Archive for July, 2020
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Morning News: July 6, 2020
Eddy Elfenbein, July 6th, 2020 at 7:05 amChina Propels Global Stock Rally to One-Month High
China Dominates Medical Supplies, in This Outbreak and the Next
Buffett’s Berkshire Ends Deal Drought With Dominion Bet
Banks Are Ditching London Offices and Not Just Because of Covid-19
Second Stimulus Checks And Student Loan Forgiveness Could Be Coming
Uber to Buy Postmates for $2.65 Billion
Patchy Demand at Stores Spells More Pain for Garment Suppliers
With Department Stores Disappearing, Malls Could Be Next
Tesla Mocks Shortsellers With Sale of Red Satin Shorts
Howard Lindzon: Living At The Speed Of The Network – Om Malik Joins Me Again On Panic With Friends
Ben Carlson: TL;DR: The Best Finance Books in One Sentence & The Bear Market in Happiness
Jeff Miller: Weighing the Week Ahead: Don’t Look Back!
Roger Nusbaum: Is It Possible to Save Too Much Money?
Michael Batnick: Change My Mind
Joshua Brown: The Broker Who Saved America, Large, Dominant Companies Are Nothing New & Technology is Taking Over the Real Estate Sector Too
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CWS Market Review – July 3, 2020
Eddy Elfenbein, July 3rd, 2020 at 7:08 am“We hold these truths to be self-evident, that all men are created equal.” – Thomas Jefferson
The first half of 2020 is on the books, and it was certainly an eventful six months.
How’s this for serendipity? For the first quarter of the year, the S&P 500 fell by 20%, almost on the nose (-20.001%). For the second quarter, the index rallied by 20%. Again, almost on the nose (-19.953%).
So, -20% followed by +20%. Perhaps that’s fitting for the year 2020.
Unfortunately, a 20% loss followed by a 20% rebound doesn’t bring us back to 0%. It’s still a 4% loss, but that’s well within the bounds of “normal” for the stock market. If you’d checked the stock market once every six months (not a bad idea, btw), then you’d hardly think anything happened from January to June 2020.
This is an oddly quiet time for our Buy List. Earnings season doesn’t get going for another few weeks. There hasn’t been much stock-specific news for us lately. Since we’re at the midpoint of the year, in this issue, I want to take the opportunity to summarize the Buy List’s performance so far. I’ll also discuss some stocks that might be candidates for next year’s Buy List.
But first, let’s look at the latest economic news. According to the government’s figures, the economy created 4.8 million net new jobs last month. That’s a massive gain. That’s the good news. The bad news is that we have a long, long way to go.
The U.S. Economy Created 4.8 Million Jobs in June
The stock market is closed on Friday, July 3, so we get the full three-day weekend for Independence Day. Because of that, the June jobs report came out on Thursday instead of its normal time on Friday.
Most months, the jobs report comes out after I send you the weekly newsletter. Thanks to the holiday, I got to see the report this month before our deadline.
The government said that the U.S. economy created 4.8 million jobs last month. That’s an amazing figure. It blows past any record, but it’s still only a fraction of the jobs that were lost. Economists had been expecting a gain of 2.9 million. The report said that 10 million Americans have permanently lost their job.
The unemployment rate fell 2.2% to 11.1%. That’s an encouraging drop, but to add context, the jobless rate is still higher than the peak rates of unemployment rate in 1982, 1992 or 2009. In other words, we’re down to levels that are still higher than some pretty rough times for the economy. Things are better, but there’s a long way to go.
Here’s a look at nonfarm payrolls.
Thanks to the strong jobs report, the S&P 500 closed higher on Thursday. In fact, the index closed higher each day this week.
Also on Friday, the jobless-claims report came in at 1.427 million. That’s the 15th week in a row that jobless claims have topped one million. Wall Street had been expecting 1.38 million.
On Wednesday, ADP said that private payrolls increased by 2.360 million in June. I don’t place a great deal of faith in some of these numbers. It’s not that I think anyone’s lying. Instead, the circumstances are so unusual that it’s hard to get an accurate picture of what’s really happening.
