Tag: STOCKS

Stocks have enjoyed yet another impressive bear market rally with a quick 8% gain from the recent lows. However, as Q3 earnings season unfolds there are more clues that things are getting worse and stocks have not yet touched bottom which is likely closer to 3,000 for the S&P 500 (SPY). Why is that? Read on below for the full story.

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The recent bear market rally is not surprising. That is because stocks dropped as far as they should until there is greater proof of the pain that is to come in the economy. In particular, investors need to see more glaring weakness in 2 key areas before pressing lower: corporate earnings and employment.

Well, here we are in the midst of Q3 earnings season with early results definitely on the weaker side. We will dig into the stats to understand what it tells us about the market outlook and why I remain decidedly bearish.

All that and more is on the menu for today’s Reitmeister Total Return commentary.

Market Commentary

Yes, we are having another bear market rally as stocks have bounced nearly 8% from the recent lows. Any student of past bear markets will see that each had several meaty bounces before the next leg lower.

Meaning there is no real reason to give this bounce any merit as the beginning of the next bull market. That is because investors cannot accurately call bottom yet as we are still in the midst of things getting worse. Meaning we need to have a better sense of how bad things will truly be in the end. (More on that topic a little bit later in today’s commentary).

Now I want to dig into the early results from Q3 earnings season to see what it tells us about economic conditions and market outlook. To put things into perspective I want to share with you this morning’s insights from Nick Raich of EarningsScout.com followed by my thoughts:

• “In total, 170 companies in the S&P 500 have now reported 3Q 2022 results.
• The overall earnings results are not making us optimistic that the worst will soon be over.
• We are discouraged S&P 500 (SPY) EPS growth expectations are not coming down more.
• As we see it, mild estimate cuts reflect too much optimism and will only prolong the negative EPS estimate revision trend.
• Stay underweight stocks.”

Please note that Nick and I spent many years together at Zacks Investment Research where we understood that the earnings outlook was the #1 predictor of stock price movements (both the overall market and individual stocks).

There is no way to look at the reductions in earnings outlook in a positive light. Note that for Q3 and Q4 the earnings growth rate has been cut in half since earlier in the year. Whereas the first half of 2023 earnings outlook is moving more and more towards recessionary levels.

For as bad as these reductions are, please note that the average recession comes with a 20% decrease in expected earnings. Yet at this stage Q2 of 2023 has only slid to a -1.78% outlook. Directionally the slide into the red is a negative. However, as Nick pointed out “We are discouraged S&P 500 (SPY) EPS growth expectations are not coming down more.”

Nick is not saying that because he likes bear markets. It is because he knows that you first need to see the worst of the estimate revisions take place. Shortly after that the market usually finds bottom and the next bull market begins.

The point is that Wall Street analysts continue to be too optimistic about what the future holds. The sooner they appreciate the full extent of the pain on the way…the sooner this market will tumble to its lowest levels…the sooner we can get back to the more joyous topic of the next long term bull market.

Now let’s transition to the uniquely bad news that sprang from Google’s earnings miss Tuesday night.  And reiterated with Meta’s earnings miss on Wednesday night.

This is not just about these 2 companies. It’s really about the steps taken on the way to recession.

Consider this…when corporate executives are fearful of the future economic outlook, the first lever they pull on is to reduce ad spending. That is because if the economy worsens, then the rate of return on that ad spend will be poor.

Seeing what happened to ad revenue reliant businesses like Google and Meta, it means that step 1 of corporations preparing for recession is taking place.

After that they start to consider holding off on other key investments in the business, like computer upgrades. We have already heard from enough folks in the corporate technology market like AMD that weakness is starting to take place.

The next and most painful leg of the downward spiral is employee layoffs. That has not happened yet…but no doubt the key indicator that many investors are watching the closest. Once the employment market rolls negative that momentum will carry for a while because of this vicious cycle process:

Lower employment > lower income > lower spending > lower profits > lower of cost > lower employment (rinse and repeat til bottom is found).

Given that on Monday we saw the PMI Composite Flash drop from a bad 49.5 last month to terrible 47.3 this month (below 50 = contraction) is even greater signs of the economic slowdown coming together. Most compelling of that report was the surprising weakness in services which had been holding up fairly well til now. All in all, this report shows more of the recessionary pieces of the puzzle falling into place.

This is why I remain decidedly bearish as there are more dominos to fall. Typically, you cannot find bottom on the stock market until investors have enough facts in hand to stare down into the abyss of the recession and predict how deep is bottom. From that stage investors can envision the eventual return of economic expansion which begets the dawning of the next bull market.

Since those facts are not yet in hand…then I call BS on the latest rally as there is no way for investors to feel comfortable enough with the forward looking picture to predict bottom and eagerly await the next economic expansion and bull market.

I have previously said that bottom is likely in the range of 2800 to 3,200 for this bear market given historical precedents. Hard to pin point more til we truly appreciate the full extent of the recession that is to come.

However, I thought it would be interesting to come at this from the earnings perspective. Typically forward looking earnings will decline 20% during a recession. From a peak of $240 for the S&P 500 (SPY) that EPS outlook would be trimmed 20% down to $192.

Now consider that the PE for the market usually ends under the long term 15.5 historical average PE as the bear claws its way to bottom. So 15.5 PE x $192 estimated earnings = 2,976 for S&P 500. That is right in the middle of the aforementioned range that I have been predicting.

Putting it altogether, we are in the midst of another bear market rally before the next leg lower. Thus, the word to the wise is to align your portfolio for much more downside to come.

What To Do Next?

Discover my special portfolio with 9 simple trades to help you generate gains as the market descends further into bear market territory.

This plan has been working wonders since it went into place mid August generating a robust gain for investors as the S&P 500 (SPY) tanked.

If you have been successful navigating the investment waters in 2022, then please feel free to ignore.

However, if the bearish argument shared above does make you curious as to what happens next…then do consider getting my updated “Bear Market Game Plan” that includes specifics on the 9 unique positions in my timely and profitable portfolio.

Click Here to Learn More >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return

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SPY shares rose $0.89 (+0.23%) in after-hours trading Wednesday. Year-to-date, SPY has declined -18.64%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

More…

The post Investors: The Worst is Yet to Come appeared first on StockNews.com

Bristol Myers Squibb Company (NYSE: BMY) posted a small gain after an earnings report; the company beat its top and bottom lines. The pharmaceutical company delivered earnings per share (EPS) of $1.99 on revenue of $11.22 billion. That was better than the analyst forecast for $1.83 EPS on revenue of $11.18 billion. 

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The results were lower when compared to the same quarter in the prior year but both were narrow losses. Earnings per share (EPS) was off by a penny and revenue was down 3%.  

Growth investors may feel disappointment with the company’s results. However, Bristol Myers Squibb has still posted strong results that establish it as an attractive value stock, even if it may not be as undervalued as it once appeared. 

BMY Stock Remains a Strong Fundamental Choice 

Bristol Myers Squibb has a profit margin of over 14%, which is better than 86% of the companies in its sector. Additionally, the company’s return on assets is 6.59%, better than 91% of the industry.  

The company continues to post a double-digit free cash flow (FCF) yield. Some of that FCF goes toward its dividend, which the company has increased in each of the last 12 years. These numbers take on added significance when you consider that the company expects to post single-digit growth in both revenue and earnings over the next five years.  

The Pipeline Keeps Flowing 

In the last year, Bristol Myers Squibb has launched three new drugs. Each should deliver over $4 billion in non-risk adjusted sales by 2029. The company also expects to receive four more approvals by the end of 2023. The company also has a robust pipeline that includes at least 50 candidates.  

What’s the significance for investors?
Companies such as Bristol-Myers Squibb only enjoy patent protection for a limited time, which was on display in this earnings report. The company said that sales of Revlimid, its blockbuster cancer drug, were impacted by generic competition. Revlimid was one of three drugs, including Eliquis and Opdivo, that combine for approximately 66% of the company’s quarterly revenue. Opdivo just received encouraging results in a clinical trial that could expand its use in treating melanoma at earlier stages. 

