Archive for November, 2021

• CWS Market Review – November 16, 2021
  Eddy Elfenbein, November 16th, 2021 at 6:08 pm

  (This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

  Angry People Shopping

  The S&P 500 fell just shy of another new all-time high today. Alas, the index closed at 4,700.90 which is just 0.8 points below last Monday’s close of 4,701.70. This would have been our 66th new high of the year. In 1995, the S&P 500 made 77 new highs. That’s probably a new high bridge too far. Still, when stocks are involved, never say never.

  Apparently, higher inflation isn’t scaring away U.S. consumers. This morning, the Census Bureau reported that retail sales rose by 1.7% last month.

  That’s a very strong number and it topped Wall Street’s expectation for an increase of 1.5%.

  Retail sales is an important report to keep an eye on because it reflects the health of consumers, and consumers appear to be very happy even though that’s not what they’re saying. Last week, we learned that, thanks to inflation, consumer confidence had fallen to a 10-year low.

  It’s as if there’s a big disconnect in the minds of consumers. They’re upset and quitting their jobs in record numbers, yet retail sales and the stock market are at all-time highs. At the same time, folks are spending money freely at the mall despite the highest inflation in 30 years. The new economic paradigm appears to be distressed people shopping.

  Over the last year, retail sales are up 16.3%. The figures for August and September were revised higher as well.

  Of course, the reason companies are raising prices is because they can get away with it. While these numbers are seasonally adjusted, they’re not adjusted for inflation. Even after we adjust for inflation, retail sales are still above trend.

  

  This reminds me of the old joke. A guy says that he just filled up his tank and that prices are way too high. An economist explains that if he filled up his tank, then prices aren’t too high.

  Analysts also like to look at the “core” retail sales figure which excludes autos. For October, core retail sales were up 1.7% while Wall Street had been expecting just 1.0%. Simply put, if folks have the money, they’re ready to go shopping. Being cooped up for so long does that.

  Obviously, inflation is impacting how Americans shop and that’s very evident at the pump. During October, gasoline sales rose by 3.9%. In the last year, sales at gas stations are up more than 46%. That’s eating away at a lot of the wage gains we’ve seen.

  In the last year, sales at bars and restaurants are up close to 30% and sales at clothing stores are up more than 25%.

  This morning, we also got another retail sales report that’s nearly as important—Walmart (WMT) reported earnings.

  For its fiscal Q3, the retail giant had sales of $140.5 billion. Dear Lord, that’s huge. That works out to more than $1 million every minute of every hour for the entire quarter.

  It’s interesting to note that Walmart grew its business rapidly during the 1960s and 70s as it became known as an inflation fighter.

  For the quarter, Walmart made $1.45 per share. That beat the Street’s forecast of $1.40 per share. For last year’s Q3, Walmart rang up sales of $134.7 billion and had earnings of $1.34 per share. In the U.S., Walmart’s same-store sales rose by 11.1%.

  Walmart also raised its full-year earnings guidance to $6.40 per share. The previous range was $6.20 to $6.35 per share. My apologies to the folks who compile the government’s retail sales report, but if Walmart is happy, that means that average American shopper is happy.

  The dynamics of the labor market are changing. The WSJ wrote, “In January 2019, 42% of employment ads for insurance sales agents called for a bachelor’s degree, the data show. In September 2021, 26% did.” Goldman Sachs said that low-wage workers are seeing “eye-popping” wage gains. Amazon is looking to hire 150,000 seasonal workers starting at $18 per hour, with sign-up bonuses of up to $3,000.

  The report on homebuilder confidence also came out this morning, and it showed many of the same trends. It’s especially noteworthy that homebuilders are so buoyant because home prices have risen so sharply.

  On top of that, the homebuilders are facing a labor shortage and supply chain issues. That’s not slowing them down. In October, the homebuilder confidence index rose to 83. That’s the highest since May. In fact, homebuilders have had to increase wait times for new homes. There’s not much they can do.

  Keeping with homebuilders, Home Depot (HD) also had a very impressive earnings report today. Like Walmart, HD’s report reflects broader optimism for the economy. For its Q3, Home Depot made $3.92 per share and sales rose nearly 10% to $36.82 billion. Expectations were for earnings of $3.41 per share on revenue of $24.8 billion.

  The government said that industrial production rose 1.6% last month. That’s another strong number and it beat estimates for 1% growth. Much of the gain was due to the recovery from Hurricane Ida. Still, this morning’s report signaled an important event. Industrial production is back to where it was before the pandemic.

