Categories
growth II-VI

II-VI: Growth At A Reasonable Price (NASDAQ:IIVI)

Even at all-time highs, I like the outlook for II-VI (IIVI) shares. On the back of top-line growth led by its vertically integrated manufacturing capabilities across a range of promising end-markets such as optical and wireless communication, industrial lasers, and EUV lithography, IIVI looks well-positioned for the future. Additionally, the stock should also benefit from margin expansion as the company continues to pay down its debt load and unlock synergies. Net-net, I think IIVI shares are still reasonably priced at the current c. 0.9x PEG multiple.

An Exceedingly Positive Q3 Report

Earnings came in well above expectations for Q3 ’20 on better revenue and profitability in telecom and datacom, as 5G deployments and network infrastructure upgrades accelerated. Specifically, transceivers were a bright spot, as ROADM demand rose 50% Q/Q. For the most part, all categories, including industrial laser, contributed positively to the Q3 beat, driving consolidated revenue of $627 million, well above the high-end of management’s $550-600 million guidance range.

Source: IIVI Investor Update Presentation

For the quarter, IIVI recorded orders of $840 million (+26% Q/Q), driving the 12-month backlog to a record $893 million. Order strength was broad-based across key end-markets, with particular strength from communications (both datacom and telecom). As a result, IIVI’s book-to-bill rose to c. 1.3.

Non-GAAP gross margins also came in strongly above consensus at 38.3% on a favorable mix, synergies, and volume. Meanwhile, operating margins also tracked to 13.8%, as operating efficiencies and cost synergies related to the Finisar (FNSR) acquisition contributed positively.

Q4 ’19

Q1 ’20

Q2 ’20

Q3 ’20

Total Operating Margin

15.7%

14.9%

11.0%

13.8%

EBITDA Margin

22.4%

22.6%

23.3%

20.1%

Source: Company Data

IIVI’s non-GAAP EPS of $0.47 (adjusted for share-based compensation, impairments, and other one-off impacts), was, therefore, significantly above both consensus (c. $0.13) and prior guidance ($0.02-0.32 range). While EPS is down Y/Y, this is mainly due to incremental interest expenses related to the FNSR acquisition. On a pro-forma basis, net income attributable to common shareholders rose c.8.4% Y/Y.

Q4 ’19

Q1 ’20

Q2 ’20

Q3 ’20

Pro Forma Net Income to Common

43.8

37.1

41.6

44.1

Net Margin

12.1%

10.9%

6.2%

7.0%

Source: Company Data

Finisar Integration Tracking Ahead of Plan

IIVI has a strong track record of successful M&A integration, and much like Oclaro in 2013, Finisar is tracking well ahead of Street expectations. Though Finisar is of much greater size and scale, IIVI’s cost discipline has been paying off, with the latest quarter’s operating margins rising 2.8 percentage points Q/Q.

Source: IIVI Investor Update Presentation

While IIVI is certainly not yet out of the woods on integration, the meaningful traction management has shown across both FNSR and core IIVI amid COVID-19-led disruption gives me confidence in the near to medium-term outlook. For example, many competitors and other equipment vendors have noted sizable constraints to capacity during the quarter, yet IIVI has successfully avoided most of this at its IIVI and FNSR facilities, due to its vertical integration.

Additionally, where FNSR margins/business concentration has to date been an overhang, IIVI has offset this by moving ahead of schedule on delivering synergies, relative to the targeted $150 million within three years. The longer-term synergies are also quite compelling, as Finisar better positions it with new customers, and increases wallet share with existing customers, allowing IIVI to leverage the combined portfolio and scale to address a $22-billion market opportunity.

Source: IIVI-Finisar Investor Presentation

Defying the COVID-19 Backdrop

Looking ahead, IIVI has lifted Q4 ’20 guidance to $650-700 million in revenues, and non-GAAP EPS $0.50-0.70, both of which were well above consensus. This factors in a c. $50 million COVID impact related to factories being shut down in China, potential supply chain constraints, and a spike in cases on employees’ return. All this seems conservative, however, as II-VI has seen limited impact since factories began operating mid-March.

On the demand side, IIVI is still exposed to the Asian supply chain and, therefore, could suffer from increased US-China trade tensions. On the other hand, IIVI should also benefit from improving data points that suggest a rebounding post-COVID market in the region.

Source: McKinsey on Asia’s Manufacturing and Supply Chains

Encouragingly, resilience and cash generation are also key focus areas, and if demand were to weaken, the company still has levers to pull on. The primary lever is a reduction in growth capex, which has now been guided to a range of $125-140 million for the full year. As of quarter-end, IIVI’s liquidity position is strong, with a $388 million cash balance, and an additional $358 million available through its revolving facility.

Q4 ’19

Q1 ’20

Q2 ’20

Q3 ’20

Cash and Equivalents

204.9

441.7

385.2

388.1

Net Debt/Total Capital

23.1%

90.9%

93.0%

100.3%

Source: Company Data

Risks to Monitor

Despite the Q3 beat and raise, several key IIVI end-markets remain sluggish. For instance, the industrial end-market declined c. 24% Y/Y as weak aftermarket sales offset the positives from new industrial laser deployments. In the silicon carbide business, revenue from power electronics has also declined due to weakness in the electric vehicles market, but on the flip side, this has freed up capacity to meet increased demand in the RF business related to 5G infrastructure deployment.

The growth outlook in China, the US, and Japan also appears to be intact, but there are still risks elsewhere, with moderate growth in Europe and a muted outlook in India. Much like its peers, however, II-VI has already seen signs of an acceleration in 5G deployments globally, highlighting its record backlog and customer conversations around accelerating production and increasing capacity.

And as we said during the script — in the script that the acceleration of 5G, I would say really worldwide, isn’t really — it’s not just about China, but also other OEMs and other carriers worldwide can continue to get ready and ramp these 5G deployments. We have seen an increase in the RF, which has been really timed very well. As you may recall, we were sold out for several quarters in terms of capacity.

