Morning News: August 18, 2022
Posted by Eddy Elfenbein on August 18th, 2022 at 7:08 am

As China’s Economy Stumbles, Homeowners Boycott Mortgage Payments

China Attacks US Chip Handouts While Warning of Market Slowdown

US-Taiwan Trade Talks Kick Off in Long-Planned Counter to China

Tesla Asks Chinese Government to Help Secure Power to Suppliers

After 2,240% Run, Tesla Visionary Leaves UK Fund Bleeding Money

Germany Has Worked Hard to Shore Up Winter Gas Supplies — and It’s Ahead of Schedule

Fed Officials See Need for Continued Interest-Rate Increases, but Less Certainty Over Destination

Fed Still Needs to ‘Shock the Market,’ Original ‘Dr. Doom’ Economist Says

Browsers Are Back in the Antitrust Hot Seat

Bank of America CEO Blasts White House’s ‘Recession’ Semantics

It Was the Housing Crisis Epicenter. Now the Sun Belt Is an Inflation Vanguard.

They Lost Crypto in the Crash. They’re Trying to Get It Back.

Wait, When Did Everyone Start Using Apple Pay?

Bed Bath & Beyond Shares Fall After Investor Ryan Cohen Reveals Intent to Sell Entire Stake

FDA Approves Bluebird’s $2.8 Million Gene Therapy for Rare Blood Disease

Could Elon Musk Wreck Manchester United Like He’s Wrecked Twitter?

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Morning News: August 17, 2022
Posted by Eddy Elfenbein on August 17th, 2022 at 7:06 am

Inflation in Britain Jumps to 10.1 Percent, Pushed Higher by Food Prices

German Utility Reports Huge Loss as Russia Slashes Gas Flows

A $379 Billion Hole Emerges in Developing Nations’ War Chests

China’s Worst Heatwave in 60 Years is Forcing Factories to Close

Australia’s Santos Surprises with Backing for Alaska Oil Project

Biden Signs Bill Aimed at Lowering Drug Costs, Boosting Renewable Energy

Yellen Directs I.R.S. to Embark on $80 Billion Overhaul Plan

Can the Texas Power Grid Survive the Crypto Mining Boom?

Why the 1 Percent Buyback Tax Doesn’t Scare Investors

Makers of Heating, Cooling Systems Expect Climate Bill to Boost Sales

American Airlines Buys Supersonic Jets Twice as Fast as Regular Planes

Target Misses Lowest Profit Estimate, Still Predicts Rebound

AMC’s CEO Will Do Whatever It Takes to Keep His Company a Meme Forever

China’s Tencent Reports First Revenue Drop as Gaming Regulations and COVID-19 Bite

Tech Companies Are Relinquishing Some Control of Online Ads to Users

Gambling Operators Including FanDuel, DraftKings Tweak Marketing as NFL Season Arrives

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CWS Market Review – August 16, 2022
Posted by Eddy Elfenbein on August 16th, 2022 at 7:22 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.”)

The Great Summer Rally of 2022

Even if this latest bear-market rally proves to be another dud, you have to admire its resiliency. The market has rallied in the face of slowing economic growth, higher interest rates and persistent inflation. None of these seems to matter.

During the day on Tuesday, the S&P 500 poked its head above 4,325. That’s a place the index has not been since early May. The S&P 500 has now gained back more than half of what it lost during this year’s unpleasantness. There’s even a reasonable, albeit small, chance that the index will close the year in the black.

Sounds far-fetched? We’re only 11% away from a new all-time high. Bear in mind that we’ve gained more than 17% in less than two months. Check out the summer rally:

About a month ago, the S&P 500 broke above its 50-day moving average (the blue line). On Tuesday, the index came within a hair, just 0.02%, of breaking its 200-DMA (the green line).

The reason why it has a decent track record is that the moving average captures the market’s momentum, and the stock market tends to be a trend-sensitive data series. When it’s moving in one direction, the safe bet in the near-term is that it will keep moving in that direction.

Sometimes the market seems like it can do nothing right, and sometimes it can do no wrong. There’s a lot of fancy math to bear that out.

The Housing Recession Has Started

Speaking of not being able to do anything right, have you seen the housing market lately? There was an economic report that came out on Monday that didn’t, in my opinion, get the attention it deserved.

What happened is that a key index of homebuilder sentiment finally turned negative. The National Association of Home Builders/Wells Fargo Housing Market Index fell 6 points to 49. That was its eighth-straight monthly decline.

