The Long Term Investor

here is Apple.

Apple shares dip after company warns of a possible $8 billion hit from supply constraints

https://www.cnbc.com/2022/04/28/apple-aapl-earnings-q2-2022.html

(BOLD is my opinion OR what I consider important content)

"Key Points

• Apple’s revenue grew nearly 9% year over year during the quarter ended in March.
• But shares fell nearly 4% in extended trading after Apple CFO Luca Maestri warned of challenges in the current quarter, including supply constraints that could hurt sales by up to $8 billion.
• The tech giant authorized $90 billion in share buybacks.

Apple beats earnings and revenue

Apple’s revenue grew nearly 9% year over year in the quarter ended in March, the company said on Thursday, showing strong growth and bucking investor worries about a deteriorating macroeconomic environment affecting demand for high-end smartphones and computers.

But Apple shares fell nearly 4% in extended trading after Apple CFO Luca Maestri warned of several challenges in the current quarter, including supply constraints related to Covid-19 that could hurt sales by between $4 billion and $8 billion. The tech giant also warned that demand in China was being sapped by Covid-related lockdowns.

Apple CEO Tim Cook added the company was “not immune” to supply chain challenges.

Here’s how Apple did versus Refinitiv consensus estimates:

• EPS: $1.52 vs. $1.43 estimated
• Revenue: $97.28 billion vs. $93.89 billion estimated, up 8.59% year over year
• iPhone revenue: $50.57 billion vs. $47.88 billion estimated, up 5.5% year over year
• Services revenue: $19.82 billion vs. $19.72 billion estimated, up 17.28% year over year
• Other Products revenue: $8.81 billion vs. $9.05 billion estimated, up 12.37% year over year
• Mac revenue: $10.44 billion vs. $9.25 billion estimated, up 14.73% year over year
• iPad revenue: $7.65 billion vs. $7.14 billion estimated, down 1.92% year over year
• Gross margin: 43.7% vs. 43.1% estimated

Apple did not provide a forecast for the current quarter — the company hasn’t provided official revenue guidance since February 2020, citing uncertainty tied to the pandemic.

In addition, Apple said that its board of directors authorized $90 billion in share buybacks, maintaining its pace as the public company that spends the most buying its own shares. It spent $88.3 billion on buybacks in 2021, according to S&P Dow Jones Indices.

Apple increased its dividend by 5% to 23 cents per share.

The smartphone business grew over 5% during the quarter, yielding more evidence that the current iPhone 13 model is selling well.

Cook said that the iPhone business had a successful quarter with sales to so-called switchers, or people who previously had an Android phone but decided to buy an iPhone.

“We had a record level of upgraders during the quarter and we grew switchers, strong double digits,” Cook told CNBC’s Steve Kovach.

The earnings beat also suggests that Apple’s premium smartphone business may be insulated from concerns about deteriorating consumer confidence. The increase in sales also came despite a difficult year-over-year iPhone comparison, since the new iPhones were launched earlier in 2021.

“It’s clearly a strong cycle,” Cook said.

This was a Tom Brady-like quarter for Apple, says Wedbush Securities Dan Ives

Elsewhere, Mac computers continued to grow strongly after Apple transitioned its lineup to use its own M1 chips instead of Intel processors. Sales were up nearly 15% year over year to $10.44 billion.

However, Apple’s iPad business continues to go sideways, with sales down 2.1% from a year ago, despite updated models with Apple’s M1 chip. Cook said the iPad business had “very significant supply constraints” during the quarter.

Apple’s profitable services business, which includes subscriptions, licensing fees, and extended warranties, continues to grow strongly with over 17% growth. However, over the past two years the business had made a habit of beating Wall Street expectations by between 3% and over 8%, and this quarter, it only exceeded Refinitiv estimates by 0.51%.

“The [services] comps are a bit strange during Covid, because we’ve had lockdowns and then reopenings and so on,” Maestri said in an interview with CNBC, adding that during some periods in the last two years that “digital content went through the roof.”

