The Long Term Investor

HAPPY George Washington's birthday.....even though it is actually not today. Markets are closed for the day.

 

I like this little article. It hits on many of the criteria I use for my BIG CAP MONSTER stock picking.

Drivers and Stock Pickers

https://smeadcap.com/missives/drive...FJo&utm_content=293777177&utm_source=hs_email

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

"Dear fellow investors,

In studies, 90% of drivers think they are above average. We believe that 100% of the people who pick stocks for a living think they will be above average. Is being above average a worthy goal and is the generation of alpha or excess return something to strive for?

Alpha is defined as:

“Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return or other benchmark over some period. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.”

We are the managers of a concentrated 25-30 stock portfolio purchased based on our eight criteria for common stock selection. What are the demonstrable sources of alpha to all stock picking organizations? Where does alpha come from in our discipline? What are the opportunities currently in the marketplace for alpha?



We believe there are four sources of alpha in stock picking. They are valuation, stock selection, low turnover and courage/contrarianism.

Let’s start with valuation. We have always said that valuation matters dearly. We look to buy shares in a company that we would feel good about if the stock market didn’t open for five years. Would you like to be the receiver of the profits of the company as a private company?

Second, we have eight criteria for stock selection which are designed to allow us to buy into meritorious companies at a time that there is a reason for them to be doubted by most investors. Our eight criteria are listed below:

Required over entire holding period:

• Meets an economic need
• Strong competitive advantage (wide moats or barriers to entry)
• Long history of profitability and strong operating metrics
• Generates high levels of free cash flow
• Available at a low price in relation to intrinsic value

Favored, but not required:

• Management’s history of shareholder friendliness
• Strong balance sheet
• Strong insider ownership (preferably with recent purchases)

Every company we own must satisfy the required criteria. For companies that do not also meet the favored criteria, we believe these short-term conditions will be ultimately corrected or overwhelmed by the required criteria.

Most of these criteria speak to having a margin of safety in our purchases. If a turnaround is needed, does the company have the financial strength to turn things around? Did American Express have the financial strength to survive losing 10% of their credit card holders when they divorced Costco (COST)? Did Target (TGT) have the financial strength to come back from the failure to succeed in Canada, fight off Amazon and recover from offending many of their best customers last year? To us the answer is yes.

Do companies have brand attachment? Moat is one of the most difficult criteria for most investors to understand. Measuring it is an art rather than math or science and we believe our 43 years of participation in the stock market gives us an advantage on understanding moats. We are weird folks because we never forget a meritorious company that we were admiring and not owning from the outside looking in.

Low turnover requires patience and carries a big reward. The biggest part of alpha comes from long-term winners that you sat with through numerous corrections in the process. We will give you a simple example: if you buy a stock at $30 per share and pay cash, you are limited to losing $30 per share. If you buy a stock at $30 per share that goes to $90 and sell it, you will leave $120 on the table if it goes to $210. What is worse, losing $30 per share or the sin of omission by missing the next $120 gain per share?

Our final factor is courage/contrarianism. Sir John Templeton said, “If you can see the light at the end of the tunnel, you are too late!” Our optimism for companies goes up as the price goes down when it fits our eight criteria for stock selection. Most of the time our rewards take 12-18 months to show up and, in some cases, have taken longer. Therefore, courage combined with patience at the point of purchase and ownership combined with patience on winners has been a source of alpha for us.

Where are we driving our portfolio now? We are holding cheap winners in oil and gas like Occidental Petroleum (OXY) and ConocoPhillips (COP), as well as cheap multi-year winners in home building like D.R. Horton (DHI) and Lennar (LEN). We are buying new positions in depressed regional banks and adding to undervalued oil and gas stocks which replaced Continental Resources after it got bought out. We are holding long-term winners that look very reasonable in Merck (MRK), Amgen (AMGN) and Bank of America (BAC).

As opposed to drivers who overestimate themselves, we seek to be above-average stock pickers by doing the things that most professional investors struggle with, like being courageous and patient. We hope to help our investors to avoid stock market failure in the process.

