Another busy week for markets and for the Lafayette College Investment Club. Co-President Noah Grossman ’21 gave an overview of the major indices and their performance this week. The Nasdaq, S&P, and Dow all experienced gains on Monday and Tuesday, however markets experienced another pullback on Wednesday and Thursday. Big tech and the Nasdaq continued their sell-off, but a beacon of light in the storm, Tesla, has rebounded sharply following its post-stock split collapse. This week, Jerome Powell and the Fed announced that they will be keeping rates low for the upcoming years. Meanwhile, uncertainty continues to swirl around date estimates for a possible Coronavirus vaccine, and politicians in Washington remain gridlocked on a new stimulus bill.
Mikias Stewart ’23 covered the biggest story on the street this week, the highly anticipated IPO of Snowflake. Snowflake Inc. offers a cloud-based data storage and analytics service, and it allows corporate users to store and analyze data using cloud-based hardware and software. Snowflake opened trading at 230.76 and reached a high of 241.50, however, SNOW fell back to the 220s on Thursday. While Snowflake is trading at an absurd evaluation at the moment, Mikias believes that in a few years Snowflake will be a major player in the cloud-based data space.
A lot has changed in the one week since Chisom Njoku ’23 provided the club with an update on the TikTok acquisition saga. Microsoft has officially been knocked out of the running. The new deal would make Oracle the company’s primary technology partner, it would also include both Oracle and Walmart as minority investors. The U.S.’s ban of both TikTok and WeChat will go into effect on Sunday 9/20. Oracle shares are up 10% over the past month versus the 2% drop in the Nasdaq. There have also been rumblings that TikTok may pursue an IPO in the near future, with a projected value of about 50 Billion.
Noah also updated the Club on a major acquisition in the tech and microchip space. Softbank has agreed to sell Arm Holdings to Nvidia for $40B. Antitrust regulators are expected to take up to 18 months to approve the deal. Nvidia became the biggest chip maker by market value in July. Arm’s chip designs are used in almost every mobile phone. This purchase is a part of Nvidia’s continued campaign to try and separate themselves from the other chip giants.
Head of Research Henry Lewand ’21 and Industrials Analyst Ian Lee ’22 gave the club an incredibly informative Fixed Income/Debt Report and provided some insight into how the actions of the Federal Reserve will influence our portfolio. The Fed announced it will not change the target Federal Funds rate (0%-0.25%) until maximum employment is achieved and long-term inflation averages 2%. Long-term low-interest rates could be a signal that the Fed thinks a full economic recovery will take a long time, so they want to make sure businesses have the capacity to invest in employees and other assets. There are two main reasons that this could increase the value of our portfolio. When our holdings borrow money in this environment, they will incur lower interest expense. Interest expense is subtracted from earnings on the income statement, so lower interest cost will benefit their bottom line. The lower rates could encourage companies to hire more employees, which would increase the amount of disposable income in the economy, and many of our holdings sell products to everyday consumers. Ian and Henry also introduced the club to Mezzanine Debt, Revolver Debt, and Credit Tenant Lease.
There are several new learning and internship opportunities coming up through Lafayette Career Services. First up there is the “Barron’s in Education: Understanding the Wealth Management Industry” Webinar on Thursday, September 24th at 2 PM, click here to register now. This is a great chance to learn more about a career in Wealth Management. Marissa Crespo ’21, an Incoming Markets & Securities Services Analyst at Citi will be hosting a zoom webinar, “Navigating the Wall Street Application Process”. Click here for the zoom link, the passcode is &3.VQ8dL. Citi also has some unique opportunities for sophomores: the Sophomore Leadership Program – deadline Oct 9 and the Early Identification Program – deadline Dec 7. Apply through Career Spot and directly with Citi. Also, register for the Lafayette Career Fair on Wednesday, October 7th from 5:00-8:00.
Sources/Articles for Further Information:
TikTok Deal Will Help Oracle – Yahoo! Finance
What a TikTok/Oracle Deal Means – USA Today
Nvidia Could Become World’s Most Important Chip Maker – Barron’s
Snowflake’s IPO – Barron’s