Cook said that Apple’s financial performance was “better than we anticipated.” The fastest-growing region was the Americas, which saw sales rise 20% during the quarter to $50.57 billion. Greater China, which includes Hong Kong and Taiwan, grew at a slower 3.47% rate to $18.34 billion. Cook said Covid-related China lockdowns didn’t affect Apple during the quarter, however."

MY COMMENT

A good report. They BEAT in every category except for Other Product Revenue. I think this company tends to give negative warnings that later lead to earnings BEATS. I will take it. All in all a very nice quarter.

 

First some good news.......at least for me as an owner of Honeywell.

Honeywell International Inc. (HON) Q1 Earnings and Revenues Top Estimates

https://finance.yahoo.com/news/honeywell-international-inc-hon-q1-114511035.html?fr=yhssrp_catchall

(BOLD is my opinion OR what I consider important content)

"Honeywell International Inc. (HON) came out with quarterly earnings of $1.91 per share, beating the Zacks Consensus Estimate of $1.86 per share. This compares to earnings of $1.92 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 2.69%. A quarter ago, it was expected that this company would post earnings of $2.08 per share when it actually produced earnings of $2.09, delivering a surprise of 0.48%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Honeywell International Inc. , which belongs to the Zacks Diversified Operations industry, posted revenues of $8.38 billion for the quarter ended March 2022, surpassing the Zacks Consensus Estimate by 0.32%. This compares to year-ago revenues of $8.45 billion. The company has topped consensus revenue estimates two times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Honeywell International Inc. Shares have lost about 8.9% since the beginning of the year versus the S&P 500's decline of -10%.

What's Next for Honeywell International Inc.

While Honeywell International Inc. Has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Honeywell International Inc. Mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $2.04 on $8.83 billion in revenues for the coming quarter and $8.55 on $35.95 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Diversified Operations is currently in the top 34% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another stock from the same industry, Federal Signal (FSS), has yet to report results for the quarter ended March 2022. The results are expected to be released on May 2.

This company that makes products ranging from street sweepers to toll booth technology for government, industrial and commercial customers is expected to post quarterly earnings of $0.27 per share in its upcoming report, which represents a year-over-year change of -29%. The consensus EPS estimate for the quarter has been revised 2.6% lower over the last 30 days to the current level.

Federal Signal's revenues are expected to be $307.88 million, up 10.4% from the year-ago quarter."

MY COMMENT

Very nice earnings from Honeywell. The stock is up nicely so far today.

 

NOW......the bad news.....Amazon is having a very BAD DAY today.

Amazon stock plunges as company reports nearly $4 billion loss

https://wsvn.com/news/us-world/amazon-stock-plunges-as-company-reports-nearly-4-billion-loss/

(BOLD is my opinion OR what I consider important content)

"(CNN) — Amazon reported a significant loss in the first three months of the year, sending the company’s stock plunging.

The tech giant on Thursday said it had a net loss of $3.8 billion in the quarter ended March 31, a sharp drop in income from the same period last year, when it made an $8.1 billion profit. It was also a big miss from the $4.4 billion profit that analysts surveyed by Refinitiv had forecast.

The company attributed the loss largely to a $7.6 billion loss from its investment in electric automaker Rivian Automotive. Rivian, into which Amazon led a $700 million investment in 2019, has seen its stock plummet more than 75% since its blockbuster November 2021 IPO.

The Amazon loss came the day after Ford, another early investor in Rivian, took a $5.4 billion pre-tax charge related to that investment, resulting in Ford reporting a $3.1 billion net loss for the first quarter.

Amazon shares sank around 10% in after-hours trading following the results.

“The pandemic and subsequent war in Ukraine have brought unusual growth and challenges,” Amazon CEO Andy Jassy said in a statement.

Amazon’s overall revenue grew 7% from the same period last year to $116.4 billion, slightly beating analyst forecasts but slower than the 9% growth in the final months of last year. The company forecast that revenue growth would slow further next quarter, anticipating a growth rate of between 3% and 7%.