Growth at a Reasonable Price

The resilient demand for communications in Q3 ’20, along with the company’s solid execution in a difficult macro environment, is greatly encouraging to me. I also like IIVI’s positioning at the epicenter of several major growth stories as it pursues a $22-billion addressable market by 2022. While risks remain, I view current headwinds as temporary in nature, with IIVI shares presenting investors an attractive way to gain exposure to themes like 5G at a reasonable c. 0.9x PEG multiple. Going forward, I will be monitoring progress around the Finisar acquisition and related synergies, the adoption of new technologies such as Silicon Carbide, and US-China trade tensions.

Data by YCharts

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Canopy growth

Canopy Growth Revises Its Deal To Acquire Acreage Holdings

Last April, the management team at Canopy Growth Corp (CGC) announced plans to acquire American hemp/cannabis giant Acreage Holdings Inc. (OTCQX:ACRGF) in a deal then valued at $3.4 billion. A lot has happened since then, with shares of Acreage falling more than 90% in response to industry oversupply, the advent of COVID-19, and shares of Canopy Growth also tanking. Generally speaking, such significant changes in the market can warrant one or more parties involved in a deal like this backing out, but in other instances it can result in a revision of the prior deal. What occurred on June 25th between Canopy and Acreage falls under the latter category, with Canopy reducing its cash exposure, kicking the can down the road on Acreage, reducing its risk to the enterprise as a whole while still providing upside potential for Acreage’s shareholders.

A look at the change in terms

The original transaction struck between Canopy and Acreage in April of last year was fairly simple. Shareholders in Acreage were slated to receive an up-front cash payment of $300 million. This worked out to be $2.55 per share at the time the news broke. In addition, upon a triggering event (that event being a federal law making marijuana consumption and distribution legal), Canopy would need to acquire all of the shares of Acreage in a stock-for-stock swap whereby Acreage holders would receive 0.5818 shares of Canopy for each share of Acreage they owned. The end result would be Acreage investors owning around 12% of Canopy as it stood back then.

A lot has changed in little more than a year. Market capitalizations of cannabis firms, both in the US and in Canada, plummeted. This came as a result of an oversupply of product to the market, combined with the general malaise that stemmed from the COVID-19 pandemic. In all likelihood, it should not have been a surprise to see Canopy or Acreage (or both) move to abandon the deal, but seeing this as an opportunity for both firms they decided to compromise.

The terms of the deal are a little more complicated than most transactions I have seen in recent years. And never have I seen a cannabis transaction this complex in nature. In short, we can break this down into a few parts. The first is a cash payment to holders of Acreage stock (including holders of some convertible securities). This cash payment will be upfront and paid upon the agreement between Acreage and Canopy being finalized. Instead of the $300 million paid out to the common holders, Acreage’s investors will receive substantially less than that at $37.50 million. This works out to around $0.30 per share.

From here, the deal gets tricky. In short, the shares of Acreage that are currently being traded are being broken up into two types of shares. The first is a Fixed share, and the second is a Floating share. Each holder of Acreage shares today will receive 0.70 shares of Fixed stock and 0.30 shares of Floating stock for every Acreage share they currently have. The Fixed stock will take over the same ticker symbol as the Acreage shares today, while the Floating shares will apply for a new security with a different ticker.

The Fixed units are called Fixed because they can be forced into an exchange of 0.3048 shares of Canopy. The Floating shares, meanwhile, are Floating because their final price will be subject to the 30-day volume-weighted-average price of the Floating shares once Canopy calls them. This will, of course, be subject to a floor price of $6.41 per unit. For both the Fixed and Floating stock, Canopy has a call option giving them the right to acquire the units upon the same triggering event that the original deal was based on. The only difference is that while the original deal allowed for up to 90 months (7.5 years) for the triggering event to occur following the finalization of the deal, the new deal calls for 10 years. After 10 years, if the trigger event has not occurred, the agreement will terminate and the floor on the Floating shares will no longer be eligible.

There’s a great deal to unpack here. For starters, while the Fixed units will be purchased at the exchange ratio disclosed using Canopy’s own shares (a share-for-share swap), the Floating units can be exchanged for either cash or stock. It’s up to Canopy at the time. What’s more is that, upon the trigger occurring, Canopy will be required to absorb the Fixed shares. They have the option, not the obligation, to do so for the Floating shares. This means that up to one-third of the stock of Acreage could go without being acquired.

All of this is complex, so the best way to understand the share side of the transaction is to simplify it all. In short, it will behave as though shareholders will receive two rights. One right is for 0.70 of each existing share to be exchanged for 0.3048 shares of Canopy. The other right is for 0.30 of each existing share to be exchanged for the same amount (0.30) of a Floating share. Management illustrates an example of this in the image below. As you can see, using current pricing, there’s significant implied upside for current holders of Acreage. However, if the triggering event never comes to pass, then all they will have received is $0.30 per common unit in the form of a distribution.

*Taken from Canopy Growth Corp.

To keep operations on a good path, Canopy’s management is placing some power behind Acreage. One of Acreage’s subsidiaries is being provided a loan for $100 million from Canopy. This loan can only be spent on hemp operations, not cannabis. The first $50 million will come once the deal between the two parties is finalized, and the other $50 million will come upon the completion of certain unspecified conditions. To further support its business, Acreage is being given the right to issue up to 32.7 million shares of itself (20.3 million Fixed (including 3.7 million that can be used for stock-based compensation) and 12.4 million Floating).

