Morningstar runs the numbers

We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 4 June.

300 to 50

The meme stocks are back, with AMC and BlackBerry leading the charge writes Morningstar: “We’ve seen this play out before with BlackBerry shares, back in late January 2021 when Reddit users created a retail investor groundswell for stocks like GameStop (GME), AMC (AMC), and BlackBerry. In less than two weeks, BlackBerry shares spiked over 300 per cent, just to plummet over 50 per cent in the following week. We caution long-term investors about the risk of a similarly precipitous decline to come for BlackBerry this time around.”

$270 billion

That’s the amount of new loans the big four banks could make with the capital they’re holding above regulatory requirements, writes Peter Warnes: “Perhaps further evidence of the level of liquidity in the system is the excess capital Australian banks are currently boasting. APRA’s current regulatory Common Equity Tier 1 Capital ratio of 10.5% for the four major banks is comfortably exceeded with ANZ 12.5%, CBA 12.7%, NAB 12.4% and WBC 12.3%. In total these banks have excess capital of $33.5bn which would support loans of around $270bn if the demand were there. Clearly it is not. Returns on bloated equity bases will struggle and so capital management initiatives are on the agenda, with buy backs front of queue.”

43

That’s the number of electric vehicle-linked companies who were in the red on a 52-week high basis. It’s one of the sectors where Jeremy Grantham sees the beginnings of the coming correction: “As of 1 June, all 43 of the different EV manufacturers, battery makers and charging infrastructure firms tracked by FT Alphaville are down off their 52-week highs. In October 1929, “flaky” stocks were already down for the year the day before the crash that signalled the beginning of the Great Depression. 'When the high beta stuff starts to underperform, that’s when you want to watch out,' Grantham said.”

600 million

One of Morningstar’s four cheap tech stock picks is Chinese internet heavyweight Tencent, writes Vikram Barhat: “Tencent’s social media app WeChat (locally known as Weixin) has 1.2 billion aggregate monthly active user base while its instant-messaging software QQ has 600 million users. The wide-moat company has been investing in areas with strong competitive advantages including cloud, business services, enterprise software, and high production value games targeting the global market.”

100,000

T. Rowe Price’s Scott Berg may have sold out of Tesla but he still believes in electric vehicles, writes Lex Hall: “Under the deal, Rivian will provide the retail giant’s entire fleet of delivery vehicles. Not bad for scale. Rivian has reportedly raised US$8 billion since the start of 2019. The California company’s new valuation with this latest investment is US$27.6 billion, Reuters reported earlier this year. Amazon ordered 100,000 electric vans from Rivian. The first Amazon vehicles go into production at Rivian’s factory in Normal, Illinois in late 2021, with all deliveries to be completed by 2024. Rivian plans to follow those products with smaller models targeted at China and Europe.”

Charts from the week - Three hundred years of bond yields and 6 months of meme stocks

The meme stocks are back, with retail favourite cinema chain AMC surging last week (here)

Source: Morningstar
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Source: PIMCO, Bank of England
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