Archive for September, 2022

• The Fed Raises by 0.75%
  Eddy Elfenbein, September 21st, 2022 at 2:02 pm

  No surprise. Here’s the policy statement:

  Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.

  Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.

  The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3 to 3-1/4 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.

  In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

  Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lael Brainard; James Bullard; Susan M. Collins; Lisa D. Cook; Esther L. George; Philip N. Jefferson; Loretta J. Mester; and Christopher J. Waller.

  Here are the economic projections.

• Morning News: September 21, 2022
  Eddy Elfenbein, September 21st, 2022 at 7:08 am

  German Government Nationalizes Uniper in Move to Secure Energy Supply

  How a Looming Oil Ban Could Devastate a Small Italian City

  U.K. Cuts Energy Bills for Companies Through Winter

  U.S. Gas Prices End Streak of Declines Just Short of 100 Days

  What’s Next for Profits? Cars Shed Light on a Key Inflation Question

  Investment Banks Revenue Shake-Up Looms in 2023, Barclays Boss Says

  Banking C.E.O.s Face a Grilling on Capitol Hill

  Fed to Hike and Hammer Home Hawkish Message

  S&P 500 History Points to a Sharp Bounce After Fed Meeting

  ‘Dilbert’ Becomes the Voice of ESG Opposition

  What Crisis? High-Stakes Crypto Lending Looks Here to Stay

  Legal Challenges to Student Loan Forgiveness Loom Before Midterms

  U.S. Mortgage Interest Rates Reach 6.25%, Highest Level Since October 2008

  Ford’s Profit Warning Shows the Truck Business Is Strong. EVs Could Make It Better

  Amazon’s $1.7 Billion Proposed Purchase of Roomba Maker Under FTC Investigation

  Ken Griffin Is Remaking Miami in His Billionaire Image

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• CWS Market Review – September 20, 2022
  Eddy Elfenbein, September 20th, 2022 at 5:15 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.”)

  Our ETF Turns Six Years Old

  Do you remember
  The 21st night of September?
  Love was changin’ the minds of pretenders
  While chasin’ the clouds away

  Tomorrow is the sixth birthday of our exchange-traded fund, the AdvisorShares Focused Equity ETF (CWS). We started trading at $25 per share on September 21, 2016. I normally steer clear of discussing the ETF, but in the event of our birthday, I hope you don’t mind a little grandstanding.

  I want to thank all our supporters. Every year, hundreds of ETFs start, and hundreds go bust, but we’re still going strong. Until the market broke earlier this year, we reached all-time highs for net asset value per share and total assets under management. Over the last six years, we’ve made millions of dollars for our shareholders, and we’re aiming to make millions more.

  If you’re not familiar with the ETF, it’s based on our Buy List, but it’s not an exact replica. The SEC will come after me if I say it’s the exact same thing, but we work hard to make it as close as possible and I think we do a good job.

  I also want to mention that we’ve been beating the market in recent months. Not only that, but we’ve been beating net of fees. This has been some of the strongest relative strength in the history of the fund. This really is our type of market.

  

  I’ll remind investors that the fund is completely transparent. You always know exactly what’s in the fund. We make our portfolio changes once a year; five stocks go in and five stocks go out. That’s a turnover rate of just 20%. That’s not that far from the S&P 500.

  The fund is also tax-efficient, and we were the first ETF to use a fulcrum fee. In plain English, a fulcrum fee means you get a discount if I underperform the S&P 500, and I get a bonus if I beat the index. That way, I have “skin in the game.”

  I promise you I won’t give you the hard sell. Check out the fund and see if it’s for you. If not, that’s fine. If you have any questions, we have a great customer service team you can reach at 1-877-843-3831. There are more stats and info at our website.

  The Federal Reserve Needs to Get Serious

  Enough of that, let’s look at Wall Street. Today was the first day of the Federal Reserve’s meeting. I almost feel that the actual meeting is a bit of an anti-climax. This meeting has been one of the most debated and analyzed Fed meetings in recent memory.

  Despite all the attention, the consensus is that the Fed will raise interest rates by 0.75%. That will bring the target rate for the Fed funds rate to 3.00% to 3.25%. There’s a small minority holding out for a full 1% hike, but I doubt that will happen. The Fed doesn’t like to be unpredictable. The Fed is happiest when it’s boring everyone.

  

  The market will be paying attention just as much attention to the press conference by the Fed chairman as it will to the rate decision itself. At this meeting, the Fed will also update its economic projections for the next few years.

