Morgan Stanley Bets on These 3 Stocks; Sees Over 40% Upside
Did the stock market’s epic rally just need a little breather? The last few weeks have seen stocks experience their first meaningful correction since the bull market kicked off in March. Now, the question swirling around the Street is, will the rally pick back up again, or is more downside on the way?According to Morgan Stanley’s chief U.S. equity strategist Mike Wilson, uncertainty regarding the presidential election and stalemate on the next stimulus package could lead to declines in September and October. “On the correction, there’s still downside as markets digest the risk of congressional gridlock on the next fiscal deal. While we think something will ultimately get done, it will likely take another few weeks to get it over the goal line,” he noted.However, Wilson argues the recent volatility in no way signals the end of the current bull market. “We think this correction is just that, a correction in a new bull market. It’s normal for markets to pullback after such an incredible run like we’ve experienced since March. Furthermore, when a new bull market coincides with a new economic cycle, the bull market usually runs for years, not months,” the strategist explained.Taking Wilson’s outlook to heart, our focus shifted to three stocks getting a thumbs up from Morgan Stanley. As the firm’s analysts see over 50% upside potential in store for each, we used TipRanks’ database to get the full scoop.Akero Therapeutics (AKRO)With its innovative medicines designed to restore metabolic balance and halt the progression of NASH, a severe form of nonalcoholic fatty liver disease, Akero Therapeutics wants to address the unmet medical needs of patients from all over the world. Based on the strength of its lead candidate, Morgan Stanley is pounding the table.Representing the firm, 5-star analyst Matthew Harrison tells clients that AKRO’s treatment for NASH, efruxifermin (EFX), has a “best-in-class profile.” EFX is the company’s lead asset and was designed to mimic the biological activity of fibroblast growth factor 21 (FGF21), which regulates multiple metabolic pathways and cellular processes, to reduce liver fat and inflammation, reverse fibrosis, increase insulin sensitivity and improve lipoproteins.According to Harrison, NASH is a complex disease, with patients usually having multiple co-morbidities like obesity, type-2 diabetes, increased triglycerides, increased LDL cholesterol and low HDL cholesterol. “A promising therapeutic solution would not only treat the multiple components of NASH but would also have an acceptable side effect profile given the potential co-morbidities,” the analyst explained.That’s where AKRO’s therapy comes in. “In June, Akero presented best-in-class data from its Phase 2a study. This data indicates that EFX improved the two liver histological endpoints recommended by the FDA along with resulting in weight loss, improving cardiovascular health (increasing good HDL cholesterol, decreasing triglycerides, not raising bad LDL cholesterol), and improving factors related to controlling blood glucose levels. This benefit/risk profile beats the competition,” Harrison stated.Looking at the indication as a whole, Harrison views NASH as a very large opportunity given that roughly 20 million people in the U.S. suffer from the condition.The analyst, however, acknowledges there are commercial hurdles. One of these is the fact that “NASH is currently undiagnosed in all but a very small percentage of the prevalent pool since diagnosis currently requires an invasive liver biopsy.” Therefore, along with demonstrating a positive benefit/risk profile, AKRO will need to find patients and secure payer support should the candidate receive FDA approval, in Harrison’s opinion.That said, Harrison believes AKRO is up for the task. “We believe that given EFX’s clean safety profile and broad-based effects, Akero will likely largely overcome these commercial hurdles,” he commented.Harrison added, “Importantly, since Akero’s treatment is injectable, we only assume the drug will penetrate into the population of the most sick patients where there are currently at least 400,000 patients diagnosed and seeking treatment in the U.S.” To this end, he assigns a 60% probability of success, and estimates unadjusted peak sales for the U.S. and the EU will land at $4.5 billion.Based on all of the above, Harrison rates AKRO an Overweight (i.e. Buy) along with a $70 price target. Should his thesis play out, a potential twelve-month gain of 93% could be in the cards. (To watch Harrison’s track record, click here)Are other analysts in agreement? They are. Only Buy ratings, 6, in fact, have been issued in the last three months. Therefore, the message is clear: AKRO is a Strong Buy. Given the $58.50 average price target, shares could rise 61% in the next year. (See AKRO stock analysis on TipRanks)TransDigm Group (TDG)Next up we have TransDigm Group, which is one of the top producers, designers and suppliers of highly engineered aerospace components, systems and subsystems. Its products are used on nearly all commercial and military aircrafts in service today. Given its ability to weather the COVID-19 storm, Morgan Stanley sees a bright future ahead.Morgan Stanley analyst Kristine Liwag stated, “We view TransDigm as the most defensible business model in commercial