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General Finance, Goodyear Tire, Alibaba and AMC highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – September 26, 2018 – Zacks Equity Research General Finance Corp as the Bull of the Day, Goodyear Tire and Rubber Company (GT - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Alibaba (BABA - Free Report) and AMC Theatres (AMC - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

When you first see today’s Bull of the Day, you’re probably going to think it’s a bank or an insurance company. To be honest with you, I thought the same thing at first glance. After taking the time to dive a little deeper in the stock, I’m glad I did. This stock is a Zacks Rank #1 (Strong Buy) with a Growth Style Score of A and just yesterday reached a new 52-week high.

I’m talking about General Finance Corp. Despite what the name may hint, the company is in the business services business. General Finance Corporation, a specialty rental services company, provides portable storage, modular space, and liquid containment solutions in North America and the Asia-Pacific regions. Its portable storage products include storage containers used in classroom equipment storage, construction equipment and tool storage, disaster shelters, landscaping sheds, recreational equipment storage, and retail inventory storage applications; and freight containers used in freight transportation by road and rail.

The reason for the favorable Zacks Rank is the series of positive earnings estimate revisions recently. Over the last thirty days, two analysts have increased their estimates for the current year. The bullish moves have pushed up our Zacks Consensus Estimate from 12 cents to 23 cents for the current year. Analysts are likely reacting to last quarter’s surprise where the company reported a breakeven quarter versus expectations calling for a 4-cent loss.

Last quarter, leasing revenues increased 31% year-over-year. That helped total revenue grow by 28%. That growth will slow the upcoming quarter as estimates for the current quarter are coming in at 11.93%. If you look at EPS growth, next year’s number is estimated to come in at a whopping 78% growth.

Taking a look at the chart, the stock was a huge momentum performer from November 2017 to July 2018. During that period, GFN rallied from $5 to $14. From July through August, GFN was chopping between $13 and $14, consolidating for an extended time. Since its last earnings report on September 5th, the stock is back to pushing up to new highs. The 50-day moving average provided plenty of support for the stock when it retested the level last week. The commodity channel index is a bit overbought, pushing up over 100 while the stock hits new highs.

Bear of the Day:

One of the best ways to use the Zacks Rank is to find a strong stock in a strong industry. We do this by looking at earnings estimate revisions coming from analysts. If analysts are out there increasing their earnings outlook for an entire industry, then finding the strongest stock in that industry gives you a great chance of success. Now flip that on its head. If you find the weakest industries out there from an earnings trend standpoint, then you can find stocks you should probably avoid loading the boat on.

Today’s Bull of the Day is one of these stocks that’s in an industry which has had a recent stretch of very negative earnings revisions. The industry is the Rubber – Tires industry which ranks as the lowest industry in our Zacks Industry Rank, 255 out of 255. It’s Zacks Rank #5 (Strong Sell) Goodyear Tire and Rubber Company (GT - Free Report) . The Goodyear Tire & Rubber Company, together with its subsidiaries, develops, manufactures, distributes, and sells tires and related products and services worldwide. It offers various lines of rubber tires for automobiles, trucks, buses, aircrafts, motorcycles, earthmoving and mining equipment, farm implements, industrial equipment, and various other applications under the Goodyear, Dunlop, Kelly, Debica, Sava, Fulda, and various other Goodyear owned house brands, as well as under the private-label brands.

The reason for the unfavorable Zacks Rank is the series of negative earnings estimate revisions recently. Over the last sixty days, three analysts have dropped their estimates for the current quarter while four analysts have cut their current year estimates. The negative revisions have brought the Zacks Consensus Estimate for the current quarter down from $1.15 to 73 cents while the current year number has been cut from $3.46 to $2.88. 

As I mentioned before, the Zacks Industry Rank for the Rubber – Tire industry is dead last of all the 255 industries we rank.

Additional content:

Inside China: The Fight to Become the World’s Cultural Epicenter

In part 4, we looked at the trade war between the US and China from a bird’s eye view. In many ways the clash was inevitable, and has important implications that investors should be aware of. To read the previous section, click here.  

In 1990, Harvard scholar Joseph Nye coined the idea of “soft power” as a key piece of a new 21st century geopolitical strategy paradigm. In his Fall 1990 Foreign Policy article, Nye noted that 30 corporations were already posting annual sales greater than the gross national product of 90 countries. He did so to make the now well-established point that power is becoming “less tangible,” and not necessarily directly tied to nations.  

