash flow for these heavily regulated industries.

    Here are the 21 companies that passed the screen, with dividend yields of at least 5% and estimated 2023 FCF yields at least twice the current payout. They are sorted by dividend yield:

    Company

    Ticker

    Type

    Dividend yield

    Estimated 2023 FCF yield

    Estimated “headroom”

    Uniti Group Inc.

    UNIT,
    +7.36%
    Real-Estate Investment Trusts

    8.33%

    25.25%

    16.92%

    Hanesbrands Inc.

    HBI,
    +5.56%
    Apparel/ Footwear

    8.33%

    17.29%

    8.96%

    Kohl’s Corp.

    KSS,
    +5.80%
    Department Stores

    7.68%

    16.72%

    9.04%

    Rent-A-Center Inc.

    RCII,
    +10.40%
    Finance/ Rental/ Leasing

    7.52%

    17.26%

    9.73%

    Macerich Co.

    MAC,
    +8.18%
    Real-Estate Investment Trusts

    7.43%

    18.04%

    10.60%

    Devon Energy Corp.

    DVN,
    +5.72%
    Oil & Gas Production

    7.13%

    14.47%

    7.33%

    AT&T Inc.

    T,
    +1.19%
    Major Telecommunications

    6.98%

    14.82%

    7.84%

    Newell Brands Inc.

    NWL,
    +5.16%
    Industrial Conglomerates

    6.59%

    17.42%

    10.82%

    Dow Inc.

    DOW,
    +2.96%
    Chemicals

    6.18%

    15.63%

    9.45%

    LyondellBasell Industries NV

    LYB,
    +3.64%
    Chemicals

    6.09%

    16.07%

    9.99%

    Scotts Miracle-Gro Co. Class A

    SMG,
    +5.01%
    Chemicals

    6.04%

    12.68%

    6.65%

    Diamondback Energy Inc.

    FANG,
    +5.23%
    Oil & Gas Production

    5.56%

    13.63%

    8.08%

    Best Buy Co. Inc.

    BBY,
    +5.86%
    Electronics/ Appliance Stores

    5.53%

    14.08%

    8.55%

    Viatris Inc.

    VTRS,
    +5.62%
    Pharmaceuticals

    5.50%

    28.95%

    23.45%

    Prudential Financial Inc.

    PRU,
    +5.66%
    Life/ Health Insurance

    5.38%

    13.30%

    7.91%

    Ford Motor Co.

    F,
    +7.76%
    Motor Vehicles

    5.23%

    15.95%

    10.72%

    Invesco Ltd.

    IVZ,
    +6.76%
    Investment Managers

    5.23%

    14.95%

    9.73%

    Franklin Resources Inc.

    BEN,
    +4.37%
    Investment Managers

    5.17%

    13.21%

    8.04%

    Kontoor Brands Inc.

    KTB,
    +0.73%
    Apparel/ Footwear

    5.17%

    14.15%

    8.98%

    Seagate Technology Holdings PLC

    STX,
    +4.09%
    Computer Peripherals

    5.11%

    13.19%

    8.07%

    Foot Locker Inc.

    FL,
    +1.35%
    Apparel/ Footwear Retail

    5.03%

    15.52%

    10.49%

    Source: FactSet

    Any stock screen has its limitations. If you are interested in stocks listed here, it is best to do your own research, and it is easy to get started by clicking the tickers in the table for more information about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.

    For the “estimated FCF yields,” consensus free cash flow estimates for calendar 2023 were used for all companies except the following:

    Don’t miss: Dividend yields on preferred stocks have soared. This is how to pick the best ones for your portfolio.

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