aerospace.” However, this is not to say the company hasn’t been confronted with serious challenges.Over the past few years, management has had to grapple with how to price its defense business, the sustainability of its pricing strategy in aerospace, the durability of its levered balance sheet and the ability to weather a downturn. That said, Liwag remains optimistic going forward. “TDG has overcome short thesis after short thesis in the past few years and we do not expect these concerns to repeat,” she noted.According to Liwag, TDG’s “ability to hold on to margins during a global pandemic” conveys its operating strength. To this end, her estimate for EBITDA margins is well above the rest of the Street’s. The analyst also points out that the company cut its SG&A expense by $89 million year-over-year in fiscal Q3 2020. “We assume the company will retain at least half of those savings, with the remainder returning in the form of variable selling expenses,” she said.Liwag added, “We are positive on TransDigm, particularly as recovery in global air traffic would be favorable for TransDigm’s core profit maker, the aftermarket. Additionally, we view it positively that TDG has the means to acquire weaker players.”Back in April, management raised $1.5 billion of additional debt to trim liquidity risks and provide an extra cushion. “A large debt load is part of management’s strategy to provide private equity like return for its shareholders. Historically, the company has used debt to acquire businesses with similar attributes to TDG’s portfolio of 90% proprietary products and 75% sole sourced. If passenger air traffic continues to normalize, we would expect TDG to use its incremental capital to acquire struggling businesses that fit its strategy,” Liwag commented.All of this prompted Liwag to leave her bullish call and $772 price target unchanged. This target conveys her confidence in TDG’s ability to climb 48% higher in the next year. (To watch Liwag’s track record, click here)Looking at the consensus breakdown, 7 Buys and 5 Holds have been published in the last three months. Therefore, TDG gets a Moderate Buy consensus rating. Based on the $500.58 average price target, shares are poised to stay range-bound for now. (See TDG stock analysis on TipRanks)Cemex SAB (CX)Cemex counts itself as one of the leading players in the building materials industry, with the company manufacturing and distributing cement, ready-mix concrete and aggregates. As its risk/reward profile has just gotten more positive, now could be the time to snap up shares, so says Morgan Stanley.Covering the stock for Morgan Stanley, analyst Nikolaj Lippmann believes that CX’s bullish guidance for the third quarter and FY20, which was significantly ahead of consensus, was “the catalyst that builds a bridge to a favorable risk-reward shift.” On top of this, the stock is trading at 6.4 2020e EV/EBITDA, which is cheap compared to its historical performance and its peers, according to the analyst.That being said, Lippmann argues “CX is mainly a good, strong deleveraging story with a call option on what could be an exceptional U.S. cement market if the U.S. Congress approves an infrastructure package in 2021… If we get a U.S. infrastructure package beyond 2020, it would add icing to the cake, we think, and take the market from good to possibly great.”Although a large multi-year package is dependent upon the outcomes of the U.S. presidential and congressional elections, even in the base case, Lippmann expects cement to show pricing power in the U.S.It should be noted that Lippmann thinks it’s possible the next year will be relatively uneventful, but in that case, he expects the industry to pause at 90% capacity utilization and grow from there. On top of this, pricing in Mexico has been holding up. This “limits the downside risk materially and helps skew the risk-reward positively,” in Lippmann’s opinion.What else is working in CX’s favor? The cement demand year-to-date has pleasantly surprised Lippmann, with upside seen during the first stage of the pandemic. He points to DIY and Department of Transportation maintenance work during periods of low traffic, and strong residential construction as the drivers of this demand.Everything that CX has going for it convinced Lippmann to rate the stock an Overweight (i.e. Buy). Along with the call, he attached a $6 price target, suggesting 50% upside potential. (To watch Lippmann’s track record, click here)Turning to the rest of the analyst community, opinions are split almost evenly. 6 Buys and 5 Holds add up to a Moderate Buy consensus rating. At $4.16, the average price target implies 4% upside potential. (See Cemex stock analysis on TipRanks)To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Major U.S. hospital chain reportedly hit with ‘1 of the largest medical cyberattacks’ in history
Universal Health Services’ computer network will reportedly remain out of order for days after a massive ransomware attack.
Computer systems at the hospital network’s 400-plus locations reportedly began failing over the weekend, forcing some workers to begin taking records by hand and even hand-labeling medications, nurses tell NBC News. Computers may remain out of service for days as the chain deals with what might be “one of the largest medical cyberattacks in United States history,” NBC News reports.
