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3 Advertising Stocks to Buy for The New Digital Age

Ad spending has been transitioning from traditional methods to digital ones. In light of this, let’s take a look at advertising stocks.
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The advertising industry has been in a slowly shifting state for decades. Companies like Google and Facebook have created more targeted advertising networks than ever before. Due to this, ad spending has been transitioning from traditional methods to digital ones. More recently, the COVID-19 pandemic rapidly accelerated this trend. In light of this, there’s never been a better time to take a look at advertising stocks.

The COVID-19 pandemic has made humans more reliant on technology than ever. In 2020, quarantines caused industries like eCommerce and digital marketing to soar. This trend has not slowed down either. In 2021, companies spent approximately $228.96 billion on digital advertising. This was a 30.5% increase from 2020.

In general, it feels as if we are at the cusp of entering a new digital age. On top of the transition mentioned above, new digital technologies are also emerging. For example, the metaverse and web 3.0 were huge talking points in 2021. Both of these have the potential to redefine the world that we live in. Regardless of what the future of advertising looks like, there’s a high chance that it will be digital.

With that said, let’s take a look at three advertising stocks to buy for the new digital age.

NOTE: I’m not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions.

Digital Advertising Stocks: A Duopoly

When it comes to finding digital advertising stocks to buy, there are two obvious choices. Google and Meta Platforms control the overwhelming bulk of the digital advertising space. Google, the world’s most popular search engine, controls 28.9% of the market. Facebook, with its nearly 3 billion-member community, controls 25.2%. Amazon is a relatively close third. It controls about 10% of the market. After these three goliaths, the digital advertising space opens up much more.

A few other companies are trying to chip away at this dominance. For example, video streaming company Roku is making a bid to lure advertisers away from TV ads. Other social media companies like Twitter, Snapchat and TikTok are all trying to dethrone Facebook. However, as it stands, Google and Facebook have a duopoly on digital advertising.

With that said, there are a few advertising stocks that focus on actually running ad campaigns.

No. 3 Omnicom Group (NYSE: OMC)

Omnicom Group is one of the biggest marketing communications firms in the world. It offers solutions for advertising, customer relationship management, public relations and specialty services. However, the bulk of its income comes from advertising. To be exact, in Q3 2021, 53% of its total revenue was from advertising. Omnicom employs about 77,000 people and works with 5,000 clients in 70 different countries. It’s comprised of three different advertising agencies: BBDO, DDB and TBWA.

One reason why Omnicom Group is one of the top advertising stocks is due to its diversified revenue streams. Half of its income comes from advertising. However, its client base is diversified across 15 different industries. Its biggest industries are technology, auto, and healthcare. However, none of these make up more than 20% of Omnicom’s revenue. Having this type of diversified client base is incredibly valuable. This helps to protect Omnicom in the event that one industry reduces its ad spend.

Building on the theme of diversification and safety, Omnicom also pays a hefty dividend. Even during 2020, one of the toughest years on record, it remained committed. It paid out $563 million to investors during 2020. Right now, it has declared a dividend of $0.70 per quarter.

In 2020, Omnicom reported $13.17 billion in revenue and net income of $945.4 million. Its stock was up 22% in 2021 but down 10% over the past five years. When you buy Omnicom stock, you are probably not going to double your money in a year. Instead, you’ll get a diversified business that makes money and pays a consistent dividend.

Advertising Stocks No. 2 The Trade Desk (Nasdaq: TTD)

The Trade Desk offers a different model than most advertising stocks. It’s not a marketplace that shows ads, like Google or Facebook. But it’s also not an agency. Instead, it’s a platform that allows ad buyers to create, manage, and optimize their ad campaigns.

One of the most impressive parts of The Trade Desk’s business is its customer retention rate. In Q3 2021, it boasted a customer retention rate of 95%. This means that it only loses 5% of its buyers to competitors or other services each year. Even more impressively, this is the 7th year in a row that this rate has been at 95%. This could be part of the reason the company was recognized as the 6th fastest-growing company in 2021 by Fortune.

In 2020, The Trade Desk reported revenue of $836.03 million. It also had a net income of $242.32 million. These numbers were up 26.47% and 123.71% respectively. Its stock broke even during 2021 but is up nearly 2,500% over the past five years.

