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11/15/2019 10:09:26 AM Eastern Time

ON AUTOPILOT BUT NEEDS BOOSTER ROCKETS
By Charles Payne, CEO & Principal Analyst

 Click here to download PDF version

It was just one of those sessions on Thursday where the market couldn’t get out of the gate, and even Walmart (WMT) gave up its early morning gains.

Still, the S&P 500 eked out another record high; 101 times that’s happened since Donald Trump took office.

Eight of the eleven sectors were higher.

S&P 500 Index

+0.08%

 

Communication Services (XLC)

+0.45%

 

Consumer Discretionary (XLY)

+0.43%

 

Consumer Staples (XLP)

 

-0.03%

Energy (XLE)

 

-0.27%

Financials (XLF)

+0.20%

 

Health Care (XLV)

+0.01%

 

Industrials (XLI)

+0.32%

 

Materials (XLB)

+0.62%

 

Real Estate (XLRE)

+1.00%

 

Technology (XLK)

 

-0.12%

Utilities (XLU)

+0.35%

 

Just Waiting

Nonetheless, the overall feeling was the market was marking time, just kind of waiting for something to provide the next spark; considering all the major macro inputs are down this month, including the jobs report, and now earnings season is winding down.

However, the trade situation is coming up against a hard deadline of sorts. With the December 15th tariffs in the cue, there is a sense something must happen between now and then. The financial media spends each day making a mountain out of an ordinary molehill.

Guess what?  Negotiations have fits and false starts, and there are breakdowns and all kinds of other shenanigans before terms are agreed upon. I often feel as if many in the media are being useful tools in Chinese negotiations with non-stop stories of a negative impact if a deal isn’t done. Ironically, President Trump is not only not intimidated by these stories. He actually relishes the challenge.

I believe the trade situation will work itself out, and I believe America is winning. The goal isn’t to punish either economy, but to open them up for fair trade rather than the kind of stuff that was truly eroding the nation’s wealth foundation.

For the most part, the rally is on autopilot but needs a spark to put it into overdrive. 

Market Breadth

The NASDAQ Composite was weighed down by Technology stocks, which stumbled in the wake of Cisco (CSCO) earnings miss.

There could be pressure this morning as NVidia (NVDA) shares began to slump after initially popping on its earnings release. This company is going to be a powerhouse in many areas, including artificial intelligence, but the hype factor is a heavy burden. Conversely, Applied Materials (AMAT) posted strong results, and the stock held its gains into the evening.

NASDAQ

  • Advancers: 1,423
  • Decliners: 1,723
  • New Highs: 97
  • New Lows: 120
  • Up Volume: 1.07 billion
  • Down Volume: 966.8 million

The NYSE is benefiting from a late entry from big money, looking for value and equity exposure.   Interestingly, one of the biggest winners in after-hours trading was Restoration Hardware (RH) after it was revealed that Warren Buffett has taken a strong position. It’s not unusual for Buffett to be attracted to a furniture store, as RH is up 46% this year and 444% over the past three years.

NYSE

  • Advancers: 1,632
  • Decliners: 1,300
  • New Highs: 91
  • New Lows: 75
  • Up Volume: 1.18 billion
  • Down Volume: 1.69 billion

Portfolio Approach

We closed a Health Care (XLV) position for a monster gain, and we only have one position bold. We may adjust our weightings there, which has been driven mostly by valuation proposition.

Long Idea: The Estée Lauder Companies Inc. (EL) @ $191.71
Industry: Consumer Staples; Personal Products
Click here to view the trading alerts that followed this recommendation

Trading Parameters
Status Closed
Entry Price$191.71
Entry Limitsee comments
Stop LossN/A
Target$230.00


Options Trade Parameters
Status Closed
Type Call
Option Symbol EL200320C001
Entry Price $12.10
Strike Price $190.00
Expiration Date 3/20/2020
  Add to Position Tracker

BACKGROUND: The Estée Lauder Companies Inc. manufactures and markets skin care, makeup, fragrance, and hair care products. The company offers a range of skin care products, including moisturizers, serums, cleansers, toners, body care, exfoliators, acne care and oil correctors, facial masks, cleansing devices, and sun care products; and makeup products, such as lipsticks, lip glosses, mascaras, foundations, eyeshadows, nail polishes, and powders, as well as compacts, brushes, and other makeup tools. It also provides fragrance products in various forms comprising eau de parfum sprays and colognes, as well as lotions, powders, creams, candles, and soaps; and hair care products that include shampoos, conditioners, styling products, treatment, finishing sprays, and hair color products, as well as sells ancillary products and services. The company offers its products under Estée Lauder, Aramis, Clinique, Lab Series, Origins, M·A·C, Bobbi Brown, La Mer, Aveda, Jo Malone London, Bumble and bumble, Darphin, Smashbox, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, By Kilian, BECCA, Too Faced, RODIN olio lusso, FLIRT!, Kiton, and Tom Ford brands. It also holds license arrangements for Tommy Hilfiger, Donna Karan New York, DKNY, Michael Kors, Ermenegildo Zegna, Dr. Andrew Weil, TOM FORD BEAUTY, AERIN, and Tory Burch brands. The company sells its products through department stores, specialty-multi retailers, upscale perfumeries and pharmacies, and salons and spas;

SKINNY: The stock is on the cusp of a major breakout at $193.27, from there we see the stock going to $230.


Key Fundamentals
PEG  2.73
Book Value  12.56
Institutional Holdings  91.84
Price/Sales  4.44
Average Daily Volume  1.23M
Shares Outstanding  222.5M
Market Value  70.2B
Insider Activity  41 Buys 23 Sales
52-week High  207.5
52-week Low  121.47
Annual Earnings Estimate  6.65

Analyst Coverage
 Piper Jaffray – Downgrade  Neutral
 Edward Jones – Downgrade  Hold
   



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