  Historically, the Fed’s projections are notoriously bad. Even for economists, they’re bad. But the projections could be of interest this time. That’s because there will eventually be some pushback within the Fed at its rate-hiking policy. I doubt it will show up at this meeting, but at a future meeting, some Fed members will express their reservations about the path of interest rates. That’s only natural. For now, Jerome Powell has the political cover to raise rates. That’s why the lousy CPI report was such a big deal. Consumers are fed up with rising prices.

  

  The Fed will probably hike by another 0.75% in November. After that, things are unclear. At that point, the Fed will probably be close to its ceiling for interest rates. I could see rates going higher in 2023, but not much higher. The famous 2/10 Spread is already negative. Plus, the U.S. dollar is hitting long-time highs against currencies like the pound and the euro. That’s not good for the U.S. economy, and the effect will soon be felt.

  The problem with the Fed is that its interest rate hikes are a blunt instrument. People think the Fed has some magic ray gun that can easily zap a bubble without causing any collateral damage to the rest of the economy. Sadly, that’s not the case. The housing market is usually the major casualty.

  For tomorrow, expect a 0.75% rate increase. The market has rallied on every rate hike day this year. I think Powell will continue his tough talk at the press conference, but the stock market is clearly nervous. The S&P 500 closed today at its lowest point since July 18, and the 10-year yield just touched its highest level since April 2011. In the last five weeks, the S&P 500 has lost 10.4%.

  The Fed has been willing to talk tough, but following through with painful rate hikes is a different matter. Let’s see what Powell does.

  Looking Ahead to Q3 Earnings Season

  The third-quarter earnings season won’t begin for another three weeks, but I wanted to look at what we can expect.

  Unfortunately, Wall Street has been slashing its estimates for Q3. On June 30, at the end of Q2, Wall Street had been expecting the S&P 500 to report earnings of $59.23 per share (that’s the index-adjusted number). Since then, the estimate has been pared back to $55.69 per share. That’s a drop of 6% in less than two months. That may sound small, but it can have a big impact on the market.

  It’s not a secret what’s happening. Wall Street is growing concerned about the state of the economy. The Fed’s rate hikes are having an impact. It’s doubly worse for the stock market. That’s because earnings are going down as interest rates are going up. That means that lower earnings are being discounted at a faster rate. That adds up to lower share prices and that’s exactly what we’ve been seeing.

  It doesn’t end there. We’re also seeing revisions to Q4 earnings and for 2023. Since June 30, Wall Street has lowered its outlook for Q4 by 4.5%. Analysts now expect the S&P 500 to earn $209.66 per share this year. For 2023, Wall Street sees earnings of $240.36 per share. That’s still a growth rate of a little under 15%. The S&P 500 is currently trading at 16 times next year’s earnings.

  Interestingly, companies in the S&P 500 have cut back on their share buybacks. During Q2, companies repurchased $219.6 billion shares of their own stock. That’s down 21.8% from the pace set in Q1.

  During the 12 months ending in June, companies bought a little more than $1 trillion of their own stock. During Q2, dividend payouts rose only 2.1% to $140.6 billion.

  Consider that the interest rate on the two-year Treasury recently hit 4%. Is it worth it to some people to sit out of the market for one year and collect an easy 4%? That’s over 1,200 Dow points for doing nothing. Personally, it doesn’t appeal to me but I’m sure it does to some investors. Valuations won’t save this market. The outlook won’t be sunny again until investors are convinced that earnings are growing rapidly again.

  The Market Often Turns in Mid-Term Years

  We’re coming up on what’s historically been an important turning point in the stock market. Historically, there’s been an unusual effect during mid-term election years: the long-term average shows a pattern of a terrible first nine months of the year followed by a very strong last three months of the year.

  My friend, Gary Alexander, compiled the data and found that the stock market has averaged a loss of 6.2% through the first three quarters of the mid-term election year. The fourth quarter averages a gain of 6.2%. As a result, the average of the mid-term year is flat.

  

  You can see that Q4 of 2018 was an outlier. It was not a good market that year. Interestingly, Jerome Powell gave us two rate hikes during that quarter.

  What leads to the Mid-Term Effect? There are a few theories. Historically, it could be that the market reacts negatively to the new president’s agenda. As the election day approaches, the president, fearful of the polls, changes course and the market rallies. At least, that’s the theory.

