Crossing Wall Street

Archive for May, 2023

Morning News: May 19, 2023
Eddy Elfenbein, May 19th, 2023 at 7:04 am

To Counter China, G7 Countries Borrow Its Economic Playbook

Japanese Stocks Have Hit a 33-Year High. Warren Buffett Helped.

What Would Happen if the U.S. Defaulted on Its Debt

Fed Officials Consider Skipping a Hike in June — But Don’t Call It a Pause

Even a ‘Mild’ US Recession Comes With Steep Price in Lost Jobs

Rebound in Treasury Yields Fueled by Resilient Growth, Inflation

BlackRock’s Wei Li Says the ‘Goldilocks’ Era is Over for Markets

ESG Investing Goes Quiet After Blistering Republican Attacks

SVB’s Collapse Resurrects the Idea of Banking Without Bank Runs

Home Prices Posted Largest Annual Drop in More Than 11 Years in April

America’s Semiconductor Boom Faces a Challenge: Not Enough Workers

TikTok Users Sue Montana, Calling State Ban Unconstitutional

A.I. Is Having a ‘Netscape Moment’

Google Is Spared a Search-Engine Switch by a Major Partner

Amazon Is Everywhere. That’s What Makes It So Vulnerable

Disney Scraps Plan for $900 Million Florida Campus, Closes ‘Star Wars’ Adventure Hotel

‘Movie Theaters Are the Marketplace of Free Ideas’

ESPN Plans to Stream Flagship Channel, Eyeing Cable TV’s Demise

Kia and Hyundai to Pay $200 Million to Settle Suit Over Car Thefts

Dozens of Car Models Tied to Potentially Explosive Air-Bag Part, WSJ Finds

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

An Untested Oil Price Cap Has Helped Choke Revenue to Russia

As Oil Giants Retreat Globally, Smaller Players Rush In

A Pipeline Pushed to the Limit Preceded Keystone’s Worst Oil Spill

How to Use the Debt Ceiling to Inflict Cruelty on the Poor

Wall Street Fears $1 Trillion Aftershock From Debt Deal

A $1 Trillion T-Bill Deluge Is Painful Risk of a Debt-Limit Deal

Micron Outlines $3.6 Billion Investment in Chip Plant With Japan’s Backing

Alibaba to Spin Off Cloud Unit. Stock Falling Despite Earnings Beat

AT&T Is Spending Billions to Wire U.S. for Fast Internet as Rivals Take Different Path

Apple’s New Headset Meets Reality

In Battle Over A.I., Meta Decides to Give Away Its Crown Jewels

TikTok Banned in First US State, Bringing Legal Test to Montana

For Gen Z, Playing an Influencer on TikTok Comes Naturally

The 31-Year-Old Learning to Run the World’s Biggest Meat Supplier

Job Cuts Ripple Across Corporate Europe, Despite Resilient Economy

For Executives Only, CEOs Amass Billions in Savings With ‘Top Hat’ Plans

Getting an MBA Closes the Gender Pay Gap—for a Little While

Job Prospects for Black Workers Have Never Been Better—In Ways That Might Last

American Workers Testing Positive for Marijuana Reaches 25-Year Record

The Scramble to Take Over What Bed Bath & Beyond Left Behind

Why Wealthy Homebuyers Are Flocking to Puerto Rico

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Morning News: May 17, 2023
Eddy Elfenbein, May 17th, 2023 at 4:35 am

EU States Approve World’s First Comprehensive Crypto Rules

China’s Recovery Loses Steam, Signaling Trouble for Global Economy

U.S. Tech Espionage Team Unveils First Cases Involving China and Russia

UBS Sees $35 Billion Gain on Credit Suisse, Warns of Legal Costs

‘Foreign Investors Are Back’: Japan Stocks Surge To Their Highest Since 1990

Wall Street’s Biggest Banks Face a Harsh Reality Check in China

Default Fears Rattle Main Street Investors

JPMorgan Asset Says Markets Are Right to Bet Fed Cuts Are Coming

Shoppers Boosted Retail Sales in April, Reversing Two Months of Declines

What Everyone—Except the U.S.—Has Learned About Immigration

America’s Biggest Source of Jobs Is Cooling Off

Americans Are Falling Behind on Their Bills

OpenAI’s Sam Altman Urges A.I. Regulation in Senate Hearing

The IRS Is Building Its Own Online Tax Filing System. Tax-Prep Companies Aren’t Happy

Burning Man Becomes Latest Adversary in Geothermal Feud

Drug Shortages Near an All-Time High, Leading to Rationing

Elon Musk Says Tesla Will Try Advertising

Siemens Raises Fiscal 2023 Guidance After 2Q Profit Soared

Here’s How Much Wealth You Need to Join the Richest 1% Globally

Taco Bell is Fighting to Cancel the ‘Taco Tuesday’ Trademark

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CWS Market Review – May 16, 2023
Eddy Elfenbein, May 16th, 2023 at 7:08 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.”)