Takeaway

At first glance, this deal between Canopy and Acreage is not as attractive as it was initially. Acreage shareholders are receiving far less cash up front and it could take a decade (if a deal is ever finally completed) for the big payoff to come. Because of the nature of the Floating shares, there could be, in theory, greater upside for investors, but in all likelihood Canopy will end up with a better deal. After all, they are being given an extra 2.5 years to see if Acreage can become and stay a valuable brand. In the meantime, the small amount of cash paid up front will act as a sort of long-term call on the enterprise. This could cost the firm more in the long run, but it could also save them a great deal of money, plus it will end up providing them with unprecedented flexibility.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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growth Vanguard

Vanguard S&P 500 Growth ETF: Best Passively Managed Fund For Long-Term Growth Investors (NYSEARCA:VOOG)

The most important quality for an investor is temperament, not intellect. – Warren Buffett

The Vanguard S&P 500 Growth ETF (NYSEARCA:VOOG) is a passively managed ETF replicating the growth companies in the S&P 500. It has an expense ratio of 0.10%, suitable for any investor seeking for long-term opportunities. It tracks the S&P 500 growth index return. By investing in VOOG, you can get the entire market performance of U.S. growth stock returns in one fund, offering immediate diversification in companies that will be future leaders of their industry. The fund uses continuous strategy refinement to reduce tracking error and is consistent especially compared to competitors. Low fees, efficient trading, and proven performances have made VOOG an excellent choice for growth-seeking investors who want to remove idiosyncratic risks.

Recent Performance

The performance of VOOG has impressed recently. The current price of the fund is over $185, approximately 2% from the 52-week high. However, the graph shows the dip in March and April caused by the Covid-19 outbreak. The fund saw an initial 31.61% drop in February, which lasted for merely a month until bouncing back. The five-year return is extremely positive, showing strong momentum with returns of 85.19%.

Holding Allocation

Source: Seeking Alpha

Source: Seeking Alpha

VOOG uses full replication method to hold all stocks with the same capitalization weighting as the benchmark. The fund has a $3.6 billion total net asset invested in 278 stocks. Looking at the sector breakdown, VOOG has 32.96% in the Information Technology sector, 13.87% in Consumer, 13.16% in Communications, 10.90% in Healthcare, 10.08 % in Financials, and 19.03% in other sectors. VOOG is trying to keep its higher-growth legacy despite the uncertainty in the market.

The top holdings are in the information technology, financial, and consumer sectors with a track record of stability in crisis periods, especially IT during the latest Covid-related pullback. Microsoft (NASDAQ:MSFT) is the top holding, taking 9.50% of the fund. Other companies taking the top 10 positions are Apple (NASDAQ:AAPL) at 9.03%, Amazon (NASDAQ:AMZN) 6.91%, Facebook (NASDAQ:FB) 3.68%, Alphabet Class A (NASDAQ:GOOGL) 2.92% and Class C (NASDAQ:GOOG) 2.90%, Visa (NYSE:V) 2.27%, Mastercard (NYSE:MA) 1.82%, NVIDIA Corporation (NASDAQ:NVDA) 1.48%, and Home Depot (NYSE:HD) 1.31%.

Sector-wise, information technology and utilities were the top contributors for the ETF with 8.2% and 8.4% returns respectively in the last 12 months.

The Reasons Behind Higher Growth

Source: Vanguard

When the coronavirus outbreak in China was confirmed as a pandemic, financial markets began to take the hit. The jobless claims in the United States went to all-time highs, far surpassing historical records. Both developing and emerging markets went under a lockdown, and we saw this in sharp declines in global stock markets, similar to the previous economic crisis periods in some ways, and in others, much sharper. Despite the confusion in the market, VOOG managed to secure strong momentum coming out of the crisis, rebounding almost as fast as it dropped. So why is the fund outperforming the overall market?

A few points below that have been positives for the passive holding:

  • The approach of keeping the expense ratio low is an important feature of VOOG. As a result, investors had the opportunity to grow their portfolio regardless of the market behavior.
  • As we can see in the above graph, VOOG strictly maintains its stock-picking style. It only invests in the large-cap stocks which provide high growth rather than value.
  • The top picks of the fund are top performers and extremely liquid in terms of cash. Apple is the most extreme example of this with hundreds of billions of dollars in liquid assets, providing a great economic moat for any uncertainty. They have been out there for decades with proven track records in the industry. The companies are quite reliable at the time of an economic recession.
  • VOOG mainly focuses on large-cap stocks. As the U.S Federal Reserve is lowering its short-term interest rates, borrowing costs will drop, increasing the overall growth and lowering any discount rate applied to future earnings.
  • The fund has sufficient liquidity for the everyday investor. The daily average volume of the fund is $43.67 million, beating the peers by 3-4 times.
  • As the market sentiment causes concern, thanks to the events like U.S.-China trade war, U.S.-Iran tensions, Brexit issues, coronavirus pandemic, and India-China border war, investors are willing to trust market-proven funds like VOOG.

Source: Seeking Alpha

Future Outlook

Cash (in $bn)

Current Ratio

Financial Health

Exposure

Microsoft

137.64

2.90

Strong

9.50%

Apple, Inc.

94.05

1.50

Strong

9.03%

Amazon

49.29

1.08

Strong

6.91%

Facebook, Inc.

60.29

4.60

Strong

3.68%

Alphabet, Inc.

117.23

3.66

Strong

2.92%

Visa

12.15

1.25

Strong

2.27%

Mastercard

10.68

1.87

Strong

1.82%

Data based on Q1-20 results

The future outlook of VOOG is promising. Healthy balance sheets of the underlying holdings can result in longevity for several of the underlying holdings. For instance, Microsoft had a strong performance in the last few years. The company had strong earnings reports, thanks to the higher-growth businesses like the purchased Azure Cloud and Microsoft’s infrastructure-as-a-service business. Likewise, Apple has increased its strong presence in the smartphone industry and expects to continue to do so in 2021.