  So far, the stock market has had a lousy 2022. The bulls will return at some point. Going by history, that day may soon be upon us.

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

  – Eddy

  P.S. If you want to learn more about the stocks on our Buy List, please sign up for our premium service. It’s $20 per month, or $200 per an entire year.

• Morning News: September 20, 2022
  Eddy Elfenbein, September 20th, 2022 at 7:02 am

  Fed Set to Reveal ‘Pain’ Coming in Next Stage of Inflation Fight

  Jerome Powell’s Inflation Whisperer: Paul Volcker

  Climbing Housing Costs Could Prop Up Inflation for a While

  Overstretched U.S. Companies Feel Pinch of Higher Borrowing Costs

  Wall Street’s Mysterious 2,200% IPOs Come From Tiny N.J. Broker

  Tycoon’s Wild $3 Billion Gamble on ‘China’s LVMH’ Crashes

  World Will Get More Millionaires After 2022’s Wealth Loss

  Mining Giant Fortescue to Spend Billions in Bid to Eliminate Fossil Fuels by 2030

  Why The Current Oil Boom For Arab States May Be Their Last

  Porsche Investor Demand Exceeds $9.4 Billion Offering in Hours

  How a Quebec Lithium Mine May Help Make Electric Cars Affordable

  Why GM Is Taking the Slow Lane in the Great EV Race

  Ford Says It Will Spend $1 Billion More in Third Quarter Because of Supply Chain Problems

  An Anti-E.S.G. Activist Takes on Apple and Disney

  Judge Rejects Antitrust Challenge to UnitedHealth Acquisition

  Morgan Stanley to Pay $35 Million to Settle SEC Charges It Mishandled Customer Data

  Beyond Meat COO Arrested for Biting Man’s Nose After College Football Game

  Be sure to follow me on Twitter.

• Morning News: September 19, 2022
  Eddy Elfenbein, September 19th, 2022 at 7:09 am

  Food Supply Disruption Is Another Front for Russian Falsehoods

  ‘Crippling’ Energy Bills Force Europe’s Factories to Go Dark

  Private Drillers Are Hitting Their Limits

  Electric Vehicles Took Off. Car Makers Weren’t Ready

  The Global Race to Hike Rates Tilts Economies Toward Recession

  Dollar’s Rise Spells Trouble for Global Economies

  Rising Bond Yields Change the Calculus for Stocks

  Put Away the Smelling Salts, the Fed Doesn’t Threaten Washington’s ‘Solvency’

  Bitcoin Drops to 3-Month Low; Ether Extends Swoon Since ‘Merge’

  Student Loan Subsidies Could Have Dangerous, Unintended Side Effects

  Home-Goods Retailers Jolted by Slowdown in Housing Market

  Railroads’ Strategy Thrilled Wall Street, but Not Customers and Workers

  Delta Looks to Improve Margins, Cut Debt as Travel Rebounds

  Business Class for $20,000 Means Staff Fly Coach or Not at All

  Porsche IPO to Raise up to $9.4 Billion for Parent VW

  Apple Flexes Muscle as Quiet Power Behind App Developer Group

  Apple Shot an Oscar Contender Starring Will Smith. That Was Before the Slap.

  Clearview AI, Used by Police to Find Criminals, Now in Public Defenders’ Hands

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• Morning News: September 16, 2022
  Eddy Elfenbein, September 16th, 2022 at 7:02 am

  China’s Downturn Moderates, Though Property Woes Linger

  Germany Seizes Assets of Russian Oil Giant Rosneft

  What Price Is Right? Why Capping Russian Oil Is Complicated

  Britain’s Spending and Tax Cut Plans Worry Investors in Its Debt

  The World Has a $1 Trillion La Nina Problem

  Thanksgiving Could Be Ruined Due to a Looming Cranberry Shortage

  Biden Administration Targets Crypto Enforcement, Digital Asset Rules

  Can ‘the Merge’ Save Crypto?

  BofA Sees New Lows for US Stocks as Inflation Shock ‘Ain’t Over’

  Mortgage Rates Top 6% for the First Time Since the 2008 Financial Crisis

  More Workers Head to Picket Lines Amid Higher Inflation and a Tight Job Market

  The Ivy League Dropout Who Just Sold His Firm to Adobe for $20 Billion

  FedEx to Close Offices, Park Aircraft After Warning of Sales Shortfall

  For Gen Z, TikTok Is the New Search Engine

  TikTok’s C.E.O. Navigates the Limits of His Power

  How Rich Is King Charles III? Inside The New Monarch’s Outrageous Fortune

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• Morning News: September 15, 2022
  Eddy Elfenbein, September 15th, 2022 at 7:05 am

  US Railroads, Unions Reach Tentative Pact on Eve of Deadline

  Households a Wild Card as Europe Moves to End Russian Gas Dependence

  A Chinese Spy Wanted GE’s Secrets, But the US Got China’s Instead

  New Inflation Developments Are Rattling Markets and Economists. Here’s Why.

