The Long Term Investor

HERE is where we are with....NINETY ONE PERCENT....of earnings in. Although we are STILL waiting for the BIG ONE.....NVDA....on August 28.

Key Data

• Earnings: With 91% of S&P 500 companies reporting......78% of S&P 500 reported a positive EPS surprise.....59% of S&P 500 reported a positive revenue surprise.

• Earnings Growth: The earnings growth rate (S&P 500) is 10.8%. If we end at 10.8% .......it will be the highest year-over-year earnings growth rate since the forth quarter of 2021.

• Guidance: 47 S&P 500 companies have issued negative EPS guidance.....39 S&P 500 issued positive EPS guidance.

• Valuation: Forward 12-month P/E ratio (S&P 500) is 20.2. Above the 5-year average
(19.4) and the 10-year average (17.9).


https://advantage.factset.com/hubfs/Website/Resources Section/Research Desk/Earnings Insight/EarningsInsight_080924.pdf

MY COMMENT

We are closing in on the end to another very good earnings reporting period. As usual lately.....even good earnings beats are often PUNISHED by the markets.....usually based on guidance and other media nit-picking. Short term, earnings beats are often disregarded....although....over the long term they do add up for investors.

In my view we are all set up for a KILLER 4.5 months to end 2024. We will see that data in the 3rd and 4th quarter earnings.

 

HERE is the week to come.

Whipsaw week for stocks leaves markets 'on edge' ahead of busy economic data week

https://finance.yahoo.com/news/whip...ead-of-busy-economic-data-week-113020547.html

PPI will be released on August 13.

CPI will be released on August 14 before the open.

MONTHLY RETAIL SALES data will be released about mid day on August 15.

In a bizarre confluence of events and investor behavior for the markets and investors last week we had......the WORST single day of the year so far......and.....the BEST single day of the year so far......in the SP500.

Lets hope we can be a bit more RATIONAL next week and avoid the PANIC we saw last week.

 

A mixed market now after the red of the open. We are maturing into the day nicely.

All my trades above happened at the market open. I was intending to invest $110,000. I was able to get it all in except for $5. that $5 will go back into the SP500. I will not let even $5 sit as cash.

 

I will do nothing based on the election result......that does not mean the result will be good for the country in general.

The Perils of Picking Policy ‘Winners’
Tune down talk of Trump and Harris trades.

https://www.fisherinvestments.com/e...mmentary/the-perils-of-picking-policy-winners

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

"Election season is frequently wild and unpredictable. But one entry on the BINGO card gets reliably ticked off every time: pundits’ hyping of a given candidate’s supposed stock market winners and losers. In 2016, it was all about the Trump Trade. Four years later, it was nonstop Biden Stocks. This time around, we have already seen a fair amount of Trump Trade chatter and Harris … well, no alliteration yet, but you get the gist. Not only do we think this is premature, but the notion of Trump Trades, Biden Stocks and now Harris … we guess Harris Hits … always missed the mark.

Elections do affect markets, and we will get there momentarily. But it isn’t about identifying the winner and the sectors and industries likeliest to thrive under them. One, the presumed winners and losers tend to be based on bias and campaign rhetoric, which may differ wildly from policies pursued in office (whose success rests on Congress passing legislation). Two, while policy matters, global supply and demand trends often swamp local industrial policy and regulatory chatter. And three, it is all so widely discussed and traded on that markets price it well before the winner takes office. Markets move most on surprises. Alleged Trump Stocks and Harris Hits don’t qualify.

