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EventShares 3Q'18 Policy Tracker

06.26.2018 | Ben Phillips, CFA

EventShares Policy Tracker

Policy Tracker 3Q18 blog image BIG

(click to enlarge)

 

The EventShares Policy Tracker is a summary of the current policies, legislation, and regulations we are monitoring in Washington D.C. The above image displays each of these items by market sector.

 

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Below we provide a short summary of each policy item, including links to primary source documents, such as a bill, press release, or agency rulemaking notice. We also provide our view on how the policy may impact both market segments and individual companies. At the bottom of each policy section, you can find a link to relevant EventShares research reports.

 

This Policy Tracker was last updated 6/19/2018 for the 3rd Quarter of 2018. Sign up below to receive the quarterly Policy Tracker!

 

EventShares Policy Tracker-3Q18.pdf
 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

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.Read Below for this Quarter's Policy Tracker.

 

 

FINANCIALS 

NYSEFloor

 

Non-Traditional Lenders

 Overview

  • Consumer Financial Protection Bureau (CFPB) deregulation of subprime and non-traditional lenders

 

Impacted Stocks

  • Lenders (ENVA, CURO, FCFS, GDOT, OMF) 

Legislation

 

Related EventShares Research

 

 

Deregulation - SIFIs

 Overview

  • Systemically Important Financial Institution (SIFI) threshold raised from $50B to $250B may benefit smaller, regional banks by lowering their compliance costs
  • Potential for regional bank M&A as banks look to scale their operations
    Stocks

 

Impacted Stocks

  • Regional Banks (ASB, PACW, ZION, KEY)

 

Legislation

 

Related EventShares Research

 

Deregulation - Leverage Ratio Requirement

 Overview

  • Tailoring leverage ratio requirements based on a bank's specific risk profile may benefit bank holdings companies engaged in less risky business segments, such as custody banks, by freeing up capital to return to shareholders or reinvest in the operations

 

Impacted Stocks

  • Large Cap Banks (BAC, C, GS, JPM, MS, WFC)
  • Custody Banks (STT, BK, NTRS)

 

Legislation

 

Related EventShares Research

 

 

TRADE 

trade_shipping

 

Trade - NAFTA

 Overview

  • "Auto Rules of Origin" & the push to source more auto content from high wage paying firms, such as U.S. auto parts suppliers, may increase revenues
  • If no material changes are enacted to NAFTA, a return to normalized U.S.-Mexico trade flows could benefit transportation companies & increase revenues

 

Impacted Stocks

  • Auto Suppliers (DLPH, BWA, CMI)
  • Transportation (KSU)

 

Legislation

 

Related EventShares Research

 

Trade - China

 Overview

  • Companies involved in U.S.-Asia Pacific trade corridor may see revenues decrease if trades flow decrease between the U.S. & Asia-Pacific region
  • Chinese tariffs levied on U.S. agriculture exports may result in decreased demand for agricultural machinery

 

Stocks

  • Asia-Pacific Trade (EXPD, MATX, AAWW)
  • Agriculture Machinery (CAT, DE)

 

Legislation

 

Related EventShares Research

 

 

INDUSTRIALS 

Trucking Industry Traffic

Infrastructure

 Overview

  • Companies involved in the privatization of infrastructure assets, such as managing toll roads, may see increased project management revenues
  • Construction material companies, such as asphalt, rock, and steel, may see increased demand under an infrastructure build out
  • The White House recently indicated an infrastructure push may not occur until 2019

 

Stocks

  • Project Management (FLR, KBR, GVA)
  • Construction Materials (MLM, VMC) 

Legislation

 

 

Rural Broadband

 Overview

  • Rural infrastructure, including broadband access, may increase demand for cell towers and fiber optic cables
  • Policy may require bipartisan push, as Trump's 2018 infrastructure proposal authorized $50B for rural infrastructure without expressly allocating any amount to rural broadband.