Nye explained that soft power is a way to “get others to want what you want,” using “cultural attraction, ideology, and international institutions.” Up until this point, the predominant school of thought was that for a country to further its agenda, that military might, or “hard power,” was the avenue of choice. But as time would tell, the world was rapidly becoming too complex for this single-track approach.

The Fight to Win Over Your Heart

In 2007, former President Hu Jintao stated that “The great rejuvenation of the Chinese nation will definitely be accompanied by the thriving of Chinese culture.” While the government had previously discussed the importance of expanding its soft power, this was the first time that it became a matter of official policy. The following year, China reportedly committed $6 billion to the global expansion of its state-owned media outlets.  

By 2011, Hu’s successor Xi Jinping prepared to begin his term, and declared that it was a national goal to “build our country into a socialist cultural superpower.” Three years later, Xi proclaimed that “We should increase China’s soft power, give a good Chinese narrative, and better communicate China’s message to the world.”

For the last decade, China has been trying to do just that. According to David Shambaugh, a scholar at George Washington University, China spends around $10 billion annually on soft power-related initiatives. The Middle Kingdom notably hosted the 2008 Olympics in Beijing, where it dazzled a TV audience of four billion with its intricate opening ceremony.

According to The Economist, China has opened 500 government-funded “Confucius Institutes” in 140 countries. These institutions facilitate the spread of Chinese language and culture, employing teachers and other staff to give context to the story of the growing giant. And since President Trump has chosen a more isolationist approach to policy, China sees the present as a chance to charm more of the world into its sphere of influence.

History is Written by… Who?

In recent years, China has made many large media investments. Xinhua, the government’s main news agency, currently runs over 170 foreign bureaus, and aims to have 200 by 2020. It opened nearly 40 bureaus from 2009 to 2011 alone.

E-commerce giant Alibaba purchased the South China Morning Post, Hong Kong’s largest English-language newspaper, for $260 million in 2015. The following year, a state-affiliated media company launched an English-language publication called Sixth Tone, which seeks to draw readers with more opinionated pieces.

In 2017, the country’s largest broadcaster, China Central Television (CCTV), spun off its foreign services division into China Global Television Network (CGTN). CGTN has continued ramping up efforts in regions such as Australia, where in September it ran a three-week marketing campaign in major cities.

China is also heavily involved in Africa, where it has made various infrastructure investments and growth-friendly loans. China’s highest grossing film of all time ($830 million), Wolf Warrior 2, pits a Chinese Special Forces operative against western mercenaries in a fictional African country. The film’s success was largely driven by its heavy-handed nationalism and high-octane action.

In the radio space, China Radio International broadcasts 392 hours of programming a day in 38 languages across 27 international bureaus, according to the Council on Foreign Relations. Chinese companies also target many of the nation’s 50 million overseas citizens, many of whom live in Southeast Asia.

Are You Not Entertained?

Investments in the entertainment industry had been another key element of China’s soft power diplomacy, but have been slowing down. The private property and cinema conglomerate Dalian Wanda made investments around the world. The company’s portfolio included a $2.6 billion stake in AMC Theatres in 2012, a $1.2 billion Swiss sports marketing company transaction, a 20% stake in the Atletico Madrid football club, and the $3.5 billion acquisition of Hollywood studio Legendary Entertainment in 2016.

But the Legendary move angered the Chinese government, which argued that domestic conglomerates were irrationally burning through money. This led to the 2017 currency controls that dramatically reduced cash outflows (We also discussed this in our section on foreign investments). Wanda has since began to unload some of its positions, most recently agreeing to sell a $600 million AMC stake to private equity firm Silver Lake in September.

But China’s footprint has still become more apparent in US media than ever before. Matt Damon was the star of Chinese film Great Wall in 2016, and while not a major success, was still a milestone in US-China entertainment collaboration.

China also made its presence felt at the 2018 World Cup, where Wanda and other companies spent $800 million on advertising. Four of the 12 official sponsors of the tournament were Chinese firms.

Looking Ahead

A trade war with the US and a slowing economy are short-term concerns for China. But its continued long-term economic growth will play an integral role in expanding the nation’s resource basket. This will prove crucial as the Middle Kingdom continues its battle to become the central cultural influence of the 21st century.

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