Cigarette Makers Can Filter Tougher Smoking Rules; Enrique Abeyta, Altria, Empire Elite Trader, and unicorn stocks; The Little-Known Mutual Fund That Loved WeWork; A WeWork TV series; Smoke with your boss; Evaluating the Dearth of Female Hedge Fund Managers
1) This "Heard on the Street" column in today's Wall Street Journal, Cigarette Makers Can Filter Tougher Smoking Rules, reminded me of the great call made by my longtime friend Enrique Abeyta.
After more than two decades on Wall Street and in the hedge-fund world, Enrique joined me a few months ago at Empire Financial Research. In late September, he launched his Empire Elite Trader service.
His first recommendation, published on September 25, was tobacco giant Altria (MO), after the company's stock had been nearly cut in half to $40 per share. It was entitled: "This Iconic Global Brand Is the Cheapest It's Been in a Decade... and It's About to Rally." (We've made it available publicly, so you can read it here.) Here's an excerpt:
is now at its cheapest valuation level in a decade, making it a fantastic buying opportunity right now.
Altria's brands include Marlboro, Parliament, and Virginia Slims. But the reason its shares have been hammered has more to do with the 35% stake it has in leading e-cigarette company Juul, which has come under tremendous scrutiny for marketing its products to teenagers and young adults.
I believe that Altria is at a major crossroads in which one of two things will happen...
- Juul will survive the scrutiny and continue to take market share, which would be bad for Altria's cigarette business, but good for its stake in Juul, or
- Juul will be forced to rein in its sales, which would be bad for Juul, but good for Altria's cigarette business.
Either way, Altria wins.
Enrique's thesis played out perfectly... Less than a month later, he closed the position for a quick 15% gain. (I also recommended Altria to my Empire Investment Report subscribers on October 16.)
Enrique is on a roll. His second pick, on September 27, was streaming company Netflix (NFLX) at $263 per share... and he booked another quick gain of 8% in less than three weeks. Just yesterday, he closed another winner on homebuilder NVR (NVR) for a 7% gain in 36 days.
Empire Elite Trader is only $69 per month and you can cancel anytime. That's a great deal... And better yet, you can check it out via a free 30-day trial – just click here.
2) Enrique also nailed the unicorn bubble. He shares his latest thoughts in this article by Michelle Celarier, The Little-Known Mutual Fund That Loved WeWork:
The more money the unicorns have raised, the worse they have performed once they went public. "You've had a flood of money. Guess what's happening now? The returns suck," says former hedge fund founder Enrique Abeyta, who is bearish on several unicorns that have hit the public market.
Abeyta, who now runs an investment newsletter for Empire Financial Research called Empire Elite Trader, believes that even Uber – once touted as the safest unicorn investment – could go bankrupt and recommends shorting it, along with Lyft and Slack.
Forty-three unicorns have gone public since 2015, according to Abeyta's research, which uses Crunchbase data. On average the group is up 102%, according to an October presentation Abeyta made. But the 12 super-unicorns have done far worse, with a median decline of 31%. Three fourths of them have produced negative returns.
Abeyta likens the unicorn fad to the dot-com bubble of the late '90s. He recalls the first day of his first Wall Street job in 1995, which happened to be the same day pioneer web browser Netscape went public. "I think it traded from like 25 to 75, and everyone's like, 'What the f*ck is going on?'"
As in a previous era, he explains, "the fledgling companies thought, 'We can lose a ton of money, but the capital markets will finance it and we can basically achieve exit velocity, like a ship going to space, where we get enough scale that now we dominate the market, but we don't have to make money.' That's the fundamental premise of the super-unicorns for sure," he says. "That's over. WeWork was the end of it."
Incidentally, as I've written previously, I think the U.S. Securities and Exchange Commission ("SEC") should ban mutual funds from investing in any private companies. Investing in totally illiquid, impossible-to-value securities is completely incompatible with any fund that, by law, must offer its investors daily redemption rights.
3) Speaking of The Whee Company, here's the least surprising news of the year: they're making a TV miniseries about co-founder Adam Neumann – LOL! 'Succession' Star to Play Adam Neumann in WeWork TV Series.
4) And speaking of smoking, I thought this new research report, The Old Boys' Club: Schmoozing and the Gender Gap, was fascinating. The authors studied "a large commercial bank in Asia" and found that male employees who socialized with their male bosses tended to get promoted faster.
The primary focus of the study was on how this disadvantages women, who saw no such benefit... whether their bosses were male or female.
But in an interesting aside, the researchers found that in cases where the manager smoked, employees who also smoked got promoted faster because they socialized on smoking breaks!
What a terrible message this sends: If your boss smokes, it's in the best interests of your career to start smoking!
(For more on why women are underrepresented in the finance industry, especially hedge funds, see the two columns I wrote for the New York Times five years ago: Evaluating the Dearth of Female Hedge Fund Managers and A Deeper Conversation on Women in Hedge Funds.)
Best regards,
Whitney