Archive for November, 2020

• Morning News: November 23, 2020
  Eddy Elfenbein, November 23rd, 2020 at 7:08 am

  China’s Surveillance State Sucks Up Data. U.S. Tech Is Key to Sorting It.

  Europe Is Trying to Crack the Door Open for Christmas

  With End of Crisis Programs, Fed Faces Tricky Post-Pandemic Transition

  JPMorgan Sees Possible $300 Billion Rebalancing Flow From Stocks

  Pipe Dreams Leave U.S. Energy Firms Caught In Climate Trap

  Astra-Oxford Vaccine Found Highly Effective in Preventing Covid

  Bill Gates, the Virus and the Quest to Vaccinate the World

  Hollywood’s ‘We’re Not in Kansas Anymore’ Moment

  ‘Very Stressful’: COVID-19 Surge Slices U.S. Demand For Big Thanksgiving Turkeys

  A Day in the Life of an Amazon Warehouse Worker

  Michael Batnick: Animal Spirits: Direct Indexing

  Joshua Brown: The Year-End Melt-Up & Pay Attention To The New Breadth Thrust

  Howard Lindzon: What A Year For Fashology and Brad Gerstner On High Flying Growth

  Jeff Miller: Weighing the Week Ahead: Will Algos Go Wild?

  Ben Carlson: The 3 Most Important Words in Finance, Bigger Problem: Student Loans or Credit Card Debt? & The Biggest Stock Market Reversal in History

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• CWS Market Review – November 20, 2020
  Eddy Elfenbein, November 20th, 2020 at 7:08 am

  ”One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.” – William Feather

  The stock market raced to a new all-time high last week on the news of Pfizer’s encouraging results for a Covid vaccine. The good news continued into this week with a similar announcement from Moderna. Their results were even better. The S&P 500 closed Monday at a new all-time high. Both the index and our Buy List are now up by double digits this year. (Who would have predicted that just eight months ago?!)

  There are, however, some worrying signs. Coronavirus cases are surging, and the labor market may be a bit shaky. Also, Uncle Sam’s enormous stimulus may soon be coming to an end, and there are no plans, as of yet, to extend it.

  

  In this week’s issue, I first want to focus on some recent economic news. We also had some very good news from our Buy List stocks. AFLAC hiked its dividend by 18%. This is the 38th year in a row that the duck stock has sweetened its dividend.

  We also got very nice earnings news from Ross Stores. The deep-discounter is doing a commendable job of staying profitable in a very tough environment. I was glad to see Fiserv’s board approve a 60-million-share buyback. That’s a nice wad of cash they’re spending! I’ll have more to say on those stocks in just a bit. But first, let’s see how the economy is faring.

  Coronavirus Cases Are Surging

  Thursday’s jobless-claims report came in at 742,000. That’s weaker than I had been expecting, and I wasn’t alone. It was above Wall Street’s forecast as well. This could be a minor bump in a long-term downward trend. However, I am concerned about the possibility of cracks reappearing in the U.S. economy.

  While the Covid vaccine news is promising, the surging numbers of new cases are alarming. As a result, more areas are falling under new lockdown orders. It appears that Thanksgiving will be a very scaled-down event this year.

  These lockdowns are very unequal. While the stock market had an unpleasant few weeks in February and March, we bounced back. My fear is that a renewed lockdown will cause most harm to people who were already hurting. The most recent retail-sales report showed the slowest growth since May. As a friend said to me recently, “You can’t install drywall over Zoom.”

  This week, Fed Chairman Jerome Powell said, “The concern is that people will lose confidence in efforts to control the pandemic, and…we’re seeing signs of that already.” The news may be getting worse. On Thursday, Treasury Secretary Steven Mnuchin said he would not extend the Fed’s emergency-lending programs. The programs are due to expire at the end of the year. In a very rare event, the Fed criticized the move. I honestly can’t remember the last time the Fed publicly criticized the Treasury Department.

