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Afternoon Note

Drumroll Please

By Charles Payne, CEO & Principal Analyst
9/18/2019 1:53 PM

We are just an hour away from the Fed cutting rates by 25 basis points, and then a question and answer period that will be the real news event.  Jay Powell has made a number of mistakes with his comments, driving the equity market lower at the conclusion of FOMC gatherings.  Will he stick to the notion of transitory and mid-cycle adjustments, or broaden his vernacular to suggest true data-driven decisions rather than the urge to justify those four rate hikes in 2019?

Dow Reaction to Recent FOMC Decisions and Powell Comments:

https://cmegroup-tools.quikstrike.net/ChartImages/BANTIXWFENLB01/QPWUFWCC_000050.png?eb567704-9f32-457f-b4a4-132c0725dccc

 

Fed Fund Rate Range

(Basis Points)

Now

1 Day

1 Week

200 – 225 (current)

27.3%

51.5%

12.3%

175 to 200

72.7%

48.5%

87.7%

150 to 175

0.0%

0.0%

0.0%

Buying the Dip

I’m getting a lot of calls and emails about buying the dip on FedEx (FDX), and the answer is “no” I wouldn’t, even with this massive drop.

As for FDX, the company has a lot of issues beyond trade, including losing Amazon (AMZN).  I combed their annual filings this morning (see below), and its clear business peaked with respect to the rate of change of operating income and margin in 2016. Fred Smith has to retool the model and find way to integrate recent acquisition faster.

FDX Fiscal Year Results

(non-GAAP)

2014

2015

2016

2017

2018

2019

Revenue

$45.6

$47.5

$50.4

$60.3

$65.5

$69.7

Operating Income

$3.59

$4.26

$5.01

$5.48

$5.14

$5.22

Operating Margin

7.9

9.0

10.0

9.1

7.8

7.5

Revenue and income in billion USD

Free cash flow is slim, as cash from operating activity swooned to $565 million from $701 million a year ago and interest cost increased.

The FDX chart has seen a series of lower highs, and failure at potential turning points, which is another reason investors probably shouldn’t have been in the stock in the first place.

https://www.tradingview.com/x/GfPtzPDp/

Dips I’m Spying

Roku (ROKU) - we sent alert to take profits at a perfect point on swing strategies. Now, I’m spying hard to buy the dip, as I continue to think one day the company commands a monster premium as a takeover target.

Adobe (ADBE) - is also oversold on news this morning, and like we have over the years, we’ll let the dust settle. At some point, this stock looks like a buy, at least for traders but also maybe for investors as well.


 

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