Author Archives: Chris Versace, Chief Investment Officer

About Chris Versace, Chief Investment Officer

I'm the Chief Investment Officer of Tematica Research and editor of Tematica Investing newsletter. All of that capitalizes on my near 20 years in the investment industry, nearly all of it breaking down industries and recommending stocks. In that time, I've been ranked an All Star Analyst by Zacks Investment Research and my efforts in analyzing industries, companies and equities have been recognized by both Institutional Investor and Thomson Reuters’ StarMine Monitor. In my travels, I've covered cyclicals, tech and more, which gives me a different vantage point, one that uses not only an ecosystem or food chain perspective, but one that also examines demographics, economics, psychographics and more when formulating my investment views. The question I most often get is "Are you related to…."
UK lawmakers plan bill to target Huawei

UK lawmakers plan bill to target Huawei

In a move to appease hawks pushing for tighter restrictions on Huawei Technologies, the UK is considering a ban on the installation of 5G equipment from Huawei as soon as next year, well before a blanket ban in 2027. UK lawmakers are set to debate the bill next week, and should it come to pass it would be a shot in the arm for Ericsson (ERIC), Nokia (NOK) and other company’s in the Tematica BITA Digital Infrastructure and Connectivity Index

Any further installations of Huawei equipment by carriers would carry fines of as much as 10% of sales or 100,000 pounds a day ($133,000).

The government already set limits on telecom companies including BT Group Plc, Vodafone Group Plc and CK Hutchison Holdings Ltd.’s Three UK buying gear from Huawei that are set to kick in after December. However, there are no rules yet barring the companies from using Huawei equipment they already bought but haven’t yet installed.

Under the new proposal, that ban could come into force as soon as September next year, the people said, asking for anonymity as the talks are confidential.

The latest proposals may not go far enough for some lawmakers, who are calling for the government to consider forcing carriers to remove Huawei equipment from their 5G networks earlier than the current 2027 plan.

Source: U.K. Looks at Huawei Install Ban Next Year to Placate Hawks – Bloomberg

Almost one-third of top online shopping domains are vulnerable to a cyber attack

Almost one-third of top online shopping domains are vulnerable to a cyber attack

It’s extremely important for digital shopping and e-commerce platform websites that handle sensitive customer information to ensure the communication between servers and users is encrypted. As we move in the 2020 holiday shopping season, one that is widely expected to shift considerably to digital shopping given the resurgence in the coronavirus, this is more critical than ever. However, new report from CyberNews found that nearly one-third of analyzed web servers were vulnerable.

CyberNews decided to see if popular online shops take their encryption hygiene seriously. To do this, our Investigation team analyzed the web servers of 2,620 popular online shopping domains for SSL configuration security, as well as their susceptibility to known vulnerabilities related to the Secure Sockets Layer (SSL) encryption protocol.

…to carry out this investigation, we gathered a list of the top 2,620 online shop domains on Google search. We then tested them for their SSL web server configuration security and their susceptibility to six known high-severity SSL vulnerabilities by using the Qualys SSL Server Test service.

We found that even though the absolute majority of online shops follow excellent to good SSL configuration practices in general, almost a third of the web servers we analyzed are susceptible to known SSL vulnerabilities, with the BEAST vulnerability being the most widespread among online shops.

BEAST (short for Browser Exploit Against SSL/TLS) is an attack that allows a threat actor to access the data exchanged between a web server and the user’s web browser.

Source: 30% of top online shopping domains are vulnerable to BEAST SSL attack | CyberNews

Unilever targets $1.2 billion sales target for meat and dairy alternatives but it’s simply not good enough

Unilever targets $1.2 billion sales target for meat and dairy alternatives but it’s simply not good enough

The plant-based meat market is expected to grow enormously in the coming years given the shift in consumer preferences for sustainable. Barclays predicting the market will grow by more than 1,000% over the next 10 years to reach $140 billion by 2029. It comes as no surprise to us then that companies would look to capture that tailwind to drive revenues, profits and cash flow.

Recently Unilever (UL) announced plans to dramatically increase sales of plant-based meat and dairy alternatives as part of a new sustainability program designed to shrink the environmental footprint of its food brands. While the company targets $1.2 billion of plant-based foods and dairy alternatives over the next five to seven years, consensus revenue forecasts put the company’s 2023 revenue near $64.4 billion.

Despite Unilever’s good intentions, that context means less than 2% of its revenue in the coming years would be derived from plant-based foods and dairy alternatives. Under the Tematica scoring system that barely gives the company a low-level “1” score for our Sustainable Future of Food investing theme and index with Foxberry.

The Anglo-Dutch consumer goods giant said last week that it plans to sell more than $1.2 billion worth of plant-based foods and dairy alternatives within the next five to seven years, largely by boosting sales from its The Vegetarian Butcher brand and increasing the number of vegan alternatives across its extensive portfolio.

