• Jobless Claims Come in at 207,000
    Posted by on January 6th, 2022 at 9:56 am

    This morning’s weekly jobless claims report was 207,000. That’s up 7,000 from last week but it’s still quite low. It was above expectations of 195,000.

    The stock market turned very weak yesterday after the Fed minutes came out. Investors found the minutes to be more hawkish than expected. I’m not sure that that should have been a surprise.

    The market is flat so far this morning, but Energy stocks are doing quite well.

    This morning, Stryker’s (SYK) said it’s going to buy Vocera Communications (VCRA) for $79.25 in cash. The stock closed yesterday at $62.52 per share. Shares of Stryker are down a bit. The deal values Vocera at $2.97 billion.

    Kevin Lobo, Stryker’s CEO, said, “Vocera will help Stryker significantly accelerate our digital aspirations to improve the lives of caregivers and patients.”

  • Morning News: January 6, 2021
    Posted by on January 6th, 2022 at 7:30 am

    Taiwan’s Tech Giants Are Being Hit by India Culture Shock

    Fed Minutes Point to Earlier, Faster Rate Hikes and More Aggressive Tightening

    Fed Leaves Gradualism Behind With Urgency on Rates, Assets

    A Fed Official’s 2020 Trade Drew Outcry. It Went Further Than First Disclosed

    Bitcoin Tanked After the Fed Minutes Were Released. Here’s Why

    How Six States Could Transform the U.S. Trucking Industry

    How Corporate America Has Changed After the Capitol Attack

    The M&A Boom Times Are Set to Continue in 2022

    Stocks Are Great for the Very Young — and the Very Old

    Consumer Demand for Goods Likely Drove U.S. Import Surge During Holidays

    Target Holiday Shopper Traffic Growth Topped Walmart, Best Buy

    Despite Theranos and Other Disasters, Startup Founders Have More Power Than Ever

    Best of CES 2022: New Tech That’s Practical, Innovative or Just Plain Crazy

    Forever 21 Owner Authentic Brands Withdraws IPO Plans

    Cases Rise, Criticism Mounts, but Ships Keep Cruising

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  • Mettler Toledo EPS Growth
    Posted by on January 5th, 2022 at 3:12 pm

    Here’s something I thought you might find interesting. This is the growth in the earnings per share for Mettler Toledo (MTD):

    The red line is Wall Street’s estimate.

    That’s pretty remarkable growth. There’s only one down year. To show you how steady, MTD’s growth has been, here’s the same chart but I’ve added a trend line growing at 15%.

    Despite have a market cap of $36 billion, you almost never hear about Mettler Toledo. So what do they do? From their press release:

    METTLER TOLEDO (NYSE: MTD) is a leading global supplier of precision instruments and services. We have strong leadership positions in all of our businesses and believe we hold global number-one market positions in most of them. We are recognized as an innovation leader and our solutions are critical in key R&D, quality control, and manufacturing processes for customers in a wide range of industries including life sciences, food, and chemicals. Our sales and service network is one of the most extensive in the industry. Our products are sold in more than 140 countries and we have a direct presence in approximately 40 countries. With proven growth strategies and a focus on execution, we have achieved a long-term track record of strong financial performance.

    I highlight MTD for you because it has one of the most impressive track records of growing its profits consistently.

    It’s not cheap. Based on yesterday’s close, MTD is going for 40 times next year’s earnings.

  • ADP Payroll Report = 807,000
    Posted by on January 5th, 2022 at 10:26 am

    The S&P 500 is about flat this morning. Value is having a good day while Growth appears sluggish. On our Buy List, AFLAC (AFL), Hershey (HSY) and Church & Dwight (CHD) are each up to a new all-time high.

    The big news this morning is that the ADP payroll report came in very strong. According to ADP, 807,000 new jobs were created last month. That more than doubled expectations of 375,000.

    Private job growth totaled 807,000 for the month, well ahead of the Dow Jones estimate for 375,000 and the November gain of 505,000. The November total was revised lower from the initially reported 534,000.

    The total was the best for the job market since May 2021′s 882,000 figure, according to the ADP data.

    Hiring was broad-based, though leisure and hospitality led with 246,000 new positions. Trade, transportation and utilities contributed 138,000, professional and business services increased by 130,000, and education and health services added 85,000.

    While service-related professions led with 669,000 new hires, the goods-producing side also showed strong gains. Manufacturing rose 74,000 and construction contributed 62,000 to the total.