  

  Abbott Labs Hits New All-Time High

  I want to say a few words about Abbott Labs (ABT), one of our Buy List stocks. In June, the stock got slammed after the company lowered its earnings guidance for this year. The shares lost 9.3% in one day.

  As we know, the stock market loves to sell first and ask questions later. But if people had bothered to look at the news, they would have seen that Abbott was in fine shape. In the premium issue, I wrote, “Don’t let this week’s drop scare you. Abbott is a very sound company.”

  We were right. Since then, Abbott has made back everything it lost, and the shares made a new all-time high today.

  So much of good investing is simply waiting for bad news to hit good stocks. People panic at the sign of bad news, and that gives patient investors a nice bargain. Wall Street is the only place where they announce a sale and everyone heads for the exits.

  

  Let’s go back to January when Abbott projected earnings for this year of at least $5 per share. That was a bold forecast as Wall Street had only been expecting earnings of $4.37 per share. For context, Abbott made $3.65 per share last year.

  In June, the company lowered its full-year forecast to a range of $4.30 to $4.50 per share. While that’s lower guidance, it’s still impressive growth over last year.

  Abbott had been doing very well during the pandemic. In January, the company said it expected full-year 2021 earnings of $5 per share. That’s growth of 35%. But on Tuesday, Abbott said it now sees 2021 earnings ranging between $4.30 and $4.50 per share.

  At the time, Abbott said:

  The updated guidance is due to significantly lower recent and projected COVID-19 diagnostic testing demand. This has been driven by several factors, including significant reductions in cases in the U.S. and other major developed countries, accelerated rollout of COVID-19 vaccines globally and, most recently, U.S. health authority guidance on testing for fully vaccinated individuals.

  While it’s positive that these external events and trends signal an accelerated return to normalcy for many countries, they have suddenly and fundamentally impacted market demand for COVID-19 testing, particularly for surveillance and screening with rapid testing.

  This was a great time to buy. Ever since, the news from Abbott has been very positive. In July, Abbott reported strong earnings ($1.17 vs $1.02). Quarterly sales rose 39.5% to $10.2 billion.

  On October 20, Abbott released its Q3 earnings report, and the results were outstanding. For the quarter, Abbott made $1.40 per share on sales of $10.9 billion. That was a huge beat. Wall Street had been expecting 94 cents per share.

  But the best news is that Abbott raised its full-year guidance to a range of $5.00 to $5.10 per share. In other words, their earnings guidance is higher now than it was before the downgrade.

  This is exactly why we stick with high-quality stocks. As Peter Lynch said, “the real key to making money in stocks is not to get scared out of them.”

  The new range translates to Q4 earnings guidance of $1.11 to $1.21 per share. Wall Street had been expecting $1.02 per share. By the way, Abbott has increased its dividend every year for the last 49 years in a row. Expect to see #50 in a few weeks. Last year, Abbott increased its dividend by 25%.

  Shares of Abbott reached an all-time high today of $131.60 per share. That’s 25% above the June low.

  That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy

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• Hershey Unveiled Its Largest Reese’s Peanut Butter Cup
  Eddy Elfenbein, November 16th, 2021 at 11:33 am

  I’m pleased to say that America is not in danger of losing its lead in peanut butter cup technology.

  Our Buy List member, Hershey (HSY), has ventured forth into new realms.

  This Thanksgiving, your pie doesn’t have to be pumpkin. Hershey has released a Reese’s Thanksgiving Pie, the largest Reese’s Peanut Butter Cup ever made.

  It’s 9 inches long and 3.25 pounds of solid peanut butter and chocolate.

  “When you bring together friends and family for Thanksgiving dinner, no table spread is complete without dessert,” said Bo Jones, senior associate brand manager at Reese’s in a Hershey press release Monday. “At Reese’s, we wanted to create a dessert that everyone wants a piece of.”

  Only a limited number of pies were released, 3,000 total, and each pie is $44.99 plus tax. But bad news for anyone who craved this for Thanksgiving dessert: In just a few hours, all the pies sold out, according to a Facebook post on Reese’s page.

