Research Reports

In this edition, we explore oil and gas exploration and production opportunities; Ameriprise manages to get a fair value estimate raise; we launch coverage of Kongsberg Gruppen; and Royalty Pharma, Hanesbrands, and Orsted.

U.S. stocks were lower on Friday morning following higher-than-expected inflation numbers, which lowers expectations for a rate cut in the near term. The Producer Price Index (PPI) rose 0.3%. Core PPI rose 0.6%, the largest increase since January 2023, with both readings well ahead of their expected 0.1% increase. The latest readings bring annual PPI to 0.9% and core PPI to 2.6%. On the earnings front, Coinbase Global (COIN) shares rose 15% after it reported a profit. The S&P 500 was nearly flat, up 0.01%, the Dow was down less than 0.1% and the Nasdaq fell 0.2%. Crude oil traded above $78 per barrel and gold was up 0.3% to $2021 per ounce.

We are maintaining our recommended sector allocations. We remain Over-Weight on Communication Services. This “barbell” sector contains high-growth, low-income, social-media stocks on one end and low-growth, high-income telecom-services stocks on the other. Hybrid cloud is emerging as the key delivery mechanism for AI-as-a-service. Social-media stocks offering hybrid cloud services are positioned to benefit from the AI wave, in our view. Also in this sector, telecom stocks are likely near the end of mobile device weakness and are positioned for improved customer ARPU as the next generation of 5G smartphones launched in fall 2023.

Rapidly rising inflation in 2022 knocked stocks into a bear market. While growth strategies suffered the most, value strategies also declined. Even bond prices were lower that year. Stocks have recovered and a new bull market has begun, but gains largely have been driven by only a handful of high-tech companies. Inflation remains an issue and no one really knows when the Federal Reserve will lower interest rates. Is a recession in the offing? With all the uncertainty, is it time for investors to cash in their chips? We note that investors exit the stock market at their own peril, as long-term returns from equities consistently have outpaced long-term returns from other asset classes such as fixed income and cash. As well, those fixed-income returns are from eras when the 10-year Treasury bond yield was much higher than the current level around 4.0%. So what's a potential equity strategy for investors amid all the uncertainty? Argus believes that Min Vol is an all-weather strategy that is timely in any investing climate. Academic literature and, more to the point, returns history indicate that Min Vol can deliver market-matching returns on an absolute basis and superior returns on a risk-adjusted basis over various time periods. Argus has developed a sophisticated approach to Min Vol investing built around our proprietary quality and safety screens. We recently updated our Min-Vol Theme Model Portfolio.

Stocks rose again on Thursday, with more evidence of rotation away from mega-cap tech. That's of particular interest knowing that Nvidia reports after the close next Wednesday. There are extremely high expectations for another blowout quarter from the company. But after a rise of more than 80% since late October (16 weeks), even a textbook "impressive" beat could lead to a "sell the news" reaction. Or the shares might surge higher and all will be good. The stocks of great companies sometimes go down, no matter the news.

Stocks were higher on Thursday, with investors apparently moving beyond the panic that set in - for one day - earlier in the week after a hot CPI report. The Dow Jones Industrial Average was up 0.91%, the Nasdaq 0.30% and the S&P 500 0.58% (and at a record closing high). Early in Thursday's session, worries kicked in after the U.S. Commerce Department reported that retail sales dropped 0.8% last month, the biggest decrease since last February. But that bad news also was quickly discounted as recent winter storms were cited as one-time events that likely negatively impacted the data.

The Vickers Top Insider Picks is a daily report that utilizes a proprietary algorithm to identify 25 companies with compelling insider purchase histories based on transactions over the past three months.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Royalty Pharma PLC is the largest buyer of biopharmaceutical royalties. The firm has a portfolio of royalties that entitles it to payments based on the sales of biopharma products. Royalty Pharma receives royalties on more than 35 commercial products, including AbbVie and Johnson & Johnson's Imbruvica (for chronic lymphocytic leukemia and other blood cancers), Biogen's Tysabri (for relapsing forms of multiple sclerosis), Vertex's cystic fibrosis franchise, and 10 development-stage product candidates.

Appian is a low-code enterprise platform-as-a-service company focusing on business process management. The Appian platform is an integrated automation platform providing tools for organizations to design, automate, and optimize end-to-end processes and complex business operations. Capabilities include case management, robotic process automation, artificial intelligence, data fabric, and process mining. Most of Appian’s revenue is subscription based with the remainder from services, with much of its subscription revenue being derived from its cloud-based platform, Appian Cloud.

Royalty Pharma PLC is the largest buyer of biopharmaceutical royalties. The firm has a portfolio of royalties that entitles it to payments based on the sales of biopharma products. Royalty Pharma receives royalties on more than 35 commercial products, including AbbVie and Johnson & Johnson's Imbruvica (for chronic lymphocytic leukemia and other blood cancers), Biogen's Tysabri (for relapsing forms of multiple sclerosis), Vertex's cystic fibrosis franchise, and 10 development-stage product candidates.