Archive for September, 2020

• FactSet Beats Earnings
  Eddy Elfenbein, September 24th, 2020 at 9:50 am

  The stock market is down again this morning. If this holds up, it will be our sixth losing session in the last seven days. The S&P 500 is now down for the year.

  This morning’s jobless claims report came in at 870,000. That was worse than expectations of 840,000.

  Also this morning, FactSet (FDS) reported very good fiscal Q4 earnings this morning. Adjusted EPS rose 10.3% to $2.88. Wall Street had been expecting $2.54 per share.

  “We executed well on our second-half pipeline to end our fiscal year in a strong position,” said Phil Snow, FactSet CEO. “I am proud of our team’s performance and remain confident in our investment plan. Our programs in content and technology are expanding the universe of knowledge our clients trust and meeting demand for the workforce of the future.”

  For the year, adjusted diluted EPS increased 8.7% to $10.87. FactSet has increased its earnings for the last 24 years in a row.

  For the coming year, FactSet expects earnings to range between $10.75 and $11.15 per share. The stock has been up as much as 6% this morning.

• Morning News: September 24, 2020
  Eddy Elfenbein, September 24th, 2020 at 7:05 am

  The Aristocracy of Pull

  A Roller Coaster Six Months Leaves U.S. Recovery Still Uncertain

  Harvard’s Chetty Finds Economic Carnage in Wealthiest ZIP Codes

  NYC Commercial Property Crisis Signals Hazards for Local Banks

  Covid Risk, Online Classes Spur Drop in U.S. College Enrollments

  Tesla’s Nevada Lithium Plan Faces Stark Obstacles On Path To Production

  Beyond TikTok, Walmart Looks to Transform

  McDonald’s Is Quietly Working On Its First-Ever Food Loyalty Program

  Why Disney’s Delay Of ‘Black Widow’ Means Doomsday For Hollywood

  Whole Foods Founder: ‘The Whole World Is Getting Fat’

  Scorpio Falling: How Harley-Davidson Went From Trump’s Favorite Motorcycle To An American Pariah

  Ben Carlson: Animal Spirits: It’s Hard Being Rich

  Michael Batnick: Know Your Competition

  Joshua Brown: SPACs are still bulls***

  Howard Lindzon: Subscriptions and Bundles Are The New Bonds In A Zero Interest Rate World.

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• Lowest Close in Eight Weeks
  Eddy Elfenbein, September 23rd, 2020 at 6:38 pm

  Today was a rough day for the market. The S&P 500 fell over 2.3% to reach its lowest close in eight weeks.

  Measuring from the closing high of three weeks ago, the S&P 500 is now down 9.6%. In other words, we’re not far from 10% which is considered to be an official market correction.

  

  Once again, growth was down more than value. The tech sector was a big loser. For the day, the S&P 500 Tech Index was down 3.2%. Apple, Amazon and Netflix were all down more than 4%.

  Our Buy List held up relatively well against the market. While the S&P 500 lost 2.37%, our Buy List lost 1.81%. FactSet is due to release its fiscal Q4 earnings tomorrow morning.

• Why the Return from Dividends Matters
  Eddy Elfenbein, September 23rd, 2020 at 11:01 am

  Yesterday, I posted what I called a very “underrated chart” to Twitter. This is the S&P 500 Total Return Index divided by the S&P 500.

  

  Some of the responders on Twitter weren’t terribly impressed. To generalize, they said, “so what, it’s just a 2% dividend yield. Big deal.”

  But in my view, it’s a very impressive chart and it shows us the importance of dividends.

  Allow me to explain. First, note how stable the line is and how it rises consistently. As an investor, that’s nice to see.

  Technically, the chart shows us the return from dividends for investing in the S&P 500 since the beginning of 1990. It’s not just the dividend yield. It’s the return from dividends. That means it’s the dividend yield plus it accounts for the growth of dividends. That’s a key factor.

  Think of it this way. Imagine a stock with a 1% dividend yield. For the next several years, the stock and the dividend both grow by 15%. What’s the result? The dividend yield will stay at 1% but you actually make a ton of money from those dividends.

  There’s also the multiplier effect. Over the last 30 years, the return from dividends has been 91.58%. Getting dividends from the S&P 500 hasn’t added 91% to your total return.

  Not even close.

  Instead, it turns an 835% gain into a 1,693% gain. It adds hundreds of percentage points to your totals — and that extra amount balloons higher each year. Dividends are small and easy to overlook, but they make a big difference.

  For another picture, here’s a look of the S&P 500 (blue) along with the S&P 500 Total Return Index (red). So the first chart is the red line divided by the blue line.

  

• Morning News: September 23, 2020
  Eddy Elfenbein, September 23rd, 2020 at 7:07 am

  China Threatens to Kill TikTok Deal Over ‘Dirty’ Trump Tactics

  Embattled Fed Nominee Celebrates Free Markets, but Not in Her Backyard

  Justice Dept. Case Against Google Is Said to Focus on Search Dominance

  Amazon Restricts How Rival Device Makers Buy Ads on Its Site

  Liberty or Lockdown

  Tesla’s Value Drops $50 Billion As Musk’s Promised Cheaper Battery Three Years Away

  Jack Ma’s Ant Plans $17.5 Billion Hong Kong IPO, No Cornerstone Investors

  Nike Profit, Revenue Boosted By China Demand And Online Sales

  KKR to Buy Online Contact Lens Retailer 1-800 Contacts

  Store Operators Outraged At Subway’s COVID-19 Demands

  Can Luxury Fashion Ever Regain Its Luster? & Is the New Guards Group the New Guard of Fashion?