• Morning News: November 16, 2021
  Eddy Elfenbein, November 16th, 2021 at 7:02 am

  China’s Property Crackdown Is Dragging Economy to Lows of 1990

  A Call to Avert a U.S.-China Cold War

  Banks Profit from Building Up and Breaking Up Companies

  Bankers and Traders Are Poised for Their Biggest Bonuses Since the Financial Crisis

  With Gas Prices High, Calls Grow to Tap Strategic Oil Reserve

  Pfizer Moves to Allow Cheap Versions of Promising Covid Pill

  Qualcomm, Diversifying from Mobiles, to Supply Chips for BMW Self-Driving Cars

  Walmart Stock Charges Higher. Retail Giant Beats Estimates and Boosts Guidance.

  Home Depot Beats Earnings and Sales Estimates. The Stock Wobbles.

  Will an Island in Indonesia Become a New Frontier in the Space Race?

  Musk Exercises Options, Sells $930 Million More Tesla Shares

  JPMorgan Sues Tesla for $162 Million Over Warrant Dispute

  Citigroup’s Jane Fraser is Doing the Unthinkable on Wall Street

  Singapore’s Temasek Invests Millions Into Push for Sustainable Food Start-Ups

  Monopoly’s Bad Cousin

  Hershey Unveiled Its Largest Reese’s Peanut Butter Cup and Called It a Thanksgiving Pie. 3,000 Sold Out in Hours

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• AFLAC Raises Dividend by 21%
  Eddy Elfenbein, November 15th, 2021 at 6:36 pm

  AFLAC (AFL) announced that it’s hiking its quarterly dividend from 33 cents to 40 cents per share. That’s an increase of 21.2%. That’s the duck stock’s 39th consecutive increase.

  Aflac Incorporated (NYSE: AFL) today announced that its Board of Directors has declared the first quarter dividend of $0.40 per share, payable on March 1, 2022, to shareholders of record at the close of business on February 16, 2022. This represents a 21.2% increase over the previously declared fourth quarter dividend.

  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 2022 dividend. We treasure our record of 39 consecutive years of dividend increases, and our dividend track record is supported by the strength of our capital and cash flows. We remain committed to maintaining strong capital ratios on behalf of our policyholders and balance this financial strength with tactical capital deployment.”

• 10 Mistakes Every Investor Makes
  Eddy Elfenbein, November 15th, 2021 at 2:11 pm

• Abbott Labs Hits New High
  Eddy Elfenbein, November 15th, 2021 at 11:57 am

  The stock market is creeping higher today which follows up days on Thursday and Friday. The S&P 500 isn’t far from yet another all-time high. The current all-time high close came last Monday when the index closed at 4,701.70. So far today, we’ve been as high as 4,697.42.

  There isn’t much economic news today. Earlier this morning, the Empire State Manufacturing Index rose for October after dropping sharply in September.

  Shares of Tesla (TSLA) are down again today. The stock has been falling lately after Elon Musk talked about selling his shares. Tesla is no longer a member of the Trillion Dollar Club. The car company’s market value is currently $991 billion, but don’t feel too bad for Elon; it’s still up over 40% this year.

  On our Buy List, Ross Stores (ROST) will report its earnings on Thursday. The other “off cycle” report that’s due soon is from Heico (HEI) but the company hasn’t said yet when it will report. It should be soon.

  Five months ago, shares of Abbott Labs (ABT) dropped 9% after the company lowered its earnings guidance. The reason for the lower guidance was fading demand for their Covid tests. At the time, I said, “Don’t let this week’s drop scare you. Abbott is a very sound company.”

  Since then, Abbott has released very strong reports in July and October. In fact, the company has raised its full-year guidance higher than where it was before. Today the stock hit a new all-time high.

  

• Morning News: November 15, 2021
  Eddy Elfenbein, November 15th, 2021 at 7:03 am

  Global Wealth Surges as China Overtakes U.S. to Grab Top Spot

  The Crypto Capital of the World

  Japan’s Economy Shrinks, but Outlook Is Brighter as Virus Ebbs

  14 Million Tons a Day Show Why China and India Won’t Quit Coal

  Oil Declines as Biden Faces Mounting Calls for an SPR Release

  Crunch at Ports May Mean Crisis for American Farms

  How America’s Pandemic Economic Response Fought the Last War

  Dollar Near 16-Month High as Clues on Fed Policy Awaited

  Post Recovery? Fed, Elected Officials Now Challenged to Define New Normal

  Morgan Stanley Says Steer Clear of U.S. Stocks and Bonds in 2022

  Shell Ditches the Dutch, Moves to London in Share Structure Overhaul

  Pfizer Fights to Keep Its $36 Billion Covid Recipe a Secret

  Santa Claus is Coming to Town – But At What Cost to Walmart and Target?

