FA Alpha Weekly Digest 12 02 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 recent trends in gold and Pepsi, Teekay Tankers (TNK), and Molina Healthcare (MOH).

The case for this 'safe haven' metal is declining

Gold surged 35% in 2024 driven by geopolitical tensions and fears surrounding the economy. However, post-election stabilization and easing inflation have seen gold prices retreat slightly from their highs. Advocates of gold argue its historic role as a store of value, but its long-term returns pale compared to businesses like PepsiCo, which have consistently created value through innovation and reinvestment. Unlike gold, PepsiCo has launched billion-dollar brands, expanded globally, and delivered compounding returns to investors, vastly outperforming gold over the past decades. As fear diminishes and markets stabilize, the case for thriving businesses over static assets like gold becomes increasingly clear.

This company can continue to grow alongside the "shale renaissance"

U.S. crude oil production surged from 5.2 million barrels per day in 2005 to 12.9 million in 2023, transforming the country into a leading exporter of crude oil and refined products. This growth has bolstered the U.S. economy, reduced the trade deficit, and created opportunities for companies like Teekay Tankers, which operates a fleet of mid-sized oil tankers. With global oil trade rising due to U.S. export volumes and geopolitical shifts, Teekay benefits from favorable market dynamics such as limited tanker supply and high spot rates. However, challenges remain, including the aging fleet, market cyclicality, and concerns about declining returns, prompting management to focus on strategic investments and fleet renewal.

This company may not share the fate of its healthcare peers

Medicaid and Medicare are key drivers of U.S. healthcare spending, with rising costs tied to an aging population and increased demand for long-term care. Despite rising medical cost ratios, Molina Healthcare stands out with its strategic acquisitions and disciplined cost management. Its focus on targeting smaller insurers and proactive planning positions Molina well for long-term success, making it an attractive investment opportunity.

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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