SPECIAL ALERT: Remember, the August episode of the Zacks Ultimate Strategy Session is now available for viewing! Don’t miss your chance to hear:
▪ Sheraz Mian and Neena Mishra, CFA, FRM, Agree to Disagree on whether inflation worries are overblown
▪ Kevin answers questions in Zacks Mailbag on whether or not investors can focus on mutual funds and/or ETFs and forget about stock-market fluctuations; is buy-and-hold better than booking profits and rebuying at lower levels; and what the Zacks Rank and Style Scores tell investors about stocks
▪ Sheraz and David Bartosiak choose one portfolio to give feedback for improvement
▪ Market conditions from both fundamental and technical views
▪ The full list of top-performing stocks over the past 30 days
▪ New stocks added to the Zacks Ultimate portfolio
▪ And much more
Simply log on to Zacks.com and view the August episode here. And please let us know what you think of these monthly episodes. Email all feedback to mailbag@zacks.com.
The CPI report for July wasn’t as hot as investors feared, which allowed the S&P and Dow to secure another round of record highs on Wednesday. The NASDAQ, though, was left behind again as investors moved toward recovery names after the third positive development for the economy in the past four days.
Consumer prices soared 5.4% year over year in July and rose 0.5% from the previous month, which were both pretty much in-line with expectations. (The annual number was 0.1% higher than the forecast.) Core CPI (which excludes energy and food) increased 4.3% over last year and was up 0.3% month-over-month, which was actually better than expectations for a 0.4% rise.
In other words, inflation is still rocketing higher, but not as much as nervous investors were fretting about. The data lends some support to the Fed’s long-standing proposition that the soaring prices are only transitory.
“The market’s response was muted, as I suspect many market participants were bracing for a much larger number,” said Dan Laboe in Headline Trader. “Investors continue to deploy cash back into recovery-oriented sectors following this morning’s ‘goldilocks’ inflation data (not too hot, not too cold).”
The end result on Wednesday was a session that looked a lot like Tuesday’s, including a couple history-making performances. The Dow advanced 0.62% (or around 220 points) to 35,484.94, while the S&P increased 0.25% to 4447.70. That makes two straight sessions of record highs for the indices. Also like yesterday, the NASDAQ didn’t join in on the fun and slipped 0.16% (or nearly 23 points) to 14,765.13.
The CPI number marks another positive signal that this economic recovery is on track. In recent days we’ve also received a fantastic employment report on Friday that added 943K jobs in July, while yesterday saw the $1 trillion infrastructure bill pass the Senate. Next is the PPI report tomorrow and then we’ll have to see what the Fed’s plans will be moving forward.
Meanwhile, earnings season is winding down and “we can now say with full confidence that the earnings picture has not been this good in a long time”, according to our Director of Research Sheraz Mian. Of all the S&P companies that have reported so far (which is most of them), approximately 87% have beaten EPS estimates while more than 86% have topped revenue estimates.
Make sure to read Sheraz’s brand new Earnings Trends article titled: “Taking Stock of the Impressive Earnings Picture”.
Speaking of earnings, one of the big releases of the week comes tomorrow when Disney (DIS) goes to the plate. Also coming on Thursday is this week’s jobless claims. The last print was at 385,000, which was inline with expectations and the first result below 400K since mid-July.
Today's Portfolio Highlights:
Commodity Innovators: With grain prices moving sharply higher, Jeremy added two names on Wednesday that should put the portfolio in a good position to capitalize. The first pick up was Tractor Supply (NASDAQ:TSCO), which is the country’s largest retail farm and ranch store. Shares of this Zacks Rank #2 (Buy) are breaking out today after a strong quarterly report that included a raised guidance, so the editor wants to “join the party”. The other buy is The Andersons (NASDAQ:ANDE), a regional yet diversified grain merchandiser that beat the Zacks Consensus Estimate by 104% in its most recent report. This Zacks Rank #1 (Strong Buy) also “looks great on the technical front” and has a 2.5% dividend yield. TSCO is seen as a mid-term holding, while ANDE is a long-term. Meanwhile, gold looks “technically broken”, so Jeremy sold SPDR Gold Shares (NYSE:GLD) and VanEck Vectors Gold Miners ETF (NYSE:GDX) today. Read the full write-up for specifics on all of today’s moves.
Home Run Investor: Today’s addition of Simply Good Foods Company (SMPL) gets the portfolio back to fully invested with 15 names. This Zacks Rank #1 (Strong Buy) makes nutrition bars, shakes and snacks through brands like Atkins, SimplyProtein and Atkins Endulge. In its most recent quarterly report, SMPL beat the Zacks Consensus Estimate by 48% and raised its guidance. The company has now exceeded earnings estimates for seven straight quarters with an average surprise of 33% over the last four. Earnings estimates for this fiscal year and next are on the rise. Margins are expanding as well, which should drive earnings and the stock higher moving forward. Learn more about today’s addition in the full write-up. In other news, this portfolio had the top performer among all ZU names on Wednesday as Open Lending Corporation (LPRO) rose 7.1% after a solid quarterly report.
Surprise Trader: In just about two weeks, shares of AdvanSix (NYSE:ASIX) have jumped double digits after the chemicals company reported a positive earnings surprise of more than 41%. It's four-quarter average beat is now over 50%. Dave decided to sell half of ASIX on Wednesday for a 21.1% return since being added on July 27. He’ll let the rest run for now. The new addition is Brinker (EAT), a restaurant company that you undoubtedly know through its Chili’s and Maggiano’s brands. It has topped the Zacks Consensus Estimate for 11 straight quarters now, and has a “pretty solid” Earnings ESP of 16.17% for the quarter coming before the bell on Wednesday, August 18. EAT also has the editor’s favorite divergence, as earnings estimates continue to rise while shares are well off the highs. The stock was added with a 12.5% allocation. See the complete commentary for more on today’s action.
Have a Great Evening,
Jim Giaquinto
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