Advertising No. 1 Thryv Holdings (Nasdaq: THRY)

Thryv Holdings is necessarily a digital advertising business. However, it still helps companies get more exposure. It does this by helping them to manage and improve their online presence. For example, it helps clients improve their Google listings, run social media pages, and monitor their status on third-party review sites. In a way, all of these are a form of digital advertising. Thryv might very well be one of the newer categories of advertising stocks.

Just like The Trade Desk, Thryv also has an incredibly sticky platform. In Q3 2021, it boasted a 95% net dollar retention. It also reported just 1.7% seasoned monthly churn. In today’s world, there are so many different parts of running a business. Even something as simple as an Instagram page can require an entire team. Thryv helps simplify businesses’ online presence which saves them time, money, and resources. This is probably why Thryv’s young platform is proving to be so valuable for its clients.

Thryv reported a 2020 annual revenue of $1.11 billion. It also reported a net income of $149.22 million. Thryv just went public in 2020 and its stock is up 200% total.

I hope that you’ve found this article on the top advertising stocks valuable! As usual, please base all investment decisions on your own due diligence and risk tolerance.

The post 3 Advertising Stocks to Buy for The New Digital Age appeared first on Investment U.

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Economics

Oil Could Be The Haven Stocks Traders Need To Shelter From Fed

Oil Could Be The Haven Stocks Traders Need To Shelter From Fed

By Nour Al Ali, Bloomberg Markets Live commentator and analyst

Oil is starting to look like an unlikely haven from the stocks selloff in the run-up to anticipated Fed tightening.

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Oil Could Be The Haven Stocks Traders Need To Shelter From Fed

By Nour Al Ali, Bloomberg Markets Live commentator and analyst

Oil is starting to look like an unlikely haven from the stocks selloff in the run-up to anticipated Fed tightening.

Traders are pricing lower volatility in the commodity than in the Nasdaq and S&P 500. Barometers of market anxiety for both indexes have shot up recently, suggesting trader sentiment is souring. Meanwhile, the CBOE Crude Oil Volatility Index, which measures the market’s expectation of 30-day volatility of crude oil prices applying the VIX methodology to USO options, shows that oil prices are expected to remain relatively muted in comparison.

With a producer cartel to support prices, the outlook for oil is more sanguine, even if the Fed raises rates. The commodity has ample support, with global oil demand expected to reach pre-pandemic levels by the end of this year. The U.S. administration has been pushing oil-producing nations under the OPEC+ cartel to ramp up output, while the group has stuck to a modest production-increase plan and is expected to rubber-stamp another 400k b/d output hike when they meet next week. This means that oil is likely to stay a lot more stable than in recent years.

The relatively low correlation between the asset classes provide diversification benefits. The relationship between the S&P 500 and the global oil benchmark is weak and lacks conviction; it’s even weaker between the Nasdaq 100 and Brent crude contracts. The divergence in price action this week could indicate that stocks have been tumbling in fear of a hawkish Feb, more so than geopolitical risk alone. That would perhaps offer traders an opportunity to seek shelter amid stock volatility in anticipation of the Fed’s next move.

Oil might have tracked the decline in stocks at the beginning of this week, but the commodity is back to its highs now. It’s up close to 15% this year, while the S&P 500 is struggling to reclaim its footing after plunging as much as 10%.

Tyler Durden Wed, 01/26/2022 - 13:45

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Stocks

Who’s Afraid Of Jerome Powell?

Who’s Afraid Of Jerome Powell?

Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,

baller (ˈbɔːlə)
n
slang someone, usually a man, who lives in an extravagant and materialistic manner, tending to be something of a socialite

My wife…

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Who's Afraid Of Jerome Powell?

Authored by Tom Luongo via Gold, Goats, 'n Guns blog,

baller (ˈbɔːlə)
n
slang someone, usually a man, who lives in an extravagant and materialistic manner, tending to be something of a socialite

My wife and I got sucked into watching the Dwayne Johnson series Ballers on HBOMax over the weekend. Aside from being hilarious, it struck me how much of a microcosm of our world this seemingly alien world of twentysomething millionaires and rapacious billionaires really is.

When you drill into the details, the world of Ballers really isn’t that far from ours.

For those that don’t know the setup, broke former NFL bad boy Johnson is trying to turn a new leaf “monetizing his friendships” to help NFL players hold onto all that money they are making at an age when they have zero ability to contemplate their own mortality.

