Investing

If you need a preparer for the 2025 filing season, now is the time to start looking, experts say.
However, vetting is important because there are no federal licensing or competency requirements, and some paid preparers have no training or experience.
You can start with referrals and double-check credentials through the IRS and state licensing websites.

Leopatrizi | E+ | Getty Images

Most tax preparers don’t have credentials

Despite the talent shortage, vetting is important because “pretty much anyone can call themselves a tax preparer,” Young said.
The IRS receives more than 160 million federal tax returns every year and most come from paid preparers, according to the National Taxpayer Advocate’s 2024 Purple Book of legislative recommendations.

There are no federal licensing or competency requirements, and some paid preparers have no training or experience, the report noted. Under current law, the minimum requirement for paid professionals is an IRS-issued preparer tax identification number, or PTIN.
However, certified public accountants, enrolled agents and attorneys — professionals with unlimited representation rights before the IRS — generally pass competency tests and have continuing education requirements.
Free preparation options like Volunteer Income Tax Assistance, or VITA, and Tax Counseling for the Elderly, or TCE, also have competency standards.  

How to vet your tax preparer

Unlike big box preparers, many tax professionals don’t accept walk-in traffic and operate mainly by referral, according to Tom O’Saben, an enrolled agent and director of tax content and government relations at the National Association of Tax Professionals.
“Talk to your friends and associates who have had a good experience with their [tax] professional,” he said. “Reach out to them now to see if they’re taking new clients.”
You should also weigh fee structure and availability outside the traditional tax season, which you may need if issues arise, Young said. “Cost is a big factor, but it shouldn’t be the only basis for your decision.”

The IRS keeps a database of credentialed preparers, including those who participate in the agency’s Annual Filing Season Program, which includes yearly refresher tests and continuing education.
You can check CPA and attorney licenses through state boards. Since the IRS oversees enrolled agents, you can email the agency to check licenses. More

Shoppers may spend $1,778 on average this holiday season, up 8% compared with last year.
Americans are set to rack up even more credit card debt as the holidays kick off.
Here’s how to get this season’s shopping tab under control without feeling like a Grinch.

Customers visit the Macy’s Herald Square store in New York City on Dec. 17, 2023.
Kena Betancur | Corbis News | Getty Images

For some shoppers, the upcoming holiday season may lead to significant credit card debt. Meanwhile, some people are still paying off debt from last year’s gift buying.
In fact, 28% of shoppers who used credit cards have not paid off the presents they purchased for family and friends last year, according to a recent holiday spending report by NerdWallet. The site polled more than 1,700 adults in September.  

“Between buying gifts and booking peak-season travel, the holidays are an expensive time of year,” said Sara Rathner, NerdWallet’s credit cards expert. “Not only are consumers at risk of getting into credit card debt, but that debt can stick around long after the decorations come down.”
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The stakes are higher in 2024 with credit card debt already at $1.14 trillion.
This year, spending between Nov. 1 and Dec. 31 is expected to increase again to a record total of $979.5 billion to $989 billion, according to the National Retail Federation.
Shoppers may spend $1,778 on average, up 8% compared with last year, Deloitte’s holiday retail survey found. Most will lean on plastic: About three-quarters, 74%, of consumers plan to use credit cards to make their purchases, according to NerdWallet.

Meanwhile, credit cards are one of the most-expensive ways to borrow money. The average credit card charges more than 20% — near an all-time high.

How to avoid overspending

“Somehow it’s been programmed into the American consumer, that essentially says ‘I have to spend a lot of money on people I care about,'” said Howard Dvorkin, a certified public accountant and the chairman of Debt.com.
It doesn’t have to be that way, he said.

“There’s no magic wand, we just have to do the hard stuff,” said Candy Valentino, author of “The 9% Edge.” Mostly that means setting a budget and tracking expenses.
Valentino recommends reallocating funds from other areas — by canceling unwanted subscriptions or negotiating down utility costs — to help make room for holiday spending.
“A few hundred dollars here and there really adds up,” she said. That “stash of cash is one way to set yourself up so you are not taking on new debt.”

How to save on what you spend

Valentino also advises consumers to start their holiday shopping early to take advantage of early deals and discounts or try pooling funds among family or friends to share the cost of holiday gifts.
Then, curb temptation by staying away from the mall and unsubscribing from emails, opting out of text alerts, turning off push notifications in retail apps and unfollowing brands on social, she said.
“It will lessen your need and desire to spend,” Valentino said.