  ‘The Freighter Markets Are on Fire Right Now. That’s Where We See Real Growth,’ Boeing Exec Says

  It Would Help If the Neo ‘Inflation’ Hawks Understood What Inflation Is

  Big Short’s Michael Burry Thinks Elon Musk ‘Just Wants to Sell Tesla’

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• The Divorce Market
  Eddy Elfenbein, November 12th, 2021 at 1:10 pm

  Everyone’s breaking up! At least it seems that way. Johnson & Johnson (JNJ) said it will break itself in two, consumer products and pharmaceuticals. General Electric (GE) will break itself into three—jet engines, power and healthcare. Toshiba (TOSBF) is also getting in the act. That company will break itself in three.

  This is a big deal. JNJ is a Dow component. GE no longer is, but it’s an original member of the index.

  It seems to me that there’s a natural energy working to keep companies from getting too large. In 1911, the government sued Standard Oil. The company was divided into 39 different companies. Standard Oil of New Jersey became Esso which later became Exxon. Standard Oil of New York (or Socony) later became Mobil and now today we have Exxon Mobil.

  The same thing happened with AT&T. The government broke it up and the Baby Bells later merged back together.

  A popular theme in some dystopian movies is massive evil conglomerates. In Stanley Kubrick’s 2001, the Orion is owned by…Pan-Am!!

  Thanks to inflation, real wages are down and folks are not happy. Today’s consumer confidence report fell to a 10-year low. The University of Michigan Consumer Sentiment Index fell to 66.8. That was below estimates of 72.5.

  The Labor Department said that 4.43 million Americans quit their jobs in September. That’s up by 1.1 million from one year ago. There are now 10.4 million job openings.

  It’s a good day so far for stocks. On our Buy List, FactSet (FDS) and Sherwin-Williams (SHW) got to new highs today.

• Morning News: November 12, 2021
  Eddy Elfenbein, November 12th, 2021 at 7:00 am

  Furious Investors Test China’s Resolve to Crack Down on Property

  High Energy Prices Likely to Mean Less Oil Demand This Year, OPEC Says

  Can Joe Biden Control Gas Prices? Here’s What the President Can Do

  Dollar Set for Biggest Weekly Rise in 5 Months as Yields Rise

  Treasuries Most Sensitive to Fed Set for Biggest Loss Since 2019

  What Are Investors Focused on for the Next Fed Chair?

  The White House Says Its Plans Will Slow Inflation. The Big Question Is: When?

  Homes Now Typically Sell in a Week, Forcing Buyers to Take Risks

  Alibaba’s Singles Day Sales Top $30 Billion. The Party May Not Last.

  Johnson & Johnson to Split into Two Companies; Shares Rise

  Toshiba Plans to Split into Three Firms, Rejects Calls to Go Private

  Now TV Wants Nielsen to Measure Up

  What Bosses Really Think About the Future of the Office

  The Shadow of Ronald Reagan Is Costing Us Dearly

  Rivian Rockets Past GM to Become 2nd-Most-Valuable Automaker

  Musk Throws Fresh Shade at Rivian a Day After Rival’s Big IPO

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• Morning News: November 11, 2021
  Eddy Elfenbein, November 11th, 2021 at 7:02 am

  Stocks Soar in India, Luring Investors at Home and Abroad

  Crypto Is Forbidden for Muslims, Indonesia’s National Religious Council Rules

  A Chastened Alibaba Tones Down Its Singles Day Retail Bonanza

  Global Luxury Sales Set to Outpace Pre-COVID Levels This Year, Bain Says

  Fed’s ‘Transitory’ Inflation Plot Thickens Again with Rate at 30-Year High

  Fastest Inflation in 31 Years Puts More Heat on Washington

  Inflation Shock Tears Up Trader Playbooks From Stocks to Bitcoin

  U.S. Oil Refiners Bet the Farm Biden Will Back Them on Biofuels

  How GE’s Larry Culp Found a Way Out of the Mess Jack Welch Made

  Tencent Says Beijing Likely to Support Metaverse – As Long As It Obeys China Rules

  Elon Musk Sells $5 Billion of Tesla Stock

  Rivian I.P.O. Is Embraced by Investors Looking for Another Tesla

  Hershey to Buy Two Pretzel Makers for $1.2 Billion

  The Core Legal Strategy Against Opioid Companies May Be Faltering

  China Weighs Moderating Property Curbs to Help Troubled Developers Unload Assets

  Tesla Had 5 Founders. Why Did Only 2 Get Really Rich?

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