viernes, 1 de junio de 2018

viernes, junio 01, 2018
CIBC’s Big Stock Buys: Apple, Amazon

By Ed Lin
 
Illustration: Getty Images        
As talks for the North American Free Trade Agreement trudge onward, Canadian banking giant Canadian Imperial Bank of Commerce has made adjustments in its investment portfolio. The changes seem to suggest that the bank is more optimistic that the U.S. will smooth disputes with China—and that President Donald Trump’s ire will cool—more easily than with its Nafta partners. 

CIBC (ticker: CM) more than tripled its holdings in Apple (AAPL) in the first quarter, and raised its Amazon.com (AMZN) investment sevenfold from the end of 2017. Should a dispute with China hit full steam, we think Apple could be one of the companies feeling the crunch, while Trump has singled out Amazon for Tweet-lashing. CIBC’s U.S.-traded equities increased in value to $24.3 billion at the end of March, according to a Friday regulatory filing, from $22.1 billion at the end of December.

The first quarter wasn’t all about buying, however. The bank also slashed its investment in General Motors (GM) by two-thirds, hacked off a third of its holdings in General Electric (GE), and sold more than a quarter of its Exxon Mobil (XOM) shares. GM would have to make major changes if Nafta is materially disrupted, while GE and Exxon could also be affected.

CIBC didn’t respond to a request for comment on the trades.

Excluding dividends, Apple shares ended the first quarter flat. Much of the period was spent with investors worrying that production of the iPhone X model was at risk and that consumers may no longer be interested in expensive phones. Upside in the shares was on hold for the first three months of the year, but since the end of March through Tuesday’s close, Apple has surged 12% on news of strong phone sales, so CIBC’s bigger bet on Apple has already paid off; the bank bought 1 million more Apple shares in the first quarter, ending March with 1.4 million shares.

Amazon shares swelled 24% in the first three months of the year in the face of blistering attacks from Trump. Speculation remains high regarding where the retailing juggernaut will place its second headquarters among 20 finalists, adding a reality-show type of suspense. CIBC is already a winner, however, having captured post-quarter gains in the stock price. The bank bought 97,600 more Amazon shares in the first quarter, raising its investment to 113,700 shares; Amazon is up some 9% since the end of the first quarter.

The prospect of a renegotiated Nafta agreement emboldened GE—for a while. On June 26, 2017, the conglomerate noted that Nafta “has expanded markets for GE’s products and enabled us to become more competitive globally, supporting thousands of jobs in the U.S. and abroad.” It added that “the world has changed dramatically over the last 20 years, and it’s good that our government is looking to upgrade this critical trade agreement.”

GE was likely feeling optimistic at the time. John Flannery had just been named to the chief executive post only two weeks before. Flannery’s start date was Aug. 1, but the announcement was enough to send the stock surging.

Unfortunately, GE soon resumed its downward course, ending 2017 with a 42% plunge, excluding dividends. The first quarter brought no relief—shares slid another 22%. During that latest slide, CIBC decided to unload 874,500 GE shares, cutting its stake to 1.6 million shares by the end of March.

The bank took an even more severe turn with its GM investment. As the auto maker’s stock went on to fall 10% in the quarter, CIBC sold 1.1 million shares, ending the period with only 484,500 shares.

In April, GM recorded almost $1 billion in restructuring costs, mostly related to its Korean operations. Guggenheim Securities analyst Emmanuel Rosner trimmed his GM target price by a dollar to $53 but reiterated a Buy rating.

He wrote that “2019 could be a pivotal year for GM, with full volume/price/mix benefit from its redesigned full-size pickups in the U.S. and continued profitability improvement overseas boosting earnings further, and possible commercial launch of its autonomous-vehicle ride-hailing service.”

CIBC unloaded some Exxon stock from its trunk, selling 248,300 shares in the first quarter and ending March with 655,900 shares. The energy giant’s stock slid 10% in the period. Energy is a hot topic in Nafta negotiations. However, we pointed out in a cover story earlier this month that although Exxon has “largely sat out the bull market of the past nine years,” Barron’s is bullish on the stock.

We noted that shareholders will “get a safe 4% dividend while they wait for the company to be re-energized.”

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