The company did reaffirm its guidance for annual sales for Revlimid, for sales between $9 and $9.5 billion. Chief financial officer David Elkins told Reuters he expects the actual number to come in at the upper end of that range.  

A Safe Port for Volatile Times 

BMY stock has gone up 23% in the last five years. However, it’s clear that the bulk of that gain has come in 2022. This is probably due to investors fleeing to safety. In that regard, Bristol-Myers Squibb delivers consistent, profitable revenue. Plus, the company delivers a dividend that pays out $2.12 on an annual basis and has a yield just under 3%.  

BMY stock recently has bounced above its 10-, 20- and 50-day moving averages. However, the recent market rally has started to stir the animal spirits in the market. If that’s the case, then growth investors may start to look at risk-on assets. That may create an opportunity for value investors who should look at every dip as an opportunity to buy shares of this still-undervalued stock.  

Any time an industry is home to top-performing stocks, there’s always opportunity among companies that operate in industries related to the industry’s big names. Array Technologies (NASDAQ: ARRY) makes the ground-mounting systems used in solar energy installations. 

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Sure, solar companies like large-cap Enphase (NASDAQ: ENPH) and mid-cap First Solar (NASDAQ: FSLR) get more attention than Array, which has a market cap of just $2.4 billion.

Within the solar energy sub-industry, those are the only two U.S.-listed companies outperforming Array at the moment, and only by slim margins. 

Array has posted a gain of 30.96% in the past three months, far surpassing the most appropriate benchmark, the S&P 600 small-cap index, tracked by ETFs such as the SPDR Portfolio S&P 600 Small Cap ETF (NYSEARCA: SPSM). 

That index has dropped 20.95% year to-date. In contrast, Array is up 2.17% in 2022. That’s not so much to cheer about, but the not-so-distant future for Array could potentially bring more gains, if analysts are correct and if tax incentives deliver the punch that’s expected. 

Array qualifies as a newly public company, having made its public-markets debut exactly two years ago, in October 2020. That’s an encouraging sign, as companies often post some of their biggest price gains within the first several years of going public.

Like other companies in the solar industry, Array is well positioned to get a boost from sales due to the Inflation Reduction Act, which includes incentives for adding solar panels to businesses and residences. 

Albuquerque, New Mexico-based Array doesn’t make panels, but instead focuses on mechanical gear that helps maximize the panels’ performance. 

Gear Helps Panels Generate More Power 

Array is among the biggest makers of gear called trackers, which align solar panels to capture the best angle toward the sun. This adjustment allows the panels to generate as much as 25% more power than more conventional mounting gear. 

According to the company’s IPO filing, trackers also deliver a 22% lower levelized cost of energy than “fixed tilt” mounting systems. Trackers cost less than ground-mounted solar projects. The company also said that about “70% of all ground-mounted solar energy projects constructed in the U.S. during 2019 utilized trackers,” according to its sources.  

Other publicly listed companies that make trackers include two small companies, Beam Global (NASDAQ: BEEM), which has a market cap of just $121 million and FTC Solar (NASDAQ: FTCI), which checks in at $205 million. 

Neither of those companies is profitable, although FTC is expected to book net income of $0.26 per share next year, and Beam has been growing revenue at a fast clip in recent quarters.

Analysts See 2022 Earnings Growth

Array has been profitable since 2019, but has an uneven history of earnings growth. Earnings dropped sharply in 2021, but Wall Street sees that trend reversing this year, expecting $0.31 per share for the full year, an increase of 31%. In 2023, analysts see earnings rising another 206%, to $0.95 per share. 

According to MarketBeat earnings data for Array, the company has an uneven history when it comes to meeting or missing net income and revenue views. However, it beat both top- and bottom-line views in the past two quarters. 

While a company’s earnings history matters, and can have some predictive value, the new tax incentives as part of the recently passed climate bill could be a game changer for Array and other solar companies. 

Toward that end, analysts have a “moderate buy” rating on the stock and a price target of $22.38, a potential upside of 39.64%. 

Array’s chart shows a correction that began in August, as the stock pulled back from a high of $24. Shares closed Tuesday at $16.03, up $0.89, or 5.88%. But a gap-up in late July, followed by another on August 10 still combine to create that three-month gain.

When the company reports its third quarter on November 8, after the bell, Wall Street expects earnings of $0.10 per share on revenue of $397.18 million. Both would be significant year-over-year increases. 

Major airline carrier American Airlines Group (NASDAQ: AAL) has returned to profitability with record third-quarter revenues surpassing 2019 pre-pandemic levels. The whole airline industry has been recovering as evidenced by the earnings releases from Delta Air Lines (NYSE: DAL), Southwest Airlines (NYSE: LUV), and United Airlines (NASDAQ: UAL). It’s also reflected in the surging demand for Boeing (NYSE: BA) airplanes. Incidentally, American Airlines has no MAX 7 or MAX 10 aircraft on order, which isolates it from any regulatory changes. American Airlines stands out as its flight schedule was more than 25% larger than its nearest competitor as measured by total departures. The metrics were impressive for the nation’s largest airline network averaging over 5,100 daily departures. It’s regional partners surpassed over half a million flights with an average load factor of 85.3%. Demand remains “very strong” for both domestic and short-haul international travel. Long-haul travel is expected to improve as travel restrictions get lifted around the world. The strong U.S. dollar is also making it very attractive for Americans looking to travel overseas despite inflationary pressures. Falling oil prices have also helped to bolster margins.

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Hybrid Work Pumping Demand

The Company has noted that the new pandemic spawned the normal of hybrid and remote work has resulted in a permanent lift in travel demand. Consumers are not restrained to travel by money but by time. Hybrid work has enabled consumers to combine both leisure travel with work since they aren’t restricted to an office. They are taking more short-haul excursions turning weekends into mini holidays which still getting work done. It also doesn’t hurt to be able to write off a piece of the leisure travel as a business expense. While capacity hasn’t returned to pre-pandemic levels, higher pricing is helping to offset this lacking metric.

Robust Rebound

On Oct. 22, 2022, American Airlines released its fiscal third-quarter 2022 results for the quarter ending September 2022. The Company reported an earnings-per-share (EPS) profit of $0.69 excluding non-recurring items versus consensus analyst estimates for a profit of $0.56, a $0.13 beat. Revenues grew 50.1% year-over-year (YoY) to $13.46 billion meeting analyst estimates. This reflects the post-pandemic off-the-chart demand generating all-time highs in the summer months. The Company plans to pay down $15 million of total debt by the end of 2025. American Airlines CEO Robert Isom commented, “The American Airlines team continues to deliver on our goals of running a reliable operation and returning to profitability. Demand remains strong, and it’s clear that customers in the U.S. and other parts of the world continue to value air travel and the ability to reconnect post-pandemic. American has the youngest, most fuel-efficient fleet among U.S. network carriers, and we are well-positioned for the future because of the incredible efforts of our team.”

Good Times Ahead

American Airlines expects fiscal Q4 2022 EPS to come in between $0.50 to $0.70 versus $0.27 consensus analyst estimates. The Company expects Q4 2022 revenues to rise 11% to 13% over 2019 to $12.56 billion to $12.78 billion beating consensus analyst estimates of $12.61 billion.