To give you an example, ADP revised the May number from a loss of 2.76 million jobs to a gain of 3.065 million. A big revision like that doesn’t exactly instill confidence. The lockdown seems to have screwed with so much economic data.
Also on Wednesday, the ISM Manufacturing Index for June came in at 52.6%. That’s up from 43.1% in May. Bear in mind that the ISM is always in relative terms. It’s only concerned with things improving or worsening, not with the overall standing. Wall Street had been expecting 49.0.
The bottom line is that the fortunes of the economy are tied to that of the coronavirus. It really is that simple. As long as states and localities can reopen, then the economy will improve. Lately, the coronavirus has been making its presence felt in regions that it had largely bypassed. The good news is that some of the early data suggests that the coronavirus is less lethal than previously believed.
My fear is that the economy will bounce back but will still be below the level it was at in February 2020. In fact, it may take years for some sectors of the economy to fully recover. After all, the U.S. didn’t fully shake off the Great Depression until World War II. The Dow didn’t take out its 1929 peak for 25 years. I’m not predicting that, but I am pointing out that the economy often grows unevenly and inconsistently.
First-Half Buy List Summary
Through Thursday, our Buy List is down 4.04% for the year. That’s not too bad, but it trails the S&P 500, which is down 3.12% for the year. (These figures don’t include dividends, but my final year-end numbers will.)
It’s frustrating to be losing to the S&P 500 because as recently as June 1, we were beating the market by nearly 2%. June was tough for our relative performance due to the big shift towards cyclical stocks.
Our big weakness is technology stocks. The tech sector is crushing the market this year, especially big tech. Amazon (AMZN), for example, is up 56% this year. When trillion-dollar companies move like that, it distorts the rest of the market.
I shouldn’t be too disappointed by trailing the index by less than 1%, but I’m very competitive by nature. Still, the 15-year track record is very much in our favor.
Now for some more details:
Trex (TREX) is our top-performing stock with a YTD gain of 41.1%. This was a great addition to the portfolio. FactSet (FDS) comes in at #2 with a gain of 25.2%. Interestingly, most of our stocks are beating the market this year (13 of 25). It’s just that the losers are weighing us down.
Eagle Bancorp (EGBN) is our biggest loser with a loss of 37.3% this year. Middleby (MIDD) is perhaps our most dramatic stock this year. At one point, MIDD was down 60% for us, but it’s rallied back 80% from its low. That’s still a big loss, but not as steep as it was. Of our four biggest losers this year, three are financial stocks (AFLAC, Eagle and Globe Life).
Per Buy List rules, at the end of each year, I add five new stocks and delete five current ones. Here are ten stocks I’m looking at for next year:
Paycom Software (PAYC)
The Trade Desk (TTD)
Colgate-Palmolive (CL)
Masimo (MASI)
Waters (WAT)
Tyler Technologies (TYL)
CAE Inc. (CAE)
Simulations Plus (SLP)
Cooper Companies (COO)
HEICO (HEI)
Next year is still six months away, so I haven’t made up my mind, but those are ones I’m seriously looking at.
That’s all for now. On Monday, the ISM Non-Manufacturing Index is due out. The job-openings report comes out on Tuesday followed by the consumer-credit report on Wednesday. Thursday means another jobless-claims report. Lastly, the wholesale-inflation report comes out next Friday. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!
– Eddy
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Morning News: July 3, 2020
Eddy Elfenbein, July 3rd, 2020 at 7:03 amGlobal Markets: COVID Recovery vs COVID Reality
Black Trader Sparks Debate on Race at China’s Biggest Brokerage
World’s Largest Pension Fund Loses $165 Billion in Worst Quarter
After June Job Gains, Still a ‘Deep Hole,’ and New Worries
The #Vanlife Business Is Booming
Tesla Shines During the Pandemic as Other Automakers Struggle
GM’s China Sales Drop 5% In Second Quarter, Underperforms Industry Recovery
Deutsche Bank May Offer Wirecard a Lifeline
Boeing’s 737 Max is Being Readied for a Comeback. What Travelers Need to Know
Airlines Are Taking New Bailout Cash as the Outlook Gets Worse
JPMorgan Drops Terms ‘Master,’ ‘Slave’ From Internal Tech Code and Materials
Tech IPOs Are Being Badly Mispriced, as Lemonade and Agora Double in Market Debuts
Ben Carlson: The Nifty Fifty and the Old Normal
Howard Lindzon: Wall Street Bound
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Massive Jobs Gains for June
Eddy Elfenbein, July 2nd, 2020 at 9:16 amThe June jobs report is out. The government said the U.S. economy created 4.8 million jobs last month. That blew past expectations of 2.9 million. The NFP chart looks like the back drop of a New Yorker cartoon.