Also consider an investment, such as individual stocks or bonds or a charitable donation, instead of gifts to create a more lasting impression. Making something from scratch, such as cookies, a candle or a sugar scrub, may also prove especially meaningful, Valentino said.
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When real estate agents guide you through a home for sale, they’re required to point out physical or material defects in the property. In most states, a recent death in the home doesn’t count.
If a death in the home or other stigmas are factors you consider in a home purchase, ask about the property’s history.
Stigmatizing events include murder, suicide, alleged hauntings or a notorious previous owner.

Matt Champlin | Moment | Getty Images

When a real estate agent works with a prospective homebuyer, they’re required to point out physical or material defects in the property.
A death on the property? It depends on the state where the house is located. In most states, death doesn’t count as a material defect requiring disclosure.

Some homes are considered “stigmatized properties,” or dwellings that have been “psychologically impacted by a past or suspected event on the property, but has no physical impact of any kind,” according to the National Association of Realtors. 
Stigmatizing events include murder, suicide, alleged hauntings or a notorious previous owner, NAR noted. 

Different people interact with stigmatized properties in different ways.

Harrison Beacher
real estate agent and managing partner at Coalition Properties Group in Washington, D.C.

Which states require disclosure of death

Listing agents will have different requirements state-by-state on what to disclose to a buyer. Most states don’t have any death disclosure requirements.
Among those that do, rules can be straightforward and explicitly require prior death to be disclosed to homebuyers. Even those rules may only apply to recent deaths or more stigmatizing events such as murder.
In California, for example, a seller must disclose if someone died in the house within the last three years.

Meanwhile, in Alaska, the listing agent must communicate if any known murders or suicides happened in the last year. South Dakota requires sellers to disclose deaths within the last 12 months.

Regulations will depend on the stigma in question. In New York, a seller doesn’t need to disclose if the house was the site of death or crime. But if a seller has made claims of paranormal activity in the home, they have to inform the buyer of supposed ghosts in the property, experts say.
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Often, it falls on the homebuyers to directly ask the agent about the property’s history. States such as Georgia do not require real estate agents or sellers to disclose upfront if the home was the site of a death. But they have to be truthful if a prospective buyer inquires.
Outside of what the disclosure laws are in a specific state, listing agents have a fiduciary responsibility to the sellers, said Harrison Beacher, a real estate agent and managing partner at Coalition Properties Group in Washington, D.C.
“If somebody asks me about it, I can point them towards empirical resources to get answers, but I’m not under any requirements to go into detail,” said Beacher.
Here’s what homebuyers should know about properties that have been stigmatized by murder, suicide, alleged hauntings or notorious prior owners, and how to find more detail about the home’s history.

Who buys stigmatized properties?

Stigmatized homes can be a “turnoff” for homebuyers who believe in ghosts or spirits, said Daryl Fairweather, chief economist at Redfin, an online real estate brokerage firm.
“Some people are spooked away,” said Fairweather, while others might “seek out those homes.”
Nearly three-quarters, 72%, of potential homebuyers said they would buy a “haunted” house for a lower price, according to a new report by Real Estate Witch, a data site owned by Clever Real Estate. The site polled 1,000 U.S. adults in September to discover their views on buying and selling supposedly haunted houses.
Some buyers don’t care what happens in a stigmatized property “if it can get them a discount on price,” Beacher said.
About 43% of polled Americans said they would offer at least $50,000 below market value on a haunted house, according to the Real Estate Witch report.
In 2021, the LaBianca mansion, the home where Leno and Rosemary LaBianca were murdered by Charles Manson’s followers in 1969, sold for $1.875 million. The previous owner, Zak Bagans, a paranormal activity investigator, originally put the house on the market for $2.2 million, but later cut the price to $1.9 million.
“Different people interact with stigmatized properties in different ways,” Beacher said.

In 2023, about 67% of would-be buyers said they would buy a supposedly haunted house if it met their wants, like having appealing features, the right location or a more affordable price, according to Zillow.
But buyers should know that “every property has a history,” said Connie Vavra, managing broker of RE/MAX, a real estate brokerage franchise, at Elgin, Illinois.
“We can’t erase the history that’s been done there … That doesn’t mean that you can’t have good energy in there and have [a] good experience living in that home.”

How to find out a home’s history

If you have questions or concerns about a property’s history, the first thing you should do is ask the real estate agent. In some states, real estate agents need to provide truthful information upon a buyer’s request, or at the very least, point you toward the right direction to find out.
Here are two ways to check, experts say:
1. Talk to neighbors and officials
Keep an eye out for the property’s neighbors, experts say. Besides the real estate agent, neighbors can give you first-hand experience of the area, as well as information about the previous homeowners. 
You can also call the county manager where the property is located, said Theresa Payton, a former White House chief information officer who is now the CEO of cybersecurity firm Fortalice Solution.