  • Morning News: January 5, 2022
    Posted by on January 5th, 2022 at 7:08 am

    As Beijing Takes Control, Chinese Tech Companies Lose Jobs and Hope

    Kosovo Bans Cryptocurrency Mining to Save Electricity During Crisis

    Goldman Says Bitcoin $100,000 a Possibility by Taking on Gold

    Markets Jingle, but Not All the Way, to a Santa Rally

    Introducing The 2022 Dobermans Of The Dow

    One Reason for Rising Food Prices? Chinese Hoarding.

    Milk Companies Look West, Pressuring Northeast Dairy Farmers

    Supply Chain Woes Prompt a New Push to Revive U.S. Factories

    The Tech That Will Invade Our Lives in 2022

    Titans of Carmaking Are Plotting the Overthrow of Elon Musk

    AT&T Shed Media Assets in 2021. This Year It Wants to Add Investors

    China Mobile Makes Debut in Shanghai After $9 Billion Stock Sale

    Walmart Arm Did Not Deliberately Remove Xinjiang Goods, China Exec Tells Analysts

    Walmart Expands Its Direct-to-Fridge InHome Delivery Service to 30 Million Homes

    KFC to Launch Plant-Based Fried Chicken Made with Beyond Meat Nationwide

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  • CWS Market Review – January 4, 2022
    Posted by on January 4th, 2022 at 7:05 pm

    (This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

    I hope everyone had a festive holiday season. Now with the new year, here’s our 2022 Buy List.

    The Buy List got off to a rocky start yesterday. Some of the diagnostic stocks got pinged but the Buy List did much better today. I’m glad to see that some of our new stocks are doing well.

    The S&P 500 got to a new all-time intra-day high today. The index traded as high as 4,818.62, although it finished the day down slightly.

    The Dow was able to close at a record high. One other highlight to note: Yesterday, Apple (AAPL) became the first $3 trillion company. That’s 16.81 billion shares going for $182.

    On the economic front, this morning’s ISM Manufacturing Index showed a small slowdown last month. For December, the index dropped to 58.7. That’s still a decent number but it’s down from November’s reading of 61.1.

    The truly eye-catching news came from the Labor Department this morning. According to the government’s numbers, the Great Resignation continues. For the first time in a long time, workers have the upper hand.

    During November, 4.5 million Americans quit their jobs. That’s an all-time record, and it’s an 8.9% increase over the number for October. There are now 10.56 million job openings across the country. According to the last jobs report, there are 6.88 million Americans who are out of work and looking for a job. This is a truly fascinating crossroads for the economy. There simply aren’t enough workers to go around. The real supply-chain issue is apparently in the jobs market.

    We’ll learn a lot more about the state of the jobs market this week. Tomorrow, ADP will release its payroll report for December. While it’s an interesting report, it’s from the private sector and it doesn’t always align well with the official numbers from the government.

    Also tomorrow, we’ll get a look at the minutes from the Federal Reserve’s last meeting. If you recall, this was the meeting where the Fed decided to accelerate its tapering policies.

    On Thursday, we’ll get another jobless-claims report. We’re still very close to 52-year lows for jobless claims. Then on Friday, the jobs report for December is due out. In the last report, the unemployment rate was 4.2%. Wall Street is expecting that to tick down to 4.1%. If that were to happen, it would be lower than almost all the job reports from the 1970s, 80s and 90s. For nonfarm payrolls, Wall Street expects an increase of 422,000. I’ll also be curious what the wage numbers are. While wage growth has perked up, much of that increase is being eaten up by inflation.

    Why I Decided to Pass on AmerisourceBergen

    Today I wanted to discuss the company AmerisourceBergen (ABC). There’s a lot I like about ABC, and I strongly considered adding it to this year’s list, but I ultimately decided against it. I thought my decision would be a good lesson to share because so much of investing comes down to what you choose not to do.

    There’s a lot to like about AmerisourceBergen. If you’re not familiar with the company, ABC is a major drug wholesaler. The company was formed 20 years ago through the merger of Bergen Brunswig and AmeriSource. They also have units offering consulting services and veterinary supply.

    It’s a great business to be in. I especially like their smooth earnings line. This is an important characteristic in a successful company. Some businesses see their earnings bounce all around during a business cycle. Other stocks, by contrast, churn out steady increases. All things being equal, the market prefers the steady increases.

    Here’s a brief thought exercise. Imagine two stocks that are similar in every way. Both are expected to earn $1 per share next year. Stock A is expected to earn $1 per share, plus or minus two cents while Stock B is expected to earn $1 per share, plus or minus 20 cents.