Recent News and Events

On Feb. 24, 2022, Russian forces invaded Ukraine and prompted many events impacting United Airlines and the airline industry. On Feb. 28, 2022, the European Union (EU) announced that airspace will be closed to every Russian plane including private planes. Crude oil prices surged to 13-year highs above $130 per barrel in March impacting fuel prices. On March 1, 2022, The U.S. government banned Russian flights from American airspace following up on actions

Here’s What the Charts Say

Using the rifle charts on the weekly and daily time frames provides a precise view of the playing field for AAL stock. The weekly rifle chart downtrend bottomed out at the $11.68 Fibonacci (fib) level. The weekly rifle chart breakdown has stalled as the weekly 5-period moving average (MA) went flat at $12.65 followed by the falling weekly 15-period MA at $13.60. Shares spiked on earnings to enable the weekly stochastic to attempt to bounce off the 20-band. The weekly 50-period MA overlaps the weekly upper BBs at $15.87 and weekly lower BBs are rising at $11.39. The weekly market structure low (MSL) buy triggered on a breakout above $13.29. The daily rifle chart uptrend is starting to stall as the daily 5-period MA slows at $13.61 and daily 50-period MA at $13.45. The daily 15-period MA is still rising at $12.93 support. The daily stochastic peaked and held above the 80-band temporarily as it decides to either cross back up or form a mini inverse pup plunge back under the 80-band. Attractive pullback levels sit at the $12.74, $12.48 fib, $11.93, $11.68 fib, $11.22, and $10.87 fib level.   

Be like Buffett and use the VIX to buy fear and sell greed in the SPY.

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The VIX finally closed below 30 on Friday and below the 20-day moving average of 31.20. It is also nearing the critical 27.50 area that served as serious upside resistance for most of September until it finally gave way. Earnings from tech bell weathers Apple (AAPL) and Microsoft (MSFT) next week and the Fed rate decision the following week will likely tell the tale regarding direction of both stocks and the VIX into year-end.

I had written an article in late August on how option prices can help predict future stock prices. I specifically used the VXN -or VIX of the NASDAQ stocks- to show how the big pullback in VXN equated to a short-term top in NASDAQ stocks (QQQ), as shown below.

But rather than just calling tops, using an IV based methodology can be a robust market timing tool to use to help discern turning points in the overall market from both a bullish and bearish perspective.

Remember, the VIX and VXN are both measures of 30-day implied volatility (IV) in the S&P 500 and NASDAQ 100 respectively. In this article I will explore how using the VIX can greatly aid in discerning the upcoming market movement for the S&P 500 (SPY)  both to the upside and the downside.

The chart below shows how extended moves higher in VIX towards 35 followed by subsequent weakness has been a bona-fide buy signal in SPY over the past year. Conversely, sharp drops lower in VIX with subsequent strength have been solid sell signals in stocks.

 

The table below summarizes the initial buy signal and subsequent sell signal based on this VIX methodology.

The total P/L for the 5 buy and sell signals is 35.86%, with an average gain of just over 7%. Worst gain was still 3%. Compare that to the overall loss of over 20% in the SPY over the past 12 months.

The average days held for each buy/sell signal was roughly a month. Total time held for all signals combined was less than half a year. So big gains in under 50% of the time using the VIX methodology compared to bigger losses holding SPY all the time.

A new buy signal was generated a few weeks ago as the SPY hit annual lows. No sell signal evident yet, but the unrealized gain on that latest buy signal is now over 5%.

Using the VIX to help tell whether the SPY is at a turning point is akin to the Warren Buffett adage to be greedy when others are fearful and fearful when others are greedy. Certainly, a little of the fear has come out of the market if VIX is any guide. Still haven’t reached the greedy level yet so stay tuned and see what happens over the coming weeks!

POWR Options

What To Do Next?

If you’re looking for the best options trades for today’s market, you should check out our latest presentation How to Trade Options with the POWR Ratings. Here we show you how to consistently find the top options trades, while minimizing risk.

If that appeals to you, and you want to learn more about this powerful new options strategy, then click below to get access to this timely investment presentation now:

How to Trade Options with the POWR Ratings

All the Best!

Tim Biggam

Editor, POWR Options Newsletter

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SPY shares closed at $374.29 on Friday, up $8.88 (+2.43%). Year-to-date, SPY has declined -20.28%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Tim Biggam

Tim spent 13 years as Chief Options Strategist at Man Securities in Chicago, 4 years as Lead Options Strategist at ThinkorSwim and 3 years as a Market Maker for First Options in Chicago. He makes regular appearances on Bloomberg TV and is a weekly contributor to the TD Ameritrade Network “Morning Trade Live”. His overriding passion is to make the complex world of options more understandable and therefore more useful to the everyday trader.

Tim is the editor of the POWR Options newsletter. Learn more about Tim’s background, along with links to his most recent articles.

More…

The post How To Use The VIX To Make Better Stock Picks appeared first on StockNews.com

Bull markets do not go straight up. There are plenty of down days, weeks and even months for the S&P 500 (SPY) added into the mix. Conversely bear markets do not go straight down. In fact, they have some pretty sizeable rallies that come along the way often clouding the picture of what comes next. This is why we call them “suckers rallies” as investors get sucked in…just before they get spit back out on the next leg lower. This is all to say we are still very much in a bear market with lower lows on the way. Here is why.

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The 24/7 investment media like CNBC needs to keep things interesting to keep you watching all in the name of selling more ads. Their favorite trick is to show the great importance of that day’s news and how it affected the S&P 500 (SPY).

That means that on Thursday they were telling people why things are so terrible and why stocks are down. And then Friday they put on a broad smile talking about how Fed whispers of potentially less stringent rate hikes led to a monster rally.

Interesting for sure…just not profitable advice.

Let’s talk about what is really happening…and why…and why stocks are still in a long term bear market battle with lower lows on the way.

Market Commentary

Stocks were floating around this past week until another shot was fired by the Fed to dampen the mood. I am talking about the mid-day Thursday comments from Philadelphia Fed President, Patrick Harker. Here the key excerpt from the CNBC article on the topic:

“Philadelphia Federal Reserve President Patrick Harker on Thursday said higher interest rates have done little to keep inflation in check, so more increases will be needed.

“We are going to keep raising rates for a while,” the central bank official said in remarks for a speech in New Jersey. “Given our frankly disappointing lack of progress on curtailing inflation, I expect we will be well above 4% by the end of the year.”

The latter comment was in reference to the fed funds rate, which currently is targeted in a range between 3%-3.75%.

“Sometime next year, we are going to stop hiking rates. At that point, I think we should hold at a restrictive rate for a while to let monetary policy do its work,” he said. “It will take a while for the higher cost of capital to work its way through the economy. After that, if we have to, we can tighten further, based on the data.”

Pretty much from that moment stocks reversed out of early gains to end firmly lower. The reason should be obvious. That we may not currently see the full measure of pain in the economy because the Fed’s work is FAR from over.

So if their efforts to date have not resulted in moderating inflation, then it will take much higher rates and likely much more damage to the economy to get the job done. And those hoping for a soft landing should start abandoning that flawed assumption.

I say that even as Friday there was a bounce for the “supposed” reason that some investors heard some talk at the Fed that would point to fewer rate hikes and less pain to the economy. Here is a CNBC article on that topic:

Stocks rally Friday as traders hope Fed rate hikes will slow down, Dow up 500 points

Sorry folks. I don’t give that much merit.

Remember that the Fed will always have internal debates on the pros and cons of any policy decision. The consensus outcome is what you see issued to the public followed by a speaking tour of Fed officials to give those comments additional weight and color.

Let there be NO DOUBT that they are currently on course with what was shared by Powell at Jackson Hole. That being a long term battle with inflation. Do NOT expect any rate cuts through the end of 2023. And do expect it to create economic pain (slowing of growth and dampening of the labor market).

Now let’s layer on top of this somber note the growing legion of corporate executives that are sounding the alarm on a looming recession. Jeff Bezos of Amazon is the one listed first in this article, but as you scroll down in the article you will see many more pounding the table followed by Elon Musk echoing that sentiment on Friday.

The most interesting part is that on this list are many Wall Street executives. The great curiosity is that crowd rarely says recession or bear market. That’s because when they do that, then more clients go from investments in stocks to cash where they make little to no fees.

Instead these folks typically speak in riddles about volatility or potential difficulties on the horizon. So historically you would have to read through the lines to get down to their real meaning.