Warm Regards,"

MY COMMENT

Just about ALL the criteria above are inherent in my BIG cap investing style and what I look for in a company......BIG CAP, ICONIC PRODUCTS, AMERICAN, DIVIDEND PAYING, GREAT MANAGEMENT, WORLD WIDE DOMINANCE, etc, etc.

I like the criteria above of low price in relation to intrinsic value. Many people misinterpret this sort of thing to.....JUST..... mean "low price". Think of this in terms of NVIDIA. Personally I see that company as having a relatively low price at the moment versus "potential" intrinsic value. I believe having a feel for Intrinsic value is extremely difficult for the typical investor.

BUT....I have no clue how to tell others how to evaluate this. Many people get caught up in the mechanical process of using formulas and fundamental data to calculate intrinsic value. BUT....to me...it goes WAY BEYOND some rote, calculation that pumps out an answer. It takes great business instincts, and intuitive sense of marketing and consumers, and the normal world around us. I am not sure you can teach this. It is one big reason why Peter Lynch was such an amazing investor.

On here it is why Zukodany does so well.....because he has the traits and instincts that have made him a very successful small business owner. Show me a successful business owner and there is a good potential they will also be good at long term investing.

 

I will say in relation to the above....good investing is a life long learning process. It takes time and effort to "learn" to be a good investor. Perhaps a few people are born with the exact, perfect traits, that make them a great investor. BUT....for the vast majority of people.....99%....it is a learning process.

That education includes making mistakes. Nothing wrong with that as long as you learn something about yourself.

Fortunately long term investing is very forgiving of mistakes.

 

Not something I worry about.....but.....I do like this little article.

Magnificent 7 profits now exceed almost every country in the world. Should we be worried?

https://www.cnbc.com/2024/02/19/mag...ountry-in-the-world-should-we-be-worried.html

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

"Key Points

• The so-called “Magnificent 7” U.S. tech behemoths encompass Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla.
• In a research note Tuesday, Deutsche Bank analysts highlighted that the Magnificent 7′s combined market cap alone would make it the second-largest country stock exchange in the world.
• However, this level of concentration has led some analysts to voice concerns over related risks in the U.S. and global stock markets.

The so-called “Magnificent 7” now wields greater financial might than almost every other major country in the world, according to new Deutsche Bank research.

The meteoric rise in the profits and market capitalizations of the Magnificent 7 U.S. tech behemoths — Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla
— outstrip those of all listed companies in almost every G20 country, the bank said in a research note Tuesday. Of the non-U.S. G20 countries, only China and Japan (and the latter, only just) have greater profits when their listed companies are combined.

Deutsche Bank analysts highlighted that the Magnificent 7′s combined market cap alone would make it the second-largest country stock exchange in the world, double that of Japan in fourth. Microsoft and Apple, individually, have similar market caps to all combined listed companies in each of France, Saudi Arabia and the U.K, they added.

However, this level of concentration has led some analysts to voice concerns over related risks in the U.S. and global stock market.

Jim Reid, Deutsche Bank’s head of global economics and thematic research, cautioned in a follow-up note last week that the U.S. stock market is “rivalling 2000 and 1929 in terms of being its most concentrated in history.”

Deutsche analyzed the trajectories of all 36 companies that have been in the top five most valuable in the S&P 500 since the mid-1960s.

Company strategies now more important to returns than macro environment, economist says

Reid noted that while big companies eventually tended to drop out of the top five as investment trends and profit outlooks evolved, 20 of the 36 that have populated that upper bracket are still in the top 50 today.

“Of the Mag 7 in the current top 5, Microsoft has been there for all but 4 months since 1997. Apple ever present since December 2009, Alphabet for all but two months since August 2012 and Amazon since January 2017. The newest entrant has been Nvidia which has been there since H1 last year,” he said.

Tesla had a run of 13 months in the top five most valuable companies in 2021/22 but is now down to 10th, with the share price having fallen by around 20% since the start of 2024. By contrast, Nvidia’s stock has continued to surge, adding almost 47% since the turn of the year.

“So, at the edges the Mag 7 have some volatility around the position of its members, and you can question their overall valuations, but the core of the group have been the largest and most successful companies in the US and with it the world for many years now,” Reid added.

Could the gains broaden out?