  Ray Dalio Does the Math: Rates at 4.5% Would Sink Stocks by 20%

  Janet Yellen Will Pledge 5,000 New I.R.S. Hires to Bolster Taxpayer Responsiveness

  U.S. Senate to Grill SEC’s Gensler Over Climate, China and Crypto

  F.D.A.’s Drug Industry Fees Fuel Concerns Over Influence

  Ethereum Finishes Long-Awaited Energy-Saving ‘Merge’ Upgrade

  The Founder of Patagonia Is Giving His Company Away to Help Fight Climate Change

  At Detroit Auto Show, Biden Announces Money for Charging Stations

  Shell Names New CEO as Longtime Boss Steps Down

  California Files Antitrust Lawsuit Against Amazon

  Inside Starbucks’ Plan to Speed Up Service

  The World’s Best Business Schools, Ranked

  Disney to Roll Out Israeli Superhero in ‘Captain America’ Film — Irking Arabs

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• Morning News: September 14, 2022
  Eddy Elfenbein, September 14th, 2022 at 7:05 am

  Chinese Manufacturers Get Around US Tariffs With Some Help From Mexico

  Rail Strike Threat Is Set to Halt Shipments of US Crops, Autos

  U.S. Inflation Remained High in August

  Markets Plunge as Inflation Data Undercuts Wall Street’s Optimism

  US Stocks Set for Bounce After $1.5 Trillion Inflation-Led Rout

  Gundlach Urges Fed to Slow Rate Hikes as Summers Prefers 1% Jump

  Are We In a Recession? Both Sides React

  U.S. SEC to Propose Treasury Market Clearing Reforms to Address Resilience Fears

  Credit Suisse-Tycoon Clash Has Wealth Industry Holding Its Breath

  Pandemic Aid Cut U.S. Poverty to New Low in 2021, Census Bureau Reports

  Social Security’s Cost-of-Living Increase Will Be Largest in Four Decades, an Estimate Says

  U.S. Mortgage Interest Rates Top 6% for First Time Since 2008

  E.U. Scores Major Legal Victory Against Google

  Battery Recycling Race Heats Up After Inflation Reduction Act

  Rio Tinto Forges Deal With China for $2 Billion Iron-Ore Mine

  China Evergrande’s Other Spending Spree—on Soccer—Is Also Running Into Trouble

  Nearly 20% of Congress Trades Stocks that Present Conflicts of Interest

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• CWS Market Review – September 13, 2022
  Eddy Elfenbein, September 13th, 2022 at 7:40 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.”)

  The Stock Market Suffers Its Worst Day Since 2020

  This morning, the government released its report on inflation for August. Wall Street had been eagerly anticipating this report. Last month inflation was unchanged, and it was hoped that we would see more good news on the inflation front.

  The equation is simple: If inflation backs off, then the Federal Reserve may back off with its rate hikes as well. After all, gasoline prices have fallen for over 90 days in a row. Up and down Wall Street, all eyes were hoping for good news.

  Well, we didn’t get it.

  Instead, inflation is alive and well. According to the Bureau of Labor Statistics, the U.S. economy had inflation of 0.1% last month. That beat expectations of -0.1%.

  Over the last year, inflation is running at 8.3%. Wall Street had been expecting 8%. At that rate, that means if you’re paid a salary at a constant rate for one full year, then you work one month for free.

  We know that falling energy costs have had a major impact on the overall inflation rate, so let’s also look at core inflation which excludes food and energy prices.

  Eh, not much good news. For August, core inflation was up 0.6% (see chart below). That doubled Wall Street’s forecast of 0.3%. I think this is the stat that really stung people. Over the last year, core inflation is now running at 6.3%.

  

  Here are some details:

  Energy prices fell 5% for the month, led by a 10.6% slide in the gasoline index. However, those declines were offset by increases elsewhere.

