Today - Tuesday, March 11, 2014
- Paycom Software, a developer of cloud-based talent management, payroll, and HR management software, has filed for a $100M IPO under the symbol PAYC. Barclays, JPMorgan, Pac Crest, Stifel, and Canaccord are underwriting.
- Paycom argues its apps are differentiated in part by their ability to leverage an integrated platform that eliminates redundant data entry and the need to access multiple databases.
- The company claims to have 10K+ clients, with none accounting for more than 0.5% of revenue. Rivals include cloud HR software leader Workday, smaller vendors Cornerstone OnDemand and Ultimate Software, and enterprise software giants SAP and Oracle (both have made acquisitions in this space).
- Paycom had 2013 revenue of $107.6M (+40% Y/Y), and net income of $5.4M. Sales/marketing spend equaled 40% of revenue, and the company's deferred revenue balance totaled $12.6M at the end of 2013.
- Given how peers have performed lately, investor interest could be strong.
- High-yield investors should take little comfort from a low default rate (with most forecasting for that to continue), says Martin Fridson, reminding the default rate in 2007 was 0.975%, but junk suffered a 5.6% price drop that year.
- The commonly held belief that high-yield total return equals yield minus default loss is "essentially irrelevant over a one-year horizon" in that it assumes the bonds which default in any given year began the year at par. In truth, the vast majority of any year's defaults began the year as distressed paper with spreads to Treasurys of 1K basis points or more.
- "Investors are ill-served by overly simplistic analysis implying that mid-double-digit returns are a sure thing as long as the default rate remains below average. The high-yield market has proven that it is quite capable of generating substantial price declines even in the face of extremely low default rates and declining Treasury yields."
- Yesterday: Junk-bond default rate slides to just 1.6%.
- ETFs: HYG, JNK, HYLD, HYS, SJNK, PHB, BSJF, SJB, BSJE, BSJG, HYHG, HYEM, IHY, EMHY, BSJI, HYXU, ANGL, PGHY, BSJH, HYLS, XOVR, THHY, UJB, QLTC, SHYG, BSJK, HYZD, BSJJ, HYND
- Italy's UniCredit (UNCFF, UNCFY) kitchen sinks it, booking a $20.8B Q4 loss as it sets aside money for bad loans and writes down goodwill from past acquisitions ahead of the ECB's EU-wide review of banks before it takes regulatory control in November.
- The bank also announced plans to cut 8.5K jobs, about 6% of the workforce, along with a stock dividend of $0.10 per share for 2013.
- The stock closed 6.2% higher in Milan, leading the FTSE MIB index to the EU's best performance on the day, +0.4%.
- The First Trust RBA Quality Income ETF (QINC) and RBA American Industrial Renaissance ETF (AIRR) will track their respective Richard Bernstein Advisors indexes; QINC will focus on total return through global firms with strong dividends and capital appreciation potential, while AIRR will invest in both small and mid-cap domestic firms in the industrial and community banking sectors.
- High dividend ETFs and capital strength ETFs: VYM, HDV, KBWD, PEY, DIV, RDIV, FTCS
- Regional banking ETFs: KRE, KBE, IAT, RKH, QABA, KRU, KBWR, KRS
- The Global X Guru Small Cap Index ETF (GURX) and Guru International Index ETF (GURI) are hoping to capitalize on the success of GURU by offering exposure to small-cap and international (respectively) stocks that large hedge fund managers hold.
- Broad hedge fund replication ETFs: QAI, MCRO, HDG, QEH
- The insurance industry finds an ally in Maine Senator Susan Collins who introduces an amendment to Dodd-Frank seeking to clarify new capital rules for nonbank financials.
- Insurance companies have made the case they're not banks and already meet state-imposed leverage requirements, and thus shouldn't be subject to the same rules as banks, and the Fed - now a regulator of AIG and PRU, and maybe MET soon as well - has asked for guidance about whether Dodd-Frank allows it leeway.
- Not a member of the Senate Banking Committee, Collins testified the Fed does indeed have flexibility and her bill seeks to make that clear.
- Related ETFs: KIE, IAK, KBWI, KBWP
- A continued wave of morning selling has brought copper lower by 4.3% on the session to $2.95 per pound, the weakest level since the summer of 2010.
- Copper started the year at $3.40 and its swift decline this week comes amid horrid Chinese export numbers, a plunging price of iron ore, and chatter about defaults and banks calling in loans in China.
- JJC -3.1%
- Other copper ETFs: CPER, CUPM
- Copper producer ETFs: COPX, CU
- Retail investors are likely to see about twice as much in "leakage" when buying and selling municipal bonds as they do for corporate paper, according to the WSJ, and regulators - who bypassed the municipal market while helping reshape how Wall Street works - have this asset class in its their sights.
- "We spend an awful lot of time on the equities side of the market where spreads are counted in pennies - and in the muni market, spreads are counted in dollars," says SEC Commissioner Michael Piwowar.