The Stock Market Is Eerily Quiet

There’s an adage on Wall Street that investors should “sell in May and go away.” There’s some historical evidence to back that up.

A few years ago, I ran through the entire history of the Dow Jones Industrial Average, going back to its start in 1896. What I found was that from May 6 until October 29, the Dow has gained an average of just 0.71%. For the rest of the year, from October 29 to May 6, the Dow has gained an average of 7.16%.

This means that roughly 10% of the Dow’s annual gain has come in one half of the year, while 90% has come during the other half. Well, we’re now in the slow half. Of course, the stock market has already gone more than 16 months without hitting a new high.

What’s been really striking lately is how lethargic this market has been, especially with all the recent talk of an interest rate-hiking pause and the debt ceiling standoff and lingering fears of more regional banks going kaput. Yesterday, the stock market had its lowest volume since August (excluding the half day after Thanksgiving).

Notice in the chart above how narrow the market has become. What’s more is that the S&P 500 hasn’t posted a weekly gain or loss of more than 1% for six weeks in a row. It seems like every day, the market closes about where it started. On 29 of the last 32 trading days, the S&P 500 has closed within 1% of 4,130. There’s just not much action in either direction.

April Retail Sales Grew by 0.4%

Will that change soon? There are no guarantees, but there’s growing evidence of weakness in the economy.

This morning, we got the retail sales report for April, and it came in less than expected. I like to keep a close eye on this report because it tells us what kind of mood shoppers are in. This is important because consumers represent about 70% of the economy.

Last month, retail sales grew by 0.4%. That wasn’t so hot. Economists had been expecting growth of 0.8%. If we exclude auto sales, then retail sales were up by 0.4% which matched estimates.

The April numbers weren’t that bad compared with recent months. In March, retail sales dropped 0.7%. April was the first positive month for retail sales since January.

The problem is that retail sales are coming in largely inline with inflation. Over the last year, retail sales are up by 1.6%, but that’s less than one-third the inflation rate of 4.9%. In other words, people are buying the same volume of stuff; they’re just paying more per unit.

A 0.8% drop in gasoline sales held back the spending figures. Sporting goods, music and book stores posted a 3.3% decline, while furniture and home furnishings saw a 0.7% drop.

Miscellaneous store retailers led gainers with a 2.4% increase, while online sales rose 1.2% and health and personal care retailers saw a 0.9% rise. Food and drink sales climbed 0.6% and were up 9.4% on a 12-month basis.

Except for a blow-out report in January, many of the recent retail sales reports have been rather weak.

We also got the industrial production report for April. It showed an increase of 0.5%. That’s not bad. Economists had been expecting an increase of just 0.1%.

Some Federal Reserve members have been pushing back on the idea of an interest rate pause. Yesterday, Raphael Bostic said he thinks another rate hike is more likely than a rate cut. So far, the futures market isn’t going along with that idea. For now, I’m in the “pause” camp, but I’m afraid the regional bank mess isn’t altering the Fed’s outlook.

A survey by Bank of America found growing pessimism from investors. According to the survey, money managers have their bond allocation at the highest in 14 years. Nearly two-thirds of those polled expect the economy to get weaker. One encouraging takeaway is that most respondents expect a soft landing.

Home Depot Posts Worst Sales Miss in 20 Years

Also today, we got the earnings report from Home Depot (HD) and it was pretty lousy. The quarterly HD earnings report is, in my opinion, a better indicator of the economy than any government report. Just about every home contractor or do-it-yourselfer can be found in the aisles of your local HD.

Simply put, if HD isn’t doing well, then the economy is probably not doing well. (To be fair, I’d include Lowe’s as well.)

For its Q1, Home Depot said it made $3.82 per share. Although that was a two-cent beat, it’s still down from $4.09 per share from last year. HD’s revenue fell 4.2% to $37.26 billion. This was the company’s biggest revenue miss in more than 20 years. Home Depot also lowered its fiscal year sales forecast.