The point being if Wall Street execs are straight up telling you that a recession is on the way…then best you believe it to be true and invest accordingly. (Which we are…more on that below).

On the economic front weakness found in the Empire State Manufacturing report on Monday was confirmed on Thursday be an even worse showing for the Philly Fed Manufacturing Index. The way forward does not look much better as the New Orders component remains weak at -15.9.

Remember that manufacturing is often a leading indicator for the economy as a whole. So the weakness here will likely spread to the services. Some of that was already on display last week from the Retail Sales report which shows that overall spending is ONLY higher because of inflation. If you remove inflation you see net spending is lower. This is likely a big part of the reason that Jeff Bezos is sounding the recession alarm.

Bull markets are long term trends that typically last 5-6 years. Once on track…it is hard to knock off its axis.

Bear markets are more like 12-18 month affairs. Not as long, but also hard to knock off its trajectory once the ball is rolling. And indeed it is rolling. And will keep rolling until the Fed has hit the brakes hard enough to throttle the economy and put an end to inflation.

Please remember the battle cry of “Don’t Fight the Fed!”

In the Fed’s own words, this is a long term battle with no signs of lower rates til 2024. This is why so many corporate executives are preparing for recession. And this is why so many investment experts, including yours truly, are beating the bearish drum.

So yes, there will be bear market rallies here and there. Some quite impressive as we saw with the 18% gain from mid June til mid August when investors regained their senses. However, the long term picture points to lower lows on the way and you would be wise to get your portfolio in tune with that reality.

What To Do Next?

Discover my special portfolio with 9 simple trades to help you generate gains as the market descends further into bear market territory.

This plan has been working wonders since it went into place mid August generating a robust gain for investors as the S&P 500 (SPY) tanked.

If you have been successful navigating the investment waters in 2022, then please feel free to ignore.

However, if the bearish argument shared above does make you curious as to what happens next…then do consider getting my updated “Bear Market Game Plan” that includes specifics on the 9 unique positions in my timely and profitable portfolio.

Click Here to Learn More >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return

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SPY shares were trading at $374.66 per share on Friday afternoon, up $9.25 (+2.53%). Year-to-date, SPY has declined -20.20%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

More…

The post Fade the Friday Rally appeared first on StockNews.com

Investors often assume that if the overall market (SPY) is in bear market territory…that means that every stock is down. It’s true that the vast majority head lower. But it is also true that there is “always a bull market somewhere”. Mean some stocks go up even during the worst of times. This article shares insights on 3 factors that help find more of these breakout stocks in good times and bad. Read on below for details.

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This week we were blessed with our largest crowd ever for a live investment webinar where we unveiled a new way to pick winning stocks. Click below to see what the excitement is all about:

3 Factors to Find Breakout Stocks >

On the surface I understand this seems like an odd choice of a webinar in the midst of a bear market with the S&P 500 (SPY) in the tank.

However, let’s remember that not all stocks are down this year. Plus, there have been some pretty glorious bounces that have led to some timely gains.

How can you enjoy more of those winners in the weeks and months ahead?

Watch the webinar to see how we combine 3 vital factors that firmly put the odds firmly in your favor.

No longer do we have to debate which is better: Fundamentals vs. Technicals?

The answer is that both increase the odds of success. So, it is best to use both.

Easy to say…but how do you do it in reality? And how to do it consistently?

This webinar replay has the answers…so start watching now!

3 Factors to Find Breakout Stocks >

Wishing you a world of investment success!

Steve Reitmeister

…but everyone calls me Reity (pronounced “Righty”)
CEO, StockNews.com & Editor, Reitmeister Total Return

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SPY shares were trading at $365.03 per share on Thursday afternoon, down $3.47 (-0.94%). Year-to-date, SPY has declined -22.26%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

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The post 3 Factors to Find Breakout Stocks appeared first on StockNews.com

Snack food giant Mondelez International (NASDAQ: MDLZ) stock is trading down (-13%) for the year faring better than the S&P 500 (NYSEARCA: SPY) which has fallen (-25%), respectively. Mondelez is the world’s top seller of cookie biscuits and the 3^rd largest chocolate maker ahead of #5 Hershey (NYSE: HSY). It sells snacks in over 150 countries under 35+ brands including Chips Ahoy, Original Philadelphia, Marabou, Sour Patch, Ritz, Wheat Thins, Triscuit, and Aspen Gold. Its acquisition of Clif Bar will bolster its snack bar business into a multi-billion dollar franchise. The Company was formerly known as Kraft Foods and spun-off in 2012 from Kraft Heinz (NYSE: KHC). Mondelez owns popular snack brands including Cadbury, Milka, and Toblerone chocolates, Oreo, belVita and LU biscuits and Trident gums. High raw material and transport cost inflation took an impact on margins despite price hikes. Developed markets are showing a softening from weakening consumer confidence but emerging markets remain strong. Its line of comfort and low-cost snack food revenues remain resilient despite economic headwinds or seasonality. It’s a competitor to packaged foods behemoths like  Conagra Foods (NYSE: CAG), Hormel (NYSE: HRL), Lamb Weston (NYSE: LW), and Campbell Soup (NYSE: CPB) without competing for the same shelf space in retailers and grocers like Target (NYSE: TGT), Walmart (NYSE: WMT), Walgreens (NYSE: WBA), and Kroger (NYSE: KR). The popularity of its name-brand snacks and candies provides a deep moat against generic and private-label knock offs.  

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The Profit Machine

On July 28, 2022, Mondelez released its fiscal second-quarter 2022 results for the quarter ending June 2022. The Company reported an earnings-per-share (EPS) profit of $0.67 excluding non-recurring items beating $0.64 consensus analyst estimates by $0.03. Net revenues climbed 9.5% year-over-year (YoY) to $7.27 billion beating consensus analyst estimates for $6.8 billion for the quarter. Organic net revenues rose 13.1% with an underlying volume/mix of 5.1%.  The Company returned $2.5 billion to shareholders in the first half of 2022. The Company raised its dividend to $0.385 per share. Mondelez will acquire Clif Bar, a maker of protein snack bars. The Company sees organic net revenue growth of 8% for the full-year 2022.

Growth and Resilience

Mondelez CEO Dirk Van de Put commented, “Our chocolate and biscuit businesses continue to demonstrate strong volume growth and pricing resilience across both developed and emerging markets. These results combined with ongoing cost discipline, simplification, and revenue growth management are delivering robust profit dollar growth and strong cash flow, enabling us to increase our dividend by 10 percent.” The acquisition of Clif Bar will enable Mondelez to create a billion-dollar snack bar business with domestic and international expansion opportunities.

Navigating Headwinds

Mondelez presented its solutions for tackling headwinds like inflation, supply chain and a strong U.S. dollar. Inflation spurred by the pandemic is accelerating input costs including energy, transportation, packaging, wheat, dairy and edible oils. The Company is taking price actions across key markets to mitigate inflationary pressures. They are now 85% hedged for the rest of 2022 near fully hedged in key areas. Supply chain volatility is being felt mainly in the U.S. from trucking and container supply lagging demand and labor shortages at third-party suppliers. The Company is improving its manufacturing and warehouse capacity, implementing new measures to support retention, and prioritizing key SKUs. To mitigate the strong U.S. dollar versus the euro and pound sterling, the Company is hedging currencies and net investments. Its packaged brands have a long shelf life and are cheap, which further help sustain sales even through recessions.

Clif Bar Acquisition

The Clif Bar acquisition has many benefits including entering the U.S. protein and energy bar market as the #1 player. Clif is the leader in the fastest growing segment of protein and energy. The global snack bar market is growing at 5% annually beyond $16 billion. It currently has over $800 million in annual sales with expansion opportunities outside the U.S. The acquisition is complementary to its existing snack bar brands Perfect Snacks and Enjoy Life and will generate significant cost synergies in manufacturing and packaging.