The unemployment rate fell to 11.1%. Expectations were for 12.4%.
The jobs growth marked a big leap from the 2.7 million in May, which was revised up by 190,000. The June total is easily the largest single-month gain in U.S. history.
The numbers capture the move by all 50 states to get activity moving again after the virus seized up much of the U.S., particularly service-related industries.
However, because the government survey comes from the middle of the month, it does not account for the suspension or rollbacks in regions hit by a resurgence in coronavirus cases.
Weekly jobless claims rose by 1.427 million. This is the 15th straight week that the number has topped one million. Economists had been expecting an increase of 1.38 million.
The stock market is up in early trading and the cyclicals are leading the charge. The S&P 500 has been up as much as 1.5% this morning. This looks to be the index’s fourth daily gain in a row.
The stock market is closed tomorrow ahead of the Independence Day weekend.
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Morning News: July 2, 2020
Eddy Elfenbein, July 2nd, 2020 at 7:00 amChina-Sanctions Bill on Hong Kong Law Passed by U.S. House
The Fed Sets Out Many Reasons to Worry About the Economy
The ‘Rocket Ship’ Economic Recovery Is Crashing
Covid-19 Isn’t Killing Cash. People Are Hoarding More of It
Clouds May Be Parting For Dividend Investors
Traders Thought Apple Had ‘The Holy Grail’ Of Oil Data, But The Quest Continues
U.S. Farmers Scramble For Help As COVID-19 Scuttles Immigrant Workforce
S&P 500 Jumps 0.5% After Pfizer Coronavirus Vaccine News
Car Sales Plunge 33 Percent in the 2nd Quarter Despite Deals
How the Facebook Boycott Could Just Make Facebook Stronger
Gun Demand Is Off the Charts in America
‘Sitting on Millions of Dollars’ and Dying to Blow It: Not This July 4
Ben Carlson: The Best and Worst Quarters in Stock Market History
Joshua Brown: The Gold Breakout
Jeff Carter: Businesses Make A Huge Mistake Choosing Political Sides
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ADP: +2.369 Million
Eddy Elfenbein, July 1st, 2020 at 11:06 amThe first half of 2020 is officially on the books. The S&P 500 fell 20% during the first quarter and it rallied 20% during the second quarter. Perhaps that’s fitting for the year 2020.
This morning, ADP said that private payrolls increased by 2.369 million in June. The expectation was for a gain of three million. The number for May was revised from a loss of 2.76 million to a gain of 3.065 million. The lockdown seems to have screwed with so much economic data.
The ISM Manufacturing Index rose to 52.6 for June. That’s up from 43.1 in May. Bear in mind that the ISM is always in relative terms. It’s only concerned with things improving or worsening, not in the overall standing. Wall Street had been expecting 49.0.
The S&P 500 is currently up about 0.5% today.
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First-Half Summary
Eddy Elfenbein, July 1st, 2020 at 10:50 amHere’s a look at how each Buy List stock did during the first half of the year. We trailed the overall market but only by a small amount.
The Buy List was down 4.39% for the first six months of the year while the S&P 500 was down 4.04%. That doesn’t include dividends. I always include dividends in the track record data. I haven’t had time yet to go through the numbers. The Buy List yields less than the S&P 500 but not by much.
Eddy Elfenbein is a Washington, DC-based speaker, portfolio manager and editor of the blog Crossing Wall Street. His