The reason why this is so important is that 50 is the tipping point. Any number above 50 is considered positive, while any number below it is considered negative. Now we’re negative. Except for a brief period around Covid, this index hasn’t been negative in eight years.

It’s hardly a secret what’s happening. Homebuilders are being squeezed by higher interest rates from the Federal Reserve and also by higher housing costs. All of this is falling on buyers. The index is composed of three parts. The most alarming is that buyer traffic dropped 5 points to hit 32.

While it’s a matter of debate as to whether or not the overall market is in a recession (I don’t think we are…yet), it’s quite clear that the housing sector is in a recession. In response, homebuilders are slashing prices.

The math is simple—home prices are too darned high. Thanks to the Fed, home prices soared during the pandemic. But now, again thanks to the Fed, mortgage rates are climbing. Since early 2021, the rate on a 30-year mortgage has doubled. The combined effect is to push millions of Americans out of the housing market.

The problem is made worse by the fact that there are far too many homes on the market. Home sellers have crowded inventories and few people looking to buy. One stat I like to watch is the supply of new homes relative to the number of homes sold. That’s at its highest level since 2010. Bloomberg notes that in June, “824,000 single-family homes were under construction in the US, more than at any time since October 2006.”

The thing about housing is that it impacts so many different areas. In many regards, the U.S. economy is centered around housing. There’s even a well-regarded academic paper by Dr. Edward E. Leamer titled “Housing IS the Business Cycle.” Note the emphasis on “is.” I think he’s exactly right.

(Side note: Leamer also has a paper called “Let’s Take the Con Out of Econometrics.” How can you not like that?)

Whenever a new home is sold, that spurs the buyers, often a young couple, to head down to Lowe’s or Home Depot to buy new things to fill out the home. Of course, this usually starts with a home mortgage which gives business to the financial sector. The sale of a new home is really the core act that has several spokes that radiate outward.

We can also see the impact on our Buy List. In recent weeks, stocks like Sherwin-Williams (SHW) and Trex (TREX) have felt the impact of a slowing housing market. On Tuesday, Home Depot (HD) reported Q2 earnings of $5.05 per share which was an 11-cent beat, but the company said it expects same-store sales growth of 3% this year. That should be slowing during the second half of the year. Home Depot said that during last quarter, customer transactions fell 3%, but the average purchase rose by 9% to $90.02. In other words, people are paying more for less stuff.

This gets to the key dilemma of the current economy. The broader economy is probably not in a recession at the moment, but its most important sector likely is.

If there is a silver lining to the recent economic news, it’s that earlier today, Walmart (WMT) released a decent earnings report. This is a relief since the company has been struggling lately. After the last earnings report three months ago, traders gave the shares a super-atomic wedgie. I often say that the Walmart earnings report is, in effect, a report on American consumer behavior.

For Q2, Walmart earned $1.77 per share which was a 14-cent beat, but the most important news is that Walmart reiterated its forecast for the second half of this year. The company expects same-store sales to rise by 3% for the back half of 2022. For earnings, that’s still ugly. Walmart said it expects EPS to decline by 9% to 11% for this year.

For Q2, same-store sales rose by 6.5%. That’s not bad. Digging into the numbers, Walmart is being helped by rising food sales, which has been aided by inflation. Here’s an interesting stat via CNBC: About three quarters of Walmart’s market share gains in food came from customers with annual household incomes of $100,000 or more. Rich folks like a good bargain.

Quarterly revenue was $152.86 billion. That works out to more than $1.1 million every minute. It also beat estimates by $2 billion. This report is good news for Walmart and should help to alleviate some concerns about the health of the American consumer. Still, the problem of inflation needs to addressed without delay.

Stock Focus: Polaris

Polaris (PII) is one of those oddball stocks that deserves more respect than it gets. It’s especially intriguing right now because the valuation appears to be quite favorable.

If you’re not familiar with Polaris, the company started off making snowmobiles. They still do today, but they also make all sorts of off-road vehicles, those crazy “slingshot” cars, plus snowmobiles, power boats, pontoon boats and lots of other stuff. They also do a nice business in selling apparel. (Off the record, it’s basically a toy store for adult men. That’s a very good business to be in.) If you want to see an example of wares Polaris has to offer, here’s Chad “Ochocinco” Johnson going off-roading in a Polaris RZR Pro R.

