5 minutes read

Market sentiment is mixed as oil and the stock market tumble. However, some sectors are faring quite well, so much that Warren Buffett closed its biggest deal in six years. Cryptocurrencies are expected to move sideways in the next few days as bulls and bears battle for control. The Brazilian Real exchange rate to the dollar is becoming increasingly favorable for foreign investment.

Major companies reporting earnings include Zoominfo (ZI) and Constellation Brands (STZ).

WHAT’S HOT

  • Gold. The precious metal was set for its biggest quarterly gain since the coronavirus pandemic hit in 2020. Gold is considered a protection investment – the Ukrainian war and inflation fears were enough to push its price up. Spot gold (XAU) is up 5.95% since the beginning of the year. Gold ETFs such as Gold Shares SPDR (GLD) and iShares Gold Trust (IAU) are up by a similar percentage.
  • Homecare. LHC Group (LHCG) stock shot up almost 6% on March 29 on news that UnitedHealth would purchase it for $5.4 billion. The $170 per share offer was 8% higher than its previous close, and is expected to be completed in the second half of this year. As of this writing, LHCG trades at about $168. The news triggered a sector wide movement, with Addus (ADUS) and Amedisys (AMED) going up by 16.7% and 4.2% respectively on the week as the market expected further consolidation in the sector.
  • Berkshire Hathaway (BRKa). A monster deal showed that Buffett can compete with more aggressive private equity firms such as Apollo (APO), Blackstone (BX), Carlyle (CG) and KKR (KKR). In its biggest hit in 6 years, the company purchased insurer Alleghany (Y) for $11.6 billion. The purchase is a vote of confidence in the US economy, and shows that there are good opportunities even amidst such uncertainty. Berkshire’s stock is up 17% this year as investors flock to safer companies, far outpacing the S&P 500 index, which is down -4.95%.
  • Stock buybacks. A stock buyback happens when a company uses its cash to buy back shares from the stock market. In 2022, a record $319 billion of share buybacks have been authorized according to Goldman Sachs, 20% more than the $267 billion of buybacks for the same period in 2021. There are two main causes for this movement: companies are eager to show they are healthy and can spend cash, and managers want to boost earnings per share by reducing the number of shares in circulation. Target (TGT), for example, has reduced outstanding shares by more than 28% in a decade, from 669 million in 2011 to 480 million in 2021.

WHAT’S NOT

  • S&P 500. The index closed its worst quarter in two years amidst fears of high inflation. For the quarter, the S&P 500 fell -5.2%, the Dow Jones fell -4.8% and Nasdaq slipped almost -10%.
  • Oil. Several factors pushed oil prices down almost -15% last week: (i) peace talks between Ukraine and Russia are progressing, as President Zelensky is willing to sign a neutrality agreement if Russia withdraws from northern Ukraine (ii) China is enforcing new lockdownd with its zero Covid policy, which should ease global energy demand (iii) US decision to release 1 million barrels per day from strategic reserves in the next 6 months, totalling 180 million barrels.
  • Softbank. Executives are told to slow down investments as tech stocks fall. Rising interest rates and the Ukrainian War have ravaged its holdings, and China regulatory crackdowns have plunged the value of Softbank’s investments there. Its shares fell more than 40% last year, and the bleeding is expected to continue.
  • SPACs. The Securities and Exchange Commission (SEC) has proposed reforms on Special Purpose Acquisition Companies that will strip the companies of its legal safeguards that have allowed sponsors to present optimistic forecasts to potential investors. SPAC forecasts, including revenue projections, would lose legal protection under the SEC’s proposed rules, opening the companies to potential lawsuits, reported the Financial Times.

WHAT’S AHEAD

  • Bitcoin (BTC) and Ether (ETH). Bitcoin traders remain cautiously optimistic. Bulls failed to push the price above $46,000 on March 31, and bears will continue to test the $45,000 mark. Most expect bitcoin to move sideways in the next few days, as exponential moving averages indicate a support zone between $42k-$45k. For Ethereum, analysts are talking about a possible correction after a 34% rally in two weeks. On-chain metrics such as daily active addresses show little promise, and a 12% correction to $3,340 is possible.
  • Exchange Rate (USD/BRL). The exchange rate held around the R$4.75 mark last week, with little volatility. Brazil is in a good position to receive foreign capital, as other emerging markets such as Russia and China are closed. That means the exchange rate should continue its down trend, which makes investing abroad ideal, as real deposits are now worth more in dollars. It is also a good time for Brazilians to begin or continue with net worth dollarization, buying more assets denominated in dollars such as American stocks or Bitcoin. However remember that this transition is a long term endeavor and short term volatility is expected.
  • FED interest raises. The market is increasingly expecting half-point interest rate rises this year, as central banks signal that they will do what’s needed to curb inflation. Jerome Powell, FED’s chairman, said that there was “nothing” preventing a 0.5% increase in May.
  • Economic Calendar. The two main indicators coming out in the week are February’s trade balance and the ISM Non-Manufacturing PMI, both on April 05. The trade balance is the difference between the value of the goods that a country exports and the value of the goods that it imports. The forecasted value is -$87.3 billion. The ISM Non-Manufacturing PMI is a survey based index that serves as an indicator on the overall economy by showing trends in the manufacturing and service sectors.

Companies with expected dividend boost

  • Wipro (WIT), from $0.016 to $0.059, ex-date at 04/05/2022
  • Lloyds Banking Group (LYG), from $0.0375 to $0.0696, ex-date at 04/07/2022
  • Movado Group (MOV), from $0.25 to $0.35, ex-date at 04/05/2022
  • Dollar General (DG), from $0.42 to $0.55, ex-date at 04/04/2022
  • Shoe Carnival (SCVL), from $0.07 to $0.09, ex-date at 04/01/2022
  • BRP (DOOO), from $0.102 to $0.126, ex-date at 04/01/2022
  • International General Insurance (IGIC), from $0.16 to $0.19, ex-date at 04/04/2022
  • Elbit Systems (ESLT), from $0.46 to $0.50, ex-date at 04/08/2022
  • Banco Bradesco (BBDO), from $0.0024 to $0.0026, ex-date at 04/04/2022
  • Banco Bradesco (BBD), from $0.027 to $0.028, ex-date at 04/04/2022
  • UDR (UDR), from $0.3625 to $0.38, ex-date at 04/08/2022
  • Cousins Properties (CUZ), from $0.31 to $0.32, ex-date at 04/04/2022

Main ex-dates this week

The ex-date is the date in which the stock begins to trade without a previously declared dividend or distribution. That is, investors must be the owner of the stock on that date to receive its dividend.

Monday (04/04) – Banco Bradesco (BBDO and BBD), Cousins Properties (CUZ), Dollar General (DG)

Tuesday (04/05) – Cisco (CSCO), Comcast (CMCSA), Gap (GPS), JP Morgan (JPM), Movado (MOV), New York Times (NYT)

Wednesday (04/06) – Campbell Soup (CPB)

Thursday (04/07) – American Express (AXP), General Mills (GIS), Lloyds (LYG), Mastercard (MA), Verizon (VZ)

Friday (04/08) – Elbit Systems (ESLT)

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