    Which stock will have a higher share price? Nearly every time Stock A will command a higher share price. Why is this? It’s because the market values reliability, even if the expected cash flows are the same. The premium which Stock A will command will fluctuate depending on the market’s mood and its appetite for risk.

    In the eyes of the market, earnings misses are not symmetrical. A negative surprise weighs more heavily than the pleasantness of a positive surprise. The market loves certainty and it doesn’t mind paying a little extra for that.

    Now let’s get back to AmerisourceBergen. Here’s a chart from Fast Graphs.

    The black line is ABC’s share price. The orangish line is its earnings-per-share. The white line is the dividends. The EPS line is scaled to follow a P/E Ratio of 15. Just by looking at the chart, you can see that ABC far from excessively priced. The stock has often traded above a P/E of 15.

    ABC’s fiscal year ends in September. The company reported Q4 earnings in early November. For the quarter, ABC earned $2.39 per share which was three cents better than estimates. The company also sweetened its dividend by 4.5%. For the year, ABC made $9.26 per share. That was a nice increase over the $7.90 per share they made in the year before that.

    This is what we like to see, nice and steady EPS increases:

    2017: $5.62
    2018: $5.88
    2019: $6.49
    2020: $7.09
    2021: $7.90
    2021: $9.26
    2022: $10.68 (est.)
    2023: $11.45 (est.)
    2024: $12.25 (est.)

    Of course, the estimates are merely guesses but they’re pretty consistent with the larger earnings trend. Predicting the future earnings for ABC isn’t a terribly hard job. Just add 10% or so to the previous year and you’re likely to be in the ballpark. Investors love the consistency.

    Yesterday, shares of ABC closed at $132.62. That means ABC is going for less than 11 times 2024’s estimate. In other words, ABC is a profitable stock going for a reasonable valuation. But here’s where blindly following the numbers can lead you astray.

    The reason is that AmerisourceBergen faces significant legal risks for its role in the opioid epidemic. Over a 20-year period, nearly half a million Americans died from opioid addiction. For purposes of today’s discussion, I’m not going to address ABC’s role or culpability in the opioid crisis. I merely want to address that these issues can impact a stock’s valuation. All we need to know is that a lot of people inside the government hold AmerisourceBergen partly responsible for the crisis.

    In July, AmerisourceBergen and two other drug companies, Cardinal Health and McKesson, reached a major settlement with several state governments. The deal calls for the drug companies to pay $21 billion over the next 18 years. ABC’s portion comes to $6.4 billion.

    The deal is intended to address, in one big action, more than 3,000 lawsuits. I don’t know if this will be the end of the matter for ABC. Just this week, a jury found that Teva Pharmaceuticals, an opioid manufacturer and distributor, contributed to the opioid crisis.

    The lesson here is that simply appearing to be a value stock doesn’t mean a stock is a good value. As investors, we have to dig deeper than what the numbers say.

    Ultimately, I decided to let ABC go. It’s a profitable company but there are too many unknowns. The simple truth is that most good investing is boring. It’s not worth it to gamble on what lawsuits may come next. With investing, we want to remove as much of the guesswork as possible.

    Now let’s look at some of the mysteries of the Dow’s calendar cycle.

    The Dow’s Calendar Cycle

    At the end of each year, I update dozens of data files I keep on the market. I have one file that contains the entire history of the Dow Jones Industrial Average, going back to its founding in 1896.

    I’ve spliced the data a number of different ways to see how the Dow has performed under different cycles. For example, here’s a remarkable stat: If you had invested in the Dow only on Thursdays, since September 1987, you would have a combined loss of 7%.

    That’s more than 1,740 trading days which is nearly the equivalent of seven years, and a Thursdays-only strategy would have yielded you nothing. Over that time, the Dow gained more than 1,300%. Of course, investing on a single day each week is wholly impractical, but it shines a light on the sometimes bizarre and often surprising behavior of financial markets.

    If we play with the numbers a little more, we see that investing in the Dow on only Thursdays and Fridays over the last 34 years has generated a gain of just 3.3%. Meanwhile, the gain for Mondays, Tuesdays and Wednesdays comes to nearly 1,250%.

    What possible explanation could there be? Beats me. Perhaps if you slice and dice numbers long enough, you’re bound to see something unusual. Maybe we’re truly being fooled by nothing more than randomness.