  The food index increased 0.8% in August and shelter costs, which make up about one-third of the weighting in the CPI, jumped 0.7% and are up 6.2% from a year ago.

  Medical care services also showed a big gain, rising 0.8% on the month and up 5.6% from August 2021. New vehicle prices also climbed, increasing 0.8% though used vehicles fell 0.1%.

  This bout of inflation is unusual in that it appears to be hitting regular consumers harder than the overall numbers suggest. It’s one thing to say that inflation has increased by 8.3% over the last year, but that’s just the average. For example, the index for food is up by 11.4% over the last 12 months. That’s the highest rate since 1979. The price for electricity is up nearly 16% in the past year.

  Larry Summers, the former Treasury Secretary, tweeted:

  Today’s CPI report confirms that the US has a serious inflation problem.
  Core inflation is higher this month than for the quarter, higher this quarter than last quarter, higher this half of the year than the previous one, and higher last year than the previous one.

  — Lawrence H. Summers (@LHSummers) September 13, 2022

  Traders hated the report. I mean, they hated this report. Prior to the report coming, the futures indicated that the stock market was ready to open higher. Today could have been the market’s fifth up day in a row.

  But as soon as the report came out, so did the bears. They loved the lousy inflation news. This was the stock market’s worst day since 2020. The S&P 500 lost 4.32% and the Dow gave up more than 1,200 points. The Nasdaq Composite lost more than 5% on the day. Today was just ugly.

  The strong inflation news gives political cover to Jerome Powell and his friends at the Fed to continue hiking interest rates. When the Fed hikes rates, risky stocks suffer the most and conservative stocks provide much greater protection. I feel like a broken record on this point, but we saw it so clearly today.

  Here are some numbers from today that make the story clear. The S&P 500 High Beta Index lost 5.16% today while the S&P 500 Low Volatility Index fell “only” 2.89%. It’s a similar story with growth and value. The S&P 500 Growth Index lost 5.19% while the S&P 500 Value lost 3.49%.

  Amazon and Netflix were both off by more than 7%. Facebook was down more than 9%.

  On our Buy List, Hershey (HSY) is probably one of the best examples of a conservative, defensive stock. It’s our top-performing stock this year. Not surprisingly, it was among our top-performing stock today. In fact, today really was a microcosm for the whole year so far. Our Buy List outperformed the S&P 500 today by more than 1% today.

  Where do we go from here? The Federal Reserve meets again next week. We can almost certainly expect another 0.75% rate increase. This would be its third 0.75% rate hike in a row. There’s even a decent chance (around 33%) that we’ll see a full 1% increase, but I doubt that will happen. Six months ago, the Fed’s range for short-term interest rates was 0% to 0.25%. After next week, it will be 3% to 3.25%.

  The meeting after next week will be on November 2, just before Election Day. Yesterday, the futures market was indicating only a 14% chance of a 0.75% rate hike. Thanks to today’s inflation report, that’s up to 53.5%. That would bring the upper range to 4%.

  One of the reasons why I like to track the two-year Treasury yield is that it serves as an unofficial estimate for what the Fed will eventually do. It’s not perfect, but it’s a decent proxy for what Wall Street is thinking. Today the two-year yield got as high as 3.75%. That’s a 14-year high (see chart below). More importantly, it’s much higher than you see in most stocks. The yield on the 30-year Treasury topped 3.5% today. Eighteen months ago, during Covid, it was at 1%.

  

  Today’s message is clear. The Fed still does not have a handle on inflation. Despite assurance that inflation is merely transitory, inflation is becoming annoyingly persistent. The Fed now realizes that it will have to take bold action to defeat inflation. Christopher Waller, a Fed governor, said, “This is a fight we cannot, and will not, walk away from.”

  As long as the Fed is determined to raise interest rates, then the stock market will be soggy. I’m not predicting a crash, or even a downward market, but bulls will find it difficult to get a sustained rally going. As fun as this summer’s rally was, it’s come to an end.

  The other important takeaway is that holding risky assets right now is dangerous. I’m mostly speaking of high-volatility stocks, but this spills into NFT and crypto as well. With higher rates on the way, conservative stocks will fare much better. That’s been consistent for the last 10 months. These stocks aren’t nearly as impacted by the Fed’s inflation battle as is the rest of Wall Street.

  BofA’s Investor Survey

  Bank of America recently conducted a survey of major investors. I’m brining this to your attention because I was struck by the level of fear it revealed. Personally, I like to keep an attitude of reasonable optimism. In most cases, it’s too easy to let fear overtake what should be a sober process.

