More real world dissent to Wall Street’s view that everything looks great for 2024. On Thursday Cisco Systems (CSCO) shares closed down 9.83% after the networking giant offered up significantly weaker-than-expected guidance for 2024. Wall Street analysts called the guidance “disappointing.” And the same day cybersecurity favorite Palo Alto Networks (PANW) dropped 5.42% after the company lowered its billings forecast for the fiscal 2024 year.
So let’s see how the market takes this tomorrow.
Today stocks staged an impressive upside more. The Standard & Poor’s 500 closed up 1.89% and the NASDAQ Composite ended the day 1.78% higher. The small cap Russell 2000 was the day’s best performer with a win of 2.67% Tomorrow? Well, the October jobs report released at 8:30 will certainly help set the tone for the day with a weak report likely to reinforce the belief that the Federal Reserve is done aiding interest rates. But given how much of the recent bounce has been fueled by a return of optimism about technology stocks, it’s likely that Apple’s disappointing results, announced after the close of trading today, Thursday, November 2, will determine the direction of the trend.
Today I posted Step #8 in my Special Report: 8 Steps to Protect Your Portfolio from the Global Debt Bomb. I recommended selling Deere (DE), Caterpillar (CAT), and BHP Group (BHP) out of portfolios ahead of rising yields i the bond market. (In the case of Deere, I said I would keep my position in my long-term portfolio but sell the position in my 12-18 month portfolio.) Here’s what I posted in my Special Report
I’ve hi-lighted the key characteristics of the coming global debt bomb explosion that investors MUST include in any plan to protect a portfolio from the explosion of this bomb.
I’m looking for another wild ride for Apple (AAPL) and consequently for the entire tech sector. Apple shares dropped another 3% on Thursday taking the two-day losses in the shares to almost $200 billion, (Yep, with a “B.” That brought Apple’s market cap to $2.9 trillion. Yep, with “T.”) A massive (Internet irony alert) rally on Friday took the shares up 0.35%. And I think that this coming week could be just as volatile.
Today’s Quick Pick is: Alphabet Inc (NASDAQ: GOOGL) or as most people know it, Google. Google is an extraordinarily good stock with pricing power. At 85% of the search market, Google is pretty close to having a monopoly. The good time to buy a stock like this is when there have been doubts about it. The recent worries were Microsoft’s addition of AI to their search engine, possibly having a huge impact on Google and a decrease in Google’s advertising market. These factors caused the stock to plateau for a time, but we’re now seeing the stock shoot upward. This has been solidified by second quarter earnings. Revenue growth returned to YouTube, searches increased, and second quarter revenue was up 7% year to year, cloud revenue grew 28% and operating margins grew to 29% from 28%. Morningstar says Google is about 17% undervalued. Google is a part of my long term 50 stocks portfolio, but I’ll be adding it to my 12-18 month JubakPicks portfolio as well.
Today’s Quick Pick is Visa (NYSE: V). Shares of Visa are showing a good trend reversal. From June through July, Visa’s stock began to pick up after sitting flat for some time. The reason for this jump? The company’s second-quarter report included a 13% increase in net revenue, a 9% increase in payment volume, and an increase in margins to 67.5% from 66.9% in the previous quarter. Visa is so embedded in the economy that it can actually outperform the economy. For example, Visa recently went to war with small merchants by lowering the permissible surcharge on credit card payments from 4% to 3% and the company has deployed inspectors to ensure merchants are abiding by that rule. That’s even though back in 2017, the Supreme Court decided that laws that regulate surcharge amounts were unconstitutional. Visa isn’t making a law, but they clearly have the market clout to put this kind of pressure on small businesses. The 20% of merchants that have imposed a surcharge on credit card use don’t seem to be affecting profit margins or growth for Visa. Morningstar calculates that Visa is trading at a 17% discount to fair value, although the trailing twelve-month PE is 30.2. Visa always trades at higher than a market multiple. The 5-year average PE is 35.6, so 30.2 actually looks like a discount. I own it in my 12-18 month Jubak Picks portfolio and will continue to hold it there. I am also adding it to my long-term 50 Stocks Portfolio.
Adobe’s recent earnings report and guidance leave investors, at least those of us still paying any attention at all to valuation, in a bit of a quandary. Do we sell Adobe on that lackluster forecast for earnings and revenue growth over the next two quarters (and what looks like a stretch, very stretched valuation) or do we hold on with the hope that the market continues its love affair with everything AI?
Spot lithium carbonate prices (for battery-grade lithium) in China are up 92% from a 19-month low in April. So now what?
I made Zimmer Biomet (ZBH) Pick #6 in my “10 Stocks for Your Core Portfolio.” Tomorrow, June 21, I’ll add it to my long-term 50 Stocks Portfolio.
Today’s Quick Pick is Albemarle Corporation (NYSE: ALB), a lithium producer. Lithium demand continues to rise with electric vehicles and rechargeable batteries finding expanding and new markets. Lithium producers have had a difficult time meeting demand–and projections say the demand gap is going to expand– and the price of Lithium has shot up. However, Sociedad Quimica y Minera de Chile (NYSE: SQM), and Albemarle Corporation (NYSE: ALB), two Chilean lithium producers, took a hit recently due to political risks. Chile’s president, Gabriel Boric announced a plan on April 22 to nationalize the country’s lithium resources, sending the lithium stocks plunging. However, investors may have overlooked some key points in the announcement: the country will honor existing leases (SQM’s leases expire in 2030, and Albemarle’s leases expire in 2043) and this plan still has to be passed by the Chilean legislature. Recent votes have favored the right in Chile and Boric’s party may not have the votes (or inclination) in the current legislature to pass this proposal. A right-wing government would likely be unhappy with the idea of nationalizing a previously private sector. (Chile’s lithium resources already belong to the state with these companies holding time-limited production leases.) Right now, with Albemarle’s longer lease and changing Chilean politics, this is a good time to get in on Albemarle and its expanding lithium production from mines in Australia and the United States. (Only 30% of its revenue comes from Chile.)