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Buy stocks with rising profit margins due to commodity inflation 

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An employee delivers cases of Coca-Cola Co. brand soda in Miami Beach, Florida.

Scott McIntyre | Bloomberg | Getty Images

An employee delivers cases of Coca-Cola Co. brand soda in Miami Beach, Florida.

With the S&P 500 not far from the firm’s 2018 year-end target, Goldman Sachs says there is still an investment strategy that can outperform.

The firm recommended companies with high and stable profit margins.

That’s because despite the one-time boost to profit from the corporate tax cut, companies face a number of challenges to maintaining profit margins, including rising commodity prices, rising interest rates and wage growth. All of these cut into margins.

“Investors should focus on stocks with high and stable gross margins,” wrote David Kostin, Goldman’s chief U.S. equity strategist, in a report Friday to clients. “The market generally rewards companies with high margins when the outlook for corporate profitability weakens.”

Kostin reiterated his year-end price target of 2,850 for the S&P 500, representing just 3 percent upside from Friday’s close.

The strategist noted that Russell 1000 stocks in the top quintile of each of their sectors for stable gross profit margin levels outperformed low gross margin stocks by 14 percentage points so far this year.

“We expect the trade will continue to outperform as the margin tailwind from tax reform passes,” he said.

Here are five companies in the Goldman Sachs “high and stable gross margins” stock basket recommended by Kostin.



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Elon Musk apologizes to British cave diver following ‘pedo guy’ claim

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Elon Musk, co-founder and chief executive officer of Tesla Inc.

Patrick T. Fallon | Bloomberg | Getty Images

Elon Musk, co-founder and chief executive officer of Tesla Inc.

Tesla CEO Elon Musk apologized after making the baseless claim that a British diver involved in the Thai cave rescue mission was a pedophile.

The apology comes after the spelunker, Vern Unsworth, who was involved in the early days of efforts to save the now-rescued boys’ soccer team, threatened legal action against the billionaire executive over the comment.

Musk said on Twitter late Tuesday that he had made the claim out of “anger” because Unsworth had criticized his idea to rescue the boys with a “mini-submarine” made out of a SpaceX rocket part.

“Nonetheless, his actions against me do not justify my actions against him, and for that I apologize to Mr. Unsworth and to the companies I represent as leader,” Musk said.

“The fault is mine and mine alone.”

Musk got involved in efforts to rescue the group of 12 boys and their soccer coach earlier this month — mere days before their rescue. The boys had gotten stuck in the flooded Tham Luang cave in Chiang Rai after venturing through it with their coach.

He and a team of engineers from SpaceX and The Boring Company brought over the vessel — a cylinder made out of the liquid oxygen transfer tube of a Falcon rocket — to Thailand, and met with government officials there about the possibility of using it to help.

But Narongsak Osottanakorn, head of the command center during the rescue, did not welcome the idea, saying the sub was “technologically sophisticated” but “not practical” with the rescue mission.

Musk then hit out at reports referring to Osottanakorn as “rescue chief,” noting that he was the former provincial governor of Chiang Rai and claiming he was not the “subject matter expert.” Osottanakorn stepped down from his role to join the initiative.



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European Union is expected to fine Google $5 billion over Android: Reports

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Sundar Pichai, chief executive officer of Google

Michael Short | Bloomberg | Getty Images

Sundar Pichai, chief executive officer of Google

European Union regulators will slap Alphabet-owned Google with a $5 billion antitrust fine for abusing the dominance of its Android mobile operating system, according to reports.

The case relates to the dominance of Google’s Android operating system, which is one of the world’s most popular mobile software systems, competing fiercely against Apple’s iOS. The Android OS controls more than 80 percent of smartphones globally.

The EU has scrutinized that dominance, arguing that Google should look to make competition fairer and allow smaller players in the market to flourish. It is widely expected to fine the firm a record levy on Wednesday.

According to the Wall Street Journal, that fine will amount to 4.34 billion euros ($5.06 billion). The Journal, citing an official familiar with the matter, said the decision is not expected to be discussed at a meeting between EU Competition Commissioner Margrethe Vestager and other officials.

Shares of Alphabet, Google’s parent company, shed more than 1 percent during U.S. premarket trading.

You can read the full Wall Street Journal report here.



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Hedge fund billionaire Einhorn places sixth in major poker tournament

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Hedge fund billionaire David Einhorn plays poker at the World Series of Poker's "Big One for One Drop."

Joe Giron | World Series of Poker

Hedge fund billionaire David Einhorn plays poker at the World Series of Poker’s “Big One for One Drop.”

Hedge fund billionaire David Einhorn busted out of a $1 million buy-in poker tournament just short of taking home prize money, Tuesday night in Las Vegas.

Einhorn and 26 other businessmen and poker players each ponied up $1 million to enter the World Series of Poker’s “Big One for One Drop” tournament.

Einhorn survived two days of play and came into the third day with the fifth most chips of the 6 remaining players.

But, while other players were doing all they could to avoid getting eliminated, Einhorn didn’t seem to mind playing aggressively.

For his sixth-place finish Einhorn receives no prize money. Fifth place would have paid out $2 million.

Einhorn has been a regular at the World Series of Poker for years, always giving his winnings away to charity.

This year he played sporting a shirt that said “Service Year,” a charity that allows people to serve in the community for a year, and be paid for it.

Simply playing in the tournament was a charitable endeavor as $80,000 from each entry goes to the charity One Drop, an organization dedicated to sustainable access to safe water.



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