Watch These 4 Stocks on Monday…

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Over the weekend, I was catching up on the new listing rules for foreign companies to list on U.S. exchanges. The legislation that passed in the Senate is directly aimed at Chinese companies raising money from American investors, and the new rules stipulate that a listing company must certify it is not a state-controlled entity and it must allow financial audits for 3 consecutive years. The bill’s easy passage reflects growing anger around “risky” Chinese companies and their lack of transparency.

The Luckin Coffee ruse only exacerbated this news story and added fuel to Washington’s fire. If you somehow missed that story, the Chinese coffee maker’s CFO lied about its 2019 sales by $310 million. These rules certainly will make it harder for Chinese companies to list in the U.S., and already many companies have decided to list in Hong Kong.

I personally find these rules rather flatulent…Jokes aside, a decoupling of the U.S. and Chinese economies is not likely. These two mega-economies are linked in so many sectors…In fact, China has eased its rules on foreign ownership in 2019, and the liberalization of these rules brought immediate joint venture stakes from Goldman SachsMorgan Stanley, and American Express — Not to mention, PayPal’s 70% stake in China’s GoPay. Furthermore, the foreign ownership of Chinese stocks and bonds reached $592 billion in the first quarter of 2020.

So, I find these rules rather ridiculous and any shutting out of Chinese firms would only benefit the Stock Exchange of Hong Kong. AlibabaNetEase, and JD.com have already nurtured second offerings on the SEHK, and it would be simple to drop their U.S. listing. And, if U.S. investors want a piece of those companies, well, they will just buy them in Hong Kong. We are now enacting wholly symbolic legislation…

Keeping our eyes on the U.S. for a second, the native IPO market has been red-hot. At least 17 companies filed to go public last week including SnowflakeUnityJFrogSumo LogicAsanaPalantirDoorDash, and AirbnbXPeng, Inc., a Chinese electric vehicle maker, hits the NYSE on Thursday.

The reason so many companies are listing? Well, the eye-popping gains. The average one-day gain for U.S. IPOs so far this year is 23.7%, compared to 12.8% in 2019 and 13.4% in 2018. The average one-week return for 2020 is 25.4%, again outpacing 15.2% in 2019 and 11.9% in 2018. At the moment, U.S. IPOs have raised $70 billion, which is more than all of 2019’s $62.5 billion.

In other news, Apple and Tesla split their stocks today. Oh, and early this morning, Beijing put a pretty interesting box around TikTok, it might make Walmart and Microsoft’s acquisition of the social media company fairly challenging.

Here are other things to watch this week:

TodayZoom earnings

Tuesday: First day in September

Wednesday: ADP employment report

Thursday: Broadcom and Campbell Soup earnings

Friday: Expect a bump in Disney as Mulan hits Disney+

Below you can find some of the most notable stocks to watch today.

Broadwind Inc. (BWEN) – Last Close:  $3.73
This wind turbine fabricator recently received new orders for around $21M. The stock was a near $1.50 at the start of the year and I like BWEN because it is climbing on fundamentals. The company announced a revenue beat earlier this month, and we expect more good things ahead for this one.
Zix Corporation. (ZIXI) – Last Close:  $6.12
We are not 100% sold on ZIXI, but we wanted to include it here. The cloud email security company is in the area of stocks we want to own right now, but ZIXI is highly geared. Yet, the company is showing an improving earnings outlook as it just roped in a bunch of new customers in the U.K. We are watching right now, not buying.

The Southern Company (SO) – Last Close: $52.42
Boring is beautiful. This stock is pretty much white bread…This energy company has a large service area, well managed, and its common shares yield 4.7%. Its not sexy but if you are really managing your portfolio effectively than you need stocks with long-term EPS growth rates of 4.6%.
Schlumberger Limited (SLB) – Last Close: $19.42
 
This is a “buy the dip” situation. SLB was another reliable oil services operator that has tracked the price of oil. It is currently trading at one of its lowest bands during one of the most challenging quarters in the company’s history. It won’t be $20 for long…That’s all we’ll say.

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