This was a week of massive market ROTATION – Out of big-cap technology stocks and into everything from small caps to precious metals and mining shares. Is this just a blip? Is this the start of something more? How can you capitalize on NEW profit opportunities? Top MoneyShow expert contributors weigh in with their thoughts and recommendations.
Roger Conrad Conrad’s Utility Investor
Italy closed the last of its operating nuclear reactors in 1990, following a 1987 post-Chernobyl referendum. But earlier this year, Enel SpA (ENLAY) and Ansaldo Nucleare forged an agreement to develop new nuclear reactors, with support of the country’s Ministry of Environment and Energy Security.
Enel’s Endesa unit operates several reactors in Spain, which at this point has a plan to phase out nuclear energy by 2035. But like Italy, the country is now reconsidering its options. And as the largest power producer in both countries, the company is poised to capture what business emerges.
(Editor’s Note: Roger Conrad is speaking at the 2024 MoneyShow/TradersEXPO Orlando, which runs Oct. 17-19.)
Enel’s primary CAPEX focus is new wind, solar, and storage, with operations in 29 countries. It will spend EUR12 billion of its 2024-26 CAPEX plan on adding 11 gigawatts of new solar (53 percent), wind (26 percent), and batteries (19 percent) globally. That’s just slightly less than the 12.8 GW installed in 2020-23 and at a lower projected cost.
In contrast to new nuclear, these projects can be sited, permitted, funded, and built within 12-18 months, enabling Enel to lock in costs and project returns. Last month, the company opened a 93-megawatt solar facility in Victoria, Australia — where plans to shutter coal plants have launched a building boom — as well as an 87 MW “solar plus storage” facility in Italy.
Moody’s has boosted the outlook for Enel’s BBB+ credit rating to stable from negative. That’s the latest sign systematic debt reduction of the past few years is paying off. And asset sales targeted at EUR20 billion have been largely met without cutting meaningfully into cash flow.
Enel generates roughly 22 percent of EBITDA from South America, particularly Brazil, Colombia, and Chile, through its 64.93 percent-owned unit Enel Chile (ENIC). That exposure accounts for the discounted price to other major European electrics, due to currency volatility. But long-term it offers the upside of faster-growing markets.
The French Right’s threat of a post-election “Frexit” energy policy no longer seems likely. But however European energy policy evolves, Enel will continue to benefit from its strong generation position, even as it capitalizes on surging demand from data centers in Italy and Spain.
Recommended Action: Buy ENLAY.
Eoin Treacy Fuller Treacy Money
Commercial real estate (CRE) risks are clear. A solid percentage of people now insist on working from home, for at least part of the time, and some companies are not fully remote. The loss of tenants in downtown areas represents a fall in foot traffic and a decline in taxation, and it inflates risk ratios. And yet, large financial firms like The Goldman Sachs Group Inc. (GS) are trading well.
Bloomberg recently published a story titled “US Commercial Property Crash Is Set to Deepen the Pain Elsewhere.” It included a passage saying “Based on Oaktree analysis, the number of US banks at risk would exceed levels seen in the 2008 financial crisis levels if CRE values fell by only 20% from their peak. Office values there fell 23% last year, according to the IMF.”
It is not difficult to predict this will end in trouble for lenders and institutional investors. However, there is no sign of trouble right now. This is a chart of GS:
I have been cautious about Goldman’s business model. The company runs the hedge book for around half of all US hedge funds. The only asset class large enough and uncorrelated enough to absorb those flows is real estate. The bank’s asset management arm has a massive position in a troubled asset class.
So, why is it at new highs? The standing repo facility means access to limitless funds. Banks have been boosting loan loss provisions, so investors are less worried now than a year ago. There is a clear belief that the Federal Reserve will rescue the bank sector because that is what they have done at every sign of stress for the last 16 years.
The S&P500 Diversified Financials Index has been ranging for the last three months. But it is, so far, holding the break above the 2021/22 peaks.