One storyline from the first season is especially relevant. A kid with a good heart, Vernon, banking on his next big contract, is out of money having spent it all on being ‘loyal’ to his friends and family, throwing parties, inviting 40 people to a business lunch, etc.

His loyalty is so out of control he has to borrow money from Johnson (who’s broke mind you) to bridge him until the contract comes through. Of course there are complications and hilarity ensues. The typical Hollywood fantasy fare. Nothing groundbreaking, eventually things work out (mostly).

Johnson has to endure a lot to get Vernon to see the truth, put limits on the situation and get Vernon to properly save his money. The pitch is the right one: put it to work and pay everyone for the long term, not just for tomorrow.

Sound familiar?

No, because that’s exactly what we don’t preach in this world of central bank issued easy money. This shouldn’t be a central conflict, it should be a given.

Because this background for this story is playing out at every level of our society, all a consequence of too much money flowing around finding ways to corrupt everything it touches.

Ballers is all about the corruption money brings to those few thousand people in the NFL and their organizations because of the millions of people who spend too much money on a passing fancy, entertainment.

The NFL, like all pro sports, is nothing but a money funnel with a Federal Reserve sized Hoover attached to it. It’s the ultimate corruption of e pluribus unum. From many to one.

Take a little bit from all of us, time and again to help us relieve the stress of the shitty world they’ve built. Give some of it to the rubes who play the game, who blow it on hookers, high end cars, and drugs, while the lion’s share gets sucked right back up into the same oligarch class that created it in the first place.

But it’s no different than you or me, buying shit we don’t need on credit, self-medicating with pro sports, alcohol, video games, day-trading cryptos on Robinhood, yelling at racists on Twitter or my personal favorite, a ridiculous board game collection.

We’re all ballers to one degree or another, spending easy money on distractions rather than facing the reality that the most unsustainable thing about our society is the money which makes it all happen.

And before anyone revokes my libertarian creds, I pass no judgment on this. It’s all voluntary exchange, mostly. At the very least it has the appearance of being voluntary.

That said, here we are waiting to hear from the philosopher kings at the FOMC and the markets are melting down around our ears.

The tantrums that have begun are no different than those pitched by Vernon’s friends over having the barest amount of fiscal discipline imposed on them.

Everywhere I look everyone is saying some version of the same thing, “Hey man, Don’t take the punch bowl away.” They’d say it a lot more colorfully on Ballers, but being white I’m not allowed to use that language.

From Chairman Xi leading off this year’s virtual Davos with a plea not to hike rates to the howls from the Financial press including some Austrians, pleading that he can’t possibly raise rates because it would cause a market meltdown and blow out the Federal budget, Powell is now off everyone’s invite list to party on the yacht.

I get the feeling that some folks would rather be right about their hyperinflation theories rather than actually figuring out what’s really going on.

But the reality is that something has changed and the markets are finally coming to that conclusion.

For months I’ve been arguing that Jerome Powell ignited a firestorm when he raised the Reverse Repo Rate by 0.05%, pulling trillions in base liquidity from overseas markets while handing U.S. banks all the collateral they needed.

It’s created a political firestorm on Capitol Hill who tried to oust him from the Chair and failed. They got three of his fellow hawks, but not the king. He was able to run out the political clock on both Build Back Better and opposition to his reappointment.

But it doesn’t happen if Powell doesn’t have the backing of the people behind him.

And who backs Powell? The New York Fed, that’s who.

That leads you to the conclusion that all is not hunky dory in Oligarchville. That, shock of shocks, narcissists only like each other when they are sucking our lives and souls away. But when they start taking from each other, that’s when the knives come out.

It seems incredible to me that many people won’t consider this idea, that these people don’t like each other, and aren’t willing to hand over their business and their wealth without a fight?

Because that’s what’s implied when everyone jumps up and down and screams at Powell to “Save them!” from deflationary forces.

And he looks down from the Marriner-Eccles building and says, “No.”

It’s time to put it all in order. With ‘Build Back Better’ dead there is no more insane new spending to monetize. There is no reason for the Fed to keep up QE or rates at the zero-bound. Savings is down, money is circulating again. Inflation isn’t transitory.

People want to work. COVID-9/11 is behind us. The anger over losing two years is just getting started but that’s a different wrinkle to this story for another day.