Despite a muted global economic outlook at the start of 2023, stock market returns on Wall Street were impressive, but heavily concentrated among the Magnificent Seven, which benefitted strongly from the AI hype and rate cut expectations.

In a research note last week, wealth manager Evelyn Partners highlighted that the Magnificent 7 returned an incredible 107% over 2023, far outpacing the broader MSCI USA index, which delivered a still healthy but relatively paltry 27% to investors.

Daniel Casali, chief investment strategist at Evelyn Partners, suggested that signs are emerging that opportunities in U.S. stocks could broaden out beyond the 7 megacaps this year for two reasons, the first of which is the resilience of the U.S. economy.

“Despite rising interest rates, company sales and earnings have been resilient. This can be attributed to businesses being more disciplined on managing their costs and households having higher levels of savings built up during the pandemic. In addition, the U.S. labour market is healthy with nearly three million jobs added during 2023,” Casali said.

Nvidia has an ‘iron grip’ on the market, says RSE Ventures’ Matt Higgins

The second factor is improving margins, which Casali said indicates that companies have adeptly raised prices and passed the impact of higher inflation onto customers.

“Although wages have risen, they haven’t kept pace with those price rises, leading to a decline in employment costs as a proportion of the price of goods and services,” Casali said.

“Factors, including China joining the World Trade Organisation and technological advances, have enabled an increased supply of labour and accessibility to overseas job markets. This has contributed to improving profit margins, supporting earnings growth. We see this trend continuing.”

When the market is so heavily weighted toward a small number of stocks and one particular theme — notably AI — there is a risk of missed investment opportunities, Casali said.

Many of the 493 other S&P 500 stocks have struggled over the past year, but he suggested that some could start to participate in the rally if the two aforementioned factors continue to fuel the economy.

“Given AI-led stocks’ stellar performance in 2023 and the beginning of this year, investors may feel inclined to continue to back them,” he said.

“But, if the rally starts to widen, investors could miss out on other opportunities beyond the Magnificent Seven stocks.”"

MY COMMENT

I dont worry about this in the slightest. I think diversification is a return killer for many investors. Wanting to see the market gains and leaders broaden out is nonsense.

BUT....the above does not mean you should invest in ONLY these seven stocks. Myself....I dont own TSLA and I dont own META. And....I have no plans to do so. I have no issue with owning ICONIC companies that are consumer companies like COST and HD and in many respects AMZN. I wish I had one or two more consumer companies....but I just dont see much that I want to buy at the moment.

What the above shows is the success of MANAGEMENT and products and marketing at these top companies. The fact that most of them have been in the top twenty or fifty companies in the world for a while is a testament to their business success. I want to tie myself to the top, most successful companies in the world.

This is also why I own the SP500 as an index. I want to be tied to the index that represents the top 500 companies in the world. To me this represents success and is an indicator of future success.

Once a company reaches the top levels of success it is all about......MANAGEMENT, MANAGEMENT, MANAGEMENT. The grave danger for any of the companies above is management changes.

Success begets success. BUT......in the end it is all about EXECUTION....basically another word for MANAGEMENT.

This is the current issue with NIKE. Their management allowed the company to drift further and further onto idiotic pathways that had nothing to do with their core business.....designing and selling shoes. This started when the current CEO took over.....and has escalated to where they are now. Of course the prior CEO was a long term 40 year NIKE person. The current CEO an outsider. A perfect lesson in the importance of MANAGEMENT.

This is why when I am trying to find another stock to buy....I tend to focus on the companies that are in the top 50 or top 100 companies in the SP500.....as the basic starting point for my search and evaluation.

 

In my little area of 4200 homes...the real estate market is HOT. We have only 24 homes actively for sale. The number of "pending" homes has taken a big jump....especially....in homes over $1MILLION. We have 15 homes "pending" right now.....with . We are off and running on the way to a good Spring selling season.

 

Good comment above Smokie. Your list shows that there is much more than MARKET CAP....when looking at success in business. There are many criteria and measurements of business success.

I DO like MARKET CAP as a long term indicator of success. It usually takes a number of years to achieve and get into the top 20 or 50 or 100 stocks in the SP500.

