Archive for January, 2023

• Morning News: January 19, 2023
  Eddy Elfenbein, January 19th, 2023 at 7:09 am

  What to Watch for After India’s Population Overtakes China

  Entrepreneurs Flee China’s Heavy Hand: ‘You Don’t Have to Stay There’

  China’s Property Bust Compounds Economic Pain

  BOJ Fails to Crush Big Short as UBS, Schroders See Capitulation

  European Central Bank Member Says Market is Mispricing Rate Hikes, Expects More to Come

  Global Bond Sales Off to Record Start of Nearly $600 Billion

  America Set to Hit Its Borrowing Limit Today, Raising Economic Fears

  Treasury to Begin Special Measures to Pay Bills Amid Debt-Ceiling Debate

  How to Invest as a Debt Ceiling Crisis Looms

  JPMorgan’s Dimon Says US Shouldn’t ‘Play Games’ on Debt Ceiling

  Microsoft to Lay Off 10,000 Workers as Slowdown Hits Software Business

  Musk Has ‘More to Lose’ If He Tries to Skip Twitter Debt Payment

  Fake Meat Was Supposed to Save the World. It Became Just Another Fad

  Could Air Someday Power Your Flight? Airlines Are Betting on It.

  The Disney Executive Who Made $119,505 a Day

  The U.S. Will Be the Biggest Loser of the Thoughtless War Against TikTok

  Party City Files for Chapter 11 Bankruptcy With Plans to Cut Debt

  Crypto Platform Bitzlato Charged With Laundering More Than $700 Million of Illicit Money

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• Morning News: January 18, 2023
  Eddy Elfenbein, January 18th, 2023 at 7:07 am

  In Davos, Leaders Fret Over Fragmenting Global Economy

  Corporate Greed ‘Gone Too Far,’ Norway’s $1.3 Trillion Fund Says

  The New Bankers to the World Aren’t on Wall Street

  Bank of Japan Governor Digs In for Standoff With Markets

  Ukraine Seeks to Add Steel to Grain Export Deal, Minister Says

  How the Netherlands Is Taming Big Tech

  Why China’s Shrinking Population Is Cause for Alarm

  Oil Demand to Hit Record Level This Year as China Reopens, IEA Says

  How ‘Extraordinary Measures’ Can Postpone a Debt Limit Disaster

  US Mortgage Rates Retreat to 6.23%, Lowest in Four Months

  Job Market’s 2.6 Million Missing People Unnerves Star Harvard Economist

  Tax Season Is Coming, and These Firms Can’t Find Enough Accountants in the U.S.

  Bonuses Will ‘Absolutely’ Fall, JPMorgan’s Co-Head of Investment Banking Says

  When Watches Team Up with Paddle Boards, Skis and Motorcycles

  Disney Defends Board, CEO Robert Iger Against Nelson Peltz’s Criticisms

  Musk’s Twitter Sells Off Coffee Makers, Neon Logo in Auction Blitz

  Wall Street Rapper Charged in Crypto Heist Gets New Tech Job

  In Hunt for FTX Assets, Lawyers Locate Billions in Cash and Crypto

  Media Start-up Semafor Plans to Buy Out Sam Bankman-Fried’s Investment

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• CWS Market Review – January 17, 2023
  Eddy Elfenbein, January 17th, 2023 at 7:34 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 is slowly getting back on its feet. This comes after a very sluggish performance for the market in December. Although the S&P 500 closed lower today (-0.20%), this comes after the index reached its highest intra-day level in a month. Today also snapped a four-day winning streak.

  On Friday, the S&P 500 closed above its 50- and 200-day moving averages. Also on Friday, the S&P 500 briefly went above 4,000. That’s something it hadn’t done since December 14.

  

  We’re now getting into the thick of earnings season. So far, the results look promising. According to FactSet, 7% of the companies in the S&P 500 have reported results. Of those, 70% have topped expectations. That’s quite good.

  The problem is that those expectations were cut back dramatically as earnings season approached. This is an old Wall Street trick: manage earnings so low that it’s easy to say you beat expectations. The paring this season has been more than usual. During Q4, analysts cut their estimates by 6.5%. Over the last five years, the average cut has been 2.5%.

  Goldman Bombs Its Earnings Report

  Typically, many of the major banks are the first to report their earnings. The big surprise today was that Goldman Sachs (GS) badly missed expectations. Wall Street had been expecting Goldman to report earnings of $5.48 per share. Instead, Goldman only made $3.32 per share. This was Goldman’s worst earnings miss in more than a decade. The stock fell more than 6.4% today.

