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☕ Betting on a turnaround is super smart, even if there’s more selling ahead

Apr 22, 2024

Good morning! 👋

The markets are finally showing some green today and, I’ll be the first to admit, that’s nice to see. I’m not sure that’ll stick by the time you read this, but still – I'll take it.

Two crosscurrents to think about.

First, the past few weeks have given naysayers a lot of ammo and they’re out in force.

Many are extremely intelligent and make alluring arguments that sound convincing as heck. Just keep in mind if you’re tempted to listen to ‘em that even blind squirrels find a nut once in a while.

And second, using $5,000 words isn’t a sign of success.

I hear from scores of investors regularly who have been left on the sidelines – in some cases for years – listening to these folks. Unfortunately, many have paid a terrible price.

They’ve cowered in fear over what might happen – the dollar, debt, the Fed, yada yada yada – only to find out the hard way that what’s likely to happen is that the best companies will continue to deliver... and have.

Case in point and over the past decade for example, Apple, Microsoft, and Tesla have all returned 899%, 1,077% and 1,013%, respectively. The S&P 500... 218%.

If there’s ever a time to “divorce the story and marry the truth”, this is it!

Here’s my playbook.

1 – 74% beating earnings so far

This earnings season will be all about the numbers, only they won’t tell the whole story.

My two cents is we will see what’s called “margin compression” - meaning it’s harder to make a buck – but that company buybacks will help boost EPS (earnings per share).

Many people think this stinks but what they fail to grasp is that buybacks are good for their money. I expect tech, utilities, and consumer discretionary to lead the parade with energy and health care at the back of the line.

The scorecard is healthy so far.

FactSet reports that 14% of the S&P 500 has put up the goods as of last Friday with 74% beating earnings estimates. The average “beat” mind you is nearly 8%.

Keith’s Investing Tip: Wall Street wants you to fawn over every nuance but the key to success is learning to push away most of the noise and remain laser-focused on what matters.... results.

2 – Betting on a turnaround is super smart, even if there’s still more selling to come

Millions of investors are questioning themselves lately as tech stocks get hammered.

That's okay and entirely normal. But at the risk of sounding like a broken record, take a deep breath.

Betting on a turnaround is super-smart.

My take with fabulous Stuart Varney ahead of today’s opening bell. (Watch)

3 – Two more insurance companies call “CA quits”

Not that I’m surprised, but wow.

Tokio Marine and Trans Pacific have both notified CA that they’re calling it good and will no longer be writing homeowners and personal umbrella policies there. The move, of course, further reduces the availability of insurance coverage.

Investing in this is counter intuitive.

You'd think that limited supply would mean less choice – and that’s true from a ratepayer’s perspective – but that also gives insurance companies carte blanche to raise prices and jack premiums.

I think Travelers may be worth a look.

Hmmm.

4 – This just in from the department of bad ideas

NYSE is apparently surveying people about 24-hour trading.

No surprise that the proposal to open the markets for round the clock activity is apparently backed by billionaire Steve Cohen.

Honestly, I can’t think of a worse idea.

If this gets approved, and it probably will, the deck will get stacked against individual investors even more than it already is absent specific regulatory changes and safeguards to protect ‘em against further market manipulation under the guise of innovation.

You will need – more than ever – a simple, effective, powerful playbook to maintain the edge!

MyPOV: You CAN beat Wall Street at its own game if you understand which stocks to buy, how and what tactics take away their advantage. You know where to find me if that’s an appealing thought.

5 – Bond bulls get to it

Treasury yields have risen sharply in recent weeks as expectations of a Fed cut have vanished faster than popsicles on a hot summer afternoon at a pool party. That, of course, means prices have fallen.

I think a few long-dated bonds could be interesting if for no other reason than nobody else seems to want ‘em. Or, better yet, long bond funds or even zeroes which have been all but kicked to the curb. (Read)

OBAers: Be sure to take a moment and think about this. I’ll have more in today’s update. 😊