You couldn’t have asked for a better start to earnings season, especially since this one is expected to be the weakest in years. We enjoyed a strong quarterly report from the country’s biggest bank, which helped to jolt a seemingly sedated market out of its haze and into a solid rally to finish the week.
Along the way, the S&P finally surpassed 2900 and is now under 1% (or less than 30 points) from an all-time high.
Investors breathed a sigh of relief when J.P. Morgan reported strong first quarter results, which included earnings that beat the Zacks Consensus Estimate by more than 14%. The stock was up 4.7% today. It’s only one report out of thousands that will be released in the coming weeks, but it provided a good first impression to a nervous market.
By the way, Disney didn’t report earnings today, but the entertainment juggernaut was still a major factor in the market’s strong session. It released the price for its soon-to-be launched streaming service Disney+, and the $6.99/month price tag is quite a deal compared to Netflix’s recently increased price of $13/month. The stock jumped more than 11.5%.
The major indices were also jumping on Friday, which was a fun change from its comatose-like state for most of this week. The Dow advanced 1.03% (or nearly 270 points) to 26412.30, but the index was just short of a weekly gain by declining 0.1%. The best weekly performance came from the NASDAQ, which advanced approximately 0.6% after today’s gain of 0.46% to 7984.16.
The S&P, though, made the biggest statement as it crossed back over 2900. It advanced 0.66% today to 2907.41, marking a weekly increase of around 0.5%. The index’s all-time closing high is just under 2931 from late September… right before things got all serious due to the correction.
Yeah, we’re “this close” to completely filling in the hole from that severe pullback, which apparently hit bottom on Christmas Eve. We should be there in no time if today’s session is foreshadowing earnings season as a whole. However, that’s a big if… Let’s just be happy with this beginning and then take it one report at a time.
Today's Portfolio Highlights:
Value Investor: It was a big day for the portfolio on two fronts. First of all, Tracey added Zacks Rank #2 (Buy) IT services company DXC Technology (DXC) and Zacks Rank #1 (Strong Buy) office furniture maker Herman Miller (MLHR). The former name gives the portfolio exposure to technology, while the latter offers exposure to the consumer and the hot jobs market. Both stocks remain cheap despite double digit improvements so far in 2019. DXC pays a dividend yielding 1.2% and should see an uptick in earnings growth due to its recent acquisition of competitor Luxoft. MLHR pays a dividend that yields 2.3% and just reported third-quarter results that beat on both the top and bottom lines.
Secondly, this portfolio owns the two hottest stories of the day: Disney (DIS) and JP Morgan (JPM). Mickey’s company jumped 11.5% in the session as the price for its upcoming and long-awaited streaming service was finally released… and it will be way less than Netflix! When Disney+ launches later this year, it will cost just under $7 per month or just under $70 per year (which comes to a little over $5.80 per month). DIS was easily the best performing stock of the day among all ZU names.
Meanwhile, JPM was the big earnings report of the day, as the banking giant kicked the season off with better-than-expected quarterly results. The stock advanced 4.7% on Friday and also made the top movers of the day. JPM is now up 27.7% in the portfolio, while DIS is right behind with a gain of 24.5% since inception.
Healthcare Innovators: Life-expectancy is on the rise… and so is the amount of medicines taken by the aging population. Juggling various prescriptions can be confusing and even dangerous. Tabula Rasa Healthcare (TRHC) is a small-cap medical IT player that helps patients, doctors and pharmacies cross-reference prescription complications to provide the best care with fewer risks. Needless to say, there’s a lot of potential for this company’s products and services, which is why sales are expected to grow 40% this year to $285 million. Several analysts expect even more beyond that. Kevin had this stock on his watchlist for a while and today he finally decided to add it. Read the full write-up for a lot more on TRHC, including a look at what several firms think about its potential.
Surprise Trader: If you’re a big fan of the old saying “slow and steady wins the race”, then you should take a look at Cadence Design Systems (NASDAQ:CDNS). This computer software company has taken the Tortoise’s advice and been slowly marching upwards since the start of the year. Dave likes that its part of a space in the top 4% of the Zacks Industry Rank and that it has a positive Earnings ESP for the quarter coming on Monday, April 22nd after the bell. For his third pick over the past three days as we begin a new earnings season, the editor added CDNS on Friday with a 12.5% allocation. Learn more in the full write-up.
TAZR Trader: Some folks think that “bigger is better”, while others believe that “good things come in small packages”. For today at least, you can put Kevin into the latter camp regarding his addition of SYNNEX (SNX). This Zacks Rank #2 (Buy) is a technology and consulting firm that creates customized IT systems/software solutions for corporations. In other words, it shares the space with the giant Cognizant (NASDAQ:CTSH). However, the editor notes that SNX has a much better valuation and stronger sales, which means it has more potential moving forward. Kevin added the stock with a 10% allocation today and thinks it could hit $120 by June. Read the complete commentary for more.
Have a Great Weekend!
Jim Giaquinto
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