  Interestingly, the earnings from Goldman Sachs had an unusually large impact on today’s market. Namely, the Dow Jones Industrial Average did significantly worse than the S&P 500 (-1.14% to 0.20%). That’s because the Dow is a price-weighted index. In other words, the Dow is calculated by adding up the prices of all 30 stocks and multiplying by some factor.

  Since Goldman was down by so much and because it has a high nominal share price, a bad day for Goldman has distorted the entire index. Goldman has the second-highest share price in the Dow.

  In my opinion, using price-weighted indexes is a bad idea. All indexes should be weighted by market cap. Price-weighted indexes can cause too many problems. I’ll give you an example. Going back to November 2021, the Dow is down by 3.49% while the S&P 500 is off by more than 14.27%.

  

  The gap should never be that large. The advantage for the Dow is that it’s been around for a long time, but the S&P 500 is the better index.

  Last year was a tough year for Goldman and other Wall Street investment houses. Rising inflation and interest rates and also the war in Ukraine weighed on investors. That held back a lot of potential deals.

  For Q4, Goldman made $1.33 billion. That’s down 66% from Q4 of 2021. The bank said it was hurt by a slowdown in deal making. Quarterly revenue was $10.59 billion, down 16% from a year ago. That missed the roughly $10.76 billion expected by analysts. For Q4, Goldman made $1.76 billion in fees. That’s down 48% from Q4 2021.

  Goldman has been trying to focus more of its attention on consumer banking. The problem with a business set on high finance is that it can follow a boom-or-bust cycle. Goldman would rather have a business that generates consistent fees no matter what the environment is. So far, Goldman’s venture into consumer finance is not working out well.

  One bright spot is that Wall Street traders have been keeping Goldman’s trading desks busy. Last quarter, trading revenue jumped 18% to $4.76 billion.

  In terms of American business giants, Goldman Sachs really isn’t that big. By market cap, Goldman is about the 70th-largest stock in the index. However, Goldman punches far above its weight in terms of influence on Wall Street and the larger economy. Goldman sits at the innermost core of finance. That’s why its quarterly reports are carefully watched.

  Earlier today, Morgan Stanley said that its profits fell 40% in Q4. Despite the big drop, Morgan earned $1.26 per share which beat by one penny per share. On Friday, JPMorgan Chase and Bank of America both reported big earnings declines. As a general rule, Goldman’s business is more Wall Street-centered while the other big banks are geared more toward banking for consumers.

  Michael Hsu, the Comptroller of the Currency, said today that the major banks might soon break themselves up. He wasn’t making a specific prediction about the stock market or regulations. He merely stressed that at some point, it may be too difficult for a large bank to navigate government restrictions. Hsu said, “Effective management is not infinitely scalable.” He’s right. In fact, some banks, like Citigroup, could do very well by spinning off certain business units.

  While today was slow on Wall Street, we’re going to have some important news coming soon and many of these reports will highlight the recent weakness in the economy. Tomorrow, for example, we’ll get the retail sales report for December. This is obviously the biggie as it covers the all-important holiday shopping season.

  I’m also curious to see the retail sales report because the last few reports haven’t been very strong. Consumers are clearly feeling stretched. The report for November showed a drop of 0.6%, and Wall Street expects to see a drop of 1% for December. This is connected to the weak wage growth we’ve seen in the recent jobs reports.

  Also tomorrow, we’ll get the report on industrial production. Much like retail sales, industrial production hasn’t been so great lately. The last report showed a drop of 0.2%. For tomorrow, Wall Street expects a drop of 0.1%. These aren’t awful numbers, but they underscore that the economy is not in top shape.

  We’ll also get the key housing reports. That sector has been struggling lately. On Thursday, the report on housing starts is due out. Then on Friday we’ll get the report on existing-home sales. I’m not expecting good news here.

  The non-bank earnings will also start to come in. On Thursday, we’re going to get earnings reports from Procter & Gamble, Fastenal and Netflix.

  One year ago, Netflix made $1.33 per share for Q4 of 2021. This time, Wall Street expects earnings of 44 cents per share. Three months ago, Wall Street had been expecting $1.12 per share for Q4. Slash, slash, beat.

  We won’t see the first of our Buy List earnings reports until next week. I’m expecting very good results for our stocks. Now let’s take at look at one of the surprising winners of the last 20 years.