Jassy referenced Amazon’s breakneck growth in its consumer business during the pandemic, and the “doubling” of the company’s fulfillment network in the last two years.

“Today, as we’re no longer chasing physical or staffing capacity, our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network,” he added. “This may take some time, particularly as we work through ongoing inflationary and supply chain pressures, but we see encouraging progress on a number of customer experience dimensions.”

The company also announced that Prime Day, its annual sales bonanza, will take place this July in more than 20 countries.

In an earnings call, Amazon’s chief financial officer, Brian Olsavsky, said higher inflation, fuel prices and labor constraints added $2 billion to costs compared to last year.

“The cost to ship an overseas container has more than doubled compared to pre-pandemic rates,” he said. “The cost of fuel is approximately one and a half times higher than it was even a year ago.”

The rise of the Omicron variant towards the end of 2021 led to “a substantial increase” in employees going on leave, prompting Amazon to increase hiring to make up for the absences, Olsavsky said. But as workers returned when the variants subsided, “we quickly transitioned from being understaffed to being overstaffed,” he added. That resulted in “lower productivity” adding another $2 billion in costs, he said.

Amazon’s earnings hit comes as the company continues to face pressure from its warehouse employees over issues such as pay and working conditions. Workers at a Staten Island, New York, warehouse voted to form the e-commerce giant’s first-ever US labor union earlier this month. Amazon has since filed an appeal, calling for a do-over of the entire vote.

A separate Amazon union election in Bessemer, Alabama, also concluded recently with the results too close to call.

Both union efforts grew from worker frustrations with Amazon’s treatment of workers amid the pandemic and were also motivated in part by increased national attention to racial justice issues and labor rights.

Amazon subsequently announced it would conduct a racial equity audit led by former US Attorney General Loretta Lynch.""

MY COMMENT

At the moment Amazon is DOWN today by nearly 13%. The stock is down by $352. In my view the company has not been performing well for about 1.5 to 2 years now. I have real doubts about the current management to deal with the various issues that are impacting ALL businesses at the moment.

I have no plans to sell. BUT.......time will tell if this company can turn things around from the problems and issues they are having now.

The investment in Rivian.......extremely foolish. I have no clue why this company would invest so much money in a company that has no real history and has no real business to speak of. What a waste of money. Throwing money at EV companies at the moment is simply GAMBLING and unproven speculation. What a waste of company and shareholder assets.

 

As to Tesla......this should help a little bit. The current media fear mongering and hand wringing should not last too long. This stuff is WAY overdone.

Musk Makes a Big Promise After Selling Millions of Tesla Shares
Billionaire and Tesla CEO is in the process of acquiring microblogging website Twitter for $44 billion.

https://www.thestreet.com/technolog...llions-of-tesla-shares?puc=yahoo&cm_ven=YAHOO

(BOLD is my opinion OR what I consider important content)

"It's a promise that will delight Tesla (TSLA) - Get Tesla Inc Report fans and investors.

After days of wondering about their hero Elon Musk's intentions regarding Tesla, they can now breathe. The Tech tycoon, whose energy has been devoted since the beginning of April on Twitter (TWTR) - Get Twitter, Inc. Report, has just made a big commitment. He just promised he doesn't plan to sell Tesla stock after recent trades.

"No further TSLA sales planned after today," the billionaire wrote on Twitter on April 28, in response to a post from the account Whole Mars Catalog, indicating that Musk had just sold some of his 173 million Tesla shares.

This commitment is important because it came at a time when the serial entrepreneur reached an agreement in principle with the management of Twitter to acquire the social network at a price of $54.20 per share for a transaction valued at $44 billion. Musk promised to take Twitter private once the deal was finalized.

Musk Sold 4.4 million Tesla Shares for $4 Billion

For days, Tesla investors and the financial community alike wondered how Musk was planning to finance the operation. Certainly his fortune is estimated at $252 billion, according to Bloomberg Billionaires Index, but it is not liquid. His net wealth is based on his Tesla shares and his stake in aerospace company SpaceX.