  According to the survey, 52% of investors are underweighted in stocks, and another 62% are overweight in cash. I would not have guessed it’s that high.

  As concerns over the economy escalate, the number of investors expecting a recession has reached the highest since May 2020, strategists led by Michael Hartnett wrote in a note on Tuesday. Sentiment is “super bearish,” with the energy crisis further weighing on risk appetite, they said. A net 42% of global investors are underweight European equities, the largest such position on record.

  What also stood out to me is that a new 92% of the respondents expect profits to fall next year. Investors are clearly shying away from risk.

  Persistently high inflation is seen as the biggest tail risk, followed by hawkish central banks, geopolitics and a global recession. Only 1% of participants see a resurgence in the Covid-19 pandemic as a tail risk.

  Unfortunately, investors see more problems in Europe. According to the survey, 70% of respondents think Europe’s energy crisis will push the continent into a recession.

  One positive note is that 79% of investors expect to see inflation calm down in the U.S. over the next year, and 36% see the Fed ending rate hikes by Q3 of next year.

  Stock Focus: McGrath RentCorp

  One of my hobbies is finding interesting (and hopefully profitable) businesses that few on Wall Street know about. I’ve featured many of them in these pages. This week, I want to introduce you to McGrath RentCorp (MGRC). This is a fascinating and little-known stock. The company is involved with business-to-business renting.

  McGrath rents relocatable modular buildings, portable storage containers, electronic test equipment and liquid containment tanks. This means things like modular classrooms. Or imagine a construction site in the middle of nowhere. McGrath can rent the foremen an instant office. These things are more common than you might expect.

  But McGrath does more than that. They also rent test equipment and storage tanks. The company currently operates through four segments: Mobile Modular, TRS-RenTelco, Adler Tanks and Enviroplex.

  Only two Wall Street analysts currently follow the stock, but despite being almost completely ignored by Wall Street, this is a very sound company. McGrath has raised its dividend for 31 years in a row. Earlier this year, they bumped up the quarterly dividend from 43.5 to 45.5 cents per share.

  The company was founded by Bob McGrath in March 1979 in a small two-acre inventory center in San Leandro, California. McGrath was quickly successful and by 1984, the stock IPO’d on the Nasdaq at $6 per share.

  Since then, McGrath has split 2-for-1 three times which comes to 8-to-1. That means that McGrath’s split-adjusted IPO price was 75 cents per share. Today it’s at $85.37 per share.

  Check out this chart:

  

  And it’s only gotten the attention of two analysts!

  McGrath was hurt during Covid but it still managed itself well. The company’s EPS dropped from $4.16 in 2020 to $3.66 in 2021. I think the company has a good shot this year of topping its all-time EPS high from 2020.

  During Q1 of this year, the company made 77 cents per share which beat by five cents. For Q2, McGrath made $1.07 per share which beat consensus by 17 cents per share. (Please bear in mind that with so few analysts following it, that’s a stretch to call it a “consensus.”)

  The current market cap is a little over $2 billion. McGrath runs a very strong business and the shares are going for a very good price. That may not last long.

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

  – Eddy

  P.S. If you want to learn more about the stocks on our Buy List, please sign up for our premium service. It’s $20 per month, or $200 per an entire year.

• Morning News: September 13, 2022
  Eddy Elfenbein, September 13th, 2022 at 7:07 am

  European Manufacturers Reel From Russian Gas Shutoff

  Inflation Is Upending Politics in the Most Unequal Region on Earth

  Inflation Explained: The Good, the Bad and the Uncertain

  Bond Yields Dip Ahead of Key August Inflation Report

  BofA Survey Shows Investors Fleeing Equities en Masse on Fear of Recession

  U.S. Banks’ Key Performance Metric Set to Turn Around in Second Half

  There’s a New Cop on the Banking Beat: Chief Climate Risk Officer

  Who Are America’s Missing Workers?

  US Falls to 18th Place in Global Retirement Ranking

  Strike Threat on Freight Railroads Is New Supply Chain Worry

  Peloton Chairman John Foley to Exit in Management Shake-Up

  Instagram Stumbles in Push to Mimic TikTok, Internal Documents Show

  A $100 Million Bet on Finding the Next ‘Mr. Beast’

  King Charles Inherits Untold Riches, and Passes Off His Own Empire

  Most Twitter Shareholders Vote in Favor of Sale to Musk

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