  The move is even more surprising given that Powell recently said that the Fed is committed to using these programs as long as they’re needed. He showed no indication that the time was ripe to wind down these efforts. In fact, most of the money the Treasury allocated to the Fed hasn’t yet been committed to any specific program. Another stimulus bill is on its way, although the details and timetable are uncertain.

  The bond market has rebounded over the past week, which could be another sign that Wall Street sees slower growth ahead. This also boosts the theme I’ve covered the past few weeks: namely, value stocks outperforming growth stocks. Whenever the economy catches a cold, higher-quality and more stable stocks typically outperform. If you recall, our Buy List got hammered in February and March, but not as much as the overall market.

  Make sure your portfolio has a healthy allocation of high-quality stocks, and pay special attention to those with good dividends. That will help protect you when the storms come. Now let’s look at this week’s earnings report from Ross Stores.

  Ross Stores Beats the Street

  On Thursday, Ross Stores (ROST) reported very impressive earnings for its fiscal third quarter. Or more accurately, Ross reported impressive earnings, all things considered.

  The reason I said that is because this has been a very difficult environment for the deep-discounter, and they’ve managed themselves very well. For the 13 weeks ending November 2, Ross Stores earned 37 cents per share, but that includes a charge of 65 cents per share due to a major debt refinancing. Add that back in, and it works out to a quarterly profit of $1.02 per share. Wall Street had been expecting earnings of just 61 cents per share. Ross earned $1.03 per share for last year’s Q3. Sales for the quarter fell by 2% to $3.8 billion, and comparable-store sales were down 3%.

  CEO Barbara Rentler said, “Sales trends accelerated during the third quarter following a slower start in August, driven by an improvement in our merchandise assortments, a later back-to-school season, stronger performance in our larger markets, and our return to more normal store hours.”

  She also noted that “Core-business results improved during the quarter, demonstrating consumers’ continued focus on value, and our ongoing ability to deliver the bargains our customers have come to expect from us.”

  Ross continues to have a strong financial position, with over $5.2 billion in total liquidity. The company also repaid its $800 million revolving-credit facility. That will significantly cut down on interest costs.

  What about the current quarter, which includes the big holiday shopping season? Unfortunately, the outlook is very uncertain. So far, sales are down in November. The big concern is how Ross will be impacted by a new wave of lockdowns. Ross has wisely decided not to provide any sales or earnings guidance for Q3.

  The good news is that this was a solid quarter for Ross. As long as the company is allowed to make a profit, it will. I’m lifting my Buy Below on Ross Stores to $120 per share.

  

  Earnings Preview for Hormel Foods

  Hormel Foods (HRL) is due to report its fiscal Q4 earnings before the market opens on Tuesday, November 24. This will be for the three months ending on October 31.

  Hormel had a decent quarter for Q3. The Spam people earned 37 cents per share, which beat the Street by three cents per share. Overall sales rose 4% to $2.4 billion. Sales volume also rose by 4%. That’s important, because you don’t want to rely overly on price increases. Hormel’s operating free-cash flow rose 72% to $242 million.

  Hormel has four key operating segments: refrigerated foods, grocery products, Jennie-O Turkey and international. For Q3, the grocery products had a great quarter, while the turkey biz was weak.

  Hormel has a solid balance sheet. Its cash on hand is now $1.7 billion. That’s due to a bond offering, and also halting share buybacks. Total debt is up to $1.3 billion from $0.3 billion a year ago.

  Hormel expects to see Q4 mirror the strength of Q3. Hormel’s CEO said he expects the food service to post a year-over-year decrease for Q4. The consensus on Wall Street is for earnings of 44 cents per share. That’s down from the 47 cents per share HRL made in last year’s Q4.

  Buy List Updates

  Fiserv (FISV) has had a tough year in 2020. The company delivered good news this week in the form of a massive stock buyback. Fiserv’s authorized a 60-million-share buyback program.

  It’s a huge block of shares. In dollar terms, that’s around $6.5 billion. Fiserv currently has 660 million shares outstanding. This week, I’m raising my Buy Below on Fiserv to $120 per share.