Ask the county manager’s office about the property you’re considering and if there are any crime records associated with it, she said. 
2. Follow the paper trail
An internet search can turn up details. If police responded to any activity at the house, the event will likely be reported in the newspaper and it would be public record, Payton said.
You can do an advanced search online through newspaper headlines and police reports, as “all that information is free,” she said. More

The Nvidia headquarters in Santa Clara, California.
Loren Elliott | Bloomberg | Getty Images

Optimism around artificial intelligence has helped lift the S&P 500 in 2024, boosting key chip stocks and power plays in the utilities space.
Investors seeking sustainable returns will need to look for companies with solid long-term growth potential.

To this end, top Wall Street analysts, with their expertise, can help investors understand the key drivers that could support a company’s long-term growth and pick stocks that are likely to deliver lucrative returns.  
Here are three stocks favored by the Street’s top pros, according to TipRanks, a platform that ranks analysts based on their past performance.
Fortinet
This week’s first pick is cybersecurity company Fortinet (FTNT). The company aims to become a leader in the secure access service edge space. Fortinet leverages machine learning and AI technologies to offer cybersecurity solutions.
Recently, TD Cowen analyst Shaul Eyal reaffirmed a buy rating on Fortinet stock and raised the price target to $90 from $75. The analyst stated that channel checks and discussions with industry participants indicate continued recovery in FTNT’s business and healthy demand across the company’s broad product portfolio.
In fact, channel checks suggest that Fortinet’s third-quarter revenue and billings will reach the top end of the company’s outlook, with the possibility of a modest upside. Also, the analyst is confident about his Q4 revenue growth estimate of 12%, given “healthy closure rates and further pipeline building into a seasonally strong 4Q24.”

Eyal also noted that one of the key drivers supporting Fortinet’s ongoing recovery is the solid traction in the company’s operational technology products, backed by a long-term replacement cycle that will replace legacy OT systems. The analyst added that FTNT is also gaining from the adoption of AI-led networks and the company’s growing focus on cloud security, which was bolstered by the recent acquisition of Lacework.
Eyal ranks No. 12 among more than 9,100 analysts tracked by TipRanks. His ratings have been profitable 71% of the time, delivering an average return of 27.3%. (See Fortinet Insider Trading Activity on TipRanks) 
GitLab
We move on to GitLab (GTLB), an AI-powered, cloud-based software company that helps organizations enhance developer productivity, improve operational efficiency, and reduce security and compliance risks.
Following meetings with the company’s management, Mizuho analyst Gregg Moskowitz reiterated a buy rating on GitLab stock with a price target of $62. The analyst noted that management is highly confident about capturing further opportunities in the $40 billion total addressable market. Currently, the two vendors, GitLab and Microsoft’s GitHub, together account for just about 5% of the market share in the software development life cycle space.
In particular, management expects the momentum for GitLab’s Duo Pro product to pick up in 2025, fueled by the generative AI wave. The analyst also highlighted the company’s optimism about the GitLab Dedicated offering, which is witnessing better-than-anticipated customer interest and driving higher average revenue per unit.
Overall, Moskowitz remains “constructive on GTLB’s ability to execute and grow at a high level over the medium-to-longer term, due in large part to multiple upside levers that include seat expansion, price increases, and upsell potential.”
Moskowitz ranks No. 321 among more than 9,100 analysts tracked by TipRanks. His ratings have been profitable 58% of the time, delivering an average return of 12.6%. (See GitLab’s Hedge Fund Activity on TipRanks) 
Nvidia
Finally, let’s look at semiconductor giant Nvidia (NVDA). The company has been seeing stellar revenue growth rates, driven by robust demand for its advanced GPUs (graphics processing units) in building artificial intelligence models and applications.
Following an investor meeting with Nvidia’s management, Goldman Sachs analyst Toshiya Hari reiterated a buy rating on NVDA stock and raised the price target to $150 from $135.
The analyst’s optimism after the meeting reflects a “better appreciation of the company’s competitive moat and, importantly, the projected increase in Inference workload complexity as well as its implications for future compute demand.”
Hari noted Nvidia’s confidence about the demand backdrop, given continued spending on accelerated computing and GPUs by data center operators amid the generative AI wave. Management also highlighted the prospects for its Blackwell platform. The analyst thinks that Blackwell’s launch and ramp-up are not just near- and medium-term revenue growth drivers, but also key factors that will enhance Nvidia’s competitive advantage.
Hari increased his revenue estimates for fiscal 2025-2027 to reflect recent industry developments like increased cloud spending, solid order trends at the major AI server original equipment manufacturers like Dell and Hewlett Packard Enterprise, and an improved chip-on-wafer-on-substrate shipment outlook.
Hari ranks No. 32 among more than 9,100 analysts tracked by TipRanks. His ratings have been successful 68% of the time, delivering an average return of 27.5%. (See Nvidia Stock Charts on TipRanks) More