- For their part, brokerages say munis cost more because they trade in lower volume and for smaller amounts than other securities.
- "You think of how the retail industry has gone from the local grocery store to Wal-Mart to Amazon," says a municipal bond wealth manager. "In municipal bonds, we're still shopping at the local grocery store."
- ETFs: MUB, HYD, BAB, PZA, MUNI, TFI, ITM, HYMB, MLN, CMF, SHM, BABZ, BABS, XMPT, SUB, NYF, PRB, PZT, SMB, CXA, SHYD, PWZ, PVI, SMMU, MUAF, INY, MUAE, MUAD, MUAC, VRD, MUAG, GMMB, MUAH, RVNU
- The SPDR Gold Trust (GLD +0.6%) saw 7.5 tons of new gold on Monday and the gold ETF sector as a whole had 8.5 tons, the largest single-day inflows since October 2012, says Commerzbank.
- "On balance, gold ETFs have now recorded only marginal net outflows since the start of the year, meaning that this bearish factor has disappeared."
- Gold continues to hold gains in morning trade, +0.6% and near its high for the year at $1,349 per ounce.
- ETFs: GLD, IAU, PHYS, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, GLDI, DGZ, AGOL, DGLD, TBAR, UBG, GLDE, GYEN, GEUR, GGBP
- The White House has dropped a proposal to permit insurers to limit Medicare coverage for certain types of pharmaceuticals, including drugs for depression and schizophrenia.
- Medicare argued that the measure would have saved money, but the Administration ran into trouble with patients, drug firms and members of Congress from both parties.
- Health insurers: AET, HNT, HUM, UNH, WLP, MOH.
- ETFs: XLV, XHE, VHT, FXH, IHF, IHI, IYH, PTH, RYH, PSCH, RXL, RXD, XHS
- Lombard Medical Technologies plans to delist in London and carry out an $80M IPO on Nasdaq, where it intends to trade under the ticker symbol "EVAR."
- Lombard has yet to decide how many shares it will offer, nor at what price.
- The U.K. medical-devices company, which focus on the repair of aneurysms, intends to use the proceeds from the offering to increase its U.S. sales force and to develop products. (PR)
- ETF: IPO
- Stock index futures are flat, taking a cue from most major global markets which are little-changed. The 10-year Treasury yield is up one basis point at 2.78% and gold is up 0.5% to $1,348 per ounce.
- Addressing the slowdown in China and Monday's troubling plunge in iron ore prices was BHP's iron ore chief Jimmy Wilson: "You have this credit issue in China, you have reasonably high iron ore stocks, traders have a view that prices are going to go down, so they do everything they can to hold back ... That’s why these fluctuations tend to amplify.”
- Index ETFs: SPY, QQQ, SH, DIA, SSO, SDS, PSQ, IVV, VOO, SPXU, UPRO, TQQQ, QID, RSP, DOG, SQQQ, QLD, DXD, RWL, EPS, UDOW, SDOW, DDM, BXUB, QQEW, QQQE, TRND, SFLA, BXUC, QQXT, BXDB, TNDQ
- Crimea's parliament has voted to declare independence from Ukraine ahead of a referendum this weekend in which the region's citizens will decide whether to join Russia.
- Ukraine's parliament has said it will dissolve the Crimean assembly if it doesn't drop the referendum by tomorrow, although how much power Ukraine has in the province is looking rather questionable.
- In other developments" Russia and the U.S. have declined to take part in new talks on the crisis; Ukraine is testing its military's combat readiness and may mobilize 20,000 people; a pro-Russian force opened fire when capturing a Ukrainian military base in Crimea yesterday; and NATO is carrying out reconnaissance flights over its eastern frontier.
- In the U.S., the Senate is preparing an aid package for Ukraine that would include IMF funding.
- More on Crimea
- Russian and Eastern European ETFs: RSX, RUSL, ERUS, RUSS, RSXJ, RBL, RUDR, GUR, ESR
- U.K. industrial production +0.1% on month in January vs +0.5% in December and consensus of +0.2%. On year, output +2.9% vs +1.9% and +3%.
- Manufacturing production +0.4% on month vs +0.4% and +0.3%. On year, output +3.3% vs +1.4% and +3.3%.
- The pound is -0.1% at $1.6633, while the FTSE 100 is -0.2%. (PR)
- ETFs: EWU, EWUS, FKU, DXPS, DBUK, FXB, GBB
- Puerto Rico has reportedly attracted strong demand for $3B in bonds that the commonwealth expects to sell today at yields of 8.625-8.875%, which are at the bottom end of expectations.
- The apparent success of the auction comes despite lingering fears that Puerto Rico will restructure its existing debt.
- However, investors have been attracted by a range of factors, including the high interest, improved finances, better disclosure, and relief that the commonwealth even has access to the debt markets.