What went wrong? The company said that folks are buying fewer big-ticket items. Instead, consumers are taking on smaller projects. HD was also hurt by colder weather and falling lumber prices. Charlie Bilello notes that in the last two years, lumber prices are down more than 80%.

This was the second quarter in a row that HD missed its revenue forecast. Before that, it beat the Street’s revenue forecast for 12 straight quarters.

By the way, one odd quirk of the Dow Jones Industrial Average is that it’s not weighted by market cap. Instead, it’s weighted by price. As a result, Home Depot has a much greater influence on the index than Walmart does. In fact, HD has about twice the weighting as Walmart even though Walmart does about four times the sales.

HD said that customer transactions were down 5% but the average ticket is about the same. People are literally paying more and getting less. Home Depot now expects full-year sales to be down 2% to 5%. That’s down from its previous forecast for flat sales. Shares of HD fell as much as 4% in today’s trading although it recovered a bit before the closing bell.

Lowe’s is due to report next week. Its shares were down today in sympathy with HD. That’s common on Wall Street. Traders assume that problems in one company must be present in every competitor. I found that not to be the case. For next week, Wall Street expects LOW to report $3.46 per share.

Stock Focus: U.S. Lime and Minerals

This week, I want to revisit a stock I first told you about in January, U.S. Lime and Minerals (USLM). The stock is up more than 22% since then.

U.S. Lime is one of those off-the-beaten-path stocks that I love. Despite its small size ($1 billion in market cap) and archaic sounding name, USLM is a very strong company.

So what does U.S. Lime do? As the name suggests, lime. Lots of it. The company “is a manufacturer of lime and limestone products, supplying primarily the construction (including highway, road and building contractors), industrial (including paper and glass manufacturers), metals (including steel producers), environmental (including municipal sanitation and water treatment facilities and flue gas treatment processes), roof shingle manufacturers, agriculture (including poultry and cattle feed producers), and oil and gas services industries.”

Best of all, no one on Wall Street follows the stock. In January, I told you that I pegged Lime’s Q4 earnings at $1.60 per share. I wasn’t even close. Lime earned $1.90 per share.

The stock has been an amazing performer, and not just recently. Twenty years ago, you could have picked up one share for less than $3. Today that same share is going for more than $180 and, it just hit another new all-time high. You’d think some firm on the Street would start coverage. Alas, that’s not the case.

Two weeks ago, Lime released a very strong Q1 earnings report. Revenues jumped 31% to $66.8 million. Lime’s gross profit grew by 65% to $24 million, and net income nearly doubled to $3 per share. Check out this chart:

I’m not adding Lime to our Buy List but I want to show investors that there are lots of unexpected places to find great stocks. Many of the best stocks shy away from the limelight.

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 more info on our ETF, you can check out the ETF’s website.
Morning News: May 16, 2023
Eddy Elfenbein, May 16th, 2023 at 7:05 am

The Green Energy Transition Has a Chilean Copper Problem

Can the World Make an Electric Car Battery Without China?

China’s Youth Unemployment Tops 20% Amid Signs of Stalling Recovery

China’s Waning Economic Recovery Spurs Calls for Stimulus

Yellen Warns ‘Time Is Running Out’ Ahead of Biden-McCarthy Meet

Shrinking Debt-Ceiling Window Has Markets on Edge as Yellen Reiterates June Warning

Investors Most Pessimistic So Far This Year, BofA Survey Shows

Workers Are Still Needed, but Many Small Businesses Have Slowed Hiring

The Return to the Office Has Stalled

A Lot of Offices Are Still Empty — and It’s Becoming a Major Risk for the Economy

OpenAI Chief Goes Before US Congress to Propose Licenses for Building AI

Microsoft Says New A.I. Shows Signs of Human Reasoning

A 32-Year-Old Nears Billionaire Status by Using AI to Broker Japan Mergers

Microsoft-Activision Gets Sliver of Hope as EU Defies UK

Capital One Shares Up After Billionaire Investor Buffett’s Near $1 Billion Bet on Bank

Amgen’s $28 Billion Horizon Deal Will Be Challenged by FTC

Wells Fargo to Pay $1 Billion in Class-Action Lawsuit

Former Silicon Valley Bank CEO: ‘I Am Truly Sorry’

Home Depot Just Forecast Weak Consumer Demand — Here’s What That Could Mean for the Rest of the Economy

