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Morning Commentary

MOVE THE CROWD

By Charles Payne, CEO & Principal Analyst
11/26/2019 9:31 AM

I have been saying this was going to happen for some time. Now we are in the throes of the market, in part because the market is rallying. I learned a long time ago that new highs beget new highs and new lows beget new lows. Some observers deride these kinds of market moves higher as “melt-ups.”  Certainly, there is a feeling that the market is on autopilot, but it couldn’t have gotten to this point without a foundation.

That foundation solidified with earnings that are nearly the best, and an economic backdrop that could improve dramatically in 2020.

Over the last few weeks, there have been fewer sessions with strong underlying market breadth. This kind of market breadth, when combined with strong volume, screams conviction.

NYSE

NASDAQ

The Message of the Market

There are several investing themes converging at the same time from bottom-fishing, value investing to chasing winners. When it comes to chasing winners, nothing increases a chip count faster than technology.

S&P 500 Index

+0.75%

 

Communication Services (XLC)

+0.31%

 

Consumer Discretionary (XLY)

+0.88%

 

Consumer Staples (XLP)

+0.11%

 

Energy (XLE)

+0.10%

 

Financials (XLF)

+0.64%

 

Health Care (XLV)

+1.17%

 

Industrials (XLI)

+0.72%

 

Materials (XLB)

+0.66%

 

Real Estate (XLRE)

+0.08%

 

Technology (XLK)

+1.46%

 

Utilities (XLU)

 

-0.33%

 

The winners yesterday where a hodgepodge of momentum names led by semiconductors that in turn were led by Nvidia (NVDA), which was an earnings loser two weeks ago. The stock closed at a new 52-week high yesterday. There is a lot of hype in the tech world; some have been a bust thus far, but artificial intelligence is the real deal and Nvidia is the most important publicly traded company in the space.

After the Close

Nutanix (NTNX) posted financial results that weren’t super great but sent the right kind of message to send shares rocketing up more than 20% in after-hours trading.

The company makes a converged compute-and-storage system, along with a software management program called “hyperconvergence.”  The company lost $0.71. The Street was looking for -$0.75. However, investors are really looking for a whole lot more in the future.

Behavioral Analysis

My mind starts to activate, rhymes collaborate

Cause when I heard the beat I just had to make

Something from the top of my head

So I fell into the groove of the wax and I said

How could I move the crowd

Eric B. & Rakim – Move the Crowd

Watching the game last night, as Lamar Jackson continues to electrify the NFL, I saw that the announcers gave a shout-out to the Baltimore Ravens assistant Daniel Stern. Stern has been with the team for three years and is one of the main reasons they go for it on the fourth down more than any other team in the league (Jackson is a big factor, too).  Stern studied economic behavioral analysis at Yale and applies it to an offensive strategy.

Investors can and should  do the same, as the crowd is easy to anticipate. Right now, they are just waking up to the fact they were led astray by the experts, and they need to get in the mix while there’s still time. The crowd is on the move, and there are opportunities to make money.

(Note: investing should be a life-long endeavor, although it doesn’t always mean an 100% vested decision.)

Portfolio Approach

Today’s Session

Good Morning, You’re Now Part of the Elites

Tax Hike Bernie Says He’ll Tax All Income Over $29K to pay for his Medicare for All plan.

This isn't the first time Bernie has pledged to hike taxes on folks making more than $29,000. What I find incredible this morning is the assault on the middle class is coming just as they are enjoying pay hikes that are outpacing inflation for the first time in a decade.  Its reflected in the stock market, which is not only at record highs, but this morning we got earnings from three well-known retailers that are perfect proxies for the families Bernie wants to tax to make his utopia a reality. 

I would rather allow folks to keep more of the money they earn and shop at Burlington and Best Buy, have a fantastic Thanksgiving and very Merry Christmas, than getting hammered over a health tax only a Bolshevik could love. 

Brick & Mortar Winners

I used to take my mom to Burlington all the time, and I would shop there for school clothes until the kids revolted over having last year's Polo shirt.  I bought the stock and made good money (wish I held it as its up +700% since 2014).

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

Beat & Raise

•             Best Buy (BBY) Earnings $1.13 beat by $0.10, guidance raised to $5.91 from $5.75

•             Burlington (BURL) Earnings $1.55 beat by $0.15, raised guidance to $7.33 from $7.22

•             Dicks (DKS) Comp store sales +6.0%, best since 2013, raised guidance to $3.60 from $3.45

 

 

 


 

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