This weekend I read a ton of negative articles attacking this market and individual company earnings reports. The Proposal: The numbers are all hiding something, and even companies like Amazon (AMZN) and Apple (AAPL) have simply reported numbers that beat lowball analyst estimates, which should generate upside potential. This is an outrageously bullish sign. You now have the main arbiters of stock prices who are completely skeptical of anything positive. And yet, the stocks themselves not only tell you otherwise, they make you feel left out of a great run. What gives? Let’s start with nine months of lowering forecasts and price targets with no sign of abating. It’s the exact flip side of what happened when stocks went higher when we had endless price target jumps. I think analysts have finally turned negative and we are seeing a bottom. Maybe not all the way down, but low enough to buy the downed ones – the Honeywells (HON) and the Carriers (CARR), the Otis Worldwides (OTIS) and ServiceNows (NOW). We are unable to call a true bottom, mainly because we don’t know how the market will react to a rise of less than 75 basis points in September. We know the bears think nothing is enough, but they’ve gotten a little cheeky. Historically, back-to-back increases of 75 points are enough to make even the late Paul Volcker, former Federal Reserve Chairman, nervous given how many raw costs are falling and spending is being reined in by all the wealthiest. I expect the Fed to signal something in a month that could lead to a sell off. Otherwise I can see the market doing well during the earnings season and then stalling just before the next Fed meeting in late September. Then we not only have to deal with the Fed, but also with the midterm elections. Current predictions are that Republicans would win thirty seats in the House of Representatives, giving them a majority in both houses and ending pretty much everything President Joe Biden wants to do. That could tip his agencies even further to the left, as the possibility of a Republican presidential nominee winning seems plausible. His agencies have so far tended to be left-leaning, but they can really go berserk against the banks and the oil and pharmaceutical companies. It’s unfortunate, but that and the Fed could make for a difficult moment in September. That being said, the past week has shown the power of larger companies. Let’s spend a second with Tim Cook and Apple. It was a very impressive quarter, but I’ve read a number of negative articles about the numbers boding badly for Apple. How the hell could they make a bad mark? Have you spoken to Tim Cook and he gave you negative reviews? Certainly it wasn’t the most impressive quarters. There were ways to look at it with some concern. For one thing, I wanted higher service revenue. But $19 billion is certainly better than satisfactory. I spoke to Cook after Apple reported earnings last week. What excited me most was the real opening of India, Brazil and Indonesia, three of the largest markets in the world. The company lures people there into the Apple world via the trade-on market and then locks them into the superior performance. I also liked that the company seemed to honor my endless requests to find out the lifetime value of an Apple customer. This is key as the company now has 1.8 billion active devices and 98% of users say they are happy so they don’t switch manufacturers. Looking at the current spate of Apple deals, one gets the feeling that there could be a pot of gold among every customer here. However, I think there must be more. That’s why I was so intrigued when Cook said that “buy now, pay later” could be the beginning of a larger financial industry. Can you imagine if Apple had a finance app that you could use to do anything on it? No matter what, it seems great to have another “must have”. The fact that Cook took a gamble on the question of getting the NFL ticket can be seen as something that has already been well incorporated into the mix. Does American Football Play Well Abroad? That may be dispositive. But maybe also the fact that Cook likes the way baseball goes. Regardless, the fact is that Apple is in an enviable position with the world’s most dominant phone. Amazon: What can I say? Amazon can and will grow with fewer people. The appeal comes from the customer who stayed with the company and is now used more as a trade down who delivers. I think Amazon needs to crush Walmart (WMT). Walmart’s stock is all the way back where it disappointed and the company has yet to report. It wasn’t just Big Tech that was doing well. We also saw great numbers from oils – Chevron (CVX) and Exxon Mobil (XOM) – and all things aerospace and auto. Club-Holding Ford (F) put on a real show, even if the doubters were once again on guard. The drug companies and healthcare names reported good numbers, but they are being sacrificed to political concerns that I think will play out in a couple of weeks. Of course there were disappointments. I intend to talk about some of them when we hold our monthly meeting this Thursday. But I think the naysayers protest too much. So far they’re losing to the Bulls, they just don’t want to admit it. They have the S&P 500 Short Range Oscillator on their side – plus 7.9 drives us to sell some stocks, not buy them. But I learned a long time ago that good is good when it comes to stocks, and that good-is-actually-bad-news rap is the stuff of idealists on the wrong side of the trade. (Jim Cramer’s Charitable Trust is long APPL, AMZN, CVX, WMT. For a full list of stocks click here.) 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Apple CEO Tim Cook speaks during Apple’s annual Worldwide Developers Conference in San Jose, California June 6, 2022.
Peter Dasilva | Portal
This weekend I read a ton of negative articles attacking this market and individual company earnings reports. The Proposal: The numbers are all hiding something, and even companies like Amazon (AMZN) and Apple (AAPL) have simply reported numbers that beat lowball analyst estimates, which should generate upside potential.