The earlier Trump and current Biden administrations bear this out. In 2016, when Trump won, headlines claimed his presidency would boost Energy and Industrials stocks bigly thanks to his campaign emphasis on fossil fuels and defense spending. But that viewpoint didn’t work out so hot. During his administration, Energy was the S&P 500’s only negative sector, down -29.5% cumulatively. Industrials was positive, up 49.1%, but it lagged the S&P 500’s 81.4%.[ii] Even over a shorter span—the year after inauguration—both sectors lagged. Now, the Aerospace and Defense industry led in the first year, but lagged over the full four years.[iii]

Similarly, when Biden moved into the White House, it supposedly meant dark days for Energy, high times for Industrials due to all the infrastructure spending he championed, and sunlit uplands for all things green. And yet, in the year after his inauguration, Energy led markets, rising 56.0%, Industrials lagged slightly (17.8% versus the S&P 500’s 21.0%) and green energy, which lives in a small nook in the Utilities sector, was down -15.8%.[iv] Even the S&P Global Clean Energy Index, a broader measure including overseas firms, was down.[v]

In the three-plus years through Wednesday, all those trends held. Energy is up a whopping 134.4%.[vi] Industrials thus far are close to their performance under Trump, at 44.4%, which is in line with the S&P 500’s 44.5%.[vii] Green energy is down -33.1% during the Biden administration … after soaring 217.6% under Trump.[viii]

So today, as people speculate a second Trump administration would boost Energy, Health Care and industries benefiting from high tariffs and a weak dollar—while perhaps hurting Tech with a chip trade war—we suggest holding your horses. Same goes for talk that Harris might be a surprising Energy boost, given her recent endorsement of fracking, as well as positive for clean energy and Health Care. Both narratives overrate polling and rhetoric, and markets are pre-pricing all the chatter. Stocks will ultimately move on the gap between expectations and actual reality, both at a market-wide and industry-specific level.

This is the real thing to watch when it comes to assessing the election’s impact. For the election year, we have a long history of stocks delivering strong, back-end-loaded returns as uncertainty falls and markets rally on simply having a winner. In the inaugural year, returns tend to hinge on whether investors’ expectations are too hot or too cold. If folks broadly fear an overactive government disrupting property rights, but gridlock results in far less legislation than feared, then this generally tends to be more bullish. If folks broadly cheer some massively free-market and pro-business government boosting the economy and markets, and gridlock results in the new administration doing far less than hoped, then it is a potential risk.

We aren’t saying either scenario is likelier than the other for now. It will hinge on the White House winner as well as Congressional results—and on the hopes and fears the results inspire. It is an important topic, but one for another day."

MY COMMENT

YES.....the future for investors and the country will depend on two things.

First, do we have a split government that will stop anything from happening. Second, who wins the Presidency.

In just 2.5 months we will know the result of the........ "NATIONAL INTELLIGENCE TEST"...... that we are about to face. I see this election as the most critical election of the past 45+ years. It is very clear to me what is at stake for the country and for our society. BUT.....that is for another thread.

ALL....I will say in advance.....and also the day after the "results are final"......( I will not say the "day after the election" since we seem to be the only country in the world that is too incompetent to be able to count results in a day or two).......anyway.....all I will say now and whenever the results are knows in......"YOU GET WHAT YOU VOTE FOR AND YOU GET WHAT YOU DESERVE".

As for me.....I will IGNORE it all and simply focus on one thing.....my family and family assets. As for others.....too bad....not my problem....other than doing my one vote..

 

The market at this moment today.

US stocks waver ahead of key signals on inflation, economy

https://finance.yahoo.com/news/stoc...y-signals-on-inflation-economy-114316459.html

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


"US stocks were mixed on Monday as Wall Street braced for a week full of key economic data signals.

All three of the major averages traded on both sides of the flat line in early trading. The S&P 500 (^GSPC) was down about 0.2% while the Nasdaq Composite (^IXIC) dropped more than 0.1%. Meanwhile, the Dow Jones Industrial Average (^DJI) was lower by about 0.4%.

Wall Street is coming off a whipsaw week that has left markets jumpy and "on edge." Though the major indexes practically ended last week where they had started, it didn't come without volatility throughout the week.

Strategists say that is likely to continue — and this week comes with plenty of opportunities. Wednesday provides a fresh look at the state of inflation with the latest release of the Consumer Price Index. Then Thursday comes with two key signals on the state of the US consumer: a reading on July's retail sales and Walmart (WMT) earnings.

Wall Street once again sees good news as good news, so volatility this week may depend on the signals those data introduce.