Risks To Consider

Higher turnover rates: The turnover rate of the fund is 22.9%, which is quite high for a passive fund. It may result in slightly higher transaction costs and taxes. A reduced turnover rate could improve the efficiency of the fund.

Declining revenues: As the fund is highly dependent on information technology and financial sectors, the declining revenues caused by the economic recession could influence the performance of the ETF. Prolonging restrictions on businesses can drive the revenues down for an extended time. It might include the digital services of Google, Facebook, and Apple.

Potential for sharp pullback after impressive rally: As we saw in March, as well as in late 2018, sharp pullbacks are becoming the norm in the markets, especially for growth-related names. There is a possibility of an extensive pullback if the economy does not rebound as expected by many economists.

We’ve seen many investors losing their money during the 2008 market crash for lacking a proper system. Now, after a decade, the Vanguard S&P 500 Growth ETF provides you the best opportunity to protect your investment from future economic depressions as the world has been permanently thrust into the online world. The cost is minimal, and the benefits of investing in these bellwether growth names will set up your portfolio for gains in the long run.

*Like this article? Don’t forget to hit the Follow button above!

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My award-winning market research gives you everything you need to know each day, so you can be ready to act when it matters most.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This writing is for informational purposes only and Lead-Lag Publishing, LLC undertakes no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Lead-Lag Publishing, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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growth Vanguard

Vanguard S&P 500 Growth ETF: Best Passively Managed Fund For Long-Term Growth Investors

The most important quality for an investor is temperament, not intellect. – Warren Buffett

The Vanguard S&P 500 Growth ETF (NYSEARCA:VOOG) is a passively managed ETF replicating the growth companies in the S&P 500. It has an expense ratio of 0.10%, suitable for any investor seeking for long-term opportunities. It tracks the S&P 500 growth index return. By investing in VOOG, you can get the entire market performance of U.S. growth stock returns in one fund, offering immediate diversification in companies that will be future leaders of their industry. The fund uses continuous strategy refinement to reduce tracking error and is consistent especially compared to competitors. Low fees, efficient trading, and proven performances have made VOOG an excellent choice for growth-seeking investors who want to remove idiosyncratic risks.

Recent Performance

The performance of VOOG has impressed recently. The current price of the fund is over $185, approximately 2% from the 52-week high. However, the graph shows the dip in March and April caused by the Covid-19 outbreak. The fund saw an initial 31.61% drop in February, which lasted for merely a month until bouncing back. The five-year return is extremely positive, showing strong momentum with returns of 85.19%.

Holding Allocation

Source: Seeking Alpha

Source: Seeking Alpha

VOOG uses full replication method to hold all stocks with the same capitalization weighting as the benchmark. The fund has a $3.6 billion total net asset invested in 278 stocks. Looking at the sector breakdown, VOOG has 32.96% in the Information Technology sector, 13.87% in Consumer, 13.16% in Communications, 10.90% in Healthcare, 10.08 % in Financials, and 19.03% in other sectors. VOOG is trying to keep its higher-growth legacy despite the uncertainty in the market.

The top holdings are in the information technology, financial, and consumer sectors with a track record of stability in crisis periods, especially IT during the latest Covid-related pullback. Microsoft (NASDAQ:MSFT) is the top holding, taking 9.50% of the fund. Other companies taking the top 10 positions are Apple (NASDAQ:AAPL) at 9.03%, Amazon (NASDAQ:AMZN) 6.91%, Facebook (NASDAQ:FB) 3.68%, Alphabet Class A (NASDAQ:GOOGL) 2.92% and Class C (NASDAQ:GOOG) 2.90%, Visa (NYSE:V) 2.27%, Mastercard (NYSE:MA) 1.82%, NVIDIA Corporation (NASDAQ:NVDA) 1.48%, and Home Depot (NYSE:HD) 1.31%.

Sector-wise, information technology and utilities were the top contributors for the ETF with 8.2% and 8.4% returns respectively in the last 12 months.

The Reasons Behind Higher Growth

Source: Vanguard

When the coronavirus outbreak in China was confirmed as a pandemic, financial markets began to take the hit. The jobless claims in the United States went to all-time highs, far surpassing historical records. Both developing and emerging markets went under a lockdown, and we saw this in sharp declines in global stock markets, similar to the previous economic crisis periods in some ways, and in others, much sharper. Despite the confusion in the market, VOOG managed to secure strong momentum coming out of the crisis, rebounding almost as fast as it dropped. So why is the fund outperforming the overall market?

A few points below that have been positives for the passive holding:

  • The approach of keeping the expense ratio low is an important feature of VOOG. As a result, investors had the opportunity to grow their portfolio regardless of the market behavior.
  • As we can see in the above graph, VOOG strictly maintains its stock-picking style. It only invests in the large-cap stocks which provide high growth rather than value.
  • The top picks of the fund are top performers and extremely liquid in terms of cash. Apple is the most extreme example of this with hundreds of billions of dollars in liquid assets, providing a great economic moat for any uncertainty. They have been out there for decades with proven track records in the industry. The companies are quite reliable at the time of an economic recession.
  • VOOG mainly focuses on large-cap stocks. As the U.S Federal Reserve is lowering its short-term interest rates, borrowing costs will drop, increasing the overall growth and lowering any discount rate applied to future earnings.
  • The fund has sufficient liquidity for the everyday investor. The daily average volume of the fund is $43.67 million, beating the peers by 3-4 times.
  • As the market sentiment causes concern, thanks to the events like U.S.-China trade war, U.S.-Iran tensions, Brexit issues, coronavirus pandemic, and India-China border war, investors are willing to trust market-proven funds like VOOG.

Source: Seeking Alpha

Future Outlook

Cash (in $bn)

Current Ratio

Financial Health

Exposure

Microsoft

137.64

2.90

Strong

9.50%

Apple, Inc.

94.05

1.50

Strong

9.03%

Amazon

49.29

1.08

Strong

6.91%

Facebook, Inc.