  Stock Focus: Old Dominion Freight Line

  If someone had told me that one of the top-performing stocks of this century is the trucking stock, Old Dominion Freight Line (ODFL), I’m not sure I would have believed them. But it’s true. Since October 2000, shares of ODFL are up 43,000%.

  

  Looking at a chart like the one above can be a little misleading. Some of those dips you can see were brutal at the time. The pullback in 2015 or the one in late 2018 appear minor in a chart from today. But they weren’t. In fact, the drop ODFL had last year was small potatoes going by recent history.

  Old Dominion describes itself as “one of the largest North American less-than-truckload (‘LTL’) motor carriers and provides regional, inter-regional and national LTL services through a single integrated, union-free organization.”

  Their services include “expedited transportation, which are provided through an expansive network of service centers located throughout the continental United States.”

  It’s a lot more than just driving a truck. Old Dominion offers a range of value-added services including container drayage, truckload brokerage and supply chain consulting.

  The company is due to report earnings again on February 1. Wall Street expects $2.68 per share, and I think Old Dominion can beat that. That’s really not a surprise. The company has beaten earnings for the last 10 quarters in a row. I should add that, unlike so many companies, the $2.68 figure has only been lowered by a few cents this season.

  Once we get the final numbers, Old Dominion will have earned about $11.90 per share, give or take. That’s a big increase over the $8.89 per share it made last year and the $5.68 per share it made in 2020.

  I’ll caution you that ODFL isn’t cheap. The stock closed today at $314.58 per share. That’s more than 26 times next year’s estimate.

  My point in highlighting ODFL isn’t to show off a great value. Instead, I want to show you that great stocks can come from the unlikeliest sectors. Investors spend too much time thinking about what sector they invest in. Instead, we want to concentrate on how well they do whatever it is they do. Think of the old country song, “Do What You Do Do Well.”

  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: January 17, 2023
  Eddy Elfenbein, January 17th, 2023 at 7:04 am

  China’s Population Falls, Heralding a Demographic Crisis

  US-China Trade is Close to a Record, Defying Talk of Decoupling

  Meme Stock Billionaire’s Alibaba Wager Risks Clash With Beijing

  Saudi Arabia Signals It’s Not Wedded to US Dollar for Trade

  What’s Worrying the Global Elite in Davos

  Price Gains Ease in Europe but Core Inflation Keeps Policymakers ‘Up at Night’

  Larry Fink Says ESG Narrative Has Become Ugly, Personal

  Wall Street Dealers Become Bit Players in Bond Sales

  Morgan Stanley Profit Beats on Strength in Trading Business

  The Crypto Collapse and the End of the Magical Thinking That Infected Capitalism

  Crypto Meltdown, What Crypto Meltdown?

  FTC Plan to Ban Noncompete Clauses Shifts Focus to Deferred Pay, Nondisclosure Agreements

  How Restaurant Workers Help Pay for Lobbying to Keep Their Wages Low

  Shopper Rebellion Against Higher Prices Helps Slow Inflation

  The Latest TikTok Star Is Canned Tuna

  Meta’s 54% Stock Comeback Is Still on Shaky Ground

  Microsoft Plans to Build OpenAI Capabilities Into All Products

  Elon Musk’s Appetite for Destruction

  Elon Musk’s Tesla Tweets Could Cost Him Billions More — in Court

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• MLK 1967 Interview
  Eddy Elfenbein, January 16th, 2023 at 8:49 am

  Fascinating interview in May 1967.

• Morning News: January 16, 2023
  Eddy Elfenbein, January 16th, 2023 at 7:08 am

  Globalization Isn’t Dead. But It’s Changing.

  IMF Warns Unraveling Economic Ties Could Shrink Global Output

  Global Economic Slowdown Dims Hope for Labor Turnaround in 2023

  Energy, Chips, Taiwan: Flashpoints for 2023 in a Fractured World

  Russia’s Seaborne Crude Flows Surge to Their Highest Since April

  Shares Shine, Dollar Dims as BOJ Battles Bond Bears

  Price Gains Ease in Europe but Core Inflation Keeps Policymakers ‘Up at Night’

  We Have a Too-Much-Federal-Revenue Problem, Not a Looming ‘Debt Crisis’