Polaris is based in Medina, MN and they’ve been in business since 1954. Polaris currently has more than 35 brands and it does business in more than 120 countries. Last year, the company did $8.1 billion in sales. Wall Street expects that to rise to $8.5 billion this year and to $8.73 billion in 2023. Global employee count is over 16,000.

Polaris is a good example of a company with a wide “moat.” Not many firms can do what they do. In fact, Polaris is one of the largest holdings in the VanEck Morningstar Wide Moat ETF (MOAT).

These days, Polaris is a complete company that makes parts and accessories. The company IPO’d in August 1987, right near the market top.

The stock has been a massive home run. Since the IPO, PII is up nearly 100-fold. Including dividends, it’s up more than 160-fold. Despite this massive return, the share price today is lower than where it was eight years ago.

Even though the share price has lagged, business continues to go well for Polaris. In 2019, the company made $6.32 per share. In 2020, that increased to $7.74 per share, and last year it rose to $9.13 per share.

In April, Polaris bombed its Q1 report. The company earned $1.29 per share which was 49 cents below expectations. Sales were flat. Three weeks ago, Polaris rebounded with a solid Q2 report. Polaris earned $2.42 per share for Q2 which beat the Street by 33 cents. Sales were up 8% to $2.063 billion.

For guidance, Polaris now expects sales for this year to rise by 13% to 16%. That’s up from the prior guidance of 12% to 15%. Polaris also sees full-year earnings ranging between $10.10 and $10.30 per share. That’s up 11% to 14% over last year. If those forecasts are accurate, that means Polaris is going for just 12 times earnings. Not that long ago, Polaris used to go for twice that valuation. One more thing: Polaris has increased its dividend every year for the last 27 years.

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

– Eddy

Morning News: August 16, 2022
Posted by Eddy Elfenbein on August 16th, 2022 at 7:09 am

To Escape the War, Ukraine’s Factories Are Moving West

Israel’s First International Bank Net Profit Drops 15% in Second Quarter

Israel’s Bank Leumi Q2 Profit Boosted by Financing Income Jump

India’s Digit Insurance Eyes $440 Million in IPO

Falling Oil Prices Defy Predictions. But What About the Next Chapter?

The Fed’s Past Crises Hold Secrets to Tackling Future Recessions

Wall Street Deal Making Faces Greater Scrutiny, Delays Under FTC’s Lina Khan

Andreessen Horowitz Thinks It’s Time for Adam Neumann to Build

A Frustrating Hassle Holding Electric Cars Back: Broken Chargers

SoftBank-Backed Ola to Launch First Electric Car in 2024

Walmart Strikes Streaming Deal with Paramount

Dan Loeb’s Third Point Calls for Disney to Spin Off ESPN, Refresh Board

Apple Lays Off Recruiters as Part of Its Slowdown in Hiring

Home Depot Posts Higher Sales as Transactions Continue to Drop

Why Is Airline Travel So Miserable? Blame Florida

Judge Refuses to Toss Financial Aid Lawsuit Against Top Colleges

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Morning News: August 15, 2022
Posted by Eddy Elfenbein on August 15th, 2022 at 7:01 am

Japan Bounces Back to Economic Growth as Coronavirus Fears Recede

China Unexpectedly Cuts 2 Key Rates, Withdraws Cash from Banking System

What a Chinese Blockade of Taiwan Would Mean for Global Business

China Stocks With US Listings Slump as NYSE Exit Gathers Pace

Wall Street Revives Russian Bond Trading After U.S. Go-Ahead

As Fed Warns of Turbulence Ahead, Markets Remove Their Seat Belts

JPMorgan Says the Stock Rally Has Legs. Morgan Stanley Disagrees

Robinhood May Need to Join Forces with a Larger Wall Street Rival

Wells Fargo Plans Major Retreat From Mortgage Business It Long Dominated

Restaurant Meals Become a Relative Bargain as Grocery Prices Soar

Washington’s Top Labor Prosecutor Battles Whole Foods Over Black Lives Matter Masks

Why Local Governments Trail Private Employers in Hiring

If the Job Market Is So Good, Why Is Gig Work Thriving?