Unilever acquired plant-based meat company The Vegetarian Butcher in late 2018 and since has expanded the brand into more than 30 countries and secured a major supply deal for the firm’s vegan patties and nuggets with Burger King. In the same time frame, it has launched a number of vegan products for its most high profile brands, including Hellman’s, Magnum and Ben & Jerry’s.

“As one of the world’s largest food companies, we have a critical role to play in helping to transform the global food system,” said Hanneke Faber, president of Unilever’s food and refreshment division. “It’s not up to us to decide for people what they want to eat, but it is up to us to make healthier and plant-based options accessible to all. These are bold, stretching targets which demonstrate our commitment to being a force for good.”

 

Source: Unilever sets $1.2B sales target for meat and dairy alternatives | Greenbiz

Which company is the Middle-class Squeeze Thematic Dividend Leader?

Which company is the Middle-class Squeeze Thematic Dividend Leader?

Folks in the U.S. will, in one form or another, be celebrating and giving thanks as part of the Thanksgiving holiday. This year they will be joined by shareholders of Costco Wholesale (COST) given the company’s recently announced $10 per share special dividend that will be paid on December 11 to shareholders of record on December 2. Like special dividends announced by other companies, this $10 per share one is in addition to Costco’s current quarterly dividend of $0.70 per share. Before I share why there is good reason why Costco will continue to increase its quarterly dividend, let’s first put some context around why this special dividend is so special.

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Announcing the Guilty Pleasure Thematic Dividend Leader…

Announcing the Guilty Pleasure Thematic Dividend Leader…

Occasionally, when I’ve had the privilege of sitting in for Doug Kass’s  Doug Kass’s Daily Diary at TheStreet, I’ve shared with readers updates for Tematica’s Thematic Leaders model portfolio. The Thematic Leaders model portfolio is set at the start of each year and reflects the crème of the crop, best thematically positioned companies for the coming year for each of our thematic investing themes at Tematica Research. After much thought and more than a few requests, we’re going to share some of the leaders for another Tematica portfolio — Thematic Dividend Leaders.

Thematic Dividend Leaders is a very different model portfolio than Thematic Leaders. The starting universe for Dividend Leaders begins with companies that have increased their annual dividends for at least 10 years. And to be crystal clear, that means no skipped dividends. From there we then use our investment themes as an overlay, to identify the best thematically positioned and the intersection of those criteria leads us to each Thematic Dividend Leader.

When done right thematic investing identifies structural changes in the marketplace, including those across the shifting landscapes of economics, demographics, psychographics, technology, government mandates and other areas. Companies positioned to capitalize on these structural shifts see a pronounced revenue, earnings and cash flow tailwind. That tailwind tends to produce a powerful combination of EPS generation and stock valuation multiple expansion thereby driving what many investors are searching for — alpha. And from a dividend investors’ perspective, those thematic tailwinds bode rather well that companies that have a track record for increasing their payouts will continue to do so.

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Thematics outperform the broader equity markets in October

Thematics outperform the broader equity markets in October

A confluence of factors weighed on equities in October including the resurgence of the coronavirus that resulted in fresh restrictions late in the month, scuttled fiscal stimulus talks in Washington, renewed US-China trade tensions, the continuation of Brexit talks, and the lead up to the final innings of the contentious 2020 US presidential election. The end result saw the major market indices record their worst month in several with the S&P 500 shedding 2.8%, which added to its September losses and left it up 1.2% through the first 10 months of 2020. The Dow Jones Industrial Average fell 4.6% in October, leaving it down 7.1% with two months left to go in 2020. In comparison, all six of Tematica Research’s thematic indices outperformed both of those major market barometers in October, once again confirming that only by thinking differently can investors hope to outperform.

With Election Day 2020 having finally arrived, investors are anxiously waiting for the presidential results and those for the U.S. Senate, which will determine its political composition for the next few years. There is chatter of a potential Blue Wave, but we are likely in for a nail biter of an evening.

Barring a landslide victory by either Trump or Biden, which, depending on your view of potential swing states is either highly probable or wishful thinking, the probability is high the next president will not be declared quickly. Indeed, we would not be surprised if a contested election emerges. When that happened in 2000, it took five weeks, complete with recounts and court rulings, to know the outcome of the presidential race, and in that time volatility was a recurring factor for U.S. equity markets.

If we get a split decision — a president from one party with the other party a majority in the Senate — odds are we are in for four years where little will get done in Washington. It wouldn’t be the first time.

Stepping back we have to ask: will a changing of the guard have a demonstrative impact on our investment themes and indices?

Will the shift to digital shopping slow in the near-term? Probably not, especially given what is unfolding with the COVID-19 pandemic.

Will people stop streaming video content? Not likely. Even Walt Disney (DIS) now refers to its box office facing business as a legacy one as it focuses on its Disney+ streaming service.