- Related ETFs: MUB, HYD, BAB, PZA, MUNI, TFI, ITM, HYMB, MLN, CMF, SHM, BABZ, BABS, XMPT, SUB, NYF, PRB, PZT, SMB, CXA, SHYD, PWZ, PVI, SMMU, MUAF, INY, MUAE, MUAD, MUAC, VRD, MUAG, GMMB, MUAH, RVNU
- Virtu Financial has submitted an application for an IPO on Nasdaq, where it intends to trade under the symbol "VIRT."
- The high-speed trading firm filed to raise $100M as a placeholder to calculate fees, although Bloomberg reports that the company hopes to draw in $250M at a valuation of up to $3B.
- Virtu has only suffered one losing trading day in five years, and last year, net income more than doubled to $182.2M as revenue climbed 8% to $664.5M.
- However, Virtu disclosed that the Commodity Futures Trading Commission is investigating the firm's "participation in certain incentive programs offered by exchanges or venues" from July 2011 to November 2013. (S-1)
- ETF: IPO
- Germany's exports rose 2.2% on month in January after dropping 0.9% in December and beat forecasts of +1.4%.
- Imports jumped 4.1% vs -1.4% and +1.3%.
- The trade surplus slipped to €17.2B from €18.3B and missed consensus of €17.7B.
- The euro is -0.1% at $1.3865, while DAX futures are +0.2%. (PR)
- ETFs: FXE, EUO, EWG, ERO, DRR, BUND, EWGS, EUFX, ULE, GERJ, DBGR, BUNL, DXGE, URR, FGM, BUNT, GGOV
- As expected, the Bank of Japan has left its key interest rate at 0.1% and maintained its program of expanding the monetary base by ¥60-70T a year.
- The BOJ upgraded its assessment of industrial output and investment but cut its analysis for exports.
- In a related development, Japanese machine tool orders, a leading indicator of capex, climbed 26% on year in February, although that was down from +40.3% in January.
- The bank's latest policy decision comes ahead of a rise in sales tax next month that is expected to drag on the economy.
- The Nikkei is +0.7%, while the USD-JPY is flat at ¥103.31. (BOJ Statement)
- ETFs: DXJ, EWJ, FXY, YCS, JGBS, JGBD, DFJ, JYN, NKY, DBJP, EZJ, EWV, YCL, SCJ, JGBL, JSC, JPP, ITF, DXJS, JGBT, JPNL, JPNS, FJP
Monday, March 10, 2014
- Chinese Internet and solar names, many of them among the standouts of the 2013/2014 tech rally, are heading into the close with steep losses after the Chinese government reported exports fell 18.1% Y/Y in February (much worse than expected).
- Internet decliners: WUBA -10.7%. YOKU -7.3%. ATHM -7.2%. QUNR -6.4%. NQ -6%. RENN -5.2%. CTRP -5.2%. YY -4.4%. WBAI -4.4%. KONG -5.5%.
- Solar decliners: JKS -6.3%. YGE -5.8%. TSL -6.7%. CSUN -4.9%. CSIQ -4.5%. DQ -4.2%. HSOL -4.5%.
- Solar ETFs: KWT, TAN
- "We are getting increasingly concerned about the extended nature of small-caps," writes MKM's Jonathan Krinsky, noting the Russell 2000 as of last week closed 42% above its 200-day moving average, the most in four years. A check of the records over the last 30 years when the Russell's been more than 40% above its 200-day finds forward returns 90 days out to be negative 94% of the time, with an average decline of 7%.
- He notes biotech makes up about 5% of the Russell 2000 and that sector's rally seems particularly unsustainable.
- Small-cap ETFs: IWM, IJS, TZA, TNA, UWM, VB, IJR, SLY, EES, RWJ, VBR, VBK, URTY, SCHA, TWM, IWO, IWN, IJT, RWM, SRTY, DWAS, SAA, JKL, VTWO, SLYG, RZV, SLYV, SDD, VIOO, JKJ, RZG, RSCO, SBB, VTWG, UKK, FYX, TILT, VIOG, XSLV, FNDA, VIOV, SKK, FYT, EWRS, JKK, PXSV, VTWV, UVT, TWOK, SMLV, SJH, FYC, IESM, VLU, PXSC, PXSG
- Amid a stock market continuing to set new high's State Street's (STT) SPDR S&P 500 ETF (SPY) has already seen $18B in outflows YTD, surpassing the $16B pulled out of the $159B fund in all of 2013. Does the divergence signal a disconnect between market highs and sentiment, or - as the bull market ages - are money managers becoming more focused on picking specific sectors and stocks.
- Maybe more of a trader's ETF, SPY net flows tend to be more volatile than those of Vanguard's S&P 500 ETF (VOO) which is nearly identical in size. The VOO has seen inflows of $1.3B this year.
- Earlier: It's a stock-pickers market