  We also received good news this week from AFLAC (AFL). The duck stock raised its quarterly dividend from 28 cents to 33 cents per share. That’s a hefty increase. It adds up to a 17.9% increase.

  What’s most impressive is that this is AFLAC’s 38th annual dividend increase in a row. That’s a remarkable streak.

  Commenting on the announcement, AFLAC Incorporated Chairman and Chief Executive Officer Daniel P. Amos said: “I am pleased with the Board’s action to increase the first-quarter-2021 dividend. We treasure our record of 38 consecutive years of dividend increases, and we are looking to reward our shareholders by extending that track record in 2021. We remain committed to maintaining strong capital ratios on behalf of our policyholders and balance this financial strength with a focus on increasing the dividend, repurchasing shares and reinvesting in our business. Our dividend track record is supported by the strength of our capital and cash flows.”

  The new dividend will be payable on March 1 to shareholders of record at the close of business on February 17. Based on Thursday’s closing price, the new dividend yields just over 3%.

  I’m going to keep AFLAC’s Buy Below price at $44 per share, but our other financial stocks have been rallying quite well lately (it’s about time).

  Globe Life (GL), for example, is up 15% for us this month. I’m lifting our Buy Below on GL to $100 per share. Our other financial stock that’s been soaring for us has been Eagle Bancorp (EGBN). The little bank has rallied nearly 50% in two months. This week, I’m raising our Buy Below on Eagle to $42 per share.

  That’s all for now. There will be no newsletter next week. I’m taking my traditional Thanksgiving break. The U.S. stock market will be closed on Thursday for Thanksgiving, and it will close at 1 p.m. on Friday, November 27. There’s not much in the way of economic news scheduled for next week. On Wednesday, the jobless-claims report is due out. On that same day, we’ll also get a revision to Q3 GDP. The initial report said that the economy grew by 33.1% last quarter. 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

• Morning News: November 20, 2020
  Eddy Elfenbein, November 20th, 2020 at 7:02 am

  WHO Tells Doctors Not To Use Gilead’s Remdesivir As A Coronavirus Treatment, Splitting With FDA

  Gap Between Vaccine Hopes and Pandemic Reality Poses Market Hazard

  Mnuchin to End Key Fed Emergency Programs, Limiting Biden

  Mnuchin-Powell Split Shows Rare Discord as Economy Struggles

  U.S. Financial Groups, Wary Of Crackdown, Feel Out Biden Transition Team

  Gen Z Trading Prodigy Wins Over Wall Street Backers for Startup

  In Pandemic Christmas, U.S. Rivals Aim to Challenge Amazon Under the Tree

  BuzzFeed to Acquire HuffPost From Verizon Media

  How Airbnb’s CEO Succumbed to An IPO He Resisted

  G.M. Accelerates Its Ambitions for Electric Vehicles

  Dutch Grocery Giant Ahold Delhaize Buying Majority Stake in FreshDirect

  Air Travel Was Gaining Momentum. Now What?

  How Steve Bannon and A Chinese Billionaire Created a Right-Wing Coronavirus Media Sensation

  Howard Lindzon: Founder and CEO of Extend Woodrow Levin Joins Me on Panic with Friends to Discuss Recovering from Failure and Building the ‘AppleCare’ of Online Retailers

  Joshua Brown: This is the part where you and I step up and become heroes.

  Be sure to follow me on Twitter.

• Fiserv Authorizes 60 Million Share Buyback
  Eddy Elfenbein, November 19th, 2020 at 11:23 am

  Fiserv (FISV) is getting a nice lift today. The company said the board authorized the repurchase of 60 million in their buyback program. In dollar terms, that’s around $6.5 billion, at today’s share price.

  The company currently has 660 million shares outstanding. The stock is currently up just under 4%.

  Weekly jobless claims fell to 742,000. That’s an increase of 31,000 over last week (a number which was revised higher).