Musk has managed to secure $25.5 billion of debt and margin loan financing and is providing a $21 billion equity commitment. This latest part of the transaction that he's personally guaranteed suggested that he could sell Tesla shares."

MY COMMENT

The media frenzy over Tesla and Twitter is a joke. BUT.......that is what they do....they live off DRAMA.

 

HERE.....is what is going on in the short term speculative markets today.

Stock market news live updates: Stocks sink as Amazon, Apple shares decline after quarterly reports

https://finance.yahoo.com/news/stock-market-news-live-updates-april-29-2022-222314612.html

(BOLD is my opinion OR what I consider important content)

"U.S. stocks dropped Friday and looked to end a volatile month lower, as a fresh set of mixed quarterly results from some major technology companies weighed on index futures.

The S&P 500, Dow Jones Industrial Average and Nasdaq Composite each declined. Treasury yields climbed, and the benchmark 10-year yield rose above 2.9%. Shares of tech juggernaut Amazon slid after the company unexpectedly posted a quarterly loss and offered a weaker-than-expected current-quarter forecast. Apple's stock also declined even after the iPhone-maker exceeded quarterly sales and profit estimates, though the company still cited ongoing supply chain constraints.

A day earlier earlier, the S&P 500 closed out Thursday's session sharply higher, gaining 2.5%, while the Nasdaq Composite rose by 3.1% in its best day since March 16. But even with these marked gains, the S&P 500 was still on track to post its third monthly decline in four months.

Volatility has resurged in recent weeks amid concerns over whether tighter monetary policies from the Federal Reserve might derail the economy. And these fears compounded with lingering jitters over persistent inflation, geopolitical turmoil and an ongoing COVID outbreak in China. The S&P 500 was on track for an about 5% drop in April, based on Thursday's closing level.

"There's a lot of rerating going on, whether it's the rerating of equity valuations, the rerating of interest rate expectations, or the rerating of inflation expectations, against tightening happening at the Fed," Todd Jablonski, Principal Global Asset Allocation chief investment officer, told Yahoo Finance Live. "The threats of a slower economy, the threats of inflation, and the threats of higher energy prices out of the conflict in Ukraine [are] all sort of coming together to really stymie investor confidence and sentiment."

Plus, the data this week on corporate profits and the broad economy have shown signs of decelerating growth. Results from Big Tech companies including Alphabet and Twitter pointed to a slowdown in online ad businesses as companies pull back on marketing spending in the wake of moderating consumer demand. And throughout this earnings season, a plethora of companies across industries have pointed to elevated input and labor costs, as well as ongoing supply chain disruptions.

Against this backdrop, the U.S. economy contracted for the first time since the second quarter of 2020 at the start of this year, government data Thursday showed. The 1.4% annualized contraction in first-quarter U.S. GDP came as net trade, inventories and government investment each weighed on overall domestic output, and as consumer spending came in less robustly than expected.

However, the weaker-than-expected GDP print may also bolster the case for members of the Federal Reserve to exercise more caution as they prepare to raise interest rates further and begin rolling assets off the central bank's balance sheet. These moves would raise borrowing costs and help bring down demand to stem inflation — but also risk tipping the economy into a deeper downturn if financial conditions tighten too quickly.

“There’s just so much concern around, do we go into a recession in the next 24 months because the Fed may just raise interest rates too much?” Ryan Payne, Payne Capital Management president, told Yahoo Finance Live. “I think that’s what’s really weighing on the markets, and more so than the fact that we have a war in Ukraine and these inflationary numbers have just been through the roof.”

8:47 a.m. ET: Personal spending unexpectedly rose in March, even adjusted for inflation

Consumers continued to spend in March despite elevated inflation.

Personal spending rose 1.1% last month, the Bureau of Economic Analysis said in a report Friday. This was well above the 0.6% rate consensus economists were expecting, according to Bloomberg consensus data. And February's spending rate was also revised higher to 0.6%, from the 0.2% previously reported.

