( Click on Picture for Interview)
China Follow-up – China, Japan and the U.S continue to put military assets into the skies over the East China Seas close to the Senkaku Islands where both China and Japan claim sovereignty. China wants the U.S. Military to file flight plans when they fly through their ADIZ (Air Defense Identification zone. As I said on Friday’s appearance on Fox Business “That isn’t going to happen.” It seems China upped the anti having scrambled jets in the area. Since then CNN is reporting that a senior official in U.S. President Barack Obama’s administration said Friday that commercial airlines are being told to abide by Beijing’s instruction, even if the U.S. government doesn’t recognize it.
It appears several airlines including United, American and Delta are all complying with the Chinese Demands. Whenever you have military assets from different countries crowded into a confined area all trying to exercise their authority, things can go wrong very quickly. “This is how policy mistakes happen.”
Healthcare.gov – According to the New York Times despite the government giving itself a passing grade insurance companies are very concerned about the rollout. They point out that back end systems still aren’t working properly and they often don’t have any record of a customer enrolling or how much their premium will be subsidized, making it difficult to price the policy.
Poltics aside, what does this mean for health insurance stocks. Someone is going to get left holding the bag. Will it be the consumer, health insurance companies or the U.S, taxpayer.
Amazon (AMZN) – Jeff Bezos wowed the audience on CBS 60 Minutes with the prospect of using small drones to deliver packages that weigh 5 lbs. or less. (This is 86% of their business) In reality this is years away but it will be interesting to see if there is any reaction from UPS and FDX. I wonder if they have their own secret drone projects in the works. Drone makers that might see some action – AVAV, BA and NOC (Merrill Lynch reiterated their Buy recommendation in FDX this morning) I’m a pilot and it’s crowded enough when I fly down the Hudson River Corridor. I’m not sure I want to look up and see a small drone off my wing. 🙂
Archer Daniels Midland (ADM) – GS and BAC have both come out in defense of ADM after Australia blocked their takeout of Graincorp. ADM currently owns almost 20% of the company. It ranks very high in our Alpha Select models and the Friday’s pullback may be an opportunity for us to get in. ADM will likely choose not to remain a minority shareholder and will eventually sell their stake. Some of the cash from the transaction could be used for a large share repo. (I am currently not involved but it is on my shopping list.)
Supermarkets – Goldman is out this morning with a negative call on Supermarkets reiterating their sell in Kroger. KR has been a great name for us and while we have reduced exposure I am concerned going into their report later this week. It has dropped substantially in the Alpha Select Model.
Barron’s – featured Capital One (COF) in their weekend edition. I’ve been looking at a purchase of COF for our Alpha Select portfolios have so far failed to pull the trigger. It ranks high in the model coming in with a score of 97 driven by estimate revisions and valuation. Sometimes I suffer from a common portfolio manager malady called analysis paralysis. I am slightly underweight financials coming into the home stretch and the addition of COF would bring me in-line. (I’ll let you know)
Funds managed by David Nelson are currently long some of the stocks mentioned in this report. BA, NOC, CBS