Twitter’s New CEO Keeps Repeating 1 Word. It’s a Brilliant Lesson in How to Create Change

Investigation Behind Huge Air-Bag Recall Demand Took 8 Years

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Morning News: May 15, 2023
Eddy Elfenbein, May 15th, 2023 at 7:12 am

Why Some Investors Are Betting on China’s Recovery but Avoiding Chinese Shares

G-7 Leaders Expected to Take Aim at Chinese ‘Economic Coercion’

The Rent Portion of CPI Is a Reminder of Its Impressive Pointlessness

Plunging Tax Revenue Accelerates Debt-Ceiling Deadline

Debt-Limit Default Risk Is Higher Than Ever. How Can You Safeguard Your Wealth?

The Greatest Wealth Transfer in History Is Here, With Familiar (Rich) Winners

The CME’s Terry Duffy on the Big Risks He’s Seeing Now

CEO Pay Packages Fell Sharply in 2022 as the Stock Market Sank

The UBS Banker Ermotti Is Counting On to Clean Up Credit Suisse

Korea’s Battery Makers Embrace LFP Cells as China Strides Ahead

U.S.-Made Technology Is Flowing to Sanctioned Russian Airlines

Why Some Countries Find It Hard to Move Away From Fossil Fuels

The World’s Biggest Gold Miner Bets Big on Copper

Vice, Decayed Digital Colossus, Files for Bankruptcy

Nuclear Plant $16 Billion Over Budget Arrives for Atomic Revival

$14 Billion Deal to Create Mega-Pipeline Company

Drug Companies Are Minting Billions on Unproven Treatments With FDA Shortcut

Climate Change Brings Warmer, Wetter Weather to Trinidad

America’s Snacking Binge Shows No Signs of Slowing

The 28-Year-Old LVMH Heir Turning TAG Heuer Into a Billion-Dollar Brand

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Morning News: May 12, 2023
Eddy Elfenbein, May 12th, 2023 at 7:05 am

How an Aging Armada and Mystery Traders Keep Russian Oil Afloat

‘Still a Long Way to Go’: UK Finance Minister Warns Inflation Remains Far Too High

Fed Official Signals Support for Further Rate Increases

Waller Says Fed Shouldn’t Let Climate Concerns Distract From Overall Stability Risks

The Debt Ceiling Dispute Raises the Risks for ‘Risk-Free’ U.S. Bonds

Yellen Says Only Good Outcome Is Congress Raising Debt Ceiling

Wall Street Loads Up on Doom Hedges as Countdown to X-Day Begins

Big US Banks to Pay Billions to Replenish Failure Fund

Jamie Dimon Says Enough Is Enough

Tales From the Crypto Winter

Ken Griffin’s Hand-Picked Math Prodigy Runs Market-Making Empire

Shipping Billionaires Race to Invest Pandemic-Era Fortunes

Fake Billionaire Hedge Fund Manager Ran Ponzi Scam, US Says

SoftBank Is Said to Pitch $10 Billion IPO of Chip Designer Arm

China Orders Tesla to Recall 1.1 Million Vehicles Over Braking Risks

Disney Stock Tumbles as Streaming Losses Spook Investors

Adidas Finally Decides What To Do With ‘Millions’ Of Kanye West’s Shoes After Cutting Ties With Rapper

Back-to-Office Battles Underscore a Change in Workplace Authority

How a Solo Gig Can Give You a Stronger Retirement

Persons You Should Tip and How Much

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Morning News: May 11, 2023
Eddy Elfenbein, May 11th, 2023 at 7:05 am

How the U.S. Is Trying to Block China’s Control of Ports Around the Globe

Luxury Imports to Russia Take a Detour Around Sanctions — Through Dubai

Bank of England Raises Interest Rates to Highest Level in 15 Years

US Credit Crunch Didn’t Start with SVB Collapse, and May Not End There

Why the April Inflation Report Reinforces the Fed’s Plans to Pause

Yellen Says Debt Default Would Hurt US International Leadership

How Past Debt Limit Crises Shaped Biden’s No-Negotiation Stance

We May Be Getting Used to High Inflation, and That’s Bad News

Food Prices Were Flat in April, Report Shows

Almost Every Powerful Economist We Have Went to 1 of 6 Schools. That’s Not Great!