• Morning News: November 19, 2020
  Eddy Elfenbein, November 19th, 2020 at 7:02 am

  Desperate For Fuel, Venezuelans Steal PDVSA Crude And Make Their Own Gasoline

  How Profit Collided With Public Health In Italy’s Wealthiest Region

  Virus Cases Rise, But Hazard Pay for Retail Workers Doesn’t

  America Just Can’t Get Enough Lysol

  Postpone Thanksgiving and Save Hundreds of Lives

  The Cost of Big Government Through Lens of Tax Brackets

  FreshDirect to Be Sold to Dutch Retailer

  Biden Urged Not To Pick Eric Schmidt, former Google CEO, in Admin Role

  Some Fracking Sand Was ‘Revolutionary,’ or Maybe It Was Just Sand

  Musk Is a Tesla Rally Away From Unseating Gates as World’s Second Richest

  How to Make Millions From Bezos’s Billions

  An Arms Race In Car Stereos

  ‘Too Soon’ To Let Boeing 737 MAX Fly Again, Say Families of Lion Air Crash Victims

  Joshua Brown: The Airbnb Pitch to Wall Street & Beat me at poker – we’re playing for a good cause!

  Michael Batnick: Max Pain

  Be sure to follow me on Twitter.

• AFLAC Raises Its Dividend by 17.9%
  Eddy Elfenbein, November 18th, 2020 at 4:58 pm

  After the closing bell, AFLAC (AFL) announced that it has increased its quarterly dividend from 28 cents to 33 cents per share.

  Commenting on the announcement, Aflac Incorporated Chairman and Chief Executive Officer Daniel P. Amos said: “I am pleased with the Board’s action to increase the first quarter 2021 dividend. We treasure our record of 38 consecutive years of dividend increases, and we are looking to reward our shareholders by extending that track record in 2021. We remain committed to maintaining strong capital ratios on behalf of our policyholders and balance this financial strength with a focus on increasing the dividend, repurchasing shares and reinvesting in our business. Our dividend track record is supported by the strength of our capital and cash flows.”

  The new dividend will be payable on March 1 to shareholders of record at the close of business on February 17.

  Based on today’s closing price, the new yield works out to just over 3%.

• Target Stock Up on Shoppers Stocking Up
  Eddy Elfenbein, November 18th, 2020 at 12:52 pm

  Target (TGT) surprised Wall Street this morning by reporting very strong earnings for its fiscal third quarter. This week, several major retailers have reported earnings.

  Many retailers follow the reporting cycle that ends in October. That way, they can fit the key holiday shopping months of November, December and January into one reporting quarter.

  For Q3, Target made $2.79 per share. That creamed estimates of $1.60 per share. Sales rose to $22.63 billion. That beat by $1.7 billion. Same-store sales increased by 20.7%. Expectations were for 11.2%.

  What accounted for the strong results?

  While some retail rivals had to shutter in the early months of the pandemic, Target’s nearly 1,900 stores remained open as an essential retailer that could sell a wide range of goods, from gallons of milk to pajamas and laptops. In recent months, even as shopping mall competitors have opened again, Target said it has held on to customers and won more of their wallets.

  Customers shopped more frequently with Target in the third quarter, and when they did, they put more in their baskets, the company said. Combined transactions in Target stores and on its website were up 4.5% year over year, while the average ticket grew 15.6% in the quarter.

  Sales in all of Target’s merchandise categories were higher in the third quarter than a year earlier. Electronics shot up by more than 50%. Home items rose by a mid-20s percentage rate. Apparel increased by nearly 10%. And the two other categories, essentials & beauty and food & beverage, grew in the high teens.

  The trend seems to be that more shoppers are using Target to “stock up.”

  

  Also this morning, the Census Bureau said that housing starts rose 4.9% in October to an annual rate of 1.53 million. Low mortgage rates are helping out. Building permits were unchanged. That’s still at a 13-year high.