Are people going to stop looking for food and other products that have cleaner ingredients and environmentally friendly packaging? Will farmers stop buying agricultural equipment that will help drive crop yields and productivity? Doubtful on both counts.

Will the deployment of 5G networks and 5G smartphones come to a grinding halt? Again not likely.

And so on…

Yes, the players in Washington may change and during that process, there will be some immediate to short-term volatility but the structural changes that power Tematica’ investment themes will continue on. That said, we’ll be sure to watch policy changes and regulatory mandates in the coming quarters to identify any potential headwinds as well as new tailwinds that could further entrench the structural changes that underpin our investment themes and indices.

How The Pandemic Has Increased The Need for Cybersecurity

How The Pandemic Has Increased The Need for Cybersecurity

The first known cyberattack hit in 1988, when what became known as the Morris Worm installed itself on a computer every one out of seven times, even if the computer claimed it already had the program. With each installation, the infected computers would become further debilitated until they finally crashed. The worm damaged approximately 6,000 computers, which represented 10% of the entire internet at the time, and we have never looked back.

Over the ensuing three decades, computing and connectivity would become increasingly ubiquitous as more of how we work, play, and live becomes digital, and the combination of chips and sensors have become the fabric of our lives.

The dark side of this increasingly digital lifestyle is the voluminous growth in the number of attack vectors by cybercriminals and other bad actors. While driven primarily by financial motives, one of the more lucrative areas for cybercriminals today is data theft. Early in 2020, the Department of Homeland Security warned of an increase in cyber threats due to heightened tensions with Iran. Later in 2020, a little thing known as the coronavirus accelerated the adoption of digital technologies and solutions, leaving us and our data increasingly vulnerable as companies were forced to go virtual nearly overnight.

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World Reimagined: A Reckoning for Companies

World Reimagined: A Reckoning for Companies

In 2010, corporate citizenship took a major step forward when the International Organization for Standardization (ISO), an international nongovernmental organization made up of national standards bodies, released ISO 26000, a set of voluntary standards meant to help companies implement corporate social responsibility.

While the notion of corporate citizenship dates back to the 1950s, the challenges presented by both the COVID-19 pandemic and Black Lives Matter movement ushered in a new era of corporate citizenship in 2020 that went far beyond the realm of philanthropy. Companies rallied to do good in the face of the coronavirus and stepped up efforts for diversity, inclusion, and belonging. In many respects, 2020 will be a year worth forgetting, but for corporate citizenship, it will be a year to remember.

In early March, the World Health Organization’s (WHO) estimated 89 million medical masks would be required for the Covid-19 response each month, along with 76 million examination gloves and 1.6 million goggles. To help fend off the coronavirus and protect medical workers treating those infected as well as address potential shortages of key products, companies altered their production lines to help how they could. Here are just a few examples:

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How the Pandemic Irreversibly Forced Digital Acceleration

How the Pandemic Irreversibly Forced Digital Acceleration

When we look back on 2020, there will be several notable items that jump out from the record books. The COVID-19 pandemic and its impact on the global economy will likely be at the top of the list, as will the pull-forward in digital transformation that ensued as people adjusted how they worked, lived, and played.

Pain points tend to give way to solutions, and given the number of pain points that emerged as a result of the pandemic, we have seen digital solutions come about in part to solve consumers’ needs.

With the deployment of new connective technologies such as 5G and gigabit fiber bringing greater data speeds and network capacity as well as lower latency compared to existing networks, there will be no putting the digital genie back in the bottle.

Read more here…

Hackers use web-based project management BaseCamp to attack networks

Hackers use web-based project management BaseCamp to attack networks

It’s never a dull moment when it comes to our Cybersecurity and Digital Privacy investing theme and the corresponding index given that hackers are constantly looking for vulnerabilities and other gaps to exploit. According to a new report, phishing campaigns that distribute malware or steal your login credentials have started to use Basecamp, a web-based project management solution that allows people to collaborate, chat with each other, create documents, and share files. It appears once again the ongoing game of one upmanship between cyber attackers and cyber defenders is poised to continue as the way we live, work and play become increasingly digital.

Security researchers MalwareHunterTeam and James have found that threat actors are distributing BazarLoader executables using public Basecamp download links.

BazarLoader is a stealthy backdoor Trojan from the TrickBot gang used against high-value targets to compromise their networks. Once installed, BazarLoader will deploy Cobalt Strike beacons that allow threat actors to access the network and ultimately deploy the Ryuk ransomware.

By abusing safe services such as Basecamp to host malicious files and phishing pages, users can be lulled into a false sense of trust and open files that they normally would not.

Furthermore, by using Basecamp URLs, threat actors can create carefully constructed and targeted campaigns to infiltrate a network as users may feel that the file is from their Basecamp project.

Source: Hackers now abuse BaseCamp for free malware hosting