Real personal spending, which adjusts for inflation, posted a surprise increase of 0.2%, whereas consensus economists were looking for a decline of 0.1% in March. February's real personal spending was also upwardly revised to show a 0.1% increase, from the 0.4% drop previously reported.

Personal income edged higher by 0.5% in March following a 0.7% increase in February.

8:32 a.m. ET: PCE inflation accelerates to 6.6% year-over-year rate in March

A closely watched measure of inflation ramped further in March, further underscoring the widespread inflationary pressures present across the U.S. economy.

The Bureau of Economic Analysis said Wednesday that personal consumption expenditures (PCE) increased at a 0.9% monthly rate in March compared to a 0.5% rate in February. On a year-over-year basis, PCE rose 6.6%, also accelerating compared to the 6.3% clip during the prior month.

However, excluding volatile food and energy prices, core PCE inflation showed some signs of moderating. Core PCE rose 0.3% in March to match February's rate. And over last year, the core PCE increased by 5.2%, slowing from February's downwardly revised rate of 5.3%.

MY COMMENT

I was going to say that I am surprised that the markets are........not down more...... today with the poor Amazon earnings and the negative surprise in the GDP......plus......the Ten Year Treasury yield. UNFORTUNATELY.....the market is now accelerating to the down side.

 

We are seeing the start of a cascading of negativity right now. Seems like we have pretty good potential for at least another TEN PERCENT drop in the markets over the coming months. As I have said before.........beware the danger of trying to catch a falling knife.

For those that have NEVER invested in a "REAL" market and have never seen a real correction.......welcome to reality. We are in the middle of a real old fashioned correction.

For some investors this will be....gut check time.

 

I like this little article.

Why Warren Buffett has ‘never made a decision based on an economic prediction

https://finance.yahoo.com/news/why-warren-buffett-economic-prediction-121058119.html

(BOLD is my opinion OR what I consider important content)

"You’d think that a big-time investor with exposure to lots of industries would pay close attention to what economists say.

Not billionaire investing legend Warren Buffett. At least that’s what he tells people.

“We think any company that has an economist has one employee too many,” Buffett said at Berkshire Hathaway’s (BRK-A, BRK-B) 2015 shareholders meeting.

One of the main reasons why he doesn’t bank on what economists say is that they’re just not that great at forecasting. And he’s right. In recent weeks, the Citi U.S. Economic Surprise Index has been telling us that economists have been underestimating the strength of the economy.

In recent years, Buffett has been pointing to the existence of trillions of dollars worth of bonds with negative interest rates as something almost no economist saw coming.

“So you don’t pay much attention to the ‘dismal scientists’ then?” Andy Serwer, editor-in-chief of Yahoo Finance, asked in a 2019 interview.

“Well, I pay none as a guideline to doing anything,” Buffett responded.

Here’s more of what Buffett said on the unreliability of economic forecasts:

Something different happens all the time. And that's one reason economic predictions just don't enter into our decisions. Charlie Munger – my partner – and I in 54 years now never made a decision based on an economic prediction. We make business predictions about what individual businesses will do over time, and we compare that to what we had to pay for them. But we have never said yes to something because we thought the economy was gonna do well in the next year or two years. And we have never said no to anything because we were right in the middle of a panic… There's so many variables. I mean, in the hard sciences, you know that if an apple falls from a tree, that it isn't gonna change over the centuries because of anything or political developments or 400 other variables that go in. But when you get into economics, there's so many variables, and the truth is, you've got to expect good times and bad times in business.

Buffett made a name for himself for being a great stock picker, and not a macro strategist. And so you’ll often hear him expounding the merits of seeking out great businesses with great managers.

Because, great businesses with great managers will be able to succeed during difficult times just as they would during good times.

Something that we all learned during the COVID-19 pandemic is that the onset of challenges doesn’t necessarily mean businesses are doomed to struggle. Rather, many companies proved to be remarkably adaptable in their efforts to keep business running.