HERE are the top 25 companies in the SP500 by market cap:

1 MICROSOFT CORP (MSFT): 7.32%
2 APPLE INC (AAPL): 6.95%
3 NVIDIA CORP (NVDA): 3.71%
4 AMAZON.COM, INC (AMZN): 3.49%
5 META PLATFORMS INC, CLASS A (META): 2.12%
6 ALPHABET INC CL C (GOOG): 1.83%
7 BERKSHIRE HATHAWAY INC. CL B (BRK.B): 1.68%
8 TESLA, INC (TSLA): 1.40%
9 BROADCOM INC. (AVGO): 1.35%
10 ELI LILLY AND COMPANY (LLY): 1.24%
11 JPMORGAN CHASE & COMPANY (JPM): 1.21%
12 UNITEDHEALTH GROUP INC (UNH): 1.16%
13 VISA INC. (V): 1.06%
14 EXXON MOBIL CORP (XOM): 0.98%
15 JOHNSON & JOHNSON (JNJ): 0.94%
16 MASTERCARD INC (MA): 0.89%
17 THE PROCTER & GAMBLE COMPANY (PG): 0.88%
18 HOME DEPOT, INC. (HD): 0.85%
19 COSTCO WHOLESALE CORP (COST): 0.74%
20 MERCK COMPANY. INC. (MRK): 0.74%
21 ABBVIE INC. (ABBV): 0.71%
22 ADVANCED MICRO DEVICES INC (AMD): 0.70%
23 ADOBE INC (ADBE): 0.68%
24 SALESFORCE INC (CRM): 0.66%
25 CHEVRON CORP (CVX): 0.62%

UNFORTUNATELY for me.....I DO NOT bother with companies in finance, banking, drugs, autos, insurance, oil, and a few others. That pretty much eliminates most of the companies above as potential investments for me.

It is NOT random chance that seven of my eight stocks are in the list above. The one that is not.....my recent small share acquisition in PLTR.

 

Well Smokie.....I have been doing the same strategy for my entire investing life....over 50 years.

Before there was TECH just about all of my stocks were the BIG CAP consumer giants......KO, PEP, PM, PG, CL, J&J, GE, IBM, HD, COST, NKE, KHC, MDLZ, GIS, KLG, CPB, WMT,.....ETC, ETC, ETC. As BIG TECH came into play in the 1990'S and beyond I gradually added most of the stocks that I still own. Over time as my other BIG CAP CONSUMER companies dropped out of my portfolio....the BIG TECH came to dominate.

I have always LOVED the BIG CAP CONSUMER CONGLOMERATE companies. I considered them proven and sure growth with their ICONIC product lines. They also paid great dividends and were somewhat of a hedge against recession and other economic issues.....since they had products that were somewhat immune to economic conditions. In the older days....EVERYONE...bought these products.

In the pre-tech days I usually tried to hold about 12-20 stocks at any one time. I have always followed the same process that you see in this thread...let winners ride, reinvest dividends, etc, etc, etc.

UNFORTUNATELY......the current environment has seen most of the big cap conglomerate stocks get watered down as they sold off many product lines in the name of.........BS......shareholder value.

This strategy has done very nicely for me over my lifetime.

I came to invest this way because there companies were the CREAM OF THE CROP in the 1950's, 1960's, 1970's and 1980's. They were the companies that I grew up with and were owned by my grandfather and mom. Classic BUY & HOLD....long term investing.

 

Of course.....I STILL own all these companies......as part of my SP500 Index Fund. Many of them are STILL in the top 50-100 largest companies in the SP500.

 

Well rg....in the distant past one of the very first stocks that I owned during my college years was Schering-Plough. I also owned Merck a few times in the distant past. I just never had much luck with the drug stocks....too erratic....and never seemed to do much. Also boom and bust with products that come and go out of patent.

i cant say that I ever made much from the drug stocks over the long term....way back in the day. So over time I just came to avoid them.

Most of the categories that I avoid strike me as too boom and bust.....too erratic. Plus....my early investing BIAS was probably set by what my Grandfather and mom invested in which was the CONSUMER CONGLOMERATE type companies.