Attacks starting early Sunday morning locked computers and phones at several UHS facilities, including those in California and Florida, people with direct knowledge of the incident tell TechCrunch. Mysterious messages referencing a “shadow universe,” which reflects messaging from the Russian cybercrime group Ryuk, then began filling the screens, one person said. “Everyone was told to turn off all the computers and not to turn them on again. We were told it will be days before the computers are up again,” the person said.
UHS said Monday its network was down due to an “IT security issue.” The issue did not jeopardize patient care, and “no patient or employee data appears to have been accessed, copied, or otherwise compromised,” the statement continued. An executive who manages cybersecurity at another major U.S. hospital system affirmed to TechCrunch patients’ data was “likely safe.”
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Chelsea Clinton slams Trump but says Barron is off limits
Chelsea Clinton has no problem throwing criticism at President Donald Trump, but says Barron Trump is off limits. The former first daughter joined Spotify’s Jemele Hill Is Unbothered podcast where she talked about the current political climate and how it hits home.
Chelsea, who shares three children with husband Marc Mezvinsky, was asked about how much their young children understand the Clintons’ place in American history. Chelsea is the only child of former president Bill Clinton and 2016 Democratic presidential nominee Hillary Clinton.
“They’re aware,” the author and activist replied. “We call my dad pop pop, they’re aware that pop pop was president. And they’re aware that grandma ran for president… so they definitely know that about their grandparents.”
However, Chelsea — whose kids are ages 6, 4 and 1 — explained that her house is more focused on the future than the past. Admittedly, she said they talk “a lot” more about President Trump.
“We talk a lot about coronavirus and how poorly we think Donald Trump has done,” she explained. “That we’re doing our parts — staying home when we can, wearing masks whenever we go outside — and how Donald Trump doesn’t even believe that you should stay home. Like, he goes golfing all the time, or he doesn’t wear a mask and how wrong that is and irresponsible that is. We talk a lot about Donald Trump, like, as a bully.”
Clinton explained how her two oldest children understand what’s happening, so she tries to talk to them in language that they will understand.
“They know it’s important to wear a mask. So, why is the president not wearing a mask? They know that they should treat everyone with respect. Why is the president so disrespectful? They know families should be together. Why does the president separate children from their parents? So, you know, we — we talk about things that we really think they’ll understand because of what’s happening in their own lives, or just because of kind of how they’re living their lives because they’re citizens. They’re little kids, but they’re citizens. I want them to grow up understanding that being a good citizen is part of being a good person,” she added.
“So yes, they’re aware of their grandparents and they’re proud of their grandparents… but at least in our house, we’re far more focused on this election and, kind of, Donald Trump is a bad president and why we think Joe Biden and Kamala Harris need to kind of succeed him and what we’re going to do to try to help make that possible — voting, advocacy and more,” Chelsea concluded.
Hill asked whether it’s a struggle to shield her kids from negative things that are said about her family — especially when one of those people is the president.
“Thankfully it’s not so much a struggle because they are so young, but we have talked to them a little bit about how Donald Trump says mean things… about grandma and pop pop,” Chelsea replied. However, she said it’s not too hard as the kids “don’t have their own phones.”
“They’re not watching television by themselves. There have been a couple of times where people like approached us, obviously like pre-COVID in the park and said some things that are unkind,” Chelsea continued.
“To your face?” Hill asked.
“Oh, everything that people say to me on Twitter, they say to me in person,” Chelsea replied. “Like, ‘I wish you were dead.’ I’m sorry you feel that way. ‘I wish your mother aborted you.’ I’m sorry you feel that way. ‘I wish you had died in Benghazi and then maybe your mother would have had a different reaction.’ Like, ‘I hope your children die so your family’s line dies with you.’ Like, ‘I hope your kids wind up in ashes, like that’s where all Jewish kids should wind up.’”
Chelsea admitted “the amount of hate is so intense.” While she said it doesn’t happen often, it “definitely” happens. “You’re always like — what else can you say? Like, ‘I’m so sorry you feel that way.’ I don’t feel that way about your kids. Like, I wish you nothing but the best, hope you have a better day tomorrow. You know?”
It’s not just her own children she feels protective of as Chelsea explained she has “a sorority of sorts” with other first children.
“I very much felt protective of the Bush twins who were just a little bit younger than me and certainly very protective of Sasha [Obama] and Malia [Obama],” she explained. “I wanted them to have as normal a life as possible. I knew that was going to be hard.”
