UPDATE

President’s Day

By The MARK IT. Team

🌤️ Good morning, and happy Tuesday. Yesterday was President’s Day. In case you got the day off from work or school, we hope you enjoyed resting up and were able to spend some time doing something you enjoy.

• In the spirit of reporting on company quarterly earnings, this week marks one quarter since we launched MARK IT. and we want to thank you for reading. Since our first issue, we have tweaked and evolved our writing style and layout to give you a rich and informative reading experience.

• If you have enjoyed our weekly newsletter, all we ask is that you share or forward this email to a friend so we can keep educating more people about the investing world.

Thanks a bunch.

WEEK IN REVIEW

No Days Off

By Abbas Akhtar

via rawpixel

Since yesterday was a federal holiday, most U.S. exchanges were closed. This likely means that this morning will be a more volatile Tuesday market open than usual. We previously talked about (in our Need Stronger Staples? issue) how the first day of the week for markets is more volatile than the rest of the week.

• Mornings are when most of the action happens because orders pile up over the weekend and stock prices react to any news that companies release on Friday night. Just because the market might be closed on a day, doesn’t mean there aren’t headlines and performance changes. Three days' worth of sales, headlines, and performance changes can create bigger swings than usual—so be on the lookout for that this morning.

• Last week, the S&P had some interesting movement, which culminated in a rather steep decline by the end of the week. Tuesday morning saw half a percentage point decrease, before the index recovered by market close. Wednesday was a similar story, with a drop and recovery within the day. It looked like the S&P was going to hold through the remainder of the week, however, late Thursday and early Friday saw a substantial 1.9% drop-off, followed by a very slight .7% recovery.

WEEKLY WATCHLIST

Cross-Industry Valuation

The following stocks for this week are both well-known companies. While the stocks are in different industries, they do complement each other in some ways. Both stocks also happen to be sizable holdings by Warren Buffet. You can view Buffet’s portfolio for reference here: HedgeFollow.

STOCK #1

Chevron (CVX)

CVX Stock (1-year), via Google Finance

⚠️ Inconsistent cash flows: Since 2009, the free cash flows of Chevron have been working in cycles. The last few years, however, have seen a rise year-over-year. Keep a look out for further financial reporting if you’re considering investing.

✅ Healthy dividend: With a 3.71% dividend yield, CVX’s dividend is much higher than the average and pays quarterly.

✅ Undervalued according to DCF: Based on our discounted cash flow model, a single CVX stock at Monday’s market close price of $162.85 is approximately 12-15% undervalued.

✅ Low debt: Of the total Enterprise Value (EV) of Chevron, debt is approximately 7% (23.64B) compared to a market cap of 93% (314.89B).

STOCK #2

General Motors (GM)

GM Stock (1-year), via Google Finance

⚠️ Steady cash flows: While the free cash flows of GM haven’t been increasing drastically year after year, they have stayed relatively steady. The past 5 years have seen small growth, which may continue thanks to electric vehicle sales.

⚠️ Dividend, but small: With a 0.83% dividend yield, GM’s dividend is relatively small compared to companies that pay one. The key here, however, is that GM’s dividend is consistent.

⚠️ Fair Value according to DCF: Based on our discounted cash flow model, a single GM stock at Monday’s market close price of $43.17 is trading at fair (intrinsic) value. According to CNBC, GM is one of the most overbought stocks, which could be contributing to the higher price. If a sell-off occurs, the share price may see a drop and allow for a larger margin of safety.

🛑 Higher debt: Of the total Enterprise Value (EV) of General Motors, debt is approximately 66% (115.7B) compared to a market cap of 34% (60.2B).

MARK IT. EXPLAINED

What's Happening with Russian Oil?

By Mario Montero-Ruberu

BZWOO Brent Crude Oil (1-year), via Google Finance

Last March, in the initial stages of the Ukraine-Russia conflict, Brent Crude Oil soared to over $130 per barrel. European countries have since pivoted away from dependence on Russian energy, but Russia remains relevant in global oil conversations. Why?

The United States and European Union have embraced aggressive measures to ban all imports of Russian oil products. In addition, the G7 forum recently instituted a $60-per-barrel price cap on Russian oil products distributed to non-Western nations. Regardless, Russian oil prices were trading well below the cap, as countries like China and India have been securing massive discounts. Russia is attempting to save face, recently announcing cuts to oil production by 500,000 barrels per day in March. After the announcement, Brent Crude prices traded 1.5% higher but managed to trade lower to pre-announcement levels just days later. Similarly, the OPEC+ group boldly announced last October that they would cut production by 2 million barrels, but Brent crude has only fallen since.

Global oil prices have been on a significant decline since last June, thanks to increased production from other oil-producing countries and a contracted global economy. Russia and OPEC+ may cause some short-term volatility with their announcements, but look for oil prices to sustain their downtrend in the long term. Source(s): PBS, Axios

ONE MORE THING

Keep in Touch

• For general announcements or updates on what we're working on, follow Abbas on Twitter 👉 @RealAbbasAkhtar

• Also, we want to hear your feedback! Send any comments or suggestions to [email protected]

Thanks again for reading!

Nothing MARK IT. publishes constitutes professional and/or financial advice, nor does any information published by MARK IT. constitute a comprehensive or complete statement of the matters discussed.