I did make very good money on AMGEN back in the 1990's. I was holding a good number of shares of AMGEN in 1991 when the announcement of their lawsuit win over Genetics Institute came out. I made about $25,000 in one day when that court ruling hit the news. I still remember driving out of Tacoma on Interstate 5 heading to Seattle when I heard the news on the radio.....that....the stock had shot up. I did make good money on AMGEN....but it did not seem to be able to sustain the early excitement and promise as the years went on. Back than AMGEN and Genentech were similar to the young, booming, high flying, tech stocks that we see today. I think I was into AMGEN for perhaps 2-3 years...before I sold all shares. That was long ago and I had forgotten all about that company till I started to type this post.

I owned the stock during this HUGE gain, which kind of reminds me of some of the TECH gains we see today:

"Today’s hero, Thousand Oaks-based Amgen, has seen its stock rocket up 150% in the last six months after a crucial patent victory, booming sales of its wonder drug erythropoietin and the Food and Drug Administration’s recent approval of its second product, another potential blockbuster."


Biotech Firms Hit Their Stride : Pharmaceuticals: Sales may reach $4 billion by 1993. A more mature industry will smooth the wild fluctuations in company fortunes and stock prices.

https://www.latimes.com/archives/la-xpm-1991-03-17-fi-1042-story.html

 

The post above has triggered a lot of memories for me.

Very heady times......1990 to 2000. An amazing decade for us. In hindsight I was a very aggressive investor. That ten year span from 1990 to when I retired in 1999.....was a peak time of HUGE income for me from my business and my investing. I was into my....12 year.... MSFT trade and others like AMGEN, SBUX, NKE, COST, CSCO, INTC, etc, etc, etc.. My PEAK earning and investing years....for making money. The money we made allowed me to retire in 1999 at age 49.

All of my aggressive investing was being done in my taxable brokerage account. My Model Portfolio at the time was two parts....a core portfolio of the type of big cap consumer conglomerate companies mentioned above.....plus....the more aggressive investments like AMGN, MSFT, CSCO, etc, etc. It was a very good balance between the two.

We were living in a high end, professional athlete,....(first round draft pick)....high level CEO neighborhood....from 1990 to 2000. We had MSFT employees in our neighborhood with employee numbers below 50. The President of MSFT lived about 6 houses down the street....there was a Venture Capital guy about 4-5 houses down. It was unusual because we were the neighborhood outliers.....simple small business owners...but we got along with everyone.

There was a ladies group that most the wives participated in....which did monthly lunches, the neighborhood Christmas party and some charity events.....very few working women. Surprisingly there was very little gossip and drama. I guess because it was mostly old school corporate people...that had moved around a lot and worked their way up over many years to get to the top in their company.

People tended to be older....we were probably the youngest people living in that neighborhood...when we moved in. Most of the business people were old school......pretty much self-made people.....with none of the "ELITE AIRS" that you see today.....pretty down to earth, corporate, people.....considering. In fact just about ALL the kids in the neighborhood went to the public schools and rode the school bus. At that time, pretty much no one had nannies or Au-pairs or housekeepers or cooks.....that came toward the end of our time there.....when the rich younger tech workers started moving in.

As I type this....all of that is a memory....that few people....over the past 24 years..... know about us.

 

LOL.....the NVDA earnings hit starts a day early.

NO doubt a big drag on the markets in general and the SP500 and NASDAQ. I will get my HD earnings after the bell today.

 

This is the way it should be.....and is.

What’s Driving the Stock Market Returns?

https://awealthofcommonsense.com/2024/02/whats-driving-the-stock-market-returns/

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

"There’s a cohort of people who think the stock market is rigged.

They assume it’s a casino where only certain people win and everyone else loses.

Or everything is manipulated by the Fed and the results are fake.

If it weren’t for the bailouts or falling interest rates or government spending or the Taylor Swift Eras Tour, the whole house of cards would collapse.

There are, of course, checks and balances in our system that have been beneficial to the economy and stock market over the years.1

But it’s ridiculous to assume this means the gains in the stock market are somehow rigged, fake or manipulated.

There is no man behind the curtain pulling levers to ensure stocks go up.

In fact, over the long run, fundamentals still play an important role in the stock market’s success.

