Chances are you already have exposure to Nvidia Corp.
NVDA,
in your investment portfolio. Just about any actively managed large-cap U.S. fund with growth objective is likely to be holding shares of the maker of graphics processing units, or GPUs, that are being widely adopted to power artificial-intelligence technology. And if you are taking a low-cost index-fund approach, the $400 billion SPDR S&P 500 ETF Trust
SPY,
which tracks the S&P 500
SPX
by holding all of its stocks, has 3.2% of its portfolio invested in Nvidia.
Nvidia’s stock has more than tripled this year, and the company reported another blowout quarter on Wednesday, with quarterly sales rising 88% from the previous quarter and 101% from the year-earlier quarter.
For long-term investors, here’s a look behind Nvidia’s valuation, profit margins and projections for further sales growth within the semiconductor industry.
If you are more focused on the short term, or on day trading, there is an easy way to increase your opportunity for gains (or losses) with this one stock. In this week’s ETF Wrap, Isabel Wang looks at single-stock exchange-traded funds that use leverage to increase exposure to Nvidia for bullish or bearish trades.
More coverage of Nvidia:
What’s next for the stock market?
After Labor Day — which falls on Sept. 4 this year — investors and professional money managers who may have been in a mellow mood while vacationing during the dog days of summer can be expected to be more focused, for better or worse. Maybe this is why some of the worst stock-market crashes have taken place during October.
Investors are still worried about rising interest rates, which typically don’t bode well for the stock market.
Jonathan Burton interviewed Keith McCullough, CEO of Hedgeye Risk Management, who believes the Federal Reserve’s tightening of monetary policy to push down inflation will lead to stagflation, which is a combination of slow or no economic growth and high inflation. Here’s how McCullough thinks investors should prepare for that scenario.
Mark Hulbert followed up with an analysis of how likely a stock-market crash might be, based on historical patterns and the movement of investors’ expectations.
Here are more (mixed) opinions about the condition of the market and what lies ahead:
Stock picks for a recession
Michael Brush interviewed Eli Salzmann, who co-manages the $12 billion Neuberger Berman Large Cap Value Fund NPRTX, which is rated five stars — the highest rating — by Morningstar. Salzmann expects a recession within the next six to nine months.
Salzman said investors would be well served to focus on companies in industries where capacity is limited relative to demand, and on stocks that are cheaply priced relative to normalized earnings. He named examples of stocks in both categories.
A recession would mean a reversal of Federal Reserve policy. Interest rates would decline and bond prices would be lifted. Dividend-paying stocks would also become more attractive to investors who right now can easily earn 5% in bank accounts with very little risk.
Mark Hulbert lists 20 dividend stocks with dividend yields ranging from 5% to 7.9% that are each recommended by at least two of the investment newsletters tracked by the Hulbert Financial Digest.
Related: Betting on quality stocks instead of junk is easier than you may think
And a different income angle: These bonds are perfect for retirees — and are paying twice their historic average
Mortgage-loan rates rise again — by a lot
According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage loan in the U.S. was 7.23% as of Thursday, up 14 basis points in only a week to its highest level since 2001. For a 15-year loan, the average rate was 6.55%.
With interest rates so high and many homeowners reluctant to sell because they locked in low-rate loans before the Fed began raising rates last year, it might not be a surprise that U.S. home sales fell in July to their lowest level in six months.
Some younger potential buyers are even giving up on homeownership, as Aarthi Swaminathan reports.
More housing coverage:
Estate planning
Beth Pinsker writes the Fix My Portfolio column. This week she helps a couple who own two houses, one of which is a second home that they might move into as part of an effort to downsize. They’re also in the midst of estate planning, and their concern is how they can limit tax consequences for their family, including their children, who will eventually inherit one or both homes. Here are various scenarios for the couple to consider.
Read on for another estate plan for a couple with $6 million.
An argument against stock buybacks
When a company repurchases its own shares, it can lower the share count. This raises its profit per share and can support a higher stock price over time — or so the theory goes. But there are plenty of examples of companies that have spent billions of dollars on buybacks over the long term, only to see their stocks underperform the market by a wide margin, or even decline.
And in some cases, the buybacks aren’t enough to keep a company’s share count from rising. Buybacks might be outweighed by the shoveling of new shares to executives. A rising share count dilutes value for other shareholders and pushes down earnings per share.
Ciara Linnane shares insights from William Lazonick, the author of “Investing in Innovation: Confronting Predatory Value Extraction in the U.S. Corporation,” who makes the case that buybacks stifle innovation and exacerbate the problem of income inequality.
Do you know someone buried in credit-card debt?
Andrew Keshner explains how a combination of a personal loan — with an average interest rate half as high as that of the average credit card — can help a borrower to reduce debt quickly, if it is combined with a change in behavior.
Labor rumbles
After the management of United Parcel Service Inc.
UPS,
decided to play nice, 86% of the company’s employees who are members of the Teamsters union voted in favor of a new contract. That was the widest positive voting margin ever for a UPS contract, according to the union.
But the strike by Hollywood writes and actors continues, and there are other ongoing battles. Levi Sumagaysay covers labor disruption in the hospitality industry in California.
Claudia Assis reports on a “labor overhang” for stocks of automakers, as the U.S “big three” negotiate with union workers ahead of a Sept. 14 contract expiration.
More about the labor market:
- Justice Department sues Elon Musk’s SpaceX alleging hiring discrimination
- Striking workers need unemployment pay — and fast, this lawmaker says
Jerome Powell speaks
Here is the full text of Federal Reserve Chair Jerome Powell’s Friday speech at the Fed’s annual symposium in Jackson Hole, Wyo. Despite some calls for the central bank to raise its long-term target of 2% for the U.S. inflation rate, Powell said the policy wouldn’t change.
Gregg Robb interviewed Susan Collins, president of the Federal Reserve Bank of Boston, who emphasized the importance of not overreacting to economic data when setting monetary policy.
Also read: Jackson Hole meeting: Stocks higher in choppy trade after Powell speech
Want more from MarketWatch? Sign up for this and other newsletters to get the latest news and advice on personal finance and investing.
Read the full article here
