Market Swoon - Deploying Capital

Market Swoon

Inflation, interest rates, employment, Fed taper, pandemic backdrop, Washington wrangling, supply chain disruptions, slowing growth, and the seasonally weak period for stocks are all aggregating and resulting in the current market swoon. The month of September saw a 4.8% market drawdown, breaking a seven-month winning streak. The initial portion of October was met with heavy losses as well. Many individual stocks have reached correction territory, technically a 10% drop, while the Nasdaq is also closing in on that 10% correction level. Many high-quality names are selling at deep discounts of 10%-30% off their 52-week highs. The outlook for equities remains positive after the weak September as the economy continues to move past the pandemic. During these correction/near correction periods in the market, putting cash to work in high-quality long equity is a great way to capitalize on the market weakness for long-term investors. Absent of any systemic risk, there’s a lot of appealing entry points for many large-cap names. Don’t’ be too bearish or remiss and ignore this potential buying opportunity.

Deploying Capital

For any portfolio structure, having cash on hand is essential. This cash position provides investors with flexibility and agility when faced with market corrections. Cash enables investors to be opportunistic and capitalize on stocks that have sold off and become de-risked. Initiating new positions or dollar-cost averaging in these weak periods are great long-term drivers of portfolio appreciation. Many household names such as Starbucks (SBUX), UnitedHealth (UNH), Apple (AAPL), Amazon (AMZN), Micron (MU), Adobe (ADBE), Qualcomm (QCOM), 3M (MMM), Facebook (FB), Johnson and Johnson (JNJ), Mastercard (MA), Nike (NKE), PayPal (PYPL) and FedEx (FDX) are off 10%-30% from their 52-week highs. Even the broad market indices such as Dow Jones (DIA), S&P 500 (SPY), Nasdaq (QQQ), and the Russell 2000 (IWM) are significantly off their 52-week highs. All of these are examples of potentially buying opportunities via deploying some of the cash on hand. Continue reading "Market Swoon - Deploying Capital"

Ominous Inflationary Signs Evident

Inflation Revving Up

Earnings season is getting underway, and thus far Costco (COST), Federal Express (FDX), and Nike (NKE) have warned that inflation is real and is bound to hit consumers as the holidays approach. Costco, Federal Express, and Nike are seeing rising shipping costs and supply chain disruptions that persist and should continue through the upcoming holiday season. In particular, the cost to ship containers overseas has skyrocketed over the past few months. These rising inflation expectations and the realization of these inflationary pressured could cause the Federal Reserve to change policy course sooner rather than later. It’s going to be a tug-a-war between inflation, employment, Washington wrangling, and the delta variant backdrop. CPI reports will become more significant as these readings are used to identify periods of inflation. The recent CPI readings result in a much stronger influence on the Federal Reserve’s monetary policies hence the recent taper guidance.

Real World Inflationary Commentary

Supply chain disruptions, specifically in the shipping channels, have led to rising freight costs that have escalated shipping costs dramatically. The cost to ship containers overseas has soared in recent months. A standard 40-foot container from Shanghai to New York costs about $2,000 a year and a half ago pre-pandemic. Now, it runs some $16,000, per Bank of America.

Costco CFO Richard Galanti called freight costs “permanent inflationary items” and said those increases combine with things that are “somewhat permanent” to drive up pressure. They include freight and higher labor costs, rising demand for transportation and products, shortages in computer chips, oils, and chemicals, and higher commodity prices. Continue reading "Ominous Inflationary Signs Evident"

Earnings Calendar for October 2021

October means the start of another exciting earnings season on Wall Street.

While the month will start a bit quiet, mid-October will heat up with some of the biggest companies scheduled to report to investors. That means some big opportunities are on the horizon for traders who know how to find big earnings plays.

Most Anticipated Earnings For October 2021

Below are some of the most anticipated scheduled earnings announcements for October Continue reading "Earnings Calendar for October 2021"

Earnings Calendar for September 2021

Over 200 publicly traded companies are scheduled to release earnings data in September 2021. While we're out of prime time earnings season, big-name companies are still announcing on Wall Street.

The story should be similar to every other earnings season - some companies will smash estimates while others will disappoint the market. And, some announcements will spawn incredible earnings plays for active traders.

Most Anticipated Earnings For September 2021

Below are some of the most anticipated scheduled earnings announcements for September Continue reading "Earnings Calendar for September 2021"

American Express: A Compelling Buy

American Express (AXP) blurs the line between a traditional credit card company and effecting traditional banking services such as personal and business loans and savings accounts. This business model blend makes American Express a dual-threat as it can ride the wave of improved consumer spending coming out of the pandemic as witnessed by its blow-out second-quarter earnings and rising interest rates as the Federal Reserve steps off its accommodative easing policies. American Express has recently dropped over 10% from its 52-week high after target price hikes and upgrades across a broad range of analysts. Couple this with inexpensive valuation metrics, and the fundamental and technical investment case comes together nicely. American Express sits in the sweet spot of an improved consumer and a potential rising interest rate environment.

Latest Earnings and Growth

The recent earnings report by American Express demonstrated its strength and potential growth moving forward as the pandemic continues to subside. Analysts across the board upgraded the stock and increased the price targets because of these stellar earnings. Earnings blew past analysts' estimates, driven by a recovery in global consumer spending, specifically on travel. Consumer spending logged double-digit growth in the second quarter. The U.S. consumer has "rocketed ahead on travel," per CFO Jeff Campbell, with spending related to travel and entertainment on its cards within the United States reaching 98% of pre-pandemic levels. On global travel and entertainment spending, he said it had recovered to nearly 70% of 2019 levels, two quarters earlier than previously expected. Strong demand for premium, fee-based products helped drive the addition of U.S. Platinum card members to record levels, per CEO Stephen Squeri. The company sold 2.4 million new proprietary cards in the quarter, while spending on goods and services on its cards grew 16% on a currency-adjusted basis. Net income rose to $2.28 billion, or $2.80 per share, for the quarter ended June 30 from $257 million, or 29 cents per share, a year earlier. Analysts had expected $1.67 per share, according to Refinitiv IBES data. Excluding interest expense, American Express’ total revenue rose 33% to around $10.24 billion. Continue reading "American Express: A Compelling Buy"