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Tag: Investment Banking

  • Scott Minerd, prominent Guggenheim Partners money manager, dies unexpectedly of heart attack

    Scott Minerd, prominent Guggenheim Partners money manager, dies unexpectedly of heart attack

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    Guggenheim Partners Global Chief Investment Officer Scott Minerd has died, the company announced in a press release issued Thursday. He was 63.

    The money manager was one of the most prominent on Wall Street, known for his calls on stocks, bonds and Federal Reserve policy as well as for his muscular physique.

    Reports indicated that Minerd suffered a heart attack during a workout. He died on Wednesday afternoon.

    “We’re deeply saddened by the death of Scott Minerd and send our deepest condolences to his husband, friends and family,” said Gerard Carney, a spokesman for Guggenheim Partners.

    Minerd became CIO of Guggenheim Partners in 1999, shortly after the firm was founded. He was a frequent commentator in the media, making calls on the S&P 500
    SPX,
    -1.45%    ,
    the Dow Jones Industrial Average
    DJIA,
    -1.05%
    and Treasurys.

    Read: Guggenheim’s Minerd believes fine art, real estate will outperform stocks, sees bitcoin bottoming at $8,000

    Also see: Fed may need to pivot by early November, when ‘something breaks,’ says Guggenheim’s Scott Minerd

    He was known for his macro approach to investing and as a fixed-income expert who understood structured securities and currencies. He was employed at Merrill Lynch, Morgan Stanley and Credit Suisse First Boston in the 1980s and 1990s, working with legendary CEOs John Mack and Bob Diamond.

    In 2017, he told Bloomberg that he had “walked away from extremely large offers on Wall Street” because he had become burnt out at age 37. “I realized this wasn’t a dress rehearsal for life, this was it,” he said.

    “I have known Scott for over 30 years and we were partners much of that time,” wrote Mark Walter, CEO and a founder of Guggenheim. “Scott was a key innovator and thought leader who was instrumental in building Guggenheim Investments into the global business it is today.

    “He will be greatly missed by all. My deepest condolences are with his husband, family and loved ones,” Walter wrote.

    At his peak, Minerd could bench-press nearly 500 pounds, and he competed in the super-heavyweight and over-40 divisions of L.A. bodybuilding championships.

    The son of an insurance salesman, Minerd grew up in southwestern Pennsylvania on land where his family settled before the Revolutionary War, Bloomberg reported.

    Members of the investment community were stunned by news of Minerd’s death.

    Billionaire Bill Ackman, who runs the hedge fund Pershing Square Capital Management, described Minerd as a “brilliant man.”

    “He was also a lot of fun. I wish I had more time with him. Carpe diem,” Ackman wrote via Twitter.

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  • This fund beats the S&P 500 by using just 75 of its components. Here’s how it works.

    This fund beats the S&P 500 by using just 75 of its components. Here’s how it works.

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    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

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  • Saudi crown prince set to invest in Credit Suisse’s new investment bank

    Saudi crown prince set to invest in Credit Suisse’s new investment bank

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    Saudi Arabia’s crown prince and a U.S. private-equity firm run by Barclays PLC’s former chief executive are among investors preparing to invest $1 billion or more into Credit Suisse’s
    CSGN,
    +6.61%

    CS,
    +9.39%
    new investment bank, people familiar with the matter said. 

    Crown Prince Mohammed bin Salman is considering an investment of around $500 million to back the new unit, CS First Boston, and its CEO-designate, Michael Klein, some of the people said. Additional financial backing could come from U.S. investors including veteran banker Bob Diamond‘s Atlas Merchant Capital, people familiar with that potential investment said. Credit Suisse previously said it had $500 million committed from an additional investor it hasn’t named.  

    Credit Suisse has received a number of proposals from investors interested in CS First Boston. Credit Suisse Chairman Axel Lehmann at a conference on Thursday said it has other firm commitments in addition to the $500 million from the unnamed investor. The bank hasn’t received a formal proposal from any Saudi entity, some of the people familiar with the matter said. 