BlackRock Overhauls Leadership of $300 Billion Credit, Private Asset Unit

Aramco Postpones Giant Energy-Trading IPO Over Market Volatility

‘De-Americanize’: How China Is Remaking Its Chip Business

U.S. Focuses on Invigorating ‘Chiplets’ to Stay Cutting-Edge in Tech

SoftBank Posts Record $32 Billion Loss at Its Vision Fund Tech Investment Arm

Robinhood Stock Rises After Earnings. Its Hottest Product Now Is Cash

The Executive Keeping Tesla Rolling Isn’t Elon Musk

Disney Makes Tough but Necessary Choices on Streaming

Workers Are Happier Than They’ve Been in Decades

Work-Life Balance Is Their Second Priority. Work Is Their First

The Plot to Steal the Other Secret Inside a Can of Coca-Cola

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Morning News: May 10, 2023
Eddy Elfenbein, May 10th, 2023 at 7:06 am

The Elusive Fix for China’s Budget Crisis

US Default Insurance Cost Eclipses Brazil, Mexico as X-Day Nears

What Happens to Social Security Benefits if the U.S. Hits the Debt Limit?

How Might the Government Avoid Default? Biden Offers Clues

How Wall Street is Preparing for a Debt Ceiling Showdown

This Is What Would Happen if Biden Ignores the Debt Ceiling and Calls McCarthy’s Bluff

‘Stop Printing Money.’ How Voters Would Solve the Debt-Ceiling Standoff

The Slowdown in Inflation May Have Ended in April

First Citizens Deposits Beat Estimates in Wake of SVB Deal

ABN Amro Q1 Net Profit Jumps 77% on Higher Rates and Lower Costs

‘Nearshoring’ Push Is Fueling Tech Job Demand in Latin America

Family Builds $900 Million Brazil Farming Empire After 935% Gain

US Airlines Are Sitting Out China’s Reopening

Boeing Wins 737 MAX Jet Order Worth Up to $40 Billion From Ryanair

How Close Is Too Close for a Flight Connection?

Home Prices Fell in Third of the U.S. During First Quarter

The Home Buyer’s Quandary: Nobody’s Selling

The Companies Trying to Make Live Shopping a Thing in the U.S.

Toyota Targets 10% Profit Jump, Robust EV Sales as Chip Woes Recede

Ford Reveals Redesigned Ranger Pickup with New Raptor Performance Model

Rivian Reports a Narrower-Than-Expected Quarterly Loss, Reaffirms EV Production Target

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CWS Market Review – May 9, 2023
Eddy Elfenbein, May 9th, 2023 at 6:55 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 Unemployment Rate Is at a 54-Year Low

The labor market is as strong as ever. Some folks thought we’d finally see some weakness in jobs, but that is not the case. At least, not yet. The important fact here is that it takes time for the Fed’s policies to work their way to the regular economy.

On Friday, the government reported that the U.S. economy created 253,000 net new jobs last month. That was above estimates for 180,000. The unemployment rate fell to 3.4%. If we work out the decimals, we now have the lowest jobless rate since May 1969 (although the methodology has changed).

The details of the report were pretty good. The broader U-6 rate is at 6.6%. The unemployment rate for African Americans fell to 4.7% which is the lowest since the government started tracking this data in 1972.

It’s also important to look at the workforce participation rate. The Labor Department only counts a person as being unemployed if he or she is actively looking for work. If you’ve given up looking, then you’re no long considered unemployed.

One problem with the workforce participation rate is that it can be heavily influenced by demographics. In this case, that means America’s growing ranks of retired folks. That’s why I prefer to look at the labor force participation rate for prime working-age adults (meaning ages 25 to 54). For April, that was 83.3%. That’s very close to a 21-year high. Ryan Detrick points out that prime working-age employment is also at a two-decade high.

The weak spot continues to be wages. For April, average hourly earnings rose by 0.5%. That’s not that bad, but the problem is that inflation is eating up much of those gains. Over the past year, average hourly earnings are up 4.4%. Tomorrow, the government will release its inflation data for April. I expect to see the trend of declining inflation continue.

What’s the Fed’s Next Move?

Last week, the Federal Reserve decided to raise interest rates for the tenth time this cycle, but this could be the last increase for some time. In previous policy statements, the Fed said that “some additional policy firming may be appropriate.” In last week’s statement, those words were gone.

As you know, dear reader, I’m fluent in the esoteric, jargon-laden language known as Fedspeak. Trust me, those missing words are a big deal. This time, the Fed said that it will “closely monitor incoming information and assess the implications for monetary policy.” This means they’re going to cool off for a few months.