  After a Burst of New Businesses, a Cooling Economy Intrudes

  Four Signs Consumers Are Pessimistic About the Economy

  Big Tech Companies Prep for a Tough Year

  CoinDesk Broke Big News About FTX. Now the News Is Closer to Home

  EVs Made Up 10% of All New Cars Sold Last Year

  Elon Musk Wins Vote of Support From Qatar Amid Twitter Turmoil

  Auburn Banned TikTok, and Students Can’t Stop Talking About It

  Alarmed by A.I. Chatbots, Universities Start Revamping How They Teach

  Agriculture Companies Push Carbon-Capture Farming; Growers Are Skeptical

  Brazil’s Crowdfunded Insurrection Leaves Paper Trail for Police

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• Morning News: January 13, 2023
  Eddy Elfenbein, January 13th, 2023 at 7:03 am

  I.M.F. Sees World Economy Rebounding, Yet Still Fragile, in 2023

  Germany and UK Defying Forecasts May Skirt Recessions for Now

  Europe’s Mild Winter Cushions Economic Blow of Ukraine War

  BofA Strategists Say US Stocks Set For 10% Drop Before Later Rally

  Your Tax Refunds May Be Smaller This Year

  Inflation Is Turning the Corner

  Wall Street’s Lucrative Leveraged-Debt Machine Is Breaking Down

  Goldman Lost $1.2 Billion in Just Nine Months in Newest Division

  Gemini and Genesis Sued by SEC Over Crypto ‘Earn’ Program

  Inflation Weary Americans Find Some Relief as Prices Fall for Dozens of Products

  FAA Pilot-Alert System Breakdown Followed Years of Warnings

  Higher Labor Costs Dent Delta’s Profit Forecast but Travel Demand Is Still Strong

  What Is ‘Shadow Banning’?

  Are Cities Too Reliant on Twitter?

  Tesla Slashes Prices Up to 20% in Broad Bid to Boost Sales

  Activist Investor Nelson Peltz to Disney’s New Board Chair: No Thanks

  Don’t Ban ChatGPT in Schools. Teach With It.

  Sex, Death, Affairs: Everything People Would Rather Talk About Than Money

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• Morning News: January 12, 2023
  Eddy Elfenbein, January 12th, 2023 at 7:06 am

  From Disciplinarian to Cheerleader: Why China Is Changing Its Tone on Business

  Forget Core CPI, Market Pros Are Searching for Supercore Inflation

  December Inflation Report to Show Whether Price Increases Continued to Moderate

  The U.S. May Finally Breach the Debt Ceiling. Here’s Why That Would Be Very Bad.

  This $2 Trillion Debt Pile Is Wall Street’s New ESG Target

  The Yearning for Cushy Retirement Rejects ‘Predatory Lending’ Narrative

  Investors Look to Corporate Reports With Low Expectations

  Young Bankers Who Got Used to Smooth Sailing Prepare for a Storm

  JPMorgan Accuses Morgan Stanley Defector of Poaching 32 Clients

  F.A.A. Outage Highlights Fragility of the Aviation System

  Airlines Resurrect Ancient Jumbo Jets to Meet First- and Business-Class Demand

  Mapping the Death of NYC’s Cheap Slice

  Disney Pushes Back Against Activist Investor’s Quest for Board Seat

  Twitter Said to Consider Selling User Names to Boost Revenue

  Elon Musk Went From Being Like Henry Ford in a Good Way to a Bad Way

  Bed Bath & Beyond Warned of Bankruptcy. Then Its Stock Soared 166%

  R.J. Reynolds Pivots to New Cigarette Pitches as Flavor Ban Takes Effect

  FTX Says It Has Located More Than $5 Billion in Cash, Liquid Assets

  Prince Harry Book ‘Spare’ Sells Over 1.4 Million Copies in U.S., U.K and Canada on First Day

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• Morning News: January 11, 2023
  Eddy Elfenbein, January 11th, 2023 at 7:04 am

  French Government Unveils Plan to Raise Retirement Age to 64

  U.S., Allies Prepare Fresh Sanctions on Russian Oil Industry

  Oil and Gas Are Back and Booming

  Powell Says Fed Will Not Be a ‘Climate Policymaker’

  World Bank Cuts 2023 Global Growth Projection as Inflation Persists

  Two Global Recessions in One Decade? That Hasn’t Happened in Over 80 Years

  Wall Street Is Going All In on the Euro

  Fed’s No-Rate-Cut Mantra Rejected by Markets Seeing Recession

  Gundlach Says Listen to Bond Market Rather Than Fed on Rates

  FAA Orders Airlines to Ground All Domestic Flights Until 9AM ET

  Super-Prime Real Estate in New York and Florida Has Hit a Wall

  Mortgage Refinance Demand Surges, As Homeowners Take Advantage of Lower Interest Rates