Either way, though, markets are seeing a slowing economy, which has shifted the debate from whether the Federal Reserve should cut interest rates in September to how much they should cut them. A small majority of traders expects a 25 basis point cut next month, while the balance — around 48% — see a bigger 50 basis point cut coming."

MY COMMENT

HOWEVER.....both the SP500 and NASDAQ are nicely green at this moment. AND......in spite of no mention above we will also get the PPI release on Tuesday this week.

I really dont expect any negative surprise in anything this week. We will face the recent BS about recession if the retail data is weak....but I repeat as usual.........YES...there is NO recession.

 

With earning winding down I think we are gong to face a NO-NEWS week other than the economic data. AND....as usual that data will be REVISED over the coming months....so it is basically useless, hindsight.

We will see HD report this week on Tuesday. We will see WMT report on Thursday and we will see NVDA report on August 28.

 

Remember good old....SMCI. I bought that stock back months ago. I held it for perhaps a month or two and than sold ALL shares to put the money into NVDA when it was on sale, at the time. I am SO HAPPY that I bailed on this company quickly.

Talk about being in correction.

SMCI most recent high.......$1188.....on March 13, 2024.

SMCI now.......$547.....today, August 12. 2024.

A LOSS of........drum roll please.....(-54%).....in five months.

 

I just did my mid-morning account check. I will check it again at the close.

Right now I have six of nice stocks GREEN. The red.....HD, GOOGL, and PLTR.

Since I am very top-heavy in NVDA it is very good for me that the stock is up by 5.4% right now.

 

You know....it really is a NO-NEWS day today. There is nothing happening and no real headlines. That makes for skimpy posting on here....but that is fine with me. I would rather make money....than sit here and type posts.

 

When it is a BORING market day....I start to play with numbers.

SO.....I decided to look at my return on ALL brokerage accounts.....for FIVE YEARS. I did not cherry pick this time span.......this is one of the best options that SCHWAB gives me for data. Over the years SCHWAB has constantly changed how and what data I can see for all the accounts that I own and manage. At this point in time that is.......NINE ACCOUNTS.....for myself, two kids, my sibling, and a family trust account.

HERE is the FIVE YEAR total return data...."excluding account contributions":

My nine accounts.......five year total annualized return....+18.42%. (as of August 12, 2024)

HERE is the FIVE YEAR total return data for the big averages:

SP500.............+14.71%.
NASDAQ.........+15.92%
DOW................+10.77%
RUSSELL........+8.03%

Keep in mind:

This five year period includes the PANDEMIC and the NASTY BEAR MARKET of 2022. Also keep in mind.....that over a longer time span these returns are EXTREMELY HIGH and ABNORMAL. AND......it is highly unlikely that these returns are "normal" for any longer time span....they would in all probability....be LOWER.....mine included.

I will take it....but....my goal remains to get a long term annualized total return of 10% or more. I refuse to give in to.....GREED....and abnormal expectations.

In any event....it is a nice surprise to see the return above for the past five years. Especially considering that a....... "BIG CHUNK"......(investing term of art)....of money in each of the accounts that I own or manage is siting in the SP500 Index and/or the Fidelity Contra Fund.

BUT.....the past is the past. As we all know...."past performance is no guarantee of future results". LOL.....we all have to do it over and over for a lifetime of investing. Every day is a new beginning and a new adventure.

 

LOL.....yeah.

Today it is STILL "crickets" on the Nvidia Blackwell delay story. It has apparently died a gruesome death.....as deserved.

After searching "news" and "general" stuff.....I see a single article on the issue......and that article....is simply quoting and talking about one of the original articles on the issue.....that came out TEN days ago.

That article on HPCwire....is "late to the party".....BS.....in my personal opinion. It includes nothing new......in my personal opinion. I would personally call this new article an......."alleged"...... "hit job" for clicks......but that is my personal opinion. A perfect example of LAZY journalism....repeating a ten day old story.....as well as a perfect example of media FEAR-MONGERING.....in my personal opinion.

NO....I will not even post the article or a link to it since In my opinion it is WORTHLESS to me as an investor.

 

"I'M MELTING, MELTING".....ohhhhhhhhhhh.


