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Morning Commentary

Oversold and Tempting

By Charles Payne, CEO & Principal Analyst
11/14/2017 9:20 AM
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On Monday, all the major indices eked out small gains in the session. Those benign results belied increasing anxiety and concerns. Underscoring this notion, is the fact that utilities were the best performing sector of the session.

S&P 500 Index

+0.10%

Consumer Discretionary (XLY)

+0.34%

Consumer Staples (XLP)

+0.57%

Energy (XLE)

-0.57%

Financials (XLF)

+0.15%

Health Care (XLV)

+0.10%

Industrials (XLI)

-0.34%

Materials (XLB)

+0.52%

Real Estate (XLRE)

+0.30%

Technology (XLK)

-0.03%

Utilities (XLU)

+1.19%

Most of the concerns revolved around one word: “leadership.”

Market and economic news were dominated by leadership and achievement, or perhaps I should say, the lack of leadership and achievement.  

Three men with storied careers have reached the pinnacle of their respective professions, but are now facing difficult times, even as they try to protect or extend their legacies. 

Roger Goodell

Roger Goodell has enjoyed an amazing run as commissioner of the NFL, bringing the league’s revenue up to $13.3 billion in 2016 up from $8.5 billion in 2010.  Goodell has stated his goal is to top $25.0 billion in annual revenue by 2027.

The NFL is a private business, and the owners are probably loathing an audible, but there are some serious issues. 

Roger Goodell has flubbed a series of non-financial issues from Ray Rice to the current kneeling controversy. Dallas Cowboys owner Jerry Jones is balking at the notion whether the league should renew Goodell in 2019 at $50.0 million a year and a private jet for life.

Jeff Immelt

Turns out Jeff Immelt had two jets while at the helm of General Electric; he took one to meetings, and another one shadowed those trips. I guess it was the ultimate spare tire, and certainly, a fitting example of all the miscues made while he was CEO.

Immelt had the misfortune of following legend Jack Welch, whom many consider the best chief executive officer of his generation.   Although GE was founded by Thomas Edison in 1889 and introduced groundbreaking products (see sidebar) from the giant electric locomotive to nuclear power plants, the company was limping along when Welch took over in 1981.

Fast forward twenty years, under dynamic and aggressive management, Welch left GE as one of the most powerful companies in the world with its stock market value up 4,000%.

GE

Yesterday, the company cut its dividend (the largest corporate dividend cut in history outside of the 2008-2009 financial crisis) by $4.1 billion as it lowered its financial outlook for next year.

I’m not a buyer yet, but I suspect traders and value investors will start kicking the tires. Last week’s bottom fishing in beaten-down stocks and sectors continued yesterday with Hasbro (HAS) reportedly offering to buy Mattel (MAT).

The trend of buying -down names will continue today as Buffalo Wild Wings (BWLD) is soaring 27% in after-hours trading on news Roark Capital Group has made a bid to buy the company. Mergers and acquisitions were the one thing this rally was missing. We may have entered into a period that could see renewed takeover mania.

For all the talk of how impressive this market has been, there are a lot of oversold stocks and a lot of companies with rich currency in the form of shares changing hands at all-time highs. 

Also after the close, Caterpillar (CAT) posted remarkable retail sales numbers for last month. CAT total machines are up 19% from 13% in September, while energy and transportation business is up +23% from 5%.

CAT Total Machines

Oct 2017

Sep 2017

Asia Pacific

+46%

+43%

EAME

+19%

+14%

Latin America

+24%

+6%

North America

+7%

+12%

World

+19%

+13%

 

CAT Energy & Transportation

Oct 2017

Sep 2017

Power Generation

+3%

-1%

Industrial

+37%

+39%

Transportation

+51%

+5%

Oil & Gas

+27%

+1%

World

+23%

+5%

There is a Manufacturing Renaissance, and it’s not just in America; it’s gaining serious momentum.

Lead, Follow or Get out the Way

Then there’s Senate Majority Leader Mitch McConnell with the inability to get bills passed, including the Obamacare repeal, which has pushed him to the lowest approval rating in the Senate.

He hasn’t been able to push through Kate’s Law, no Sanctuaries Act, or border wall funding.  I’m not convinced the Senate will get tax reform done. 

Today’s Session

The market will start the session under the gun as investors grapple with earnings, economic data and the plight of tax reform, which should sail out of the House and then the Senate, but it will face a potential swell when those versions meet.

This morning saw the latest read of confidence from small businesses, the group most optimistic about the election of President Trump.  The 103.8 read was slightly less than the 105.0 anticipated, but there were strong highlights:

Red Flag


Comments
"... few or no qualified applicants ..."

How real are these employers? Are they looking for "Einstein Move Over" candidates? Are the applicants THAT "unable" to perform? Is EVERYBODY playing internet games? A friend came back from an assignment and said that the EMPLOYERS are unqualified to even ask employees to do simple tasks. I am interested in what's going on in Puerto Rico ... used to commute to there ... They hired a labor contractor who brought in helicopters and linemen to dangle from those helicopters, AND THE PUERTO RICANS HAD NO MONEY TO PAY THEM, SO THEY DID IT ON THE COME. But the rates were too high and so the contractor apparently got fired. [There are a lot of go-getters from Whitefish, Montana.] They want the National Guard to do the work. Seriously. I love the National Guard, but they are not going to do high voltage electrical work whilst dancing from helicopters.


Sorry ... don't get me started.

Al M. on 11/14/2017 11:45:35 AM
GE is a mess and the epitome of C suite greed why not actually minding the store for the benefit of it's owners. Cut the BOD back to 10 and cut the compensation of the Executives. Based compensation for the separate business units SOLELY on performance metric that are published quarterly. All stock based compensation for anyone above mid level management must have a 5 years minimum vesting clause. AND NO golden parachutes for Flannery or anyone else......
Wht the past CEO Immelt and the BOD has done to the shareholders borders on criminal.

garro on 11/14/2017 2:52:34 PM
 

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