  Here’s the chart on housing starts:

  

• Morning News: November 18, 2020
  Eddy Elfenbein, November 18th, 2020 at 7:04 am

  Judy Shelton, Trump Fed Nominee, Fails to Advance to Final Vote

  Pfizer, BioNTech Plan Filing as Vaccine Proves 95% Effective

  Airlines Scramble To Prepare For Ultra-Cold COVID-19 Vaccine Distribution

  U.S. To Approve 737 MAX Return As Boeing Faces Strong Headwinds

  Berkshire’s Bet A Bright Spot In Gloomy Year For Big Pharma Stocks

  High Wireless Taxes Crush the Poor and Hurt Everyone Else

  As Occupancy Dwindles, College Dorms Go Beyond Students

  Kind Bars to Be Acquired by Maker of Snickers

  Apple to Cut App Store Fees in Half to 15% for Most Developers

  Nick Maggiulli: How to Save for a Big Purchase

  Ben Carlson: Should Index Fund Investors Care About Tesla Getting Added to the S&P 500?

  Michael Batnick: Everything Is Working & Cancel All Debt

  Jeff Carter: Revolutionizing Asset Management

  Howard Lindzon: NeoBanks…The Banks Forgot About Many Things, But Mainly Their Customers – Stuart Sopp Founder Of Current.com Joins Me On Panic With Friends

  Joshua Brown: Don’t Share This Chart & The Worst Job Interview Ever

  Be sure to follow me on Twitter.

• Tesla Joins the S&P 500
  Eddy Elfenbein, November 17th, 2020 at 10:15 am

  Yesterday, the S&P 500 announced that it’s adding Tesla (TSLA) to its famous index. The stock will join up on December 21. By market cap, it will be one of the largest stocks in the S&P 500. After the announcement, the shares shot up 13% in yesterday’s after-hours trading.

  Business Insider said it the announcement added $15 billion to Elon Musk’s net wealth and made him the third-richest person in the world. He just passed the Zuck.

  Home Depot said that thanks to rising sales, it will spending $1 billion more on employee compensation.

  Walmart reported very good earnings this morning. Walmart’s earnings report might as well be an American consumer spending report. Same-store sales rose by 6.4%. Expectations were for 3.8%.

  Interesting detail from Walmart’s earnings report: in the US, transactions were down 14% but the average transaction price rose by 24%. Folks are shopping less but buying more.

  E-commerce sales rose by 79%. For the quarter, Walmart made $1.34 per share which beat by 16 cents per share.

  There were two economic reports this morning. Industrial production rose by 1.1%. Like so many other data series, IP has rebounded a lot but it’s still well below its high.

  

  We also got the retail sales report. For October, retail sales were up 0.3%. That was a bit below Wall Street’s forecast of 0.5%. The good news is that September’s strong figure of 1.6% was revised even higher to 1.9%.

  Excluding automobiles, gasoline, building materials and food services, retail sales nudged up 0.1% after a downwardly revised 0.9% increase in September. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have risen 1.4% in September.

  We’re probably looking at GDP growth of around 5% for Q4.

• Morning News: November 17, 2020
  Eddy Elfenbein, November 17th, 2020 at 7:04 am

  Biden’s China Policy? A Balancing Act for a Toxic Relationship

  Don’t Fear the Robots, and Other Lessons From a Study of the Digital Economy

  Vaccine Unproven? No Problem in China, Where People Scramble for Shots

  Pfizer To Start Pilot Delivery Program For Its COVID-19 Vaccine In Four U.S. States

  Tesla Value Set To Jump $40 Billion As S&P 500 Beckons

  Amazon Expands Push Into Health Care With Online Pharmacy

  Rupert Murdoch’s News Corp Bids for Simon & Schuster

  Walmart Sales Surpass Expectations With Buyers Still Stocking Up

  Home Depot To Spend $1 Billion More On Employees As Sales Surge

  Delta Skirts Trump Tariffs by Sending Airbus Jets on World Tour

  How Copart Is Making A Billion Dollars From A Junkyard

  Ben Carlson: Is the Vaccine Our One Giant Leap?

  Joshua Brown: When’s The Best Time To Buy A Value Stock? When It Figures Out How to Become A Growth Stock Again.

  Howard Lindzon: Momentum Monday – The Bull Market in Puppies…And More Great Vaccine News

  Jeff Carter: Corporate Education

  Be sure to follow me on Twitter.