Futures traders took the hint. The Fed meets again in mid-June and the futures prices currently show an 82% chance that the Fed will leave rates alone. For the meeting after that, the one in late July, traders see a 57% chance that rates will be left alone.

Then it gets interesting, For September, the odds are in favor of a rate cut. In other words, traders see the Fed taking back its rate hike from five months before. It’s no secret why: Wall Street is afraid of a recession. The chart above shows the spread between the two- and ten-year Treasuries. It’s been negative for 10 months. A negative spread has often been a precursor of a recession.

Earlier this week, Austan Goolsbee, the top banana at the Chicago Fed, said “I think you have to say that recession is a possibility.” I think that’s the case and financial markets are reflecting that reality.

It’s not all dreary news. One positive note is that this has been a good earnings season. Most of the numbers are in, and Wall Street has been pleasantly surprised with the resilience of corporate earnings.

Q1 Earnings Summary

Here are some numbers from FactSet. So far, 85% of companies in the S&P 500 have reported results. Of that, 79% have topped their earnings estimates. That’s above the 10-year average of 73%. (That’s right. On Wall Street, you’re expected to beat expectations.) The average “beat” has been by 7.0%. That’s also above the 10-year average of 6.4%.

At the current rate, it looks like Q1 earnings will be down about 2.2% from last year’s Q1. This would be the second quarterly decrease in a row. While earnings are down, not too long ago, Wall Street was expecting a larger drop of 6% or 7%. We may not be out of an earnings recession just yet. Wall Street currently forecasts an earnings drop of 5.7% for Q2.

In particular, strong earnings from the Tech and Healthcare sectors have aided the overall earnings environment this season.

Of the companies that have reported, 75% have beaten Wall Street’s revenue forecast. That compares favorably with the 10-year average of 63%. On average, revenues are 2.7% higher than estimates. That’s 1% higher than the 10-year average.

Revenue for Q1 2023 is on pace to be 3.9% above last year’s Q1. That would be the slowest growth rate since Q4 of 2020.

Wall Street expects to see earnings growth return later this year. As I mentioned before, earnings are expected to fall by 5.7% for Q2. For Q3, analysts expect earnings to grow by 1.2% and that will increase to 8.5% in Q4.

I should mention that Wall Street analysts have been known to be somewhat less than precise with their forecasting abilities. FactSet notes that the forward P/E Ratio for the S&P 500 is 17.7. That’s below the five-year average of 17.3.

Trex Jumps 8% on Earnings Beat

After the close on Monday, our favorite deck stock, Trex (TREX), reported very good results for Q1. The stock rallied more than 8% on Tuesday to reach a nine-month high.

I should be humble in talking about our track record with Trex. We added the stock in 2000 and it was an instant home run. Trex was the top-performing stock on our Buy List in 2000 and again in 2001.

Then came the Fed. As the central bank raised interest rates, Trex’s business plunged, and the shares followed. Last year, Trex was our worst-performing stock by far, but we held on.

That’s why Monday’s report was so important. While Trex’s business is still down from last year, the company is healthy again and it continues to deliver profits.

For Q1, Trex has sales of $239 million which was $1 million ahead of expectations. The company earned 38 cents per share which beat the Street by four cents per share.

Thanks to today’s rally, Trex is again our top-performing stock this year (+44%). Not only that, but Trex has beaten the overall market since we first added it more than three years ago, and that includes the disaster year of 2022. This is an important lesson for investors. All companies go through difficult periods, but the strong ones pill through.

“Our performance in the first quarter demonstrated the broad-based appeal of our product line and the continued attractiveness of the outdoor living category as an ongoing secular trend. Supported by our industry-leading brand, manufacturing efficiency, and the strength of our decades-long relationships with best-in-class channel partners in the industry, Trex continued to generate industry-leading margins and profitability,” said Bryan Fairbanks, President and CEO of Trex.

Now for the best news. Trex sees Q2 earnings coming in between $310 million and $320 million. That’s above Wall Street’s forecast for $309 million.

Also, Trex’s Board of Directors approved a big repurchase program of up to 10.8 million shares. That’s 10% of all the outstanding shares. This program has no expiration date.

Shares of Trex closed today up 8.15% to reach $60.89. I’m raising our Buy Below to $65 per share.

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 more info on our ETF, you can check out the ETF’s website.