 

Stocks

  • Broadband (AMT, GLW)

 

Legislation

 

 

TECHNOLOGY 

social media regulation

 

Social Media & Data Regulation

Overview

  • Rapidly expanding technology & social media companies may not be able to collect and monetize individual user data
  • Third-party data brokers & aggregators may face increased compliance costs and/or not be permitted to compile & help companies sift through user data to target specific advertising groups
  • Credit reporting agencies may be subject to increased compliance costs

 

Impacted Stocks

  • Social Media (FB, TWTR, GOOGL, AMZN)
  • Data Brokers & Aggregators (ACXM, CLGX)
  • Credit Reporting Agencies (EFX, TRU)

 

Legislation

 

Related EventShares Research

 

Chinese IP Theft

Overview

  • Technology companies with Chinese sales may be subject to tariffs & decreased revenues
  • Large cap companies may not be allowed to form joint ventures with Chinese companies, decreasing market access for US companies

 

Stocks

  • Technology (INTC, QCOM, NVDA, MU, IBM, AMD, TXN)

 

Legislation

 

 

AEROSPACE & DEFENSE 

EventShares Policy Investing military defense jet

 

Appropriations - Defense Spending

Overview

  • Defense contractors for the Department of Defense may see revenue growth from increased contract opportunities
  • Companies with products advancing technological capability of military may see new revenue growth as Defense Secretary Mattis pushes to modernize

 

Impacted Stocks

  • Defense Contractors (LMT, RTN, NOC, BA, HII, GD)
  • Defense Industry Suppliers (HXL, FLIR)

 

Legislation

 

Related EventShares Research

 

Defense Industry Foreign Spending

Overview

  • Trump administration issued an executive order to speed up and deregulate the process of defense industry sales to foreign allies

 

Impacted Stocks

  • Defense Contractors (LMT, RTN, NOC, BA, HII, GD)
  • Defense Industry Suppliers (HXL, FLIR)

 

Legislation

 

Related EventShares Research

 

 

ENERGY 

Policy Investing Oil Refiner

 

Energy Infrastructure

Overview

  • Trump administration infrastructure proposal would authorize the interior secretary to approve natural gas pipelines that cross the country's national parks
  • The plan would shorten the time a state has to issue water permits under Section 401, as required under the federal Clean Water Act, needed for construction of interstate natural gas pipelines
  • Potential for increased pipeline capacity, which may lead to increased exports of crude and/or natural gas

 

Impacted Stocks

  • Liquefied Natural Gas Terminals (LNG)

 

Legislation

  

Federal Energy Regulatory Commission (FERC) MLP Ruling

Overview

  • FERC issued a ruling affecting 'cost-of-service' MLPs by disallowing income tax expense when calculating their rates, which may mean decreased revenues for pipeline operators using the 'cost-of-service'
  • Crude pipelines are the predominate users of the 'cost-of-service' method and may be the most at risk of revenue decreases
  • Other pipelines, such as natural gas, tend to operate under a 'fixed cost' contract. The FERC doesn't impact these currently.

 

Impacted Stocks

  • MLPs (WPZ, SEP, EEP, TCP, SHLX, EQM, ETP)

 

Legislation

  

Renewable Identification Number (RIN) Waivers

Overview

  • Refining companies with large RIN expenses may see decreased renewable fuel compliance costs

 

Impacted Stocks

  • Refiners (ANDV, CVRR, HFC, PSX, VLO)

 

Legislation

 

Related EventShares Research

 

 

AGRICULTURE 

tractor

 

Farm Bill

Overview

  • SNAP (food stamps) work requirements, which may decrease number of SNAP recipients & lower revenue for grocery stores

 

Impacted Stocks

  • Grocers (WMT, TGT, KR, DLTR, DG)

 

Legislation

 

Related EventShares Research

 

 

 

HEALTHCARE 

HealthInsurance

 

2% Medicare Sequestration Cuts

Overview

  • Across the board Medicare provider payment cuts of 2% enacted in 2013 due to sequestration. The cuts will continue through 2027.
  • Potential for decrease in revenue for hospitals, home health services, physicians, and prescription drug companies.