  Halloween Costume Masks Don’t Replace Face Masks, CDC Warns

  Nick Maggiulli: How Much Lifestyle Creep is Okay?

  Ben Carlson: Is the Ford F-150 Partially Responsible For the Retirement Crisis?

  Michael Batnick: The Stock Market Makes No Sense. And it Makes Perfect Sense.

  Joshua Brown: Household Net Worth Explodes: What Are Your Thoughts?

  Be sure to follow me on Twitter.

• Q3 Earnings Preview
  Eddy Elfenbein, September 22nd, 2020 at 3:31 pm

  September comes to a close next week and with it, the third quarter of 2020. By the middle of October, firms will start releasing their Q3 earnings reports.

  Here’s the S&P 500 in black with trailing operating earnings in blue. Trailing earnings are expected to trough in Q4. The two lines are scaled at a ratio of 18 to 1.

  

  This will be another tough earnings season due to the widespread dislocations caused by Covid-19. The good news is that we’ve gradually improved from the dire numbers we saw earlier this year. For Q1, operating earnings plunged 49% from Q1 of 2019. For Q2, earnings were down 33%.

  Now analysts are “only” expecting a decline of 19%. That estimate has actually increased somewhat in recent weeks. At the middle of the year, Wall Street had been expecting Q3 earnings of $30.89 per share for the S&P 500 (that’s the index-adjusted number). Now the estimate is up to $32.05 per share. (Every point in the S&P 500 is worth around $8.27 billion.)

  Earnings are expected to fall another 9% for Q4. After that, earnings are expecting to snap back briskly in 2021. That’s why price/earnings ratios, based on trailing earnings, are to be so stretched. Earnings are looking backward but prices are looking forward.

  For all of this year, earnings are expected to be $113.84 per share. By today’s price, that gives the S&P 500 a lofty p/e ratio of 29. However, Wall Street expects full-year 2021 earnings of $164.04 per share. That assumes earnings growth of 45% for next year. Going by that figure, that gives the S&P 500 a forward p/e ratio of 20.

  Here’s the expected earnings growth for Q3:

  Health Care 23.81%
  Technology 9.77%
  Utilities -1.19%
  Consumer Staples -1.68%
  Communication -9.95%
  Materials -12.56%
  Financials -34.55%
  Consumer Discretionary -37.20%
  Real Estate -50.29%
  Industrials -60.10%
  Energy -108.27%

• Existing-Home Sales Hit 14-Year High
  Eddy Elfenbein, September 22nd, 2020 at 11:06 am

  The stock market is up modestly this morning. Fed Chairman Jerome Powell is testifying this morning about the economic relief package.

  This morning, we learned that existing-home sales rose for August rose to an annualized rate of six million. That’s the highest in 14 years. In the last year, sales are up 14.5% and housing inventory is down 18.6%.

  This comes after July when existing-home sales were up 24.7%. In August, the median sales price rose to $310,600. That’s up 11.4% in the last year. In the last year, sales of homes worth over $1 million are up 44%.

  From the WSJ: “’The luxury housing sector is just simply taking off,’ said Lawrence Yun, chief economist of NAR.” The average mortgage rate is now down to 2.87%.

• The Bank of Jamaica
  Eddy Elfenbein, September 22nd, 2020 at 9:36 am

  The Bank of Jamaica wins the award for best communication with the public:

• Morning News: September 22, 2020
  Eddy Elfenbein, September 22nd, 2020 at 7:04 am

  EU Top Court Backs Crackdown On Short-Term Home Rentals In Setback To Airbnb

  Justice Dept. to Brief States on Google Antitrust Inquiry

  Stakeholder Capitalism Gets a Report Card. It’s Not Good. & Capitalism Isn’t Working Anymore. Here’s How The Pandemic Could Change It Forever

  Ruth Bader Ginsburg’s Indelible Mark On American Business

  The Magic Number That Unlocks The Electric-Car Revolution

  TikTok’s Zero Hour: Haggling With Trump, Doubts in China and a Deal in Limbo

  The Math Doesn’t Add Up on TikTok’s Deal With Oracle and Walmart

  The Disappointing Ban Of WeChat Calls For American Conservatives To Look Inward

  Houston-to-Dallas Bullet Train Given Green Light From Feds, Company Says

  Hedge Fund Bridgewater Set Up Tent Offices In The Woods To Beat COVID-19

  Judge Fast-Tracks Tiffany Suit Against LVMH Over Abandoned $16B Deal

  Ben Carlson: How Benchmarking Impacts Your Decisions

  Michael Batnick: The Easiest Thing In Investing

  Joshua Brown: How Big A Drawdown Can You Survive? & “more than half the racial gap in individual stock ownership has disappeared essentially overnight.”

  Be sure to follow me on Twitter.

• Fourth Down Day in a Row
  Eddy Elfenbein, September 21st, 2020 at 4:19 pm

  A rough day for the markets is on the books. The S&P 500 lost ground for the fourth day in a row. At its low, the index was off by 2.72%. Fortunately, we made a good deal of that back by the close. For the day, the S&P 500 lost “just” 1.16%.

  The S&P 500 isn’t far from being down 10% from its high from earlier this month. That’s the official definition of a correction.

  Even though the market was down, value stocks were down more than growth. Generally, value stocks don’t fall as much as growth, nor do they rally as strongly. Today was an exception. For the day, the S&P 500 Growth lost -0.73% while Value lost -2.43%. Bank stocks were the culprit. The entire financial sector got hit hard.

  The big divide today was between cyclical and defensive stocks. Cyclical stocks were down the most. By this, I mean sectors like industrials, energy, financials and materials. From today’s action, I assume the market has raised its outlook for longer lockdowns.