The trust fund that Social Security relies on to pay retirement benefits may be depleted in nine years.
The next U.S. president, either Democratic candidate Vice President Kamala Harris or Republican candidate Donald Trump, may address that issue.
Here’s what we know about their positions on the future of the program.

Former President Donald Trump and Vice President Kamala Harris are shown on screen during a debate watch party at the Cameo Art House Theatre in Fayetteville, North Carolina, Sept. 10, 2024.
Allison Joyce | Bloomberg | Getty Images

With the Social Security Administration facing a looming funding crisis over the next decade, it’s clear that the next U.S. president — either Democratic candidate Kamala Harris or Republican candidate Donald Trump — is poised to inherit a Social Security dilemma.
Almost 68 million Americans receive Social Security payments every month. The benefits support seniors in their retirement, disabled Americans and survivors of beneficiaries, but the future of the Social Security Administration has been in jeopardy for years.

More than 11,200 Americans are now turning 65 every day. As more retirees start to claim Social Security, there are not enough workers contributing to the program to make up for that increase in benefit payments.
When such a shortfall happens, Social Security turns to its trust funds — money that is set aside to help pay for benefits and other administrative costs.
But the trust fund Social Security relies on to pay retirement benefits is projected to be depleted in 2033. At that time, just 79% of benefits may be payable, according to the program’s trustees.
The average retired worker would see about a $403 cut to their current average monthly benefit of $1,920.
Most Americans rank Social Security as “one of the top” or a “very important” issue that will help determine how they vote in November, a recent CNBC poll found.

Both presidential candidates — former president Trump and Vice President Harris — have vowed to protect Social Security benefits.
But restoring the program’s solvency will require changes — benefit cuts, tax increases or a combination of both. Yet some experts say the candidates’ discussions have thus far avoided specific details on how to address that shortfall.
“We’re not seeing anyone step up and say, ‘In nine years, our main retirement program is looking at the trust of being insolvent, and that could lead to roughly a 20% benefit cut across the board of everybody,” said Jason Fichtner, chief economist at the Bipartisan Policy Center and executive director of the Alliance for Lifetime Income’s Retirement Income Institute.

Trump promises no taxes on Social Security benefits

Republican presidential nominee and former U.S. President Donald Trump speaks during a rally in Coachella, California, U.S., October 12, 2024. 
Mike Blake | Reuters

On the campaign trail, Trump has touted an idea aimed at letting retirees keep more of their Social Security checks — ending taxes on benefits.
“Seniors should not pay tax on Social Security,” Trump wrote on July 31 in all capital letters on social media platform Truth Social.
A recent ABC News/Ipsos poll found 85% of voters support the idea.
Currently, retirees pay federal income taxes on up to 85% of their benefits, depending on their incomes.
Just how much taxes retirees pay on benefits is based on a formula called combined income, the sum of adjusted gross income, nontaxable interest and half of Social Security benefits.
Married couples may pay taxes on up to 50% of their benefits if their combined incomes are between $32,000 and $44,000. If their incomes are over $44,000, up to 85% of their benefits may be taxable.
Individuals may be liable for taxes on up to 50% of their benefits if their incomes are between $25,000 and $34,000. If they have more than $34,000 in income, up to 85% of their benefits are taxable.
Because those thresholds do not change from year to year, more beneficiaries are paying taxes on their benefit income over time.
Ending taxes on Social Security benefits would move the insolvency date of Social Security’s trust fund closer by over one year, according to the Committee for a Responsible Federal Budget.
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And it may not make a big difference in retirees’ budgets, according to Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.
The median household income for retirees is about $50,000, so the “vast majority” pay very little or nothing in taxes on their Social Security benefits, Gleckman said.
Exempting taxes on benefits would mostly help those with incomes between $63,000 and $200,000, the Urban-Brookings Tax Policy Center’s research found.
But while the top 20% of households would see an average tax cut of about $1,400 after the elimination of the taxes on Social Security benefits, Gleckman explained, they would see an average tax increase of $6,500 with Trump’s plans to impose tariffs on imports.
“The net effect of what Trump is trying to do, if you look at everything including the tariffs, is probably increased taxes on retirees, even if they do get some benefit from repealing the tax on Social Security benefits,” Gleckman said.
The Trump campaign did not respond to a request for comment by press time.