YES.....we have lost our green markets right now. the DOW and SP500 are red and the NASDAQ has lost most of the prior gains.

BUMMER.

The........."DRAMA-QUEEN---HIGH-MAINTENANCE"...... markets continue. (Apologies to any actual drama-queens)

 

BUT...no change for "me". I am still six green and three red. With the same stocks red.....HD, PLTR, and GOOGL.

 

i will mention early that Wed though Friday this week will be very skimpy posting by me.....perhaps none. I am going to be tied up in other ventures and adventures on those days. So I will be counting on you all to make me some money and keep the markets.....MOVING ON UP.

 

SHOCKING information below.....as well as....very good discussion.

Retail Investors Just Lost a Poker Game

Pros just bought stocks while retail investors sold … the market perspective to remember … how convicted are you about your stocks? … you must prepare today

https://investorplace.com/2024/08/retail-investors-just-lost-a-poker-game/

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

"During the recent market turmoil, mom ‘n pop investors sold about $1 billion worth of their stock.

At the same time, what did institutional investors do?

They bought $14 billion.

If that doesn’t raise an eyebrow, consider this…

For retail investors, their recent selling clocked in as a -2.5 standard deviation move below the 12-month average for stock market orders.

But for institutional investors, their buying registered as a +2.9 standard deviation move above the 12-month average.

What’s behind this enormous differential?

Analyst Adam Khoo has a theory:

Short term price movement is largely manipulated by market makers and algos (and later justified by ANAL-lyst using bullshit reasons) … e.g. driving prices down to scare and force weak holders to sell… it’s like a game of poker… bluff the weak hands to fold their cards so the pros can grab their money and their shares more cheaply.

Today, let’s look at how to prevent this.

You don’t own a “stock.” You’re a partial owner in a business.

This distinction is critical.

In the short-term, prices can wildly decouple from the value of an underlying business. So, if price is your central focus, it’s entirely reasonable that violent selloffs would shake you out of your position.

But if your focus is on the underlying business itself – and assuming the business remains healthy – then the stock price is just an indicator suggesting one of three things:

• Buy more of the business if you want (when prices are abnormally low)
• Skim profits from your stake in the business if you want (when prices are abnormally high)
• Do nothing (when prices are somewhere in the wide middle, i.e., the majority of the time).

But what about stop-losses?

Stop-losses are another critical part of investing. If you’re a regular Digest reader, you know I’m a staunch advocate of using stop-losses. They prevent small, acceptable losses from snowballing into massive, portfolio-busting losses.

But stop-losses must be tailormade to each unique stock you hold. For example, a 35% stop loss might be appropriate for a volatile biotech that moves 10% a day, but it would be far too high for a low-volatility utility company that rarely moves 2% in a day.

Conviction.

Are you making a trade where the outcome is less certain? Is your “buy” decision based on a few technical indicators that can change quickly? Is your planned hold period just a few weeks or months?

If so, your conviction is wholly dependent on price and your indicators. That’s fragile conviction.

So, if price and your indicators move against you, you need to honor that shift via your stop-loss – and do so fast.

But for a company that you believe is a multi-year (or decade) hold, your conviction should be influenced far less by price, and far more by your awareness of the company’s operational strength.

You could take it one step farther. For certain stocks that you believe will be the bedrock pillars of your portfolio, your stop-loss could be qualitative, not quantitative.

In other words, your reason for selling wouldn’t be a depressed stock price; instead, it would be a material change in the business’s operations or ability to perform in the marketplace.

Examples of such “material changes” include a new technology that changes the game for your company, or perhaps new crippling legislation, or maybe an operational misstep so severe that it’s irrecuperable.

So, does that mean you should never reference a stock price as a basis to sell?

No. But you should be able to connect a falling stock price to that tectonic shift in your company’s operating landscape. If such a shift hasn’t taken place, then how do you know that the lower price isn’t simply a rare gift to buy more shares of a world-class company?

Take Coca-Cola…

Last fall, Coca-Cola investors found themselves at the bottom of a 17% pullback

This is an outsized move for the blue-blood beverage giant.