60.29

4.60

Strong

3.68%

Alphabet, Inc.

117.23

3.66

Strong

2.92%

Visa

12.15

1.25

Strong

2.27%

Mastercard

10.68

1.87

Strong

1.82%

Data based on Q1-20 results

The future outlook of VOOG is promising. Healthy balance sheets of the underlying holdings can result in longevity for several of the underlying holdings. For instance, Microsoft had a strong performance in the last few years. The company had strong earnings reports, thanks to the higher-growth businesses like the purchased Azure Cloud and Microsoft’s infrastructure-as-a-service business. Likewise, Apple has increased its strong presence in the smartphone industry and expects to continue to do so in 2021.

Risks To Consider

Higher turnover rates: The turnover rate of the fund is 22.9%, which is quite high for a passive fund. It may result in slightly higher transaction costs and taxes. A reduced turnover rate could improve the efficiency of the fund.

Declining revenues: As the fund is highly dependent on information technology and financial sectors, the declining revenues caused by the economic recession could influence the performance of the ETF. Prolonging restrictions on businesses can drive the revenues down for an extended time. It might include the digital services of Google, Facebook, and Apple.

Potential for sharp pullback after impressive rally: As we saw in March, as well as in late 2018, sharp pullbacks are becoming the norm in the markets, especially for growth-related names. There is a possibility of an extensive pullback if the economy does not rebound as expected by many economists.

We’ve seen many investors losing their money during the 2008 market crash for lacking a proper system. Now, after a decade, the Vanguard S&P 500 Growth ETF provides you the best opportunity to protect your investment from future economic depressions as the world has been permanently thrust into the online world. The cost is minimal, and the benefits of investing in these bellwether growth names will set up your portfolio for gains in the long run.

*Like this article? Don’t forget to hit the Follow button above!

Subscribers told of melt-up March 31. Now what? 

Sometimes, you might not realize your biggest portfolio risks until it’s too late.

That’s why it’s important to pay attention to the right market data, analysis, and insights on a daily basis. Being a passive investor puts you at unnecessary risk. When you stay informed on key signals and indicators, you’ll take control of your financial future.

My award-winning market research gives you everything you need to know each day, so you can be ready to act when it matters most.

Click here to gain access and try the Lead-Lag Report FREE for 14 days.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This writing is for informational purposes only and Lead-Lag Publishing, LLC undertakes no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Lead-Lag Publishing, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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growth underground

AI goes underground: root crop growth predicted with drone imagery

Michael Selvaraj, right, prepares to fly a drone at the Colombia campus of the Alliance of Bioversity International and CIAT. Credit: Neil Palmer / CIAT

Root crops like cassava, carrots and potatoes are notoriously good at hiding disease or deficiencies which might affect their growth. While leaves may look green and healthy, farmers can face nasty surprises when they go to harvest their crops.

This also poses problems for , who have to wait months or years before knowing how respond to drought or temperature changes. Not knowing what nutrients or growing conditions the crop needs early on also hinder crop productivity.

New research using machine learning and to help predict root growth and health with aboveground imagery was published June 14 in Plant Methods.

“One of the great mysteries for plant breeders is whether what is happening above the ground is the same as what’s happening below,” said Michael Selvaraj, a co-author from Alliance of Bioversity International and the CIAT.

“That poses a big problem for all scientists. You need a lot of data: plant canopy, height, other that take a lot of time and energy, and multiple trials, to capture what is really going on beneath the ground and how healthy the crop really is,” said Selvaraj, a crop physiologist.

While drones are getting cheaper, and hardware for capturing physical images through crop trials has become easier, a major bottleneck has been in analyzing vast quantities of visual information. And, distilling it into useful data that breeders can make use of.

Using drone images, the Pheno-i platform can now merge data from thousands of high-resolution images, analyzing them through machine learning to produce a spreadsheet. This shows scientists exactly how are responding to stimuli in the field in .

Using the technology, breeders can now respond immediately, applying fertilizer if a particular nutrient is lacking, or water. The data also allows scientists to quickly discover which crops are more resistant to climate shocks, so they can advise farmers to grow more drought or heat-resilient varieties.

“We’re helping breeders to select the best root crop varieties more quickly, so they can breed higher-yielding, more climate-smart varieties for farmers,” said Gomez Selvaraj.

“The drone is just the hardware device, but when linked with this precise and rapid analytics platform, we can provide useful and actionable data to accelerate crop productivity.”

The technology holds promise for other crops.

“Automated image analytical software and models developed from this study is promising and could be applied to other crops than cassava to accelerate digital phenotyping work in the alliance research framework,” said Joe Tohme, the Alliance research director for Crops for Nutrition and Health.



More information:
Michael Gomez Selvaraj et al, Machine learning for high-throughput field phenotyping and image processing provides insight into the association of above and below-ground traits in cassava (Manihot esculenta Crantz), Plant Methods (2020). DOI: 10.1186/s13007-020-00625-1

Provided by
International Center for Tropical Agriculture (CIAT)

Citation:
AI goes underground: root crop growth predicted with drone imagery (2020, June 18)
retrieved 18 June 2020
from https://phys.org/news/2020-06-ai-underground-root-crop-growth.html

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part may be reproduced without the written permission. The content is provided for information purposes only.

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Gauging growth Technology

Gauging growth in the most challenging environment in decades

Michael Whitmire, CPA
Contributor

Michael Whitmire, CPA, is co-founder and chief executive officer at Los Angeles-based FloQast, Inc., a developer of accounting close management software.

Traditionally, measuring business success requires a greater understanding of your company’s go-to-market lifecycle, how customers engage with your product and the macro-dynamics of your market. But in the most challenging environment in decades, those metrics are out the window.