Harris wants ‘wealthiest Americans’ to ‘pay their fair share’

Democratic presidential nominee U.S. Vice President Kamala Harris looks on as she participates a “town hall” with radio host Charlamagne Tha God, in Detroit, Michigan, U.S., October 15, 2024.
Kevin Lamarque | Reuters

The Harris campaign’s economic plan promises to “shore up Social Security and Medicare so that these essential programs will stay solvent in the long run by making corporations and the wealthiest Americans pay their fair share in taxes.”
In budget proposals and during the State of the Union, President Joe Biden has likewise called for having high earners pay more into the program.
More specific details on how Democratic candidate Harris would restore solvency to the program as president were not available by press time.
Employers and employees each pay 6.2% of wages to Social Security up to a taxable maximum (self-employed individuals pay 12.4%). In 2024, the limit on earnings that are subject to the Social Security payroll tax is $168,600. Top earners with $1 million in gross annual wage income stopped paying into the program as of March 2, according to the Center for Economic and Policy Research.
Washington Democrats have proposed reapplying those taxes for earnings over $400,000 or $250,000 in separate proposals, while also potentially raising taxes on investment income. Those tax increases would improve the program’s solvency, while also making certain benefit increases possible, per the proposals.
If Harris holds to the $400,000 threshold set by the Biden administration, her Social Security proposal would have “no impact on the vast majority of households,” according to Gleckman, since around 95% to 98% of households make that amount or less.  
“Vice President Harris and Governor Walz are fighting to lower costs and will always protect and strengthen Social Security and Medicare,” campaign spokeswoman Mia Ehrenberg said in a statement.

Older Americans may feel effects of reform

As Social Security’s depletion dates get closer, any reform changes would need to phase in more quickly.
And people ages 55 and over — who are typically left out of Social Security reform proposals such as raising the retirement age — may also feel the effects of any changes, according to Fichtner.
“You don’t have a lot of time to change your retirement trajectory once you hit 55,” Fichtner said. “But now that we’re getting so close to trust fund depletion … and the magnitude is so large, I’m not sure we can actually afford from a financial standpoint to hold them harmless.”
Regardless of who is elected, it remains to be seen how much a new president can accomplish on Social Security.
With 60 votes required in the Senate to pass Social Security reform, both parties would have to agree.
Experts say it is possible lawmakers may wait until the last minute to address the issue.
“As you get closer and closer to the insolvency date, it means the benefit reductions have to be steeper and quicker, and it means the tax increases have to be more significant and faster,” Gleckman said. “So it makes it even harder.” More

Budrul Chukrut | SOPA Images | Lightrocket | Getty Images

Company: Air Products and Chemicals (APD)

Business: Air Products and Chemicals is an industrial gases company. It’s focused on serving energy, environmental and emerging markets. Its base business provides essential industrial gases, related equipment and applications expertise to customers in dozens of industries, including refining, chemicals, metals, electronics, manufacturing and food. Air Products also develops, engineers, builds, owns and operates clean hydrogen projects supporting the transition to low- and zero-carbon energy in the heavy-duty transportation and industrial sectors. In addition, it provides turbomachinery, membrane systems and cryogenic containers globally. Air Products has operations in approximately 50 countries.
Stock Market Value: $73.83B ($332.10 per share)

Stock chart icon

Air Products and Chemicals in 2024

Activist: D.E. Shaw & Co

Percentage Ownership: n/a
Average Cost: n/a
Activist Commentary: D.E. Shaw is a large multi-strategy fund that is not historically known for activism. The firm isn’t an activist investor, but it uses activism as an opportunistic tool in situations where it thinks it may be useful. D.E. Shaw seeks out solid businesses in good industries, and if the firm identifies underperformance that is within management’s control, it will take an active role. The investor places a premium on private, constructive engagement with management. As a result, it often comes to an agreement with the company before its position is even public.

What’s happening

D.E. Shaw has reached out to Air Products’ board. The firm proposed that the company take various steps to enhance shareholder value, including improving capital allocation, refreshing the board and restructuring executive compensation.