    To me, the most interesting calendar effect is the monthly cycle. Nearly all of the markets’ gains have come during the first six days of the month. Here’s what the historical average month looks like:

    After the sixth calendar day of the month, the Dow has basically been flat. Bear in mind that this is the average of 125 years’ worth of data.

    I don’t advocate any trading strategy based on this. I merely find it interesting. As Isaac Newton once said, “I can calculate the motion of heavenly bodies, but not the madness of people.”

    That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

    – Eddy

  • Morning News: January 4, 2022
    Posted by on January 4th, 2022 at 7:19 am

    London’s Fintech Boom Opens the Door for Dirty Money

    China’s Anti-Graft Crackdown Has Ensnared Over 20 Finance Officials So Far

    JPMorgan Strategists Say Global Stock Market Party Far From Over

    Democrats Blast Corporate Profits as Inflation Surges

    Customer Service at the IRS Is So Bad, Even Tax Pros Are Fed Up

    What Investors Learned From the Elizabeth Holmes Trial: ‘Zero’

    COVID-19 Loss of $44 Billion Is 3rd Largest Catastrophe Cost to Insurers

    AT&T and Verizon Agree to New Delay of 5G Rollout

    Your BlackBerry Dies Today: End of an Era for Iconic Handset

    Apple’s $3 Trillion Valuation Should Unnerve Investors

    Toyota Poised to Dethrone GM in 2021 as U.S. Sales Leader

    Ford Doubles Lightning Production as Electric Truck Battle With GM Heats Up

    Covid Brings America’s Beer-vs.-Liquor Rivalry to a Head

    Office Attire That Makes a Statement: ‘OK, Let’s Hug’

    10 Predictions for 2022

    These Were the Worst Predictions About 2021

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  • First Trading Day of the Year
    Posted by on January 3rd, 2022 at 12:01 pm

    It’s the first trading day of 2022. Historically, this has been a good time for the stock market. Today is a good example of a contra-trend day. That’s a fancy term for “all the stuff that’s been lagging is leading, and all the stuff that’s been leading is now lagging.”

    As I write this, the S&P 500 High Beta is up 1.21% while the S&P 500 Low Vol is down 1.59%. That’s a wide spread for one day. To give you an example of the high betas, Tesla has been up as much as 11% today. Elon Musk’s net wealth increased by around $20 billion this morning (although he’s been dumping shares recently so I don’t know the exact amount).

    While last week was very slow for economic news, this week will have a lot more. Of course, the big jobs report is due out this Friday. On Wednesday, the ADP report is due out as are the minutes from the Fed’s last meeting. Also, the ISM Manufacturing Index is scheduled to come out tomorrow.

    One report this morning came from the Census Bureau. Construction spending rose by 0.4% in November. In the last year, construction spending increased by 9.3%.

  • Morning News: January 3, 2022
    Posted by on January 3rd, 2022 at 7:11 am

    Singapore’s 2021 GDP Grows at Fastest Pace in Over a Decade

    Sprightly European Stocks Greet New Year By Hitting Record High

    Europe Plans to Say Nuclear Power and Natural Gas Are Green Investments

    Trump-Appointed Chairman’s Resignation Hands Control of FDIC to Democrats

    Here’s (Almost) Everything Wall Street Expects in 2022

    Goldman Sachs Follows Wall Street Rivals in Asking Staff to Work From Home

    Why Does Goldman Sachs Fund An Economics Department?

    A Former Facebook Executive Pushes to Open Social Media’s ‘Black Boxes’

    Verizon and AT&T Decline Regulators’ Request to Delay New 5G Services

    Tesla Reports 87% Increase in 2021 Deliveries

    Hyundai, Kia Expect Auto Sales Jump in 2022 Amid Chip Shortage

    LG Energy Solution Opens Books for South Korea’s Largest IPO at Up to $10.8 Billion

    China Evergrande Shares Halted, Set to Release ‘Inside Information’

    Lab-Grown Shrimp’s Price Tag Shows Long Way Ahead to Mass Market

    WW Failed to Cash In On the Diet Craze in 2021

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  • The 2022 Buy List
    Posted by on December 31st, 2021 at 9:15 pm

    Here are the 25 stocks for the 2022 Buy List. It’s locked and sealed, and I can’t make any changes for 12 months.

    For tracking purposes, I assume the Buy List is a $1 million portfolio that’s equally divided among 25 stocks. Below are all 25 positions with the number of shares for each and the closing price for 2021. Whenever I discuss how the Buy List is doing, the list below is what I’m referring to.