    Credit Suisse is spinning off the New York-based investment bank as part of a fresh start after being buffeted by scandals, regulatory scrutiny and steep losses. It is raising $4.2 billion in new stock that separately will make Saudi National Bank its largest shareholder. It isn’t clear if Prince Mohammed would make the investment through that bank, or another investment vehicle. He is chairman of the country’s sovereign-wealth fund, Public Investment Fund, which along with another government fund is Saudi National Bank’s main owner. 

    An expanded version of this report appears on WSJ.com.

    Also popular on WSJ.com:

    Apple makes plans to move production out of China.

    FTX founder Sam Bankman-Fried says he can’t account for billions sent to Alameda.

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  • Oil Could Rise After Latest EU Sanctions on Russia. Why a Rally May Not Last.

    Oil Could Rise After Latest EU Sanctions on Russia. Why a Rally May Not Last.

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    The European Union’s ban on seaborne imports of Russian oil, along with the Group of Seven’s plan to cap prices of oil from Russia early next month won’t guarantee that prices for the commodity will see a lasting rally, or that supplies will tighten further in the days ahead.

    “In isolation, the sanctions on Russia should be bullish for prices,” says Matt Smith, lead oil analyst, Americas, at Kpler. However, they may have a limited effect, as Russian barrels get “rerouted and not taken off the market,” while a price cap still has so much uncertainty surrounding it that its impact may be “muted due to workarounds or may simply be ineffective.”

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  • Bank of America Reports Earnings Monday. What Wall Street Is Watching.

    Bank of America Reports Earnings Monday. What Wall Street Is Watching.

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    Bank of America Reports Earnings Monday. What Wall Street Is Watching.

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  • JPMorgan profit falls but beats estimates while Wells Fargo misses

    JPMorgan profit falls but beats estimates while Wells Fargo misses

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    JPMorgan Chase & Co. shares rose Friday after the megabank beat analyst targets for third-quarter profit and revenue and said it would top forecasts for its net interest in come in the coming quarter.

    In a busy day for bank earnings, Wells Fargo & Co.
    WFC,
    +4.62%
    fell short of earnings target but its stock rose in premarket trades as it beat revenue estimates.

    Morgan Stanley
    MS,
    +3.55%
    shares fell after it missed Wall Street’s targets for earnings and revenue.

    Citigroup Inc.
    C,
    +5.17%
    shares rose after beating its profit mark, although revenue fell 1% after breaking out the impact of divestitures.

    Overall, banks benefited from higher interest rates and strong trading volumes, but investment banking deal activity fell sharply. Banks also channeled more capital into reserves and away from their collective bottom lines to prepare for a potential economic downturn.

    As the largest bank in the U.S. and a bellwether for the sector, JPMorgan Chase
    JPM,
    +5.56%
    turned in a “solid performance” in the latest quarter, in the words of Chief Executive Jamie Dimon.

    The bank said it expects to meet its capital requirements under the international Basel III banking guidelines and resume stock buybacks early in 2023.

    “In the U.S., consumers continue to spend with solid balance sheets, job openings are plentiful and businesses remain healthy,” Dimon said. “However, there are significant headwinds immediately in front of us – stubbornly high inflation leading to higher global interest rates, the uncertain impacts of quantitative tightening, the war in Ukraine, which is increasing all geopolitical risks, and the fragile state of oil supply and prices.”

    Dimon said the bank remains “prepared for bad outcomes” so it can continue to operate even in the most challenging times.

    Dimon’s prepared statement comes a day after the oft-quoted CEO said the U.S. consumer sector remains strong currently, but inflation will start weighing on people by 2023.

    Also Read: JPMorgan CEO Dimon says inflation hasn’t dampened consumer spending yet but give it time

    JPMorgan Chase’s stock rose 2.4% ahead of Friday’s open after it said its third-quarter net income fell 16.7% to $9.74 billion, or $3.12 a share, from $11.69 billion, or $3.74 a share, in the year-ago quarter.

    Third-quarter revenue at the megabank rose to $32.72 billion from $29.65 billion in the year-ago quarter.

    Wall Street analysts expected JPMorgan Chase to earn $2.90 a share on revenue of $32.12 billion, according to estimated compiled by FactSet. T

    The bank said a net credit reserve build of $808 million ate into its net income for the latest quarter, compared with a net reserve release of $2.1 billion in the prior year.