As inflation concerns began surging a year ago, some warned that rising costs meant collapsing profit margins, which certainly would’ve made economic sense. However, many corporations went on to report robust profit margins in subsequent quarters.

When Buffett is looking for the next stock to buy, he doesn’t obsess over figuring out whether economic conditions will be good or bad in the near future. Rather, he’ll seek out well-priced businesses that he expects to perform over the long term no matter what the economy may throw at them in the short term.

“We're going to have good years, bad years, in-between years, and maybe a disastrous year some year,” he said. “We care a lot about the price. We do not care about the next 12 months.”

Buffett will be sharing his wisdom on Saturday at Berkshire Hathaway’s annual shareholders meeting."

MY COMMENT

I have no idea why any SANE investor would care in the least what ANY economist has to say. They have absolutely ZERO training in investing or business for the most part. It is all a bunch of.....hindsight.....semi-scientific......baloney. They can never seem to predict anything.....except by luck.

I dont invest in the economy......I invest in specific businesses. I also invest for the long term. Amazingly if you look at the most successful investors over the past 50 years......they all seem to do the same thing.

 

Good for you oldmanram. Glad to see that you are making a good recovery. I am sure you already feel much better than you did prior to surgery.

No.....I am definately NOT making any money today.

 

Guess what? I was in the RED today. Who would have known. I also got handily beat by the SP500 by 1.24% for the day.

 

Read'em and weep.

DOW year to date (-9.25%)
DOW for the week (-2.47%)

SP500 year to date (-13.31%)
SP500 for the week (-3.27%)

NASDAQ 100 year to date (-21.23%)
NASDAQ 100 for the week (-3.76%)

NASDAQ year to date (-21.16%)
NASDAQ for the week (-3.93%)

RUSSELL year to date (-16.98%)
RUSSELL for the week (-3.95%)

The NASDAQ 100 and the NASDAQ are in a BEAR MARKET at the moment.

 

So......since the week is over I am going to post some opinion. Feel free to disagree or post your own opinion......especially if it is different. There is no need to agree with me in this thread. Opinion is simply.....personal. So I have no intent to argue opinions or to dispute the opinions of anyone else.

I have been investing for a long time.......over 45 years. The ONLY time I have seen a market and economy like now is during the CARTER years. I am starting to feel like the current government is even WORSE than CARTER was. We are now starting to get into a situation where we....."might"......actually end up in STAGFLATION. I have NEVER seen any other government that was as incompetent as the current government. They are making ALL the wrong moves at the wrong times. They are focused on moronic issues and have NO HOPE of turning things around with their current thinking......and.....I dont see any hope that they will improve. They have ZERO concept of business or how to achieve economic success. Just about every policy is intentionally the exact opposite of what has worked in the past to create a good economy and stock market.

Will people wake up to what and how things are going? I doubt it.

I will say......if we continue on the current path that we have been on since the current government took over.......we are in for a very long and very sad and very dismal rest of their term for the economy and for investors. Eventually the FREE MONEY that is fueling the consumer economy at the moment will run out.

Eventually the job markets will tank, the stock markets will tank, interest rates will be sky high, inflation will be high, housing prices will tank. This is where we are headed if we continue on the current path and escalate it from here. I am not saying that it is set in stone that these things....."will"....happen. BUT......we are heading that way at the moment.

Am I worried or pessimistic? No....not really. I am insulated from most of the above and will simply wait it out. But if the above happens......or if we continue on the current path....... the wait will be a very long time.....at least 2-6 years.

Do I have any plans to go to cash or sell anything? NO. Absolutely not. I will continue to be fully invested for the long term as usual.

 

So regardless of the above.......everyone have a great weekend. Lets come back on Monday ready to fight the good fight.

 

Since I am a glutton for punishment......lets review.