So, if you had purchased Coke as a trader earlier that spring, or if you had focused on fears of softer sales volume due to the explosion of weight loss drugs like Ozempic, then your holding conviction likely wouldn’t have withstood the selling pressure.

Like the mom ‘n pop investors who sold earlier this week, you might have jettisoned Coke from your portfolio.

On the other hand, if your focus was on Coke’s core operations and wide portfolio of products (many of which aren’t impacted by weight-loss drugs), then its price decline would have carried a different interpretation…

Opportunity.

Here’s what we wrote about Coke last October after suggesting readers should consider buying into the pullback:

Readers who viewed KO through an opportunistic trading lens are enjoying profits on a stock that is most certainly not going belly up because of a weight-loss drug.

Keep in mind, beyond its sugary drinks, Coca-Cola has an enormous portfolio of brands including Dasani, smartwater, vitaminwater, Topo Chico, BODYARMOR, Powerade, Minute Maid, Simply, innocent, Del Valle, and fairlife. Terrified investors who sold KO due to Ozempic fears seem to have forgotten this.

But…other investors’ fear is our advantage…

Since that Digest, KO shares are up nearly 30%, outpacing the S&P over the same period.

But what if Coke had continued to trade flat or down?

It would have been a good thing – and too many investors completely misunderstand this.

Let’s step back a moment…

Financial talking heads love to point toward the long-term average yearly return for stocks, which is about 10%.

What many investors don’t realize is that this 10% average assumes you reinvest your dividends. Without dividend reinvestment – looking at price action alone – that average return drops to 5.8%.

Don’t miss what this means. Roughly 40% of the S&P’s long-term returns come from dividends.

Now, there are two huge implications…

• First, stay invested to benefit from the power of long-term compounding (assuming you own quality stocks).
• Second, welcome lower prices in quality stocks because your dividends will buy you more shares of the business when prices are low.

Back in 2012, an analyst named Joshua Kennon analyzed Coke’s long-term returns with and without dividend reinvestment since 1962.

“Thomas” was the hypothetical KO investor who did not reinvest dividends. “James” did reinvest his KO shares.

Here’s Kennon:

Over the past 50 years, [Thomas] collected $136,270 in cash. That is more impressive than it appears because $1 in dividend income back in the 1960’s had significantly more purchasing power.

Adjusting for inflation, the current dividend equivalent of the cash income he was paid is $193,350. On top of this, his 131 shares of Coca-Cola have grown into 6,288 shares of Coca-Cola with a market value of $503,103…

[James] reinvested all of his dividends over the years. He never added to nor took away from the position over than those reinvested dividends.

Today, James is sitting on 21,858 shares of Coke stock with a market value of nearly $1,750,000. His annual cash dividend income is nearly $22,000.

And how do you be more like James than Thomas?

By remembering that you’re a business owner, not just stock-price watcher.

What all this means as we bring the discussion back to today’s volatile market

Yesterday, the Nasdaq gave up a 2% gain to end the day down 1%.

Even though we’re enjoying a great rally as I write Thursday, yesterday’s reversal is troubling. It suggests heightened risk of more weakness to come.

Keep in mind, we’re headed into the worst time of the year for stock market returns. Historically, August isn’t a great month for stocks, but September is downright awful. If we were to annualize September’s average return, it would come in at -13.5%.

Then we have all the various market overhangs we’ve covered in the Digest in recent months which we won’t rehash today.

The takeaway is we might be in for some significant downward volatility.

This means you and I have some decisions to make right now…

Will we take the time to truly understand each of our stocks, therein either increasing our conviction in holding them, or helping us recognize that we’re not all that convicted?

In the first case, greater conviction should enable us to sail through painful market corrections without handwringing and sleepless nights.

In the second case, lesser conviction should point us toward the need to identify and implement appropriate stop-losses…which should enable us to sail through painful market corrections without handwringing and sleepless nights.

In either case, our goal is to avoid what happened earlier this week with so many scared mom ‘n pop investors – getting shaken out of quality stocks because the Big Boys want to profit from fear.

Bottom line: A little preparation today will make all the difference tomorrow.