If the Fed isn’t intimidated by the recent weakness in stocks, in truth a healthy correction after a massive run, and raises rates on Wednesday we have our answer as to what Powell and friends are willing to do. Whatever your opinion of it is, it will not be a ‘policy error’ but a clear-eyed understanding that it’s time to rein it in, change the direction of the big boat, and begin living within our means.

If he doesn’t it won’t be the opposite signal. It will simply mean that they’ll take another couple of months to nail down the particulars, namely getting proper control over the O’Biden administration, and begin hiking on schedule per the current expectations in the Eurodollar futures market.

Has anyone looked at the ratings for pro sports? Old media? Hollywood box office receipts? All down. Netflix is getting killed because it’s growth cannot sustain its valuation, much like a lot of the NASDAQ. This is something that should have happened two or three years ago, just like Tesla.

But didn’t because of COVID-19 and the massive wealth transfer the stimulus provided to them during the absence of sanity oceans of money always produces.

That said, these are all unsustainable Ponzi scheme masquerading as viable industries based on cheap money and malinvestment in politically-motivated production.

Now I’m not suggesting for a second that Powell is some kind of saint or anything. He’s no savior sent down to redeem us sinful ballers from our excesses. No sir. He represents the very people that helped create this mess.

But at the same time, they want to remain where they are. They are not willing to hand their power and their money over to another group within the cartel.

They didn’t get where they were putting their money on the table to bail out anyone else.

And they won’t this time.

All I’m doing here is assessing what everyone’s real motivations are and who they answer to. To quote another, far more classic television show“The universe is run by the interweaving of three elements: Energy, matter, and enlightened self-interest.”

And, to me, where’s the enlightened self-interest angle for the NY Boys, represented by Powell, for turning over their business to a bunch of European and Chinese commies?

When you step back and really look at what’s happening, they have already told Europe, China and all those emerging markets currently whining, the post-COVID world you created is your mess now.

This is why I’m convinced the Fed will hike and hike aggressively this year, maybe starting on Wednesday.

There is no deal possible between Wall St., City of London and Europe. In that game, Europe loses. If China wants to play hardball and default on foreign-held property debt, fine. Have fun attracting any capital in the future.

All the fiscal projections of the U.S.’s insolvency are great (and accurate) but I hate to burst anyone’s bubble, literally, but you CAN taper a Ponzi scheme if you’re 1) the biggest Ponzi and 2) control the flow of funds into them.

And if you don’t think Powell and his backers at the NY Fed aren’t willing to sacrifice a few thousand points on the Dow or even a few points of GDP, to restructure the US’s finances for the long term while the Fed hands them all the collateral and liquidity they need to keep playing while everyone else craps out, I do believe you are terminally naïve.

It’s what they call playing hard ball.

There are two ways to reset the monetary system. The first option is printer go brrr and default by switching out the old currency for a new one. The other is collapse the old system by returning risk and rebuilding it after the malinvestment is gone.

Paul Volcker chose the latter to finally establish the Dollar Reserve Standard as the only game in town. Nixon set the process in motion, Volcker closed the deal. It’s what established today’s game.

We are at an inflection point in history, both monetary and geopolitical.

I discussed this in my latest podcast with Alex Krainer and believe the rules of the game have fundamentally changed. The next game will look a lot different than the baller one we’ve been playing.

Those who won’t adjust to that or admit it should be very afraid of what Jerome Powell does next.

*  *  *

Join my Patreon if you hate the game, not the playa.

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Tyler Durden Wed, 01/26/2022 - 12:25

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Economics

Boeing Jumps On First Positive Cash Flow Since 2019 Despite Another Huge 787 Charge

Boeing Jumps On First Positive Cash Flow Since 2019 Despite Another Huge 787 Charge

It was another painful quarter for Boeing, which reported revenue and earnings both of which missed expectation amid mounting 787 Dreamliner losses which…

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Boeing Jumps On First Positive Cash Flow Since 2019 Despite Another Huge 787 Charge

It was another painful quarter for Boeing, which reported revenue and earnings both of which missed expectation amid mounting 787 Dreamliner losses which amounted to another $3.5 billion in pre-tax non-cash charge s (focused on actions required to resume deliveries) however a surprise boost in 737 Max output from 19 to 26 per month was welcome news as was the unexpected end of the company's chronic cash burn as Boeing reported its first positive free cash flow since early 2019.

