Today (11/17/2017), CBS Corporation (CBS) will spin off CBS radio and merge it with Entercom Communications (ETM). The combined company named Entercom (ETM) will have annual revenue of about $1.7 bn. An investor presentation can be found here.
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Today (11/16/2017), the House is expected to vote and pass (H.R. 1), Tax Cuts and Jobs Act, an important step in sending a bill to the President’s desk by the end of year. Without a doubt, there are imperfections in the House bill that have been kicked to conference including SALT, overall individual rates, and int’l corp. provisions. We view these issues as fixable in a conference committee that could take place as soon as early December. From a markets standpoint, our long-short tax reform basket has only outperformed 1.9% YTD and our sense is that investors have priced in roughly one-third into the stock market as investors remain in wait and see mode given the Senate’s slim majority and now the Alabama Senate issue. Our strong sense is that with innumerable changes to both the House and Senate bills, many investors have tax fatigue and shifted their focus elsewhere. Nonetheless, we still place very high odds that a tax bill is enacted into law.
Financials’ relative performance has been tethered to the slope of the yield curve, with the sector lagging this year into flattening. Further, our sense is that Financials’ underperformance has exacerbated the rotation into large-cap Tech companies exhibiting strong fundamentals and price momentum. This has also been a key dynamic driving the outperformance of Growth over Value and Large over Small.
According to Reuters, General Electric (GE) is said to be weighing options for its aircraft leasing operations, which could include a sale or possible spin-off. GE Capital Aviation Services has a fleet of roughly 1,300 planes worth an estimated $25 billion. The news of a possible sale or spin-off is indicative of the current challenges in the leasing sector as Asian rivals force consolidation.
We track the share price performance of thematic stock baskets relative to a sector neutral benchmark. Year-to-date, companies with high international revenues, stocks with high EPS growth, our top stock idea model (SIM), companies with accelerating buybacks and high cash, and high beta stocks have been top performing themes. Year-to-date, the worst performing themes have been stocks with low P/E’s, value stocks, high short interest, recent spin-offs, and companies with low earnings quality and high short interest. In October, growth and momentum themes significantly outperformed, while value strategies lagged. Click here for more information
Our Global Materials sector Drilldown focuses on (1) identifying key indicators of S&P 1200 Global Materials subsectors’ relative performance; and (2) identifying stocks likely to be influenced most by these trends. Our regular readers will notice that this morning’s piece is in a presentation deck format, rather than our typical note template. Please let us know what you think!
Wolfe Research's Senior Macro Research Analyst, Chris Senyek, hosted a Webcast to cover the implications of the new tax bill.
Two Harbors (TWO) distributed the 33.1m shares of Granite Point Mortgage Trust (GPMT) it had acquired in connection with the contribution of its commercial real estate portfolio to Granite Point. Granite Point Mortgage Trust focuses primarily on originating, investing in and managing commercial mortgage loans and other debt commercial real estate investments. Following the stock dividend, Two Harbors completed a reverse stock split.
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