 

Stocks

  • Home Health/Post Acute Providers (LHCG, AMED, KND, CHE, SEM)
  • Medical Device Companies (MDT, ISRG, SYK, TFX)

 

Legislation

 

Affordable Care Act

Overview

  • Hospitals recognized for quality services may receive higher reimbursement rates from CMS, which prioritizes high quality of care and low readmissions
  • Medicaid and Medicare expansion under the Affordable Care Act may generate increased revenues as the insured population grows. Trump administration and Republican governors are beginning to look at expending Medicaid/Medicare, which may increase the insured populations in those government programs.
  • Healthcare tech firms focused on increasing efficiency by improving patient outcomes and lowering costs may increase revenue as the healthcare sector works to modernize its services and lower costs

 

Impacted Stocks

  • Hospitals (HCA, UHS, LPNT, EHC)
  • Health Insurers (MOH, CNC, WCG, HUM)
  • Healthcare Tech (CERN, TDOC, ASGN)

 

Legislation

 

Related EventShares Research

 

Opioid Crisis

Overview

  • Potential negative business model disruption, increased compliance costs, and lawsuits for drug distributors involved in the opioid supply chain

 

Stocks

  • Drug Distributors (MCK, CAH, ABC)

 

Legislation

 

Related EventShares Research

 

White House Prescription Drug Price Plan

Overview

  • White House push to increase generic drug approval by FDA may offer pharmaceutical companies with large generic drug lineups to take market share from companies with branded drug lineups

 

Stocks

  • Specialty Pharma (AGN, MNK)
  • Generic Pharma (TEVA, MYL)

 

Legislation

 

 

EDUCATION 

Geopolitical Risk Policy Investing Resources ETFs

 

Student Lending & Loan Servicing

Overview

  • Potential for less regulation in the student loan servicing industry, leading to higher loan volumes and margin expansion. Trump administration plan to stop using private debt collectors for overdue student loans and give that responsibility to student loan servicers.
  • Department of Education reduced the scope and team size of a unit investigating abuse by for-profit colleges
  • Trump administration push to restrict availability of Pell Grants may result in lower student enrollment and spending on higher education

 

Impacted Stocks

  • Student Lenders (NNI, NAVI, SLM)
  • For Profit Colleges (CECO, ATGE, CPLA, LAUR, LOPE
  • Educational Materials GHC, CHGG

 

Legislation

 

Related EventShares Research

 

 

 

TAX REFORM 

Policy Investing Washington DC Wall Street

 

2017 Tax Reform & Jobs Act

Overview

  • Companies with tax rates historically above 30% may see increased profitability due to decreased tax expenses
  • U.S. exporters may become more competitive in foreign markets due to a lower tax rate differential between the U.S. and foreign countries

 

Impacted Stocks

  • Total Market (CAL, COST, EHC, FISV, FIZZ, GPK, STAY)

 

Legislation

 


 

 

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Important Information

Active Weighting Advisors LLC ("AWA") is an SEC-registered investment adviser that manages ETFs under the brand name EventShares Funds. Mr. Phillips is the Chief Investment Officer of AWA. The views expressed are subject to change, and no forecasts can be guaranteed. The comments may not be relied upon as recommendations, investment advice or an indication of trading intent. AWA is not soliciting any action based on this document. In preparing this document, the author has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources. Investing involves risk, including the possible loss of principal and fluctuation of value. Mr. Phillips and AWA disclaim responsibility for updating information. In addition, Mr. Phillips and AWA disclaim responsibility for third-party content, including information accessed through hyperlinks. For more information about EventShares, contact us by calling 877.539.1510 or visit our website at www.EventShares.com.

 

Policy Investing - Policy investing focuses on understanding the laws and regulations that impact companies. It attempts to find mispriced assets and invest in those companies before the market understands the implications to a company’s profitability and operations.

 

Policy Making - Policy making is the formulation of legislation and policies, especially in politics.

 

Geopolitical risk - Geopolitical risks is commonly defined as the risk of one country's foreign policy influencing or upsetting domestic politics and policy in another country or region.