Monday, January 30, 2023

Strong October Ends With New Highs


Now that’s a great month! You could almost feel investors letting out a sigh of relief over the past few weeks on the strong start to earnings season (save a couple high profile disappointments). The end result was the S&P putting together its best month of 2021 with record highs for all the major indices.

The NASDAQ was up 0.33% (or about 50 points) today to 15,498.39, while the Dow advanced 0.25% (or around 89 points) to 35,819.56. The S&P increased 0.19% to 4605.38. Not bad considering a couple major earnings misses last night.

But the month of October was much more impressive with the NASDAQ soaring nearly 7.3%, while the S&P was up 6.9% and the Dow rose 5.8%. These totals more than make up for a somber September that saw declines of 4.5% or more.

Plus, the indices all finished today at record highs.

This week was all about the ‘Big 5’ tech players: Apple (NASDAQ:), Amazon (NASDAQ:), Alphabet (NASDAQ:) (GOOG), Facebook (NASDAQ:) and Microsoft (NASDAQ:). As our Director of Research Sheraz Mian has said, these five companies account for nearly 23% of the total capitalization of the S&P 500 index. Despite the strong monthly totals, these names didn’t all impress (more on that in a moment).

However, the results of earnings season so far suggest that the economy is handling the soaring inflation and severe supply chain issues. These are definitely problems that will hopefully be resolved sooner rather than later, but it hasn’t been the gut punch that many feared.

“Including all the results that came out through Friday, October 29th, we now have Q3 results from 279 S&P 500 members or 55.9% of the index’s total membership,” said Sheraz Mian in his fresh-off-the-presses article titled: “Even Big Tech Has Supply Chain Problems”.

“Total earnings (or aggregate net income) for these 279 companies are up +39.2% from the same period last year on +17.8% lower revenues, with 82.1% beating EPS estimates and 73.5% beating revenue estimates.”

But it hasn’t all been good news, as Sheraz’s title implies. Last night after the bell, AAPL and AMZN fell short of expectations in their quarterly reports. And the aforementioned supply chain issues were a big part of the problem. AMZN was down more than 2% on Friday, while AAPL slipped about 1.8%.

Declines from such major players had an impact in today’s session, but stocks still managed new highs and completed an impressive month. And earnings season is far from over. There are hundreds more reports coming out next week. So have a Happy Halloween and we’ll see you right here again in November.

Today’s Portfolio Highlights:

Headline Trader: While many investors have long considered Twilio (NYSE:) as a stock that got too rich too fast, Dan sees it as a market-disrupting AI pioneer with “enormous” earnings potential moving forward. And now that it’s had a post-earnings capitulation, it’s finally within the editor’s wheelhouse. TWLO is a cutting edge automation company that uses AI to provide businesses with effective customer service. Its still unprofitable and very expensive, but its long-term potential is limitless in these “roaring ‘20s”, making this selloff a textbook example of “buying the dip”. TWLO looks like it might experience some springboard price action in the short-term to recover from its plunge and then should be off to the races as more and more businesses realize how indispensable its services are. Make sure you read Dan’s complete commentary on this addition.

Blockchain Innovators: What if Facebook paid you for the ads you were being shown? That’s the idea behind SRAX (NASDAQ:), a digital marketing and consumer data management technology company. It’s BIGtoken platform is a consumer-managed data marketplace where people can own and earn from their data. So this is a company that’s drenched in blockchain technology. The editor really likes its current year forecasts, which call for revenue growth of 262% and earnings growth of 26%. Next year is looking pretty good too and should see the company move into profitability. Dave added SRAX on Friday, while also getting out of “laggard” Funko (NASDAQ:). Read the complete commentary for a lot more on today’s moves. In other news, this portfolio had TWO double-digit winners in the session with A10 Networks (NYSE:, +33.6%) and Agilysys (NASDAQ:, +11.4%).

Counterstrike: With earnings coming next week for Roku (NASDAQ:) and Qualys (NASDAQ:), Jeremy decided to play it safe and sell both of these names. ROKU brings a slight loss, but QLYS is an 11.9% profit in less than a month. The new buy is EQT Corp. (NYSE:), a Zacks Rank #2 (BUY) explorer and producer of . The company beat the Zacks Consensus Estimate by 340% in its recent quarter, but shares have dipped more than 10% since the report. The editor feels that the stock has a good risk/reward at $20, especially after a positive JPMorgan (NYSE:) note this morning. He added EQT on Friday with an 8% allocation. Read the complete commentary for more on all of today’s action, including more on that JPM note.

Surprise Trader: The final addition in this busy week of earnings was Genco Shipping (NYSE:), a Zacks Rank #1 (Strong Buy) from the drybulk cargo business (top 23% in the Zacks Industry). The company, which has beaten the Zacks Consensus Estimate for three straight quarters, now has a positive Earnings ESP of 3.59% for the quarter coming after the bell on Wednesday, November 3. Dave added GNK on Friday with a 12.5% allocation, while also getting out of Teck Resources (NYSE:). Read the full write-up for more. Also, this service had one of the biggest winners of the session with SM Energy Corp. (NYSE:) rising 7.2%.

See You in November,
Jim Giaquinto

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