First, this is what Boeing reported for Q4:

  • Revenue $14.79 billion, -3.2% q/q, -3.3% y/y, missing estimates $16.67 billion (Bloomberg Consensus)
  • Core loss per share of ($7.69), on the continued Dreamliner charges, which was an "improvement" from the whopping ($15.25) reported but clearly missed estimates of (0.42).

If the massive Q4 charge was not enough, Boeing now sees 787-Related abnormal costs about $2B, above from the $1BN it had seen previously. The company said that it continues to perform rework on 787 in inventory and is focused on actions required to resume 787 deliveries.

Remarkably, as the following table from Boeing's earnings release shows, pretty much every Y/Y comparison is NM, which should tell you all you need to know about the company's headline financials.

And a prettier rendering:

Looking at revenue we get the following disappointing picture:

  • Commercial Airplanes revenue $4.75 billion, +0.5% y/y, missing estimates $5.50 billion
  • Defense, Space & Security revenue $5.86 billion, -14% y/y, missing estimate $6.85 billion
  • Global Services revenue $4.29 billion, +15% y/y, beating estimate $4.18 billion
  • Boeing Capital operating earnings $7 million, missing the estimate $24.4 million
  • Total commercial planes deliveries 99, +68% y/y, missing the estimate 102.36
  • Backlog $377 billion, +3.9% y/y

Adding insult to injury, the planemaker reported $5.5 billion in total costs to cover rising factory and customer expenses for the Dreamliner. Boeing took write-offs on the KC-46 aerial tanker and the global services division as well. As Bloomberg notes,
the 787 program’s profits have been wiped out as Boeing pays airlines for service they’ve lost because of delivery disruptions. The company hasn’t handed over any Dreamliners since June as it addresses structural imperfections on the roughly 100 aircraft in its system.

“This effort continues to impact our deliveries and our financial results -- but we are fully confident it is the right thing to do,” Calhoun’s memo said. “I view the financial impacts of this work as a long-term investment in a program that has significant runway ahead.”

It wasn't all bad news, however, as Boeing announced it is hiking the output of the 737 to 26 jets a month, up from 19 in October, Chief Executive Officer Dave Calhoun said in a note to employees. That was taken by the market as a sign the planemaker may be turning around its operations after burning through more than $31 billion during a nearly three-year-long slump marked by the Max’s grounding, the Covid-19 pandemic and a spate of quality lapses.

Looking ahead, Boeing said it still expects passenger traffic to return to 2019 levels in 2023 to 2024, and said that commercial recovery is broadening as regional dynamics continue to evolve driven by COVID-19. It also said says increasing 777/777X production rate to 3 per month in 2022.

But the biggest positive surprise was the company's announcement that in Q4, it generated $494 million in fourth-quarter free cash flow, up from a cash burn of over $4.2 billion a year ago; analysts had expected an outflow of about $1 billion.

This was the first positive FCF from Boeing since Q1 2019. It also meant that operating cash flow of $716 million as beat estimates of negative $429.0 million and was far above the negative $4.01 billion reported a year ago.

"2021 was a rebuilding year for us as we overcame hurdles and reached key milestones across our commercial, defense and services portfolios. We increased 737 MAX production and deliveries, and safely returned the 737 MAX to service in nearly all global markets. As the commercial market recovery gained traction, we also generated robust commercial orders, including record freighter sales. Demonstrating progress in our overall recovery, we also returned to generating positive cash flow in the fourth quarter," said David Calhoun, Boeing President and Chief Executive Officer.

"On the 787 program, we're progressing through a comprehensive effort to ensure every airplane in our production system conforms to our exacting specifications. While this continues to impact our near-term results, it is the right approach to building stability and predictability as demand returns for the long term. Across the enterprise, we remain focused on safety and quality as we deliver for our customers and invest in our people and in our sustainable future."

Also notably, the company which has been flirting with junk status for the past two years, managed to reduce its gross debt load again, even if its net debt remained unchanged as the entire reduction came at the expense of cash on hand.

Boeing shares ignored the latest huge 787 charge and operating loss and instead focused on the positive free cash flow and improvement in 737 MAX output, and rose 2% premarket. The shares gained 1.4% this year through Tuesday, while the Dow Jones Industrial Average dropped 5.6%.

Benchmark called Q4 a “kitchen sink” quarter, and noted that the Max production schedule was progressing, which is the main focus for analysts and investors. 

The company's Q4 investor presentation is below (pdf link)

Tyler Durden Wed, 01/26/2022 - 09:05

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