Behind the scenes

Air Products provides industrial gases and related equipment in end-markets such as refining, chemicals, metals, electronics, manufacturing and food. The company’s industrial gas business is extremely stable and low risk, functionally a risk-free, inflation-protected, senior secured bond when the business is kept pure. The nature of the business is that the company enters into long-term 15- to 20-year “take or pay” contracts with customers that have very high renewal rates exceeding 95%. The business is basically immune to economic cycles, contracts are inflation-protected, and the oligopolistic industry has huge barriers to entry. These long-term contracts functionally guarantee an unlevered double-digit return before Air Products even needs to put a dollar into the ground. When unadulterated and committed purely to its core business, this is a fantastically stable and well-valued enterprise.

However, while the company was focused on its own operations, it missed out on a wave of consolidation in the industry. In 2016, Air Liquide finalized its purchase of Airgas. In 2018, Linde and Praxair completed a merger of equals. Before Air Products knew it, the company was the odd man standing, and it was standing all alone. CEO Seifi Ghasemi’s expansion solution, having missed out on combinations with pure-play peers, has been to pursue non-core business expansion. Departing from its longstanding strategy in the traditional industrial gas business model that generates dependable capital returns, the company has moved up along the risk curve towards more speculative investments without locked-in revenue through several clean hydrogen project investments. Across five investments — the most notable of which being the Air Products’ NEOM Saudi Arabia green hydrogen project and its Louisiana blue hydrogen project — the company expects to spend nearly $12 billion of capex. When initially planned, Air Products did not have offtake agreements — agreements with buyers to purchase its future offerings — for four of the five projects (only 6% of capacity had offtake agreements). Today, over 80% of project capacity remains uncontracted.
This is a perfect example of “di-worsification.” Investors appreciate companies like Air Products for their low-risk and highly stable cash-flowing operations. Regardless of the efficacy of these non-core businesses, the typical risk-averse investors that have been historically attracted to companies like Air Products are going to flee when the risk profile changes. Moreover, investors with a larger appetite for risk who might be attracted to businesses like NEOM or the Louisiana project, are less likely to invest in it when it is diluted by a low-risk, stable business like Air Products’ core industrial gas businesses. Further, matters are not helped by the fact that peers Linde and Air Liquide have been able to execute on hydrogen projects with secured offtake agreements in place pre-construction and have focused on partnerships in line with its low-risk traditional business model.
As a result of its investment in these speculative projects, Air Products’ capex as a percent of sales has more than doubled over the past five years and is roughly four-times higher than its peer average. The company’s free cash flow conversion has turned negative whereas peers are averaging 92% since 2016. Further, its return on capital employed is moving inversely compared to peers. While management thinks that being a first mover in green and blue hydrogen and moving up the risk curve should be rewarded with a higher multiple and stock price, investors clearly disagree. Air Products has underperformed its peers and relevant benchmarks over functionally every relevant time frame in the past ten years and is trading at a 20% discount.
Now, D.E. Shaw has taken an approximate $1 billion stake in Air Products and has taken its engagement public after initially reaching out to the company over a month ago and presenting its value-enhancing plan to management on Oct. 2. D.E. Shaw will typically go public with a campaign after a resolution has been reached with the company, but the firm has encountered some resistance to engagement here. It put forward a seven-point plan to improve value at the company, focused on a revised capital allocation framework and corporate governance. Beginning with capital allocation, D.E. Shaw is urging the company to de-risk its existing large project commitments by signing offtake agreements at reasonable return hurdles, as their peers have been able to do. In addition, in light of Air Products finalizing another large hydrogen project in Texas without existing offtake agreements in place, the firm demands that the company commit to tying future capital investment to offtake agreement milestones. Furthermore, D.E. Shaw wants the company to limit annual capex to $2 billion to $2.5 billion beyond 2026, with a specific target of capex to not exceed the mid-teens as a percent of Air Products’ revenue. The firm also argues that the company should immediately repurchase its discounted shares up to its three-times target net leverage ratio in fiscal year 2025 and direct future excess free cash toward additional repurchases.
The second part of D.E. Shaw’s campaign pertains to corporate governance, in particular, succession planning for CEO Seifi Ghasemi. At about 80 years old, he has been serving in the role for a decade. Ghasemi was given a five-year extension in 2020 and it was renewed in 2023 on an evergreen basis. There appears to be no formal succession plan in place, only vague commitments to a search for an experienced former CEO of a public company. Air Products’ COO Samir Serhan officially left the company at the end of September, removing a quality internal candidate. There are questions about what viable candidate would want to join the company if Ghasemi essentially has an indefinite contract. Not to mention, his compensation over the past five years of $87 million is far greater than both the company’s peer average ($78.5 million) and S&P 500 average ($67.2 million), despite underperforming both. D.E. Shaw is demanding that the company communicate a clear, credible, and transparent CEO succession plan. It wants the company to refresh the board with highly qualified independent directors, and to restructure executive compensation to improve alignment with strategy and performance (i.e. the introduction of return on equity/return on capital employed metrics for the long-term incentive plan as peers have). The firm is also calling for the formation of one or more ad hoc board committees to oversee these initiatives.
D.E. Shaw is a large multi-strategy fund that is increasingly embracing activism as a tool to create shareholder value and has an experienced team that has had success in its activist engagements. Since the beginning of 2022, it has commenced six activist campaigns, settling for board seats in five (L3Harris Technologies, Corpay, Fidelity National Information Services, FedEx and Verisk Analytics) and successfully opposing a merger at the sixth (Diversified Healthcare Trust). The firm is known for its deep quantitative and technical research. This is exemplified in its Oct. 2 presentation on Air Products. D.E. Shaw thoroughly outlines the company’s issues and offers proposed fixes.
It is not uncommon to see multiple activists in the same stock, especially at a company with such a strong underlying business paired with relative underperformance, capital allocation missteps and corporate governance red flags. On Oct. 4, Mantle Ridge announced a more than $1 billion position in Air Products, and echoed a similar sentiment and identified similar issues as D.E. Shaw. The main difference between the two is that D.E. Shaw historically adds a minority of directors to the board and generally not a principal of the firm. Mantle Ridge has historically reconstituted a majority of boards with the inclusion of its founder, Paul Hilal. While certain investors and CEOs may look at the activist principal being on the board as a negative, we see it a significant positive in that it signals long-term engagement, and the activist investor is often the most prepared and assertive independent director at board meetings. It should also be noted that in three prior campaigns, Mantle Ridge never placed more than one of its own insiders on the board, and the firm always had a slate of impressive, independent directors.
D.E. Shaw is only seeking three seats on Air Products’ nine-person board, including one for Scott Sutton, the former CEO of Olin, who oversaw a stock appreciation of 379.2% as CEO from Sept. 1, 2020 to March 18, 2024, versus 28.3% for the Russell 2000 over the same period. The two others will likely be impressive public company executives with a track record of creating shareholder value. While D.E. Shaw’s investment thesis has plenty of overlap with Mantle Ridge’s plan, there are two glaring issues that both investors prioritize: CEO succession planning and capital allocation refocus. We strongly expect that many of Air Products’ other shareholders are concerned about the same issue. So, the question here is not whether there will be change, but what will that look like. Having two different activists gives the company some optionality to settle with the one it thinks will be a better fit. D.E. Shaw likely means fewer new directors and no activist principal. But Mantle Ridge has a pre-existing relationship with the company, as well as some of the current directors and CEO Ghasemi, going back more than ten years, and it has a reputation of working well with management. As both activists will insist on better capital allocation and a firm succession plan, either way it should be a win for shareholders.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. More