  Apple to Begin Making In-House Screens in 2024 in Shift Away From Samsung

  Inside Intel’s Delays in Delivering a Crucial New Microprocessor

  Korean Solar Company Plans to Build $2.5 Billion Plant in Georgia

  Several Top Rivian Executives Depart the Electric-Vehicle Startup

  Elon Musk’s Love of Debt Is Destroying His Record Wealth

  Trump’s Tax Returns Show He Was a Bigger Risk Than We Realized

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• CWS Market Review – January 10, 2023
  Eddy Elfenbein, January 10th, 2023 at 6:20 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 Fed Talks Tough but Will It Act Tough?

  Yesterday, the stock market was having a nice day. At one point, the S&P 500 was up 1.4%.

  But then Atlanta Fed President Raphael Bostic came out with a 2×4 and smacked the rally over the head. More specifically, he said that the Federal Reserve is going to hold interest rates high until inflation is thoroughly defeated. Central bankers are rarely so direct.

  Bostic said that he sees interest rates rising about 5%. He was then asked how long the Fed would hold rates over 5%. Bostic said, “Three words: a long time.” Bostic even said that it’s “fair to say that the Fed is willing to overshoot.”

  Yikes. He’s not alone. Also on Monday, San Francisco Fed President Mary Daly said she also sees rates going above 5%, but she added that it’s unclear for how long.

  Bostic’s words clearly rattled the market. From the day’s high until the close, the Dow dropped over 400 points.

  

  As dramatic as Bostic’s words were, Wall Street doesn’t buy it and neither do I. For one thing, he’s not even a voting member of the FOMC this year. Neither is Daly, for that matter.

  Two voting members did speak today. Federal Reserve Governor Michelle Bowman said, “In recent months, we’ve seen a decline in some measures of inflation but we have a lot more work to do, so I expect the [Federal Open Market Committee] will continue raising interest rates to tighten monetary policy.”

  Lastly, the big boss spoke earlier today. Federal Reserve Chairman Jerome Powell gave a speech in Sweden. He stressed that the Fed shouldn’t be subject to political pressures. Powell said, “restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.”

  The important point is that the cheapest asset on the Fed’s balance sheet is talk. It costs them nothing to sound tough. Of course, Fed officials will always say they’re committed to stable prices. That’s what they’re hired to do.

  The problem is that once a recession sets in, the odds are very likely that they’ll get scared and start cutting interest rates. That’s what Wall Street will want and that’s what the politicians will want. Historically, the Fed almost always obliges.

  After all, no Fed official wants to go before Congress and have some member of Congress demand an explanation as to why the Fed is keeping rates highs while their constituents are losing their jobs to fight an already defeated foe. It always amuses me when traders are shocked to discover that the Fed is a political body first, and a monetary authority later.

  The facts are that inflation is showing early signs of weakening and the economy is beginning to show some cracks. Coinbase just said that it’s laying off 20% of its staff. Amazon and Goldman Sachs recently announced job cuts. Tesla appears to have a big oversupply of cars.

  In Q4, Wall Street analysts slashed their 2023 earnings forecast by 4.4%. That’s the largest cut since 2014. This Friday, we’re going to get Q4 earnings reports from big banks like JPMorgan Chase, Wells Fargo and Bank of America.

  Wall Street doesn’t buy any of this “over 5%” talk. The futures market currently expects the Fed to hike by 0.25% in February and by another 0.25% in March. That would bring the target range to 4.75% to 5%. After that, traders expect the Fed to pause for eight months. After that, they expect the Fed to start cutting interest rates.

  The next big test for the market will come on Thursday when the government releases the CPI report for December. The last CPI report showed that inflation increased by 7.1% in the 12 months ending in November. The year-over-year rate has now declined for five months in a row (see below)

  

  Wall Street thinks we can make it six in a row. The current consensus says that inflation increased by 6.5% in the 12 months ending in December.

  For the month, Wall Street thinks prices fell by 0.1% while the core rate increased by 0.2%. We’ll know more on Thursday.

  The Lowest Unemployment Rate Since the Sixties

  On Friday, the government said that the U.S. economy created 223,000 net new jobs last month. That beat Wall Street’s forecast of 200,000.

