In hisDaily Market Notes report to investors, while discussing Microsoft buying Nuance, Louis Navellier wrote:
Q1 2021 hedge fund letters, conferences and more
Microsoft buys Nuance
Microsoft Corporation (NASDAQ:MSFT) buys Nuance Communications Inc. (NASDAQ:NUAN) in $16B deal that shows the big get bigger. Gates and Ballmer retiring looks like the best thing that's happened to MSFT in a long time"
The chip shortage continues to cause logistics problems. Re-opening to a growth rate stronger than we've seen in decades will bring growth problems in the short run, opening the door to inflation pricing.
Wholesale Inflation
This going to be a big week for economic news. March retail sales are going to be announced on Thursday and expectations are sky high due to the $1,400 stimulus checks/direct deposits that were sent out. The Consumer Price Index (CPI) will be announced on Tuesday and economists are expecting a significant increase. This is a good time to remind investors that growth stocks that post earnings exceeding the rate of inflation are typically great inflation hedges.
The Labor Department announced that the Producer Price Index (PPI) rose 1% in March, which was substantially higher than economists’ consensus expectation of a 0.5% increase. Clearly, the Fed has succeeded in “sparking” wholesale inflation, but we have to now see if this inflation is “transitory,” which is how the Fed has previously described it.
Ford and General Motors Announce Idling Manufacturing Plants
The big news is both Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) announced that they are idling or extending manufacturing plant closures due to the ongoing semiconductor chip shortage. Both Ford and GM are prioritizing high margin vehicles, like luxury pickup trucks and SUVs, during the semiconductor chip shortage, so plants that make lower margin vehicles, like crossovers, are increasingly being idled. Since global supply chains are fragile at the moment, the long-term outlook for U.S. manufacturing remains very bright.
The other supply “glitch” is that LG Chem and SK Innovation were fighting over trade secrets at the International Trade Commission (ITC). LG Chem won this fight, and the ITC imposed a 10-year ban on imports from SK Innovation which further complicates the U.S. supply chain. SK Innovation has a massive new lithium battery plant in Georgia and did receive temporary ITC approval to sell to Ford for four years and VW Group for two years. Fortunately, both LG Chem and SK Innovation reached an agreement this week to settle their trade secret dispute. Specifically, SK Innovation will pay LG Chem $1.8 billion and additional royalties to resolve their trade secret dispute.
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