ETF Strategist

While passive ETFs replicate an index, such as the S&P 500, active managers aim to outperform a specific benchmark. 
Some 328 active ETFs have launched in 2024 through September, compared to 352 in 2023, according to Morningstar data.
However, only 40% of active stock ETFs had more than $100 million in assets, as of October.

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Exchange-traded funds are generally known for passive strategies. But there has been a surge in actively managed ETFs as investors seek lower costs and more precision, experts say.
Active ETFs represented just more than 2% of the U.S. ETF market at the beginning of 2019. But these funds have since grown more than 20% each year, rising to a market share of more than 7% in 2024, according to Morningstar.

Some 328 active ETFs have launched in 2024 through September, compared to 352 in 2023, which has been “kind of remarkable,” said Stephen Welch, a senior manager research analyst for Morningstar, referring to the growth of ETFs this year.

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There are a few reasons for the active ETF growth, experts say.
In 2019, the U.S. Securities and Exchange Commission issued the “ETF rule,” which “streamlined the approval process” and made it easier for portfolio managers to create new ETFs, Welch said.
Meanwhile, investors and advisors have increasingly shifted toward lower-cost funds. Plus, there has been a trend of mutual fund providers converting funds to ETFs.
Still, only a fraction of issuers have been successful in the active ETF market. The top 10 issuers controlled 74% of assets, as of March 31, according to Morningstar. As of October, only 40% of active stock ETFs had more than $100 million in assets.