  Average hourly earnings rose by 0.4%. Over the last year, average hourly earnings were up by 4.6%. The labor force participation rate was 62.3%. The broader U-6 rate was 6.5%.

  The labor force participation rate can be heavily influenced by demographics such as an aging population. The labor force participation rate for prime working-age adults was 82.4%. That’s still below the pre-Covid peak but it’s not bad considering it fell below 80% during the lockdown.

  The unemployment rate fell to 3.5%. This was the sixth time the unemployment rate got to 3.5% since 1969. I broke out my spreadsheet, looked at the decimals and found out that last month’s unemployment rate reached 3.469%. That was the lowest rate since May 1969. The only months that were lower came during the wars in Korea and Vietnam. In other words, this was the lowest peacetime unemployment rate in 75 years.

  

  (I understand some may quibble with my use of “peacetime.” I merely mean a labor force not impacted by the draft.)

  I probably shouldn’t jinx it, but I need to mention that our Buy List is off to a very good start in 2023. The Buy List is already 1.3% ahead of the overall stock market. We’ve beaten the S&P 500 in five of the six trading days.

  One of our new stocks, Celanese (CE) is already up 16% this year. Trex (TREX), which got clobbered last year, is a 14% winner so far this year.

  Make no mistake, we’ll have plenty of down days this year, but we’re focused on the long term. If you’re not a subscriber to the premium letter, then I urge you to join us today. It’s $200 for the year or $20 per month.

  I promise not to give you the hard sell, but if you’re interested, check it out!

  Stock Focus: American Water Works

  American Water Works (AWK) is a public utility that provides water to 1,700 communities across 24 states. I know what you’re thinking—slow growth, boring utility. Well, that’s not AWK at all. It has an impressive record for growth. Not only that, but it’s been remarkably consistent in its growth.

  American Water serves a population of 14 million people. The company serves residential and business customers. They also have long-term contracts with the U.S. military.

  The company’s founding goes back to 1866, but it didn’t get its current name until 1947. Most of AWK’s services are managed locally and they navigate local and state laws. The company also owns facilities that run municipal drinking water systems.

  It’s a big business. AWK is a member of the S&P 500. They’ll generate revenues of close to $4 billion this year. American Water “owns 80 surface water treatment plants, 480 groundwater treatment plants, 160 wastewater treatment plants, 52,500 miles of pipes,1,100 groundwater wells, 1,700 pumping stations, 1,300 water storage facilities, and 76 dams.”

  Water is a good business to be in. No town wants to be another Flint, Michigan water disaster.

  The stock IPO’d in 2008. Prior to the IPO, it was owned by RWE, a European utility. They decided to ditch their water business because it was seen as a no-growth anchor.

  No one liked this business. The IPO was a bit of a dud. The underwriters had originally expected $25 or $26 per share. Ultimately, the stock was priced at $21.50 per share. Nearly fourteen years later, AWK is going for $160.77 per share. It’s been a huge success.

  

  One of the reasons why I like AWK is that it’s one of the steadiest earners around. This is AWK’s adjusted operating earnings per share.

  2009: $1.25
  2010: $1.53
  2011: $1.81
  2012: $2.11
  2013: $2.20
  2014: $2.43
  2015: $2.64
  2016: $2.84
  2017: $3.03
  2018: $3.30
  2019: $3.61
  2020: $3.96
  2021 $4.44
  2022 $4.45 (est)
  2023 $4.77 (est)
  2024 $5.15 (est)
  2025 $5.61 (est)

  I really like these steady, consistent increases. (The net income isn’t as smooth because weather can impact the business.) In my opinion, consistency of returns is underrated by investors. I like to have a good idea of what our stocks are going to do.

  AWK’s Q3 earnings report came out on October 31. The company reported earnings of $1.63 per share. That beat the Street by 12 cents per share. The Q4 report will probably be out in mid-February. Wall Street expects 77 cents per share.

  Last year, AWK raised its dividend by 8.7%. That was its 14th consecutive annual increase in a row.

  Over the last three years or so, AWK hasn’t done particularly well versus the rest of the market. That could be coming to an end.

  American Water said it sees 2022 earnings between $4.39 and $4.49 per share. For 2023, the company sees earnings of $4.72 to $4.82 per share. Long-term, AWK expects EPS growth of 7% to 9%. Not bad for a boring castoff stock.

  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.