Here’s What the Charts Say

Using the rifle charts on the weekly and daily time frames provides a bird’s eye view of the landscape for MDLZ stock. The weekly rifle chart downtrend has a falling 5-period moving average (MA) resistance that also overlaps the $57.38 Fibonacci (fib) level. The weekly 200-period MA is slowly rising at $56.97. The weekly lower Bollinger Bands (BBs) sit at $53.81. The weekly market structure low (MSL) buy triggered sits at $57.93. The daily rifle chart is attempting a breakout as the daily 5-period MA rises at $56.78 to cross over the 15-period MA at $56.79 as the stochastic rises to the 40-band. The daily 50-period MA sits at $60.74. The daily upper BBs sit at $61.62 and daily lower BBs sit at $53.43. Attractive pullback levels sit at the $56.71, $56.29, $54.82 fib, $53.27 fib, $52.51 fib, $50.64, and the $49.61 fib level.

The retail industry continues to do well despite surging commodity prices, supply chain disruptions, and labor shortages, thanks to the expansion of e-commerce. Therefore, fundamentally strong retail stocks, such as Buckle, Inc. (BKE), J.Jill, Inc. (JILL), and Movado Group (MOV), could be promising investments. On the other hand, avoiding The Gap (GPS) could be wise due to its weak fundamentals. Keep reading.

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Despite the cost pressures and supply chain disruptions, the retail industry has remained strong this year thanks to steady consumer spending. Despite the persistently high inflation and the Fed’s interest rate increases, consumer spending was flat in September. Moreover, retail sales rose 8.2% from the year-ago period.

Despite the rising recession fears, the retail industry is expected to perform steadily, thanks to the expansion of e-commerce and higher discretionary income in a red-hot job market. The global apparel market is expected to grow at a CAGR of 6.1% to $768.26 billion by 2026.

Given this backdrop, it could be wise to invest in fundamentally strong retail stocks The Buckle, Inc. (BKE), Movado Group, Inc. (MOV), and J.Jill Inc. (JILL). However, we think The Gap, Inc. (GPS) is best avoided now due to its weak fundamentals.

Stocks to Buy:

The Buckle, Inc. (BKE)

BKE operates as a retailer of casual apparel, footwear, and accessories for young men and women. It markets a selection of brand-name casual apparel and private-label merchandise primarily comprising BKE, Buckle Black, Salvage, and Red by BKE, among others.

For the fiscal second quarter ended July 30, 2022, BKE’s sales increased 2.3% year-over-year to $301.98 million. BKE’s gross profit increased 2.3% from the prior-year quarter to $145.37 million. In addition, its total assets increased 3.6% to $809.06 million, compared to total assets of $780.88 million for the fiscal year ended January 29, 2022.

BKE’s consensus revenue estimate of $332.50 million for the quarter ending October 31, 2022, indicates a 4.1% increase year-over-year. Its EPS for fiscal 2024 is expected to increase 6.8% year-over-year to $5.44.

It has a commendable earnings surprise history, beating the consensus EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 18.2% to close the last trading session at $34.80.

BKE’s strong fundamentals are reflected in its POWR Ratings. BKE has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It is ranked #8 out of 67 stocks in the Fashion & Luxury industry. It has an A grade for Quality and a B for Sentiment.

We have also given BKE grades for Growth, Value, Momentum, and Stability. Get all BKE ratings here.

Movado Group, Inc. (MOV)

MOV designs, sources, markets, and distributes watches worldwide. The company operates in two segments, Watch and Accessory Brands and Company Stores. It offers its watches under the Movado, Concord, Ebel, Olivia Burton, and MVMT brands, as well as licensed brands, such as Coach, Tommy Hilfiger, HUGO BOSS, Lacoste, Calvin Klein, and Scuderia Ferrari.

On May 25, 2022, MOV published its 2022 Corporate Responsibility report. The report details the evolution of MOV’s Corporate Responsibility program and announces MOV’s 2025 Make Time plan. Efraim Grinberg, Chairman and CEO of MOV, said, “Our main goal outlined in the report is to empower our employees to ‘Make Time’ for impactful, long-term ESG improvements that ultimately strengthen the Movado Group community and brand.”

For the fiscal second quarter ended July 31, 2022, MOV’s net sales gained 5.1% year-over-year to $182.80 million. The company’s gross profit increased 8.6% year-over-year to $106.92 million. In addition, its non-GAAP net income attributable to MOV increased 22.4% year-over-year to $24.57 million. Also, its non-GAAP EPS came in at $1.07, representing an increase of 25.9% year-over-year.

MOV’s consensus revenue estimate of $225.60 million for the quarter ending October 31, 2022, indicates an increase of 3.6% year-over-year. Its EPS for fiscal 2023 is expected to increase 7.4% year-over-year to $4.23. The company has a commendable earnings surprise history, surpassing the consensus EPS in each of the trailing four quarters. Over the past month, the stock has gained 1.4% to close the last trading session at $30.82.

MOV’s strong fundamentals are reflected in its POWR Ratings. MOV has an overall rating of B, which equates to a Buy in our proprietary rating system. It has an A grade for Quality. It is ranked #3 in the Fashion & Luxury industry.

To see the other ratings of MOV for Growth, Value, Momentum, Stability, and Sentiment, click here.

J.Jill, Inc. (JILL)

JILL operates as an omnichannel retailer of women’s apparel under the J.Jill brand in the United States. The company offers knit and woven tops, bottoms, dresses, sweaters, outerwear, footwear, and accessories, including scarves, jewelry, and hosiery.

On August 4, 2022, JILL launched Welcome Everybody, a new shopping experience online and in its stores, celebrating all women’s totality and marking a transformative moment in the brand’s evolution. Claire Spofford, CEO and President of JILL believes that this venture could modernize the company’s value proposition, introduce new customers to relevant and compelling products, and communicate what it offers.

JILL’s net sales for the second quarter ended July 30, 2022, increased marginally from the year-ago period to $160.34 million. The company’s gross profit rose 2.8% year-over-year to $112.47 million. Also, its adjusted EBITDA gained 8.8% year-over-year to $35.57 million.

Analysts expect JILL’s EPS and revenue for fiscal 2023 to increase 26.8% and 4% year-over-year to $2.70 and $608.80 million, respectively. JILL has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 30% to close the last trading session at $19.16.

JILL’s POWR Ratings reflect solid prospects. The company has an overall rating of A, which equates to a Strong Buy. It is ranked #2 in the same industry. In addition, it has an A grade for Sentiment and Quality and a B for Value.

To see the other ratings of JILL for Growth, Momentum, and Stability, click here.

Stock to Sell:

The Gap, Inc. (GPS)

GPS operates as an apparel retail company. The company offers apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, and Athleta brands. Its products include denim, tees, fleece, and khakis; eyewear, jewelry, shoes, handbags, and fragrances; and fitness and lifestyle products.

GPS’ net sales decreased 8.3% year-over-year to $3.86 billion for the second quarter ended July 30, 2022. The company’s operating loss came in at $28 million, compared to an operating income of $409 million. Its non-GAAP net income declined 89% year-over-year to $30 million. Also, its adjusted EPS decreased 88.6% year-over-year to $0.08.

Analysts expect GPS’ revenue for the quarter ending October 31, 2022, to decrease 3.2% year-over-year to $3.82 billion. Its revenue for fiscal 2023 is expected to decline 6.4% year-over-year to $15.61 billion. Over the past year, the stock has fallen 57% to close the last trading session at $9.92.

GPS’ poor fundamentals are reflected in its POWR Ratings. GPS has an overall rating of D, equating to a Sell in our proprietary rating system. Within the Fashion & Luxury industry, it is ranked #60. The company has a D grade for Stability.

Click here to see the additional POWR Ratings of GPS for Growth, Value, Momentum, Sentiment, and Quality.

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GPS shares were trading at $9.72 per share on Thursday afternoon, down $0.20 (-2.02%). Year-to-date, GPS has declined -41.96%, versus a -22.17% rise in the benchmark S&P 500 index during the same period.

