As has been the pattern since any 2-3 day sell-off in recent years, a vague headline suddenly emerges and just like that, prices are shooting back up. This week was news that the random U.S./China trade talks may be back on. The market basically turned on a dime, yet it’s a headline we’ve heard numerous times. The theme of Washington and governments around the globe being obsessed with stock prices is on a level which I’ve never seen. Quick follow-up to the China trade situation during yesterday morning’s market surge: President Trump tweeted the story of a U.S./China sit-down was not accurate, boasting China needs the U.S. more than vice-versa. You literally can’t make this stuff up these days!
Wall Street is on board for better or worse. Analyst estimates continue to be on the conservative side, making it quite easy for companies to beat and rally. Valuation calls are few and far between. No longer are we in need of Benjamin Graham’s esteemed valuation analysis as no one wants to challenge the new math on what is reasonable in terms of PE ratios, or whatever valuation metric one uses. The only thing we can do is stay in as investors and hope this party continues, but remember to peek over to know where the nearest exits are in case things really do change. For now, enjoy the music.
Notes From Thursday’s Action
Relative strength standouts – Tilray Inc. (TLY) – cannabis frenzy leader, but did close well off the day’s highs, Intuitive Surgical (ISRG), Apple (AAPL) – delayed rally following yesterday’s product launch showcase, Illumina (ILMN), Stitch Fix (SFIX) – positive analyst commentary, Humana (HUM) – positive analyst commentary, Qualcomm (QCOM) – share buyback news/positive analyst commentary, Nvidia (NVDA), Mastercard (MA), Regeneron Pharmaceuticals (REGN), IAC/Interactive (IAC), Match Group (MTCH), Brady Corporation (BRC) – earnings pop, MSCI Inc. (MSCI), Intuit (INTU), United Continental Holdings (UAL), NextEra Energy (NEE), CNOOC Limited (CEO), Inogen Inc. (INGN), Paycom Software (PAYC), AppFolio Inc. (APPF), Take Two Interactive (TTWO), Thermo Fisher Scientific (TMO), Molina Healthcare (MOH), Roper Technologies (ROP), L3 Technologies (LLL), Aerovironment (AVAV), Markel Corporation (MKL), White Mountains Insurance (WTM), Gartner Inc. (IT), Accenture (ACN), Google (GOOGL) (GOOG), Reata Pharmaceuticals (RETA), Coupa Software (COUP), Salesforce.com (CRM).
Other notable names rallying nicely – Netease Inc. (NTES), Charter Communications (CHTR) – positive company chatter at conference, Broadcom (AVGO), International Flavors & Fragrance (IFF), 58.com (WUBA), 51job Inc. (JOBS), Micron Technology (MU) – positive mention from noted hedge fund manager on CNBC appearance, ASML Holdings (ASML), RH Inc. (RH) – CEO insider buying, Lockheed Martin (LMT).
Notable names lagging during the session – ICU Medical (ICUI), Pivotal Software (PVTL) – earnings-related selling, Kroger (KR) – earnings-related selling, Wageworks (WAGE) – cautious analyst commentary, LendingTree (TREE), United Parcel Service (UPS), Red Hat (RHT), Canopy Growth Corporation (CGC), AMD (AMD) – big reversal off of early morning highs on extremely heavy volume.
Sometimes We’re Better Off Looking Elsewhere
I often hear from folks who don’t invest in the stock market that it just hasn’t been their thing and they have not fared well when they tried. I would always be dismissive of that as too easy a reason to not pursue doing something at least. But as I’ve gotten older, I can see where someone decides they are better off staying in the lane they know and more importantly, understand. Yes, there are some folks who can invest across numerous asset classes and see consistent results, but it’s not so simple. Understanding the investment space that has treated someone well is a big deal for sure. Real estate diehards often like to point to them holding their own cards, and they don’t feel that’s the case in the stock market. But there is plenty of intertwine along the way – bad stock markets can leak into the real estate space and vice versa. So if someone says stock, real estate, or whatever asset isn’t for them, maybe it just isn’t.
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