FA Alpha Weekly Digest 07 22 2024

Wall Street’s stock picks can’t be trusted and the advertising bias of the mainstream financial media makes their news only sensationalist-driven. Gain an edge by knowing the trends that matter and some of the mispriced stocks in the market.

We bring you the FA Alpha Weekly Digest, a roundup of FA Alpha’s unique and unparalleled equity, credit, and macroeconomic insights over the past week.

In today’s digest, we’ll cover the U.S. Economy, Northern Oil and Gas (NOG), NGL Energy (NGL), D.R. Horton (DHI), and Smurfit Westrock (SW).

The world still runs on the U.S. dollar?

Due to its strong economic fundamentals and attractive investment climate, the U.S. has attracted a significant share of global capital since the pandemic, solidifying its position as the top destination for foreign investments. In contrast, China's share of global capital inflows has dwindled from 7% to 3% over the same period. This shift is largely driven by U.S. high interest rates compared to China's efforts to lower rates to stimulate its economy. With the U.S. government perceived as a safer investment over its Chinese counterpart, the stage is set for continued investment influx into the U.S. economy.

This company is fueling the energy demand with little risk

The global energy market is changing due to recent events, creating opportunities for oil and gas producers. Northern Oil and Gas (NOG) is one of the energy players that benefits from this trend. NOG owns stakes in oil and gas wells across key regions and generates revenue without the high costs of drilling. This model has allowed them to achieve high returns. However, the market is concerned about future energy prices and regulations. Despite these concerns, high commodity prices and rising natural gas demand, especially in Europe, present significant opportunities for NOG.

Hedge funds are betting big on energy

Hedge funds are increasingly betting on energy and materials stocks, driven by soaring commodity prices amid supply disruptions and high demand. The U.S. shale renaissance has significantly boosted domestic oil and gas production, benefiting companies like NGL Energy Partners, which provides critical water disposal services and sells recovered crude oil. Despite some recent performance softness, NGL's Water Solutions segment is thriving, supported by significant contracted revenues and a positive outlook amid higher commodity prices.

This company can help solve America’s housing problem

Signs of a cooling U.S. economy, such as slower job growth and rising unemployment, suggest potential interest rate cuts by the Federal Reserve. This development could greatly benefit D.R. Horton, the largest U.S. homebuilder, which thrives on a tight housing supply. With a national footprint and diverse housing offerings, D.R. Horton is well-positioned to capitalize on continued strong demand despite market skepticism about its future profitability.

This newborn giant will dominate the packaging

Smurfit Westrock, formed from the merger of Smurfit Kappa and Westrock, has become the largest packaging company globally. Despite Westrock's prior financial struggles and industry challenges, the merger has bolstered its financial health through Smurfit Kappa's strong cash reserves. The combined company boasts a global footprint and aims to lead in sustainable packaging. While market concerns remain, the merger's cost savings, operational efficiencies, and solid financials position Smurfit Westrock for growth as consumer spending recovers.

We hope you find this week’s FA Alpha Daily articles insightful.

See you next week as we talk about another set of interesting names.

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