The Rise of the Worker Productivity Score

Saudi Aramco Posts 90% Jump in Profit, Generating Billions for Kingdom

How Frustration Over TikTok Has Mounted in Washington

Movie Theaters Plot Revival as Americans Show Up for Blockbusters

Being Thrown Off Social Media Was Supposed to End Alex Jones’s Career. It Made Him Even Richer

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Broadridge Earns $2.65 per Share
Posted by Eddy Elfenbein on August 12th, 2022 at 7:34 am

For its fiscal Q4, Broadridge (BR) earned $2.65 per share. That was two cents better than estimates. For the year, earnings grew 14% to $6.46 per share. The company is raising its annual dividend by 14% to $2.90 per share.

“A strong fourth quarter capped another great year for Broadridge, with record closed sales, 16% recurring revenue growth, continued margin expansion, and 14% Adjusted EPS growth,” said Tim Gokey, Broadridge’s CEO. “Our results reflect continued execution of our long-term growth strategy, the ongoing digitization of financial services, and strong performance from our Itiviti acquisition.

For next year, Broadridge see recurring revenue growth of 6% to 9% and EPS growth of 7% to 11%. Working off a base of $6.46 per share, that implies 2023 earnings of $6.91 to $7.17 per share.

Morning News: August 12, 2022
Posted by Eddy Elfenbein on August 12th, 2022 at 7:03 am

Global Population Is About to Hit 8 Billion—and Some Argue It Is Near Its Peak

Britain’s Economy Shrank in Second Quarter, as Warnings About the Future Get Bleaker

Mostly Bluster: Why China Went Easy on Taiwan’s Economy

China State-Owned Giants to Delist From US Amid Audit Spat

BofA Says Cash Racing to Stocks, Bonds as Inflation Fears Ease

Stocks Set for Best Stretch of Year, as Inflation Fears Recede

3 Warning Signs About the Economy Coming Out of America’s Top Companies

Credit Suisse Weighs Break With Trading Unit That Minted Billions

Masayoshi Son Is Now Down $4 Billion on His SoftBank Side Deals

Climate and Tax Bill to Rewrite Embattled Black Farmer Relief Program

What the Great Mayonnaise Inflation Mystery Can Tell Us About Prices

Gas Prices in the U.S. Fall Below $4 a Gallon

For Electric Vehicle Makers, Winners and Losers in Climate Bill

Rivian’s Losses Nearly Triple to $1.7 Billion

Shops Ordered Lots of Bikes in 2020. Peddling Them Is an Uphill Climb.

Disney+ Price Increase Shows Limits of Subscriber-Growth Push

Johnson & Johnson Will Discontinue Talc-Based Baby Powder Globally in 2023

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Morning News: August 11, 2022
Posted by Eddy Elfenbein on August 11th, 2022 at 7:11 am

The Snowballing US Rental Crisis Is Sparing Nowhere and No One

Inflation Cooled in July, Welcome News for White House and Fed

Fed Likely to Want Further Evidence of Inflation Slowdown

Lower Gasoline Prices Portend Higher Consumer Confidence, Affect Inflation

Republicans Are Outraged at Joe Biden for Accurately Describing the Economy

Mark Cuban Says Buyback Levy Is Top of ‘Bad Taxes’ List

The Boy Bosses of Silicon Valley Are on Their Way Out

Regulators Weigh Asking Hedge Funds to Report Crypto Exposure

Inflation Takes a Bite Out of the Fast-Food Value Menu

Russians Lining Up to Snag H&M Clothes, IKEA Furniture as Stores Close Over Ukraine War

Investindustrial to Pay $950 Million for TreeHouse Meal-Prep Business

Disney Posts Profit Surge, Cuts Forecast on Streaming Users

Daimler Truck to Keep Prices High, Sees Strong 2023

Thyssenkrupp’s Q3 Operating Profit Nearly Triples on Steel Price Rebound

Samsung’s New $1,800 Galaxy Z Fold 4 Tests High-End Budget

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Morning News: August 10, 2022
Posted by Eddy Elfenbein on August 10th, 2022 at 7:09 am

Historic Drought Threatens to Cripple European Trade

Greece to Exit EU’s ‘Enhanced Surveillance’ Framework After 12 Years

U.S. Renewables Investors See Senate Bill Sparking Gold Rush

U.S. Republicans Prepare Consumer Watchdog, SEC Probes as Mid-Term Elections Loom

The Fed Is Cooling Down the Economy, but Stocks Are Hot. What Gives?