Have a good evening"

MY COMMENT

AMEN. That COKE example above with one investor reinvesting dividends and the other taking them out show the POWER of compounding.

This is also a perfect example of the POWER of long term ivnesting.

AND....yes you MUST see investing as owning a slice of an actual business. it is not some turn of the cards or a spin of a roulette wheel. it DOES take CONVICTION in your selection of that particular business.

This is why FUNDAMENTAL analysis and earnings are the KEY. This is why PROBABILITY based on these two factors is the KEY. By investing on and using these two factors you are seeing your stock as a REAL BUSINESS.

 

In spite of four of nine stocks in the red......AMZN, HD, GOOGL, and PLTR......I still had a big gain today. Thank you NVDA. I also beat the SP500 today by 1.72%.

A very good start to the week. I will get my HD earnings.....BEFORE the open..... tomorrow. We will also get the PPI data.

 

Good one TireSmoke. So now they are all going to back off that BS story-line. They can never admit that something was false....they just have to qualify it to death and let it disappear.

I still call BS on the whole thing. It was an obvious HIT-JOB.......and...."fake news" to coin a phrase.

The main indicator for the whole thing being BALONEY was NVDA calling it a rumor and refusing to confirm it. I dont think they want a HUGE shareholder lawsuit.....if it was true....so I believe it is all BS.

 

Yes...part of a busy day for me.

Chipotle stock falls as CEO Brian Niccol leaves for Starbucks

https://www.cnbc.com/2024/08/13/chipotle-stock-falls-as-ceo-brian-niccol-leaves-for-starbucks.html

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

"Key Points

• Chipotle CEO Brian Niccol is leaving his role later this month to become CEO of Starbucks.
• Niccol has been CEO since March 2018 and led the company through a foodborne illness scandal and the pandemic.
• Chipotle has seen its traffic and sales climb while other restaurants have struggled in recent quarters.

Starbucks replaces CEO Laxman Narasimhan with Chipotle CEO Brian Niccol

Chipotle stock fell as much as 10% in premarket trading Tuesday as the company announced CEO Brian Niccol would be leaving his role on Aug. 31 to become CEO of Starbucks.

Niccol began as Chipotle CEO in March 2018. Chipotle stock has risen more than 770% since since he took over.

Chipotle’s board named Chief Operating Officer Scott Boatwright as interim CEO. He’s been at the company since 2017. The board also announced that Chief Financial Officer Jack Hartung, who had announced his intention to retire, would stay with the company indefinitely and assist with the transition.

“What we saw with Brian was someone who’s, quite honestly, been there done that — through all sorts of market environments, all sorts of cycles,” Mellody Hobson, who was the board chair at Starbucks but stepped down to become lead independent director as part of Tuesday’s changes, said on CNBC’s Squawk Box. “When I talked to him I remember him saying, ‘I know what to do.’”

Chipotle has seen strong same-store sales growth and traffic while other restaurants have reported that consumers are pulling back on customer spending.

Chipotle reported second-quarter earnings in July that topped analyst estimates, with $2.97 billion in revenue. Net sales climbed 18.2% during the quarter, with same-store sales up 11.1%.

Niccol helped lead Chipotle through a foodborne illness scandal and oversaw the chain of restaurants during the pandemic.

Before taking over at Chipotle, Niccol was the CEO at Yum Brands’ Taco Bell.

Analyst Mark Kalinowski, chief executive of Kalinowski Equity Research, struck a cautious tone on the CEO change.

“While this will be viewed as bad for Chipotle in the short term, Mr. Niccol had been CEO there 6+ years, so perhaps the opportunity to bring some new thinking to that highly-respected company isn’t the worst thing in the world for the long run,” Kalinowski wrote in note on Tuesday."

MY COMMENT

A management change is always a negative in a very nicely performing business. I was not a fan of how he handled the Social Media campaign against the company on portion size. I thought his response was very poorly done and extended the turmoil over the issue.

An issue that you just have to take in as a long term investor in a company. I dont know enough about this management team so time will tell if this is neutral, positive or negative for the operations and financial results for the company. I an guessing that at worst it will be neutral. It is not like he is the company founder.