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Yes, earnings CAN save the markets

Oct 09, 2023

Good morning! 👋

Not surprisingly, markets are down as fighting rages following Hamas’ attack against Israel.

I’m going to keep it very brief this morning under the circumstances; like many people around the world, I am awaiting word from friends who live there.

Meanwhile, my thoughts on why earnings CAN save the markets, why gold isn’t the bellwether it used to be, oil, tech, and more. All from a conversation with the venerable Stuart Varney ahead of today’s opening bell. (Watch)

Here’s my playbook.

Oil stocks jump

Not surprisingly, oil prices have jumped as the fighting rages in Israel and Gaza. Brent was $87.63 a barrel while West Texas was $85.85 a barrel when I rolled into the office around 0430 today. (Read)

Oil stocks, predictably, were leading the way despite red on the screen nearly everywhere else. I’ve been talking all year long about the possibility of $100 oil because of rising geopolitical tensions and bad economic policies. Honestly, I’d rather be very, very wrong right about now.

Let’s hope the conflict ends quickly and that prices drop as a result.

Defense stocks

Same story.

People have been bashing defense stocks all year. Shares are down an average of 14% YTD while the S&P 500 has tacked on roughly 19%.

I have repeatedly told you that’s a king-size mistake.

Investors who cannot understand the importance of buying great companies at a discount have no business in the stock market. The stock market is the only “store” on earth where people fear a sale.

Case in point, one of my favourites is down 12.19% YTD but just declared a Q4 dividend that marks the 21st consecutive year of dividend increases while authorizing the purchase of an additional $6B in stock, which, of course, improves the shareholder yield. Upgrade to Paid

I hope I own enough shares.

Meanwhile, travel stocks are getting shellacked. I haven’t had any interest all year, but this makes me want to stay away from ‘em even more.

Tesla is about to stick it to Detroit

It’s been a problem for a long time.

Millions of people want to drive a Tesla, but prices have been too high for the average person.

No longer.

A new study from Bloomberg Green shows that Tesla’s price cuts now bring ‘em within range of average US cars. In fact, Bloomberg reports that the Tesla 3 “is now $6,500 less than the BMW 3 series, which is often seen as the Tesla sedan’s most direct gasoline-powered competitor.” (Read)

Unka Elon strikes again.

Meanwhile, the UAW strike people are counting on continues to work in Tesla’s favour.

You know what to do (I hope).

Your doctor is about to get smarter

Medicine is changing so rapidly that even the best doctors cannot keep up.

That’s about to change with a new generative AI search capability Google intends to roll out for doctors. (Read)

Much of the paperwork, according to Google, will go away, as will the need to scroll through endless records to answer simple questions like, “What medicines did this patient take last year?” or “When was the last time I asked him/her about shortness of breath and what was the response?”

The challenge, of course, is that it means even more intimate personal data gets stored… and needs to be protected.

Cybersecurity stocks are about to get a whole lot more valuable.

Boo Buckets are back

McDonald’s marketing department is rockin’ it with mini marketing campaigns like the Boo Bucket that delight customers and keep ‘em coming back.

First introduced in 1986, they’re a throwback to a simpler time and a stroke of genius because millions of happy little gremlins are going to use their Boo Buckets for Trick or Treating long after they’ve left Mickey-D’s. (Read)

Notes CEO Chris Kempczinski, “It’s the little things.”

I agree.

MCD has returned about 8% per year, but the stock’s beta is just 0.70, according to our proprietary calcs, which means that it’s roughly 30% less volatile than the S&P 500 and, as a result, offers a significantly higher risk-adjusted return to savvy investors.

Burger King is apparently releasing its own version, too. (Read)

Keith’s Investing Secret: Many investors think only in terms of price, which is a mistake, particularly when it comes to a stock like McDonald’s. Total return—a measure of both price appreciation and dividend—provides a comprehensive assessment that reflects capital gains and income. Price is... well, just price. 😊

Bottom Line

People ask me about hot stocks frequently.

That’s not the right question, especially right now.

Ask yourself which stocks will be there when you need them and work backwards.

It’s a very short list.

As always, let’s MAKE it a great day—you got this!

Keith 😊

Straight to your inbox from Keith himself!

*Trusted by 20,000+ savvy investors in 36+ countries (and counting)


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