Enterprise application and SaaS companies are changing their approach to measuring performance and preparing to grow when the economy begins to recover. While there are no blanket rules or guidance that applies to every business, company leaders need to focus on a few critical metrics to understand their performance and maximize their opportunities. This includes understanding their burn rate, the overall real market opportunity, how much cash they have on hand and their access to capital. Analyzing the health of the company through these lenses will help leaders make the right decisions on how to move forward.

Play the game with the hand you were dealt. Earlier this year, our company closed a $40 million Series C round of funding, which left us in a strong cash position as we entered the market slowdown in March. Nonetheless, as the impact of COVID-19 became apparent, one of our board members suggested that we quickly develop a business plan that assumed we were running out of money. This would enable us to get on top of the tough decisions we might need to make on our resource allocation and the size of our staff.

While I understood the logic of his exercise, it is important that companies develop and execute against plans that reflect their actual situation. The reality is, we did raise the money, so we revised our plan to balance ultra-conservative forecasting (and as a trained accountant, this is no stretch for me!) with new ideas for how to best utilize our resources based on the market situation.

Burn rate matters, but not at the expense of your culture and your talent. For most companies, talent is both their most important resource and their largest expense. Therefore, it’s usually the first area that goes under the knife in order to reduce the monthly spend and optimize efficiency. Fortunately, heading into the pandemic, we had not yet ramped up hiring to support our rapid growth, so were spared from having to make enormously difficult decisions. We knew, however, that we would not hit our 2020 forecast, which required us to make new projections and reevaluate how we were deploying our talent.

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growth Unstoppable

Unstoppable EV Growth In Norway — 66% Market Share

Cars

Published on June 3rd, 2020 |
by Dr. Maximilian Holland

June 3rd, 2020 by  


The world’s leading electric vehicle market, Norway, has seen another month of record market share growth in May — 66% share. That’s up from 47% a year ago. Popular all-electric models included the e-Golf, the Audi e-tron, and newcomer MG ZS EV breaking into the top 5.

The overall auto market was down 39% year on year from May 2019, with combustion vehicles taking a much bigger hit than plugin electric vehicles. The market share of electrics grew by 40% relative to May 2019 (from 47% share to 66% share), equaling April’s growth rate. These are the highest growth rates we have seen for two years.

Full battery electric vehicles (BEVs) were favoured over plugin hybrids (PHEVs) with a ratio of approximately 2:1. Favourite BEV models in May were as follows:

In #5 spot, just ahead of the affordable Peugeot e-208 and Renault Zoe, the MG ZS EV is having it first decent volume month in the country, with 187 units, almost 3× its previous average monthly sales. It’s one of the best value EVs on the market, priced from NOK 239,890 (~ €22,560) with moderate range (262 km WLTP) and great DC charging speed, up to 85 kW in the right conditions.

What will full year 2020 EV market share climb to in Norway? So far, relative growth 2020 over 2019 (56% full year) is stronger than 2019 over 2018 (49% full year). Whilst 2019 grew 14% in relative terms over 2018 full year, in 2020 we’re seeing the most recent two months growing at 40% in relative terms over 2019, growth rates not seen for 2 years.

We have the new Volkswagen ID.3 model arriving in decent volume later this year, amongst others. If 2020 averages out at around 25 to 30% relative growth, we should be looking at 70% to 73% full year market share in Norway.

What do you think? Please jump in to the comments section and “place your bets.”

Article photos courtesy of respective brands

 

 
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About the Author

Max is an anthropologist, social theorist and international political economist, trying to ask questions and encourage critical thinking about social and environmental justice, sustainability and the human condition. He has lived and worked in Europe and Asia, and is currently based in Barcelona.
Find Max’s book on social theory, follow Max on twitter @Dr_Maximilian and at MaximilianHolland.com, or contact him via LinkedIn.

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Australia growth

Australia GDP Growth Rate

The Australian economy contracted 0.3% in Q1 2020, after a 0.5% growth in the prior period and in line with market consensus. This was the first decline in the GDP since Q1 2011, capturing just the beginning of the expected economic effects of COVID-19. Household consumption fell for the first time since Q2 1988 (-1.1% vs 0.5% in Q4) and gross fixed capital formation shrank further (-0.8% vs -1.2%) as both private and public investment declined. At the same time, government spending grew less (1.6% vs 1.8%). Meanwhile, inventories dropped AUD 909 million driven by a rundown of manufacturing inventories and falls in retail and wholesale inventories. Exports declined (-3.5% vs -0.2%), while imports fell at a faster 6.2% (vs 0.1%). On the production side, most sectors contracted except wholesale trade, retail trade, information media & telecommunications, and financial and insurance. Through the year to Q1, the economy advance 1.4%, after a 2.2% growth in Q4.

GDP Growth Rate in Australia averaged 0.84 percent from 1959 until 2020, reaching an all time high of 4.40 percent in the first quarter of 1976 and a record low of -2 percent in the second quarter of 1974. This page provides – Australia GDP Growth Rate – actual values, historical data, forecast, chart, statistics, economic calendar and news. Australia GDP Growth Rate – data, historical chart, forecasts and calendar of releases – was last updated on June of 2020. source: Australian Bureau of Statistics

GDP Growth Rate in Australia is expected to be -8.00 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate GDP Growth Rate in Australia to stand at 0.70 in 12 months time. In the long-term, the Australia GDP Growth Rate is projected to trend around 0.90 percent in 2021 and 0.80 percent in 2022, according to our econometric models.

News Stream

Australian Economy Shrinks for First Time in 9 Years

2020-06-03

Australia Q4 GDP Growth Beats Estimates

2020-03-04

Australia Q3 GDP Growth Below Estimates

2019-12-04

Australia Q2 GDP Growth Matches Estimates

2019-09-04

Australia GDP Growth Rate

Australia’s economy is dominated by the service sector (65 percent of total GDP). Yet its economic success in recent years has been based on the mining (13.5 percent of GDP) and agriculture (2 percent of GDP) as the country is a major exporter of commodities. Other sectors include: manufacturing (11 percent) and construction (9.5 percent).