Coinbase Reports 63 Percent Drop in Revenue Amid Industry Slump

Chip Makers Expect Demand Slowdown to Expand Beyond PCs, Smartphones

Musk Sells $6.9 Billion of Tesla to Avoid Twitter Fire Sale

Bankers Turned Billionaires for an Instant, Then Came 89% Crash

VC Funding Is Drying Up. Here’s a Four-Time Founder’s Guide to Surviving a Market Downturn

Ford’s New F-150 Lightning Truck to Get Price Hike

Disney’s Streaming Strategy, Theme Park Outlook Face Investor Scrutiny

Ralph Lauren, Michael Kors Buck Consumer-Spending Woes

Chipotle Agrees to Pay Over $20 Million to Settle New York City Workplace Case

DOJ Is Preparing to Sue Google Over Ad Market as Soon as September

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CWS Market Review – August 9, 2022
Posted by Eddy Elfenbein on August 9th, 2022 at 7:32 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.”)

The Blow-Out July Jobs Report

Last Friday, the Bureau of Labor Statistics released the jobs report for July, and it was much stronger than analysts had been expecting. According to the government, the U.S. economy created 528,000 net new jobs during the month of July. That was more than double expectations.

This report came in for especially close scrutiny since the last two GDP reports were negative. While that’s not a recession according to the technical definition, it certainly is cause for concern. Even though there are pockets of weakness in the economy, such as business and residential construction, the labor market has been holding up well. At least for now.

I don’t believe we’re currently in a recession, and some folks are being unduly alarmist. However, I am concerned that a recession may start sometime in the next six to 12 months. That’s why it’s crucial for investors to maintain a conservative posture. This is especially true with rising inflation and interest rates.

One encouraging sign is that the U.S. economy just passed an important threshold: the economy has now made back all the jobs it lost during the economic shutdown of 2020. In two months, the economy shed 21.991 million jobs, but in the 27 months since then, we’ve made them all back. Add it all up and in a 29-month period, the U.S. created a grand total of 32,000 jobs.

Still, there are parts of the economy that suffered greatly during the lockdowns. If the economy were to have the same jobs-to-population ratio that we had two years ago, then we would need an additional 1.7 million new jobs.

According to the jobs report, the unemployment rate fell to 3.5% last month which matches a 50-year low. I dug through the data and calculated the jobless rate number out for a few decimal places. To be absolutely precise, the unemployment rate for July was 3.458%. That’s the lowest unemployment rate since May 1969.

I was impressed with how broad the jobs gains are. For example, leisure and hospitality added 96,000 jobs last month. Of that, 74,000 was in bars and restaurants. This is an important number to watch because that sector has been a laggard since the lockdowns. It’s still 7% below the high from early 2020. It’s a good sign that more people are going out.

Professional and business services added 89,000 jobs last month. This is a sector that hasn’t been impacted as much as many others. It’s up nearly a million jobs since pre-Covid.

The public sector added 57,000 jobs last month, mostly teachers. The only major industry to lose jobs last month was auto manufacturing, which lost 2,200 jobs.

The labor force participation rate slipped a bit in July. This is important because we want to see how many people are looking for work. If you’ve given up looking, then the government doesn’t count you as unemployed. Labor force participation has mostly improved over the last two years, but it needs to go even further.

A better measure of the labor force participation rate is to look at prime working-age people (ages 25 to 54). That’s improved over the last two years, but it’s not quite where it was prior to the recession of 2020.

For the most part, the stock market didn’t do much of anything in the wake of this report. During the day yesterday, the S&P 500 reached its highest point in three months. However, it gave that back by the closing bell.

The index has now fallen for the last four days, but it’s been modest losses. The next big test for the market comes tomorrow when the government releases the inflation report for July. This will be important because it will be the first report that includes the recent drop in oil prices.

This raises an interesting topic: how does the unemployment rate impact the stock market? A few years ago, I looked at the numbers. I took all the monthly unemployment rates since 1948 and saw how the market performed in those months.

I then divided the months into four groups based on the current unemployment rate. The four groups were under 4%, 4% to 6%, 6% to 8% and over 8%. This is the S&P 500’s annualized price return by unemployment rate since 1948:

Under 4%: +4.71%
4% to 6%: +7.83%
6% to 8%: +18.09%
Over 8%: +22.17%

This makes sense. The best time to invest is when the economy is in rough shape. Meanwhile, when the economy is humming along is a good time for the bears to strike. I should caution you against reading too much into this kind of analysis. The market is made up of people and it’s only as rational as its most impassioned trader. As long as inflation weighs on the market, investors will be nervous.