    Company Ticker Price Shares Balance
    Abbott Laboratories ABT $140.74 284.212022 $40,000.00
    AFLAC AFL $58.39 685.048810 $40,000.00
    Broadridge Financial Solutions BR $182.82 218.794443 $40,000.00
    Carrier Global CARR $54.24 737.463127 $40,000.00
    Church & Dwight CHD $102.50 390.243902 $40,000.00
    Danaher DHR $329.01 121.576852 $40,000.00
    FactSet FDS $486.01 82.302833 $40,000.00
    Fair Isaac FICO $433.67 92.236032 $40,000.00
    Fiserv FISV $103.79 385.393583 $40,000.00
    HEICO HEI $144.22 277.354042 $40,000.00
    Hershey HSY $193.47 206.750401 $40,000.00
    Intercontinental Exchange ICE $136.77 292.461797 $40,000.00
    Moody’s MCO $390.58 102.411798 $40,000.00
    Miller Industries MLR $33.40 1,197.604790 $40,000.00
    Otis Worldwide OTIS $87.07 459.400482 $40,000.00
    Reynolds Consumer Products REYN $31.40 1,273.885350 $40,000.00
    Ross Stores ROST $114.28 350.017501 $40,000.00
    Science Applications International SAIC $83.59 478.526139 $40,000.00
    Stepan SCL $124.29 321.827983 $40,000.00
    Sherwin-Williams SHW $352.16 113.584734 $40,000.00
    Silgan SLGN $42.84 933.706816 $40,000.00
    Stryker SYK $267.42 149.577444 $40,000.00
    Thermo Fisher TMO $667.24 59.948444 $40,000.00
    Trex TREX $135.03 296.230467 $40,000.00
    Zoetis ZTS $244.03 163.914273 $40,000.00
    Total $1,000,000.00

    The five news buys are Carrier Global (CARR), Fair Isaac (FICO), Otis Worldwide (OTIS), Reynolds Consumer Products (REYN) and Science Applications International (SAIC). Fair Isaac is a returning member. It was on our Buy List in 2006 and 2007.

    The five sells are Ansys (ANSS), Cerner (CERN), Check Point Software (CHKP), Disney (DIS) and Middleby (MIDD).

    Only AFLAC (AFL) and Fiserv (FISV) have been on the Buy List all 17 years. This is Stryker’s (SYK) 15th year.

    Thermo Fisher Scientific (TMO) is our largest stock with a market value of $263 billion. Miller Industries (MLR) is by far our smallest with a market value of $381 million. Stepan (SCL) is our second smallest and its market value is more than seven times that of Miller.

    Here are the corporate descriptions of our five new stocks:

    Carrier Global Corporation is located in Palm Beach Gardens, FL, United States and is part of the Ventilation, Heating, Air-Conditioning, and Commercial Refrigeration Equipment Manufacturing Industry. Carrier Global Corporation has 56,000 total employees across all of its locations and generates $17.46 billion in sales (USD). There are 1,495 companies in the Carrier Global Corporation corporate family.

    FICO powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 200 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, manufacturing, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 120 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.

    Otis is the world’s leading elevator and escalator manufacturing, installation and service company. We move 2 billion people a day and maintain approximately 2.1 million customer units worldwide, the industry’s largest Service portfolio. Headquartered in Connecticut, USA, Otis is 69,000 people strong, including 40,000 field professionals, all committed to meeting the diverse needs of our customers and passengers in more than 200 countries and territories worldwide.

    RCP’s mission is to simplify daily life so consumers can enjoy what matters most. RCP is a market-leading consumer products company with a presence in 95% of households across the United States. RCP produces and sells products across three broad categories: cooking products, waste & storage products and disposable tableware; that are sold under iconic brands such as Reynolds and Hefty, as well as under store brands that are strategically important to RCP’s customers. Overall, across both branded and store brand offerings, RCP holds the #1 or #2 U.S. market share position in the majority of product categories in which it participates.

    SAIC® is a premier Fortune 500® technology integrator driving our nation’s technology transformation. Our robust portfolio of offerings across the defense, space, civilian, and intelligence markets includes secure high-end solutions in engineering, digital, artificial intelligence, and mission solutions. Using our expertise and understanding of existing and emerging technologies, we integrate the best components from our own portfolio and our partner ecosystem to deliver innovative, effective, and efficient solutions that are critical to achieving our customers’ missions.

    We are more than 26,000 strong; driven by mission, united by purpose, and inspired by opportunities. Headquartered in Reston, Virginia, SAIC has annual revenues of approximately $7.2 billion.