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Canopy growth

Canopy Growth Corp: Something Has To Change

These days are looking awfully painful for shareholders in Canopy Growth Corporation (CGC). Canada’s largest cannabis provider has seen tremendous growth in recent years, but between oversupply of the plant in Canada and the impacts associated with COVID-19, the business has seen quite a slowdown. Management is making painful revisions to the firm’s growth initiatives, cash balances (while high) are falling, and management has not shown the discipline to adequately cut costs and materially improve cash flows. Based on the firm’s financial data, it still has plenty of runway before it finds itself in a potentially devastating situation, but something needs to change and it needs to change rather quickly. Even the market has come to demand this, and a failure to listen to the market can cause unimaginable pain.

A necessary disclosure

Unless otherwise stated, and even then on a case-by-case basis, any reference to $ or dollars refers to Canadian dollars, not US dollars.

A tough quarter

Times have been rough for Canopy. Less than a year ago, the company’s share price traded as high as $45.78 (US dollars). Today, that price is $17.37 (US dollars). That’s a decline of 62.1%, and on May 29th alone, the company reported a drop of 20%. Though this is not the low point for the company over the past year (it hit a low of $9 (US dollars) in March of this year), it’s incredibly painful for shareholders who bought in at prices materially higher than where units are trading today.

There are many contributors to the company’s decline, some of which have been out of management’s control and others of which have been within their control. The latest decline is in response to the firm’s fourth quarter earnings release, which was made public on May 29th. According to management, net revenue for the business’s full 2020 fiscal year came in at an impressive $398.77 million. This is 76.2% higher than the $226.34 million the business generated in its 2019 fiscal year. You might think that this alone is a great win for the firm, but what’s worth mentioning is that the latest quarter saw only minimal growth compared to last year. In the quarter, the business saw net revenue of just $107.91 million. This is just 14.8% higher than the $94.03 million seen a year earlier. It is, however, 13% lower than the prior quarter’s figures.

*Taken from Canopy Growth Corp.

There have been some areas of growth exhibited by Canopy. Medical cannabis products saw really robust expansion, but the area that should be a boon for the business (recreational) has taken a beating. Based on the data provided, recreational cannabis revenue of $49.8 million saw a quarter-over-quarter, and a year-over-year decline for the quarter of 28%. This was driven in large part by a hit to the company’s B2B operations, with quarter-over-quarter, and year-over-year sales declines of 31% and 36%, respectively. B2C sales fared a little better, with the year-over-year figure coming in 12% higher, but with a 14% contraction sequentially. As you can see in the image below, dry bud sales have been mixed, but still fairly strong compared to its softgel, oil and 2.0 products.

*Taken from Canopy Growth Corp.

With weak sales have come weak profits (or we should say enlarged losses). The firm lost $1.30 billion in the quarter, bringing total losses for the year up to $1.32 billion. This compared to a loss in the same quarter last year of $379.52 million, and to $736.28 million for all of 2019’s fiscal year. A big part of this in 2020 was chalked up to non-cash impairments. Net losses are one thing, but more damaging was the cash outflow picture of the business. For the full quarter, the firm’s net cash outflow was $210.64 million and its free cash outflow was $304.73 million. Admittedly, these figures are better than last year, when the outflows totaled $240.13 million and $389.35 million, respectively.

Preparing for the future

Financially, the picture for Canopy could use a lot of improvement. I understand the firm has focused on growth and that makes sense to an extent, but cash flow cannot remain negative forever. Hemorrhaging cash can only work until cash reserves dwindle. Fortunately, Canopy does still have plenty, even though it’s far lower than it was last year. Total cash (including restricted cash and short-term investments) came out to a hair under $2 billion for the quarter. A year earlier, it was $4.54 billion.

*Taken from Canopy Growth Corp.

To address tough times and prepare for the future, management has instituted a number of changes. The firm cut its number of employees by around 200 between Canada, the US, and the UK. Management transferred ownership of its operations in Africa to a local business. Management also shuttered three greenhouses in Canada and stopped plans for a fourth one in development. Perhaps the most significant move was the firm’s choice to halt hemp farming in New York. It was only last year that management announced plans to invest $150 million into a hemp campus of sorts in the state as part of what would become a $500 million push into the US market. It’s unclear the extent of their halting of operations there, but it’s safe to say that this decision will involve significant revisions to their plans for that region.

Not everything is looking horrible on this front though. While management is severely reducing its growth projects, the firm is focusing on other areas. It’s launching a number of products under the Cannabis 2.0 initiative, including RTD (ready-to-drink) beverages, vaping products, CBD creams, and more. It also announced that 90% of its corporate-owned retail stores have already reopened, though the firm is having them operate on reduced hours and it’s emphasizing online and phone order sales. Even so, it’s likely the firm will have at least one more tough quarter, and until we see a return to what should be normal for them and until we see what kind of impact the full rollout of Cannabis 2.0 products has, there are legitimate concerns about the company’s ability to survive long-term.

*Taken from Canopy Growth Corp.

Takeaway

Based on the data provided, it’s clear that things are looking bad for Canopy at the moment. Investors are right to worry about the firm after seeing its latest quarterly figures. At the end of the day, the firm’s financial position is strong enough to keep it going for the foreseeable future, but this won’t always remain the case. Management needs to prove to investors over the next couple of quarters that it can improve its bottom line or its viability as a long-term prospect will come into serious doubt. As for me, I intend to stay by the sidelines and watch things for the moment. Even if the business can fare well, I don’t think legitimate upside potential is all that great compared to other investments on the broader market.

Crude Value Insights offers you an investing service and community focused on oil and natural gas. We focus on cash flow and the companies that generate it, leading to value and growth prospects with real potential.