Chelsea said she feels “very protective” of Barron Trump, too.
“I think he was 11 when his dad won and that’s a year younger than I was when my dad went and took office. Like he’s a kid. He’s a kid! Leave him alone,” she declared. “Who knows what he’s going to be like when he grows up, like that’s none of our business. And I really don’t like it when people comment on the clothing choices of, like, when Sasha, Malia were there or Barron Trump. Don’t objectify this kid.”
“I think he just turned 14… leave him alone,” Chelsea added. But she noted she has “a whole lot of sympathy” for “any critiques, criticism, pain, anger you want to hurl at his parents,” but that Barron should be left alone.
Read more from Yahoo Entertainment:
How rich Americans avoid taxes
Like President Donald Trump, rich Americans often deploy sophisticated tax avoidance strategies to maximize their wealth.
Not to be confused with tax evasion, which is illegal, tax avoidance is entirely legal, even if many view it as unfair.
A sweeping New York Times report published Sunday revealed numerous tax reduction strategies used by Trump. He’s not alone. Affluent taxpayers often have more avenues than ordinary Americans to avoid paying Uncle Sam.
Wealthy Americans are the largest source of underreported income, according to IRS data analyzed by researchers. The top 1% of American taxpayers account for about 34% of misreported income, according to a study published in the National Tax Journal.
Many wealthy Americans deploy complex, arcane but wholly legal strategies to minimize their tax obligations. Some use fairly straightforward strategies that allow them to minimize their taxes under the tax code.
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Here are some of the most common tax avoidance strategies deployed by the wealthy:
Growing wealth through investments
It’s much harder to avoid taxes on your paycheck than on your investments.
In general, the federal government taxes regular wages at higher rates than investment income. The long-term capital gains tax rate maxes out at 20%, and the highest income tax rate is 37%.
In other words, if you make a salary of $1 million, the government keeps $370,000. If you make $1 million on stocks or similar investments, the government keeps $200,000.
Selling assets at strategic times
Taxes on assets such as stocks and real estate investments aren’t owed until they are sold. That helps people such as Jeff Bezos, the Amazon CEO, founder and richest person in the world, grow their wealth rapidly while avoiding a huge tax bill. Then they can be strategic about when they sell.
By stockpiling assets without selling, rich investors can minimize their tax burden.
“Wealthy individuals can wait to sell until it makes the most sense for them, such as a year in which they will have large capital losses to offset the gain,” according to the Center on Budget and Policy Priorities.
Unrealized capital gains accounted for more than one-third of the assets held by the richest 1% of Americans in 2013, according to a Federal Reserve analysis. By comparison, the bottom 90% of Americans have only 6% of their assets in unrealized capital gains.
Using business income loopholes to reduce personal tax liability
The 2017 tax bill passed signed into law by Trump allowed for a 20% deduction on certain business income that passes through partnerships, sole proprietorships and S-corporations.
This is income that individuals report on their personal IRS returns, but the tax break allows them to reduce the tax rate on that money by up to 7.4 points, according to the CBPP.
This setup is most likely to help the wealthy: 61% of the benefits go to the wealthiest 1% of Americans, according to the Joint Committee on Taxation.
Lisa De Simone, associate professor of accounting at the McCombs School of Business at the University of Texas-Austin, said many tax breaks available for business owners were put in place to stimulate risk-taking and innovation.
“There’s a notion that there are lots of tips and tricks that only the wealthy can take advantage of,” De Simone said. “The provisions weren’t written to try to help the wealthy get away with things.”
Instead, she said, new businesses can benefit when they’re able to deduct early losses from income.
“You don’t have to be super-rich in order to claim a business loss,” she said.
Taking advantage of death tax policies to enrich their heirs
The tax code allows Americans to build wealth through deferred capital gains, then pass those assets tax-free along to their heirs upon death.
Called the “stepped-up basis” tax break, this loophole “encourages wealthy people to turn as much of their income into capital gains as possible and hold on to assets until death, when a lifetime of gain becomes permanently exempt from tax,” according to the CBPP.
The inheritor could be subject to paying the estate tax if the total value of the estate exceeds a certain threshold, but that threshold has been substantially increased.
The 2017 tax law doubled the amount of a deceased person’s wealth that’s shielded from the estate tax from about $5.5 million to more than $11 million. The limit is poised to reset to its original amount in 2025 unless Congress takes action.
Contributing: Susan Tompor of the Detroit Free Press
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
This article originally appeared on USA TODAY: Trump tax returns: How rich Americans avoid taxes
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