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About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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40 year investment veteran Steve Reitmeister shares his #1 investment for 2023 that should easily top the S&P 500 (SPY). However, timing WHEN you get into this trade is the real battle. Read on below for the full story.

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Right now its mid-October 2022 as I write about my favorite pick for 2023. And right now I am extremely bearish on the short term outlook expecting stocks to find bottom between 2,800 to 3,200 by early 2023.

But then things become glorious for the bulls.

Because from that darkest hour stocks will rise with gusto. We are truly talking about the “phoenix rising from the ashes” which is how all new bull markets begin.

In fact, going all the way back to 1900, the average first year gain for new bull markets is +46.2%.

Now consider that small caps generally rise 20% more than large caps in the S&P 500 (SPY).

Now consider that using 3X leverage in this small cap ETF could easily lead to first year returns north of 100%.

Now you understand why I am pounding the table on buying this 3X ETF focused on small cap stocks for 2023. I am referring to Direxion Small Cap Bull 3X ETF (TNA)

This sounds great except for one thing….WHEN do you buy it?

If you buy too early, and the market is still racing lower, you will have tremendous losses on your hands. So I caution against just blindly buying it without some consideration for determining market bottom.

Again, right now it is October 2022. So this is an evolving story that needs vigilant watch on all the key indicators like employment, earnings, inflation, Fed rates and price action. That is the only way to determine when it may be time to enact this TNA trade.

If you would like some help with timing the market bottom, and when to buy into this TNA trade,  then please sign up to get my free market commentary. Not only do I provide constant updates on the market outlook, but also timely trading strategy and top picks.

Click here to get free market updates from Steve Reitmeister

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, StockNews.com

Editor of Reitmeister Total Return

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TNA shares were trading at $32.02 per share on Wednesday morning, down $1.18 (-3.55%). Year-to-date, TNA has declined -62.22%, versus a -21.08% rise in the benchmark S&P 500 index during the same period.

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About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

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Better-than-expected corporate earnings and stubbornly high inflation numbers may be enough to convince the Fed to continue with its aggressive rate hikes, thereby dampening market sentiments. With the market volatility set to continue in the foreseeable future, it could be wise to buy fundamentally strong stocks Comcast (CMCSA) and Energy Transfer (ET) and hold it forever. Continue reading….

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While the markets seem temporarily buoyed by better-than-expected earnings and easing of the turmoil in the U.K., the latest inflation data will keep investors worried. The hotter-than-expected employment and inflation reports are expected to keep the Fed on track to respond with a fourth consecutive 75-bps rate hike in its meeting next month. Therefore, the stock market will likely remain under pressure.

“When you’re in the throes of a bear market, to see meaningful moves higher for stocks, you also need to see a big move in the bond markets. You need yields to meaningfully fall,” said Michael Antonelli, managing director and market strategist at Baird. However, with persistent macroeconomic headwinds, the yields on U.S. government bonds have been climbing higher.

With a soft landing for the economy increasingly seeming like an improbable scenario, markets are expected to witness heightened volatility in the upcoming months. Hence, loading up shares of companies with fundamental strength, pricing power, attractive dividend records, and long-term growth would be the best strategy for generating stable returns.

Hence, we think it could be wise to buy fundamentally solid stocks, Comcast Corporation (CMCSA) and Energy Transfer LP (ET), and hold them forever.

Comcast Corporation (CMCSA)

CMCSA is a global media and technology company. It operates through three segments: Cable Communications; Media; Studios; Theme Parks; and Sky.

On September 21, 2022, CMCSA announced that it is working with Samsung to deliver 5G Radio Access Network (RAN) solutions that can be used to enhance 5G connectivity for Xfinity Mobile and Comcast Business Mobile customers in Comcast service areas. The company expects this to deliver more next-generation applications and services to its customers seamlessly.

On September 14, CMCSA announced an expansion in its share repurchase authorization to a total of $20.0 billion, with $9 billion worth of shares repurchased to date. This demonstrates the company’s financial strength and commitment to enhancing shareholder value.

On July 28, CMCSA declared its quarterly dividend of $0.27 a share on the company’s common stock, payable on October 26, 2022. The company pays $1.08 as a dividend annually, which translates to a yield of 3.5% at the current price. This compares favorably to the 4-year average dividend yield of 2.02%.

CMCSA’s dividend payouts have grown for the past five years at an 11.7% CAGR.

For the second quarter of the fiscal year 2022 ended June 30, CMCSA’s revenue increased 5.1% year-over-year to $30.02 billion. During the same period, the company’s adjusted EBITDA increased 10.1% year-over-year to $9.83 billion, while its adjusted net income increased 14.3% year-over-year to $4.51 billion. As a result, its adjusted EPS grew 20.2% year-over-year to $1.01.

Analysts expect CMCSA’s revenue to increase 4.5% year-over-year to $121.57 billion in the current fiscal year, ending December 31, 2022, while its EPS is expected to grow 11% year-over-year to $3.59 for the same period. Also, the company has an impressive earnings history, surpassing the consensus EPS estimates in each of the four trailing quarters.

The stock has gained 7.2% over the past five days to close the last trading session at $30.75.

CMCSA’s POWR Ratings reflect its promising outlook. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

It has a grade of B for Value and Quality. CMCSA tops the list of nine stocks in the Entertainment – TV & Internet Providers industry.

Click here for the additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for CMCSA.

Energy Transfer LP (ET)

ET owns and operates a portfolio of energy assets in the United States. The company sells natural gas to electric utilities, independent power plants, local distribution, and industrial end-users.

On August 24, 2022, ET announced that its subsidiary, Energy Transfer LNG Export, LLC, has entered into a 20-year LNG Sale and Purchase Agreement (SPA) with Shell NA LNG LLC related to its Lake Charles LNG project. Under the agreement, Energy Transfer LNG will supply Shell with 2.1 million tonnes of LNG per annum (mtpa). This SPA is expected to boost the company’s revenue streams.

On August 19, ET paid a quarterly dividend of $0.23 per share. The company pays $0.92 as a dividend annually, translating to a yield of 7.86% on the current price. The 4-year average yield stands at an impressive 10.45%. The company’s payout ratio is 60.6%, and its dividends have grown at a 1.9% CAGR over the last ten years.

In addition, ET announced the completion of the sale of its 51% interest in Energy Transfer Canada ULC (Energy Transfer Canada). The company expects the sale of these assets would allow it to deleverage its balance sheet further and redeploy capital within its footprint across the United States.

During the fiscal 2022 second quarter ended June 30, 2022, ET’s revenue increased 71.8% year-over-year to $25.95 billion. Its operating income grew 32.3% year-over-year to $2.11 billion. The company’s adjusted EBITDA amounted to $3.23 billion, up 23.4% year-over-year.

Furthermore, the company’s net income attributable to partners and net income per common unit came in at $1.33 billion and $0.39, registering increases of 111.8% and 95% from the prior-year period, respectively.

Analysts expect ET’s revenue and EPS for the fourth quarter of the current fiscal (ending December 2022) to increase 29.5% and 37.5% year-over-year to $24.16 billion and $0.38, respectively. The company has topped the consensus EPS estimates in three of the trailing four quarters.

ET’s stock has gained 35.4% year-to-date to close the last trading session at $11.79.

ET’s strong performance and stable prospects have earned it an overall rating of B, which equates to a Buy in our POWR Ratings system. It has an A grade for Momentum and a B grade for Value.

ET is ranked #32 among 94 stocks in the B-rated Energy-Oil & Gas industry.

Beyond what has been discussed above, we have also given ET grades for Sentiment, Growth, Quality, and Stability. Get access to all ET ratings here.

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CMCSA shares were unchanged in after-hours trading Wednesday. Year-to-date, CMCSA has declined -38.02%, versus a -21.52% rise in the benchmark S&P 500 index during the same period.