Subscribers get to use a 50+ stock model account, in-depth cash flow analyses of E&P firms, and live chat discussion of the sector.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Breakouts growth

V&M Breakouts: Top Growth And Dividend Mega Cap Stocks For June 2020

V&M Breakouts: 5 Top Growth & Dividend Stocks For June 2020

Introduction

The Top Dividend Growth stock model expands on my doctoral research analysis on multiple discriminant analysis (MDA), adding new complexities with these top picks. Research shows that the highest frequency of large price breakout moves are found among small-cap stocks with low trading volumes offering no dividends and delivering higher than average risk levels. The challenge with the Top Dividend Growth model is to deliver a combination toward optimal total return with characteristics that typically reduce the frequency and size of price breakouts, but deliver more reliable growth factors for higher profitability longer term.

These 5 stocks have above a minimum $10 billion market cap, $2/share price, 500k average daily volume and at least a 2% dividend yield. The population of this unique segment is approximately 330 stocks out of over 7,800 stocks across the US stock exchanges. While these stocks represent less than 5% of available stocks, their market cap exceeds $19 trillion out of the approximately $33 trillion (57.6%) of the US stock exchanges. Efforts are made to optimize total returns on the key MDA price growth factors (fundamental, technical, sentiment) for the best results under these large cap constraints with high priorities for dividend growth and dividend yield.

Top Growth & Dividend Stocks For June 2020

  • Allstate Corp. (ALL)
  • Ameriprise Financial (AMP)

Unlike many other market based selection approaches, these picks are based on a proprietary algorithm using key variables across fundamental, technical, and behavioral finance characteristics. The justification for the selections is detailed in the research analysis link above that explains the algorithm and variable approach. Much of the narrative detailed below has been added to provide readers with familiar measures to consider for your own due diligence.

Score Overview of the Growth & Dividend Stocks for June

(StockRover)

Dividend Calendar

(StockRover)

The factors shown are not necessarily the selection variables used in the MDA analysis and dividend considerations for growth and strong total returns. These additional financial perspectives are included to enhance your investment decisions for total returns.

Allstate Corp.

In addition to strong positive fundamental factors shown below, certain key technical and behavioral variables are very positive for ALL. For example, the high net inflows to ALL have returned to levels comparable to early February but significantly ahead of the same price recovery expected with degree of positive sentiment.

(FinViz)

(StockRover)

(StockRover)

(FinViz)

The Allstate Corporation, through its subsidiaries, provides property and casualty, and other insurance products in the United States and Canada. The company operates through Allstate Protection, Service Businesses, Allstate Life, and Allstate Benefits segments. The Allstate Protection segment offers private passenger auto and homeowners insurance; specialty auto products, including motorcycle, trailer, motor home, and off-road vehicle insurance; other personal lines products, such as renter, condominium, landlord, boat, umbrella, and manufactured home and stand-alone scheduled personal property; liability insurance products; and commercial lines products under the Allstate, Esurance, and Encompass brand names.

Ameriprise Financial

Ameriprise Financial delivered a strong Q1 earnings and revenue beat on May 6th and is likely to continue higher with strong net inflows and very positive investor sentiment. Watch for the continuation of the bullish stair-step technical price behavior as the financial sector continues to get stronger and higher levels of investment. AMP is likely to retest prior resistance around $160/share price levels in the near term.

(FinViz)

(StockRover)

(StockRover)

(FinViz)

Ameriprise Financial, Inc., through its subsidiaries, provides various financial products and services to individual and institutional clients in the United States and internationally. It operates through five segments: Advice & Wealth Management, Asset Management, Annuities, Protection, and Corporate & Other. The Advice & Wealth Management segment provides financial planning and advice, as well as full-service brokerage services primarily to retail clients through its advisors. The Asset Management segment offers investment management, advice, and investment products to retail, high net worth, and institutional clients through unaffiliated third party financial institutions and institutional sales force.

Prior Growth & Dividend Breakout stocks

A sample of prior MDA breakout Growth & Dividend stocks from the full portfolios exclusive to subscribers are as follows:

V&M Breakouts: Top Growth And Dividend Stocks For May 2020

  • Garmin Ltd. (GRMN) +11.1%
  • T. Rowe Price Group (TROW) +4.56%
  • Cummins Inc. (CMI) +3.73%
  • ConocoPhillips (COP) +0.19%

V&M Breakouts: Top Growth And Dividend Stocks For April 2020

  • KLA Corporation (KLAC) +22.4%
  • BlackRock Inc. (BLK) +20.2%
  • Intel Corporation (INTC) +16.3%
  • Amgen Inc. (AMGN) +13.3%

V&M Breakouts: Top Growth And Dividend Stocks For March 2020

  • The Clorox Company (CLX) +29.4%
  • The Kroger Company (KR) +15.96%
  • Gilead Sciences Inc. (GILD) +12.2%
  • Taiwan Semiconductor (TSM) -6.52%

Conclusion

These stocks continue a live forward-testing of the breakout selection algorithms from my doctoral research applied to large-cap, strong dividend growth stocks. None of the returns listed above include the high dividend yields as part of the performance and would further increase total returns for each stock. These monthly top Growth & Dividend stocks are intended to deliver excellent total return strategies leveraging key factors in the MDA breakout models in the small cap weekly breakout selections.

These selections are being tracked on the V&M Dashboard Spreadsheet for members and enhancements will continue to optimize dividend, growth, and higher breakout frequency variables throughout the year.

All the very best to you and have a great week of trading!

JD Henning, PhD, MBA, CFE, CAMS

If you are looking for a great community to apply proven financial models with picks ranging from short term breakouts to long term value and forensic selections, please consider joining our 700+ outstanding members at Value & Momentum Breakouts

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Disclosure: I am/we are long NAIL, LABU, SOXL, BNKU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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