    Net interest income climbed 34% to $17.6 billion and net interest income excluding its Markets unit rose 51% to $16.9 billion on higher interest rates.

    JPMorgan Chase’s total assets under management fell 13% to $2.6 trillion in the face of losses in the equities market and difficult conditions in the bond market.

    Looking ahead, JPMorgan Chase said it expects fourth-quarter net interest income of about $19 billion, ahead of the $18.2 billion analyst estimate.

    Octavio Marenzi, CEO of management consultant company Opimas said the bank’s results were “surprisingly solid” and if you strip away its payments for loan reserves, its profit is basically unchanged.

    “Individual lines of business, such as investment banking and mortgages did predictably badly, but this was more than compensated for by strength in other areas of lending and in trading,” Marenzi said.

    Shares of JPMorgan Chase have lost 30.9% in 2022 compared with a 17.3% drop by the Dow Jones Industrial Average
    DJIA,
    +2.83%
    and a 23.0% loss by the S&P 500
    SPX,
    +2.60%    .

    Wells Fargo misses profit target but share rise

    Wells Fargo & Co. shares advanced 2% in Friday’s premarket after the bank posted net income of $3.528 billion, or 85 cents a share, for the quarter to end September, down from $5.122 billion, or $1.17 a share, in the year-earlier quarter.

    The megabank fell short of the earnings-per-share target of $1.09 a share.

    Wells Fargo’s revenue rose to $19.505 billion from $18.834 billion a year ago, ahead of the $18.775 billion FactSet consensus.

    Chief Executive Charlie Scharf said performance was “significantly impacted” by $2 billion, or 45 cents a share, in operating losses “related to litigation, customer remediation, and regulatory matters primarily related to a variety of historical matters.”

    However, the bank is seeing historically low delinquencies and high payment rates, and the “timing of deterioration in those measures due to high inflation remains unclear. “

    The bank set aside $784 million in provisions for loan losses, after reducing them by $1.395 billion a year ago.

    Net interest income rose 36%, while noninterest income fell 25%, as mortgage banking income declined.

    Citi analyst Keith Horowitz said Wells Fargo turned in a “good” quarter overall, although larger-than-expected one-time charges and a reserve build reduced profits. But Wells Fargo also raised its outlook for net interest income “and we still see upside to 2023 consensus,” Horowitz said.

    Shares of Wells Fargo have declined 12% in the year to date.

    Morgan Stanley shares fall on results

    Morgan Stanley fell 2.6% in premarket trades after the investment bank missed Wall Street’s targets for earnings and revenue amid a drop in deal activity.

    Morgan Stanley said its third-quarter net income fell to $2.49 billion, or $1.47 per share, from net income of $3.7 billion, or $1.98 per share in the year-ago quarter.

    Third-quarter revenue dropped to $12.99 billion from $14.75 billion.

    Wall Street analysts were looking for earnings of $1.52 a share and revenue of $13.29 billion, according to FactSet data.

    “Firm performance was resilient and balanced in an uncertain and difficult environment, delivering a 15% return on tangible common equity,” said CEO James Gorman. “Wealth Management added an additional $65 billion in net new assets and produced a pre-tax margin of 28%, excluding integration-related expenses, demonstrating scale and stability despite declining asset values.”

    Morgan Stanley shares have lost 19.2% in 2022.

    Citi beats targets but shares lose ground

    Citigroup shares fell 1.3% in premarket trades Friday after the bank posted stronger-than-expected profit, but revenue fell 1% after breaking out divestiture-related impacts, as growth in net interest income was more than offset by lower non-interest revenue.

    Citi said its third-quarter net income dropped to $3.5 billion, or $1.63 per share, from $4.6 billion, or $2.15 a share, in the year-ago quarter.

    Excluding divestiture-related impacts, earnings were $1.50 a share.

    Total revenue increased to $18.5 billion from $17.4 billion.

    Analysts were looking for earnings of $1.42 a share and revenue of $18.26 billion for Citigroup, according to a FactSet survey.

    Citi said it continues to shrink its operations in Russia, and expects to end nearly all of the institutional banking services offered in the country next quarter. “To be clear, our intention is to wind down our presence in this country,” Chief Executive Jane Fraser said.

    Shares of Citigroup have dropped 28.9% in 2022.

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