The “biggest thing” to focus on is the health of an active ETF, explained Welch, warning investors to “stay away from ones that don’t have a lot of assets.”

Active ETFs allow ‘tactical adjustments’

While passive ETFs replicate an index, such as the S&P 500, active managers aim to outperform a specific benchmark. Like passive ETFs, the active version is typically more tax-friendly that similar mutual funds.
“Active ETFs allow managers to make tactical adjustments, which may help navigate market volatility more smoothly than a passive index,” said certified financial planner Jon Ulin, managing principal of Ulin & Co. Wealth Management in Boca Raton, Florida.
These funds can also provide “more unique strategies” compared to the traditional index space, he said.  

The average active ETF fee is 0.65%, which is 36% cheaper than the average mutual fund, according to a Morningstar report released in April. But the asset-weighted average expense ratio for passive funds was 0.11% in 2023.
However, there is the potential for underperformance, as many active managers fail to beat their benchmarks, Ulin said. Plus, some active ETFs are newer, with less performance data to review their performance.

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As investors worry about the impact the November election, financial advisors say public debt is a more pressing issue, a new survey finds.
Experts say there are certain moves individual investors can make to limit their financial exposure to those broader risks.

Voters work on their ballot at a polling station at the Elena Bozeman Government Center in Arlington, Virginia, on September 20, 2024.
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Many investors worry about how the outcome of the presidential election will impact their investments.
But there’s another risk financial advisors are focused on — public debt, according to a new survey from Natixis Investment Managers.

Most U.S. advisors — 68% — rank public debt as the top economic risk, while 64% of advisors worldwide said the same, according to the survey of 2,700 respondents in 20 countries, including 300 in the U.S.
“No matter who wins the election, they’re convinced public debt is going to continue to go up,” said Dave Goodsell, executive director of the Natixis Center for Investor Insight.
The term public debt is used interchangeably by the U.S. Treasury with national debt and federal debt.
The government has borrowed to pay expenses over time, comparable to how an individual might use a credit card and not pay off the full balance each month. The U.S. national debt is now more than $35 trillion and growing.

The next U.S. president and Congress will inherit that government spending dilemma, as well as looming trust fund depletion dates for Social Security and Medicare.

More individuals now believe they are on their own when it comes to funding their retirements, the Natixis survey have shown, according to Goodsell.
Experts say there are certain moves individual investors can make to limit the financial exposure they have to those broader risks.
“You cannot control what Congress is doing, but you can control how you plan, how you save, invest and react to the news,” said Marguerita Cheng, a certified financial planner and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland. Cheng is also a member of the CNBC FA Council.

Diversify your portfolio

To help protect against volatility risks and avoid chasing returns or trying to time the market, it helps to stay appropriately diversified.
“Right now, in particular, you need some sort of risk offset in your portfolio, something that is non-correlated to stocks,” Goodsell said.
As the equity market has reached new all-time highs, investors have ratcheted up their expectations for higher returns.
The Natixis research found that investors expect returns of 15.6% above inflation, while financial professionals say about 7.1% above inflation is more realistic, Goodsell said.
Bonds can offer an opportunity to mitigate stock risks, he said.
To diversify, investors may consider both U.S. and international bonds, said Barry Glassman, a certified financial planner and the founder and president of Glassman Wealth Services. Bonds that have longer duration tend to come with more risks. Glassman is also a member of the CNBC FA Council.
For investors who worry the country’s debt may lead to slow growth, it can help to add international exposure to a portfolio, Cheng said.

Adjust your tax exposure

Higher national debt means taxes may also likely go up.
“We can’t forecast what tax rates will be in the future,” Cheng said.
Having money in a mix of tax-deferred, tax free and taxable accounts can be helpful, because it gives investors flexibility to limit their taxable withdrawals.
Roth individual retirement accounts and 401(k) plans allow savers invest post-tax money toward retirement. Taking advantage of other kinds of accounts — 529 college savings plans or health savings accounts for medical expenses — may provide tax advantages for money spent on qualified expenses.

Pare back personal debts

While the U.S. national debt is high, consumer debts have also been climbing.
“The sheer amount of debt that is outstanding that is charging more than 10% per year is shocking,” Glassman said.
To help keep those balances in check, and how much they cost, it helps to have good credit, Cheng said.
Consumers can help reduce the cost of their debts by paying their bills on time, which then lets them borrow money at better interest rates on everything from cars to homes, and can even help to reduce car insurance costs, she said. More