The KBW Regional Banks Index has been ranging with a downward bias all year. The sector is heavily dependent on interest rates coming down soon to ease the burden of losses on their Treasury holdings. It has steadied over the last couple of weeks as 2-year yields broke below the 200-day MA.
The belief, backed up by experience, that the Fed always rides to the rescue is also a significant reason why gold remains firm. It is hedge against central banks making mistakes.
It’s been quite the year so far for gold, silver, and (more recently) mining shares. Gold blasted to an all-time high above $2,400 an ounce a few months ago, while silver surged to an 11-year high above $32, before consolidating those gains. Now, many of our expert contributors think there’s a lot more profit to be had.
In the just-released gala report I’ve been working on for weeks – The Golden Era: 3 Powerful Forces Driving Precious Metals Higher (& How YOU Can Profit!) – you’ll find all the details. Clocking in at 37 pages, it tells investors about…
The three powerful forces driving the surge in gold, silver, and mining shares in 2024 – and why they should continue to drive metals and miners higher in 2025 and beyond
Which foreign central banks are piling into gold like never before – and how “global fragmentation” and “de-dollarization” virtually guarantee that trend will accelerate in the years to come
Why gold could hit $3,000 soon…$8,000-plus later…and in an extremely bullish scenario, $20K (or more)!
How Western investors have been lagging their Eastern counterparts in recognizing the profit potential in precious metals so far…and the one catalyst that will drive a massive awakening SOON (Yes, that’s even MORE bullish for metals)
The two primary reasons why junior mining and exploration stocks look incredibly attractive – and which senior sector plays should be added to your portfolio immediately, too
Top profit strategies from EIGHT MoneyShow expert contributors and sponsors with a century-plus of combined experience in the sector. They include two highly acclaimed newsletter editors…one chief global strategist with a million followers on X/Twitter…two junior mining executives with active projects in the Yukon and British Columbia…and three experts in the bullion and coin business.
And so much more. Finally, as I note in the report’s conclusion…
“I am NOT a traditional ‘gold bug.’ There are times when I love the metal as an investment. Times when I don’t. And times when I don’t focus much on it at all because there are more promising opportunities elsewhere.
“But since the second half of 2018, I have been a staunch bull on gold and silver. And I am even more of one today given the three powerful forces covered in this report…In the end, the only thing you should NOT do is let this ‘Golden Era’ pass you by completely.”
Download your complimentary copy of “The Golden Age” report here…Peter Boockvar Bleakley Advisory Group
Peter Boockvar is Chief Investment Officer at Bleakley Financial Group, as well as editor of The Boock Report markets newsletter. In this MoneyShow MoneyMasters Podcast episode, which you can watch here, we take a 360-degree tour of the markets, the economy, Federal Reserve policy, and the most (and least) promising strategies, sectors, and asset classes for 2024-2025.
We start with a discussion of the “two different economies, two different stock markets” problem – why that’s the case, who’s winning, who’s losing, and how and when this “glaring gap of historic proportions” could get closed. Peter then shifts to a discussion of the Artificial Intelligence/AI boom, the surge in tech investment, and why a “Show me the money” moment might be coming soon.
We pivot next to a discussion of the post-Covid changes in the economy, from increased government spending to higher-for-longer interest rates, and how a normalization of the latter “takes a lot of time and takes a lot of pain.” He highlights one particularly vulnerable sector and one particularly vulnerable group of businesses – as well as the “canary” he’s seeing that might point to increased market stress in the months ahead.
Peter then outlines his expectations for Fed policy, the important shift Chairman Jay Powell just signaled, and why investors should be “careful what they wish for” when it comes to rate cuts. After touching on the impact of global and US elections on markets, he lays out a bullish case for commodities and foreign markets (particularly in Asia)…and warns investors against “just chasing the things that have worked because they’ve worked.”
Finally, Peter shares a sneak peek at what he’ll cover at the 2024 MoneyShow Toronto, set for Sept. 13-14 at the Metro Toronto Convention Centre North.