The price for oil is a very important piece of the monthly CPI report. According to GasBuddy, the average price for gasoline peaked at just over $5 per gallon in mid-June. Since then, it’s fallen consistently and gasoline in now under $4 per gallon.

The inflation report for June showed that consumer prices rose by 9.1% over the prior 12 months. In simple terms, for every $11 dollars you had one year ago, today you have the buying power of $10. The core rate, which excludes food and energy, is “only” up 5.9% over the past year. That 12-month core rate has gradually ticked down over the last three months. I’ll be curious to see if it hits four months in a row.

I suspect that the jobs numbers will soon slow down. That’s a result of the higher interest rates from the Fed. Ultimately, that will reduce demand. That will force companies to cut costs, and an easy way to do that is to hold back on hiring new people.

We’re nearly finished with the Q2 earnings season, and it’s been a decent one. For now, the S&P 500 is on pace to record earnings growth of 9.63% compared with last year’s Q2. The energy sector is looking to quadruple its profits over last year. The big loser is the consumer discretionary sector which is down 14.23% over last year. So far, 76.0% of companies have beaten expectations, although those are much-reduced expectations.

The Federal Reserve doesn’t meet again until late September. Thanks to Friday’s jobs report, Wall Street is expecting another 0.75% rate increase. After that, however, the outlook gets cloudy.

Traders expect 0.25% hikes in November and December. Then begins a long pause. Traders expect the Fed to hold its target range at 3.50% to 3.75% for the entire first half of next year. They see a rate cut by July as a 50-50 bet. It’s extraordinary that investors expect a U-turn in Fed policy so quickly.

Stock Focus: Waters Corporation

I wanted to update you on a stock I’ve discussed before, Waters Corporation (WAT). I like this company a lot. Even though it’s not well-known to investors, Waters is one of the world’s leading specialty measurement companies.

The company was founded in 1958 by James Waters. He passed away last year at the age of 95. Waters got his big break in 1972 when he solved a complicated problem for Robert Woodward, a Nobel Prize-winning chemist at Harvard. Waters went to Woodward’s lab with a liquid chromatograph and helped solve the problem within a few weeks.

Waters is headquartered in Milford, Massachusetts. After 74 years, it’s become a pretty big outfit. The company currently has over 40,000 customers and a workforce of 7,800 employees. Waters went public in 1995 and the shares are up 86-fold since then. This year, Waters is on track to register nearly $3 billion in revenue. The current market cap is $19.5 billion. Waters is also a member of the S&P 500.

So what do they do? The company makes, sells and services high-performance liquid chromatographs, ultra-performance liquid chromatographs and mass spectrometers. Waters operates through two segments, Waters and TA (for thermal analyzers).

If you’re like me, then you probably rarely find yourself in the market for a spectrometer. Or maybe never. But there are lots of businesses who love them and buy them. But what do these things do? Spectrometers help identify chemical compounds. This is important for drug development, food testing, and air and water quality testing. Waters also designs and sells thermal analysis, rheometry and calorimetry instruments through its TA product line.

This is normally a very good business to be in. Waters has a high “moat” which means it’s well-protected from competitors. That’s the kind of company I like to buy. Waters often delivers operating profit margins near 30%.

Check out its long-term performance:

A sign of a good long-term chart is when you can barely make out the numbers for the Y-axis.

Being a growth stock, shares of Waters got beaten up in recent months. The stock peaked at $428 per share about this time last year. By the time of its recent low in April, Waters had shed $140 per share.

Despite the drop, Waters has continued to deliver very good earnings. Waters earned $11.20 per share last year. Wall Street expects earnings of $12.08 per share for this year and $13.18 per share in 2023. Last week, Waters reported another solid quarter. For Q2, Waters made $2.75 per share which beat the Street by nine cents per share.

Let’s look at guidance. The company said it expects earnings to range between $2.50 and $2.60 per share for Q3. For the full-year, Waters said to expect earnings between $11.95 and $12.05 per share. That’s almost certainly too low. I’d say that $12.20, give or take, is more accurate.

I used to think that Waters was overpriced but the recent selloff has made the stock much more attractive. This is one I’m going to be taking a close look at when it’s time to update our portfolio at the end of this year.

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

– Eddy