6 Charts on The Stock Market's April Downdraft
Consumer stocks have provided some shelter from the storm, but Big Tech has resumed its decline.

https://www.morningstar.com/articles/1090229/6-charts-on-the-stock-markets-april-downdraft

(BOLD is my opinion OR what I consider important content)

"For stock investors, April may not have been “the cruelest month'' but it turned out pretty darn bad.

It may have seemed in late March that the worst of the selloff to start 2022 was in the rear-view mirror. Yet now amid signs the Federal Reserve will be even more aggressive in raising interest rates, stocks have suffered renewed declines that left broad market benchmarks flirting with their lows for the year.

Through April 26, the Morningstar US Market Index lost 8% for the month, bringing the year-to-date declines to just under 13%.

As was the case during much of the first quarter, big name technology and communications stocks such as Microsoft (MSFT), Apple (AAPL), and Nvidia (NVDA) led the broader market lower. While this meant continued poor performance for companies landing in the growth category bucket, value names have provided shelter from the storm in recent weeks. Consumer stocks, often seen as playing a defensive role in a portfolio, lived up to their reputation as Johnson & Johnson (JNJ) and Procter & Gamble (PG) both rose this month.

There remain risks for the months and quarters to come, including inflation, rising interest rates, and geopolitical ruptures such as Russia's invasion of Ukraine.

The good news for investors looking to put money to work: Stocks covered by Morningstar analysts are now the cheapest they’ve been since the pandemic-driven bear market.



With the latest downward slide, stocks neared their worst levels of the year. On March 14, the Morningstar US Market Index was down 13.6% from its last high on Jan. 3. That’s well into so-called correction territory, which is a decline of 10% or more from the most recent peak.



Underneath the hood, there’s been a continued, considerable divergence among stocks based on whether they land in the growth category or value category. So far in April, growth stocks have lost 14.9% while value has shed 2.9%.

Whether a company lands in Morningstar's value, core, or growth categories depends on the “style score” assigned to each stock. That is based on metrics such as growth rates for earnings, sales, book value, and cash flow. In addition, it factors in dividend yields and relative valuations such as the price/projected earnings ratio, price/book, price/sales, and price/cash flow.

Growth stocks have higher readings on earnings and sales ratios, for example, and low dividend yields. Companies that end up at the lower end of the spectrum on these metrics land in the value category, and those in the middle are considered “core.”

For the trailing 12-month period ending April 26 the Morningstar US Growth Index lost 14.9%, while the Morningstar US Value Index gained 7.1%.

April’s value versus growth divergence extends a performance reversal that started late last year when, after a long period of underperformance, value stocks started posting returns that topped those of growth companies.



Drilling down further, April brought losses across the board to every sector except consumer defensive. The Morningstar US Consumer Defensive Index rose 3.4%, led by Johnson & Johnson, which gained 4.2%, and Procter & Gamble, which rose 5.2%.

Renewing losses seen earlier in 2022, the technology and communication services sectors dragged down the market in April. The Morningstar US Technology Index fell 13%, and the Morningstar US Communication Services Index lost 13.7%. Microsoft has been the leading decliner, down 12.4% as of April 26.



The technology sector was responsible for 3.3 percentage points of the Morningstar US Market Index’s 8% drop for the month, dragged down by Apple, off by 10.2%, and Nvidia, which plummeted 31.1%.

Led by losses in Netflix (NFLX), which plunged 47% in April alone, the communication services sector contributed 1.2 percentage points to the market’s total loss this month.

Amazon (AMZN), which fell 14.5%, and Tesla (TSLA), down 18.7%, were major contributors to the decline in the consumer cyclical sector.



For investors able to put money to work, stocks now trade at much more attractive prices. The broad market is at an approximately 6% discount to Morningstar analysts’ fair value estimates versus the 13% premium at the end of 2021. The last time the market was considered nearly this cheap was during the coronavirus recession.

recession.
"

MY COMMENT

Many stocks have now taken a ride in the old time machine and are down to levels not seen since 2020. We have lost between a year to two years of market gains in many companies and stocks.

I find it AMAZING that the SP500 is ONLY down by about 13-14% year to date.