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About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant.

With a master’s degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.

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Shares of Johnson & Johnson (NYSE:JNJ) are down slightly despite the company scoring a double beat for its third quarter earnings. J&J reported earnings per share (EPS) of $2.55 on revenue of $23.79 billion. This was better than the analysts’ forecast for EPS of $2.49 on revenue of $23.43 billion. However, the EPS number was 1.9% lower than in the same quarter the prior year.
But the stock is down about 0.5% in late-day trading due to the company’s guidance. For the full year 2022, the company is also lowering (i.e. tightening) its guidance for the rest of the year. J&J now says it expects EPS to reach a midpoint of $10.05 with midpoint revenue of $93.3 billion. Analysts were estimating $10.03 earnings pers share and $94.85 billion.  

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The company cited a stronger dollar which is decreasing the value of its international sales, as the reason for the tighter forecast.  

To be fair, if J&J hit the midpoint of its earnings forecast it would be a 7% increase from 2021. That’s not bad at a time when an earnings recession is being forecast. And JNJ stock is seen as a defensive play which has typically done well in bear markets. But there is one issue that makes longer-term forecasts uncertain.  

Balancing Alpha and Beta 

Like most industries, investing has its own language. Two common terms or Alpha and Beta. Alpha refers to finding profit in the market. For obvious reasons, traders and investors are looking for companies that have a consistent track record of positive (and growing) revenue and earnings. These stocks are sought after because they are likely to outperform the market. 

Beta on the other hand is a measurement is how a stock performs relative to the broader market. High beta stocks are considered to be more volatile than the overall market. This means when the market is up these stocks tend to be higher. But when the market goes down, these stocks tend to fall more than the broader market. 

Conversely, a low beta stock is one that has less dramatic price swings. This means it has higher highs during a bull market; but it will also have lower lows – which can help investors manage risk during a bear market. 

Johnson & Johnson is squarely in the low beta category. The question that investors are weighing is if the company will deliver enough revenue to be an investment in this bear market.  

Is Kenvue the Band-Aid the Company Needs? 

An unresolved issue for Johnson & Johnson is the announced spinoff of its consumer division. The new company, which will be named Kenvue, will house some of the company’s iconic brands such as Tylenol, Band-Aid, and Johnson’s Baby Powder. 

By itself, the spinoff is a non-event. In recent years, Abbott Laboratories (NYSE:ABT) spun off AbbVie (NYSE:ABBV) and Kraft Heinz (NASDAQ:KHC) made a similar move with Mondelez (NASDAQ:MDLZ). And the company says the reason behind the move is that the consumer health market is diverging from the company’s other core businesses.  

And to be fair, the consumer products division posted a decline in revenue in the current quarter. This is due to several factors including the pressure from private label brands in the space.  

Still, the products that will be part of Kenvue accounted for nearly $15 billion ($14.6) in revenue which was 16% of the company’s total sales. And the effect of that is already being implied as the company announced it will be cutting some jobs as it downsizes from three business units to two.  

Is JNJ Stock a Buy? 

I’ll waffle on this just a bit. It’s not NOT a buy. Especially when you consider that the company is a Dividend King having increased its dividend for 60 consecutive years. At a time when inflation is eating away at our portfolios, that’s not something to ignore.  

But it remains to be seen how the company will make up for the revenue it’s losing with the spinoff of Kenvue. If that concerns you, there are other dividend stocks that can do the same work. But if you currently own JNJ stock, there’s no reason to sell. The stock is still likely to be a safe harbor in the current bear market.  

Today, as the MarketBeat Podcast celebrates the milestone of Episode 50, Kate welcomes back a popular guest, Jason Brown of the Brown Report. Today, he discusses three widely held large caps. If you don’t own these as individual stocks, you may own them inside index funds. Their sheer size means they have influence over index direction.
Jason presents a strong bull case for the future of each stock, regardless of the current market downturn. And he shares why he believes they are likely to hold near recent support levels, rather than continue falling.
In today’s episode, Kate and Jason discuss: 
Why Amazon could be considered a “good company” because it has carved out a secure role as a company consumers trust to buy the goods they need and want. It’s hard for other companies to compete with that.
Jason believes the downside potential for Amazon is limited, but based on the chart, he sees more room to grow to the upside.
He walks listeners through some of the price points he’s seeing. 
What is the significance of the “unknown” business (at least to consumers) Amazon Web Servers, which has huge corporations as customers? 
Jason’s next stock is Google/Alphabet, which he believes is one of the best positioned to emerge from the post-pandemic, interest-rate driven selloff
Why Google’s ad-based business model is likely to hold up even in a recession, or gas price increases or interest-rate hikes, even if some advertisers slash spending
Jason’s third stock is Tesla, where he sees ongoing potential due to the business itself, and the stock’s chart
Why Jason says it’s more important to look at Tesla’s future, not the news today, such as disappointing Q3 deliveries
Is there upside in not-yet-available products such as electric boats and motorcycles?
Why Tesla’s focus on EVs means it can continue growing without distractions, as the legacy automakers have
How to find Jason, and download the Stock Market Starter Pack and Stock Options Starter Pack: 
https://thebrownreport.com/
Let’s all become smarter investors together. Subscribe to the MarketBeat Podcast today.

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Tesla is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.

After slipping to its lowest level since 2013, Biogen Inc. (NASDAQ:BIIB) was all but forgotten by growth investors. That changed in dramatic fashion late last month when the biotech’s pipeline got a major boost. 

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Why Did Biogen’s Stock Jump Higher?

On September 27th, Biogen along with co-development partner and Japanese pharmaceutical leader Eisai announced positive top-line data from their Phase 3 trial of lecanemab. The investigational treatment for early-stage Alzheimer’s disease met its primary endpoint in reducing cognitive and functional decline by 27%. It also met the secondary endpoint of changing amyloid levels in the brain in a statistically significant manner.

The news was greeted with intense buying activity for a stock that had plunged 58% from its summer 2021 peak. Biogen shares gapped up 40% on the day of the announcement in 15-times the 90-day average volume. The stunning gapper erased 10 months of losses in a single day, bringing newfound hope to biotech investors.

The FDA has agreed to use the Biogen/Eisai trial as a confirmatory study. This means that it will be used to confirm the clinical benefit of the Alzheimer’s candidate as it reviews the pair’s Biologic License Application (BLA). The regulatory body granted priority review for the BLA and set an action date target of January 6th. 

As the market awaits the pivotal FDA decision, additional data from the lecanemab study is expected to be released at the Clinical Trials on Alzheimer’s Congress (CTAC) conference held in San Francisco from November 29th through December 2nd. 

Is it a Good Time to Invest in Biogen Stock?

Unfortunately for Biogen shareholders, the big rally was short-lived but not by any fault of the company. Selling pressure set in because of the broader market downturn causing the stock to slide back to the mid-$200’s. 

A second burst came on Thursday, however, when Biogen benefitted from a strong day in the market and surged back to the $270 level. Yet it is still trading below where it soared on the Phase 3 lecanemab update, giving investors an opportunity to pounce on a name that has momentum on its side and a potential catalyst to come in January’s anticipated FDA decision.

While some sell-side research firms have taken a cautious stance after the big move (and due to FDA uncertainty), others see more gains ahead. More than a dozen analysts have called Biogen stock a buy since the big news, expecting the positive trial outcome to pave the way for FDA approval. Several of the revised price targets run well into the $300’s.

However, there’s reason to be cautious here because Biogen is no stranger to extreme volatility. Less than two years ago, the stock went on a wild up and down ride related to another Alzheimer’s drug (aducanumab). The FDA initially offered a positive review of the drug only to decline endorsement days later. Marketed under the Aduhelm name, the drug was ultimately not covered by Medicare, dealing a devastating blow to the company and its investors.

