TradeSmith Snippets: The Roaring Job Market, GE’s Shakeup, and Micron’s $40 Billion Plan
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From the job market defying all expectations, to a 130-year-old company deciding it’s time for a shakeup, to a company making a $40 billion investment in the United States, we’ll show you how to navigate it all.
I’ll let the team take it away from here.
Enjoy your Monday — Keith Kaplan, CEO, TradeSmith
Snippet No. 1: The Hiring Spree Continues
OverviewDespite issues in the rest of the economy, the job market is on fire.
The Breakdown
Hiring in July crushed expectations, with nonfarm payrolls reaching 528,000, more than double the 258,000 that were expected.
The unemployment rate clocked in at 3.5%, back to pre-pandemic levels.
In fact, the unemployment rate is now tied for its lowest level since 1969.
The TradeSmith Takeaway
Even before the jobs report came out, we expected robust hiring across the United States to continue.
Senior Analyst Mike Burnick said on Aug. 4 that “the labor market is tight as a drum right now, with far more job openings than qualified workers to fill them … In a ‘real’ recession, folks would be losing jobs by now in the tens if not hundreds of thousands. That’s not the case.”
Running a quick screen of companies that benefit from increased hiring, we found two that jumped out right away: Automatic Data Processing Inc. (ADP) and Paychex Inc. (PAYX).
Each company offers automated services to handle the nitty-gritty of hiring employees, onboarding them, and getting them their paychecks on time.
You can find out more about ADP and PAYX and the profit opportunity each can offer in this report.
Snippet No. 2: GE Prepares for Three-Way Split
OverviewGeneral Electric Co. (GE) will dismantle itself into three different companies, with one focused on energy, one focused on health care, and one focused on aviation.
The Breakdown
In the 1980s and 1990s, GE stock returned more than 25% a year on average.
Since then, it’s been all been downhill.
The company became bloated and made some huge missteps during the financial crisis, and the stock price consequently dropped 7% a year between 2000 and 2018.
However, instead of getting bogged down by the mistakes of the past, GE is giving itself — and investors — a fresh start.
The TradeSmith Takeaway
Historically, company spinoffs have unlocked value for shareholders.
Deloitte and Edge Consulting Group found that between 2000 and 2014, spinoff stocks generated a 22% return in the first 12 months of trading. That’s even better than the 14% return of the parent company that performed the spinoff.
The first company to separate from the parent company would be the health care division, which could be spun off in early 2023.
For GE, this sounds like what the company has needed to do for a long time, as these new individual businesses can operate more efficiently on their own. But after running General Electric Co. through our trading tools, it still appears to be too early to make a move.
It is currently in our Red Zone and is considered a high-risk investment.
However, Kellogg Co. is executing a spinoff of its own, and our system is saying the parent company is a “Buy.”
You can find out more about that right here.
Snippet No. 3: CHIPS and Science Act Attracts Micron to the United States
OverviewMicron Technology Inc. (MU) said on Aug. 9 that it plans to invest $40 billion in the U.S. by 2030.
The Breakdown
The United States CHIPS and Science Act was signed into law last week, and it will provide $52 billion to increase the domestic production of semiconductors.
With tax credits and other benefits to entice them, more companies will want to manufacture semiconductors in the United States.
Micron said that its planned $40 billion investment will create 40,000 new American jobs.
The TradeSmith Takeaway
Semiconductors are used in everything from video game systems to cars to washing machines.
When there aren’t enough semiconductors, fewer products can be produced, customers end up waiting for items to be restocked, and companies lose out on sales.
With a bigger focus on domestic production, the United States is building itself into a semiconductor hub, and it’s an industry that is going to make people a lot of money.
Semiconductors are such a vital component of the electronics that we purchase that the industry is expected to more than double in value from $573.44 billion in 2022 to $1.38 trillion in 2029, and picking the right companies to invest in will be key to unlocking this profit opportunity.
Currently, our system says Micron is not one of those companies to invest in — but it does say ON Semiconductor Corp. (ON) is a “Buy.”
ON Semiconductor Corp. (ON), often referred to as onsemi, is a chip supplier that fuels emerging technologies like industrial workplace automation, energy infrastructure, 5G and cloud connectivity, and autonomous and electric vehicles (EVs).
We just released a full report about ON, which is free to access right here.
That brings us to the end of TradeSmith Snippets. We hope it helps you kick off a successful week of investing and trading.