Many are expecting this time to be different. The data around lecanemab has been particularly strong which, combined with the limited options for Alzheimer’s patients, makes it hard to deny. According to the Alzheimer’s Association, more than 6 million Americans are living with Alzheimer’s disease. Within the next 30 years, the costs associated with Alzhiemer’s and other forms of dementia are expected to approach $1 trillion. 

What are Biogen’s Growth Prospects?

The developments around lecanemab will dictate where Biogen’s stock goes in the near-term. Even if it clears regulatory hurdles, securing approval from the Centers for Medicare and Medicaid Services is another hurdle. Getting FDA approval without the backing of Medicare would be a major setback.

While Biogen has become synonymous with Alzheimer’s treatment over the last few years, the company has a larger growth driver at hand. Led by its flagship Tecfidera product, multiple sclerosis (MS) drugs account for approximately two-thirds of Biogen’s revenue. And with generic competition on the rise in the MS market, the need for a non-MS blockbuster such as lecanemab can’t come soon enough.

Outside of its MS and Alzheimer’s programs, Biogen owns the first approved treatment for spinal muscular atrophy. It has also achieved milestones on new treatments for depression and various neuromuscular disorders. It is ramping up its own biosimilar product launches to combat the growing threat of generics. Looking into the back half of the decade, new programs in neuropsychiatry, Parkinson’s disease, lupus and stroke are expected to progress. 

In the meantime, Biogen’s five different MS products will be leaned on to build off last year’s $7.1 billion revenue total. Whether its latest Alzheimer’s drug turns into a blockbuster or not, the company is positioned to become more diversified over time. This translates to a diminishing risk profile which, combined with the emerging growth prospects, makes the stock attractive here.

September inflation report came in hotter than expected, increasing the chances of aggressive interest rate hikes later this year. Since analysts expect the economy to tip into a recession next year, dividend-paying stocks Walmart (WMT), Coca-Cola (KO), and Greif (GEF), which are backed by solid fundamentals, could help you plan your retirement even in a bear market. Read more….

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The Federal Reserve has undertaken a series of interest rate hikes in an effort to control the surging inflation. Despite rate hikes, inflation came in hotter than expected in September, rising 0.4% sequentially and 8.2% from a year ago. The report initially rattled financial markets, with stock market futures plunging and Treasury yields increasing.

The latest GDP estimate showed that the U.S. economy contracted in the first half of this year. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon cautioned about the possibility of a recession, as persistent and elevated inflation could cause interest rates to rise higher than 4.5%.

The S&P 500 has slid more than 20% this year, signaling a bear market. However, there might still be opportunities left for long-term investors, as bear markets usually don’t continue for long.

Given this backdrop, fundamentally strong dividend stocks Walmart Inc. (WMT), The Coca-Cola Company (KO), and Greif, Inc. (GEF) could be solid investments to ensure a stable income stream. 

Walmart Inc. (WMT) 

WMT engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club. 

On October 3, WMT’s division Sam’s Club launched its expanded Photo and Customization Services, where its members are granted access to professional photographers, enhanced photo printing services, as well as made-to-order apparel and home goods, making Sam’s Club the first to do so in the warehouse space.

On September 28, WMT celebrated the grand opening of Walmart’s first of four Next Generation Fulfillment Centers in Joliet, Illinois. The new FC should improve the company’s operative capacity and might drive up its revenues.  

In February, WMT declared an annual dividend of $2.24 per share to be paid in four quarterly installments of $0.56 per share. Its annual dividend yields 1.69% on prevailing prices. The company’s dividend payouts have increased at a 1.9% CAGR over the past three and five years. The company has a record of 48 years of consecutive dividend growth. 

WMT’s total revenues came in at $152.86 billion for the second quarter that ended July 31, 2022, up 8.4% year-over-year. Its consolidated net income came in at $5.15 billion, up 17.9% year-over-year, while its EPS stood at $1.88, up 23.7% year-over-year. 

The consensus EPS estimate of $1.48 for the fiscal fourth quarter ending April 2023 represents a 14.1% improvement year-over-year. The consensus revenue estimate of $144.64 billion for the same quarter indicates a 3.1% increase from the prior-year period. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. 

Over the past three months, the stock has gained 5.5% to close the last trading session at $132.28. 

WMT’s POWR Ratings reflect this promising outlook. The company’s overall A rating translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. 

It has an A grade for Sentiment and a B for Growth, Stability, and Quality. It is ranked #6 out of 38 stocks in the A-rated Grocery/Big Box Retailers industry.  

To see the additional POWR Ratings for WMT for Value and Momentum, click here.  

The Coca-Cola Company (KO)  

Beverage company KO manufactures, markets, and sells various non-alcoholic beverages worldwide. The company provides sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy and plant-based beverages, tea and coffee, and energy drinks. 

On September 29, KO and Molson Coors Beverage Company (TAP) announced that they had entered into an exclusive agreement to develop and commercialize Topo Chico Spirited, a line of spirit-based, ready-to-drink cocktails. The new product launch might bolster the company’s revenue stream. 

On July 21, KO declared a quarterly dividend of 44 cents per common share, which was payable to shareholders on October 3. Its annual dividend of $1.76 yields 3.15% on prevailing prices. The company’s dividend payouts have increased at a 3.1% CAGR over the past three years and a 3.6% CAGR over the past five years.  The company has a record of 59 years of consecutive dividend growth.

KO’s net operating revenue increased 11.8% year-over-year to $11.33 billion in the second quarter that ended July 1. Its non-GAAP gross profit grew 7.2% from the year-ago value to $6.67 billion, while its non-GAAP net income improved 4.4% year-over-year to $3.06 billion. The company’s non-GAAP net earnings per common share increased 2.9% from its year-ago value to $0.70. 

Street expects KO’s revenue to increase 8.9% year-over-year to $42.09 billion in the fiscal year 2022. Its EPS is estimated to grow 5.9% year-over-year to $2.46 in the same year. It has surpassed EPS estimates in all four trailing quarters, which is impressive.  

KO’s shares have gained 2.5% over the past five days to close the last trading session at $55.87. 

KO’s overall B rating equates to a Buy in our proprietary rating system. The stock has a B grade for Stability, Sentiment, and Quality. It’s ranked #17 out of 35 stocks in the A-rated Beverages industry.  

Click here to get the KO ratings for Growth, Value, and Momentum. 

Greif, Inc. (GEF) 

GEF is a global producer of industrial packaging products and services. The company operates through three segments: Global Industrial Packaging; Paper Packaging & Services; and Land Management.  

On August 30, GEF declared quarterly cash dividends of $0.50 per share on its Class A common stock and $0.75 per share on its Class B common stock, which was payable on October 1, 2022. Its annual dividend of $2.00 yields 3.37% on prevailing prices. The company’s dividend payouts have increased at a 2.2% CAGR over the past three years and a 2.3% CAGR over the past five years. 

For the fiscal third quarter that ended July 31, 2022, GEF’s net sales increased 8.8% year-over-year to $1.62 billion. The company’s operating profit increased 18.8% year-over-year to $205.70 million. Also, its net income rose 23.4% year-over-year to $146.10 million, while its class A common stock EPS grew 24.9% from its prior-year quarter to $2.36.  

For the fiscal year ending October 2022, GEF’s EPS and revenue are expected to increase 43.2% and 16% year-over-year to $8.02 and $6.45 billion, respectively. It has surpassed the consensus EPS estimates in each of the trailing four quarters. 

The stock has declined 1.4% over the past five days to close the last trading session at $59.34.

GEF’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system. It also has a B grade for Value and Quality. Within the A-rated Industrial – Packaging industry, it is ranked #3 out of 22 stocks.  

Beyond what we’ve stated above, we have also given GEF grades for Growth, Momentum, Stability, and Sentiment. Get all GEF ratings here.

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WMT shares were trading at $130.77 per share on Friday afternoon, down $1.51 (-1.14%). Year-to-date, WMT has declined -8.54%, versus a -23.65% rise in the benchmark S&P 500 index during the same period.

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About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor’s degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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