Check out this chart2 of earnings vs. the S&P 500 index going back to the end of World War II:


There have been times when prices have gotten ahead of themselves but for the most part stock prices have been going up because earnings have been going up.

Another myth of the stock market is that all of the gains are due to multiple expansion. While it is true that valuations have been slowly rising over time as markets have gotten safer, multiple expansion has probably played a smaller role than most people assume.

The late-John Bogle had a simple formula for expected returns in the stock market that looks like this:

Expected Stock Market Returns = Dividend Yield + Earnings Growth +/- the Change in P/E Ratio

In his book Don’t Count on It, Bogle applied his formula to each decade in the stock market going back to the turn of the 20th century to see how well fundamental expectations matched up with the actual returns.

The difference between the two is essentially human emotions.

Bogle published the data through the 2000s so I’ve been updating his work into the 2010s and 2020s. Here’s the latest data through the end of 2023:


There has been some multiple expansion in the 2010s and 2020s but nothing like the 1980s, 1990s or even the 1930s.

Earnings growth has been the main driver of stock market returns since the end of the Great Financial Crisis.

It’s also worth noting that although dividend yields have been relatively low in recent decades, the growth in dividends paid out by corporations has been healthy.

S&P 500 dividends grew at an annual average growth rate of just 3% in the 2000s.3 That’s well below the historical average of more than 5%.

But since 2010, dividends are up more than 8% per year.4

Dividend and earnings growth have been strong and so has the stock market.

Another reason returns have been so stellar is because U.S. corporations are so much more efficient now.

Just look at the upward trend in margins since the advent of the Internet:


There was this idea that profit margins were the most mean-reverting time series in all of finance because of competition and capitalism. Technology stocks have put this idea to rest.

Margins went up and never reverted back to previous averages.

This one chart helps explain the dominance of U.S. stocks over the rest of the world for the past 15 years or so.

The stock market has been good in part because the fundamentals have been good. There are other factors at play, but that’s the simplest explanation.

It is worth noting, however, that stock prices are always going to be far more volatile than the fundamentals, especially in the short run. The stock market is forward-looking but that doesn’t mean it knows how to forecast what’s going to happen next.

Prices move around a lot more than earnings or dividends because of fear and greed.

But in the long run fundamentals tend to win out.

The fundamentals of the U.S. stock market have been exceptional."

MY COMMENT

It is that simple.....this...is why over the long term steady and sure investors WIN.

 

WHOOPS.....I guess the HD earnings are out....before....the open.

Home Depot beats earnings, sales estimates even as consumers take on smaller home improvement projects

https://www.cnbc.com/2024/02/20/home-depot-hd-q4-2023-earnings.html

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

"Key Points

• Home Depot beat earnings and revenue estimates even as sales fell.
• The home improvement retailer expects sales will rise 1% in fiscal 2024.
• Home Depot also anticipates it will open about a dozen new stores over the year.

Home Depot on Tuesday said quarterly sales declined nearly 3% year over year, but it surpassed Wall Street’s earnings and revenue expectations despite the cooler demand.

The home improvement retailer said it expects total sales to grow about 1% in fiscal 2024, which includes an additional week. That compares with a 1.6% increase expected by Wall Street, according to StreetAccount. Home Depot also anticipates it will open about a dozen new stores over the year.

On a call with CNBC, Chief Financial Officer Richard McPhail said demand dipped throughout the year as consumers returned to more typical spending patterns. He added that falling lumber prices and rising interest rates hurt the business.

Home Depot now sees a chance to return to growth, McPhail said.

“Our market is on its way back to normal demand conditions,” he said. “We’re not quite there yet, but the pressures we saw in 2023 are receding.”

Here’s what the company reported for the three-month period ended Jan. 28 compared with what Wall Street expected, based on a survey of analysts by LSEG, formerly Refinitiv:

• Earnings per share: $2.82 vs. $2.77 expected
• Revenue: $34.79 billion vs. $34.64 billion expected

Home Depot dipped slightly in early trading Tuesday.

Net income for the fiscal fourth quarter fell to $2.80 billion, or $2.82 per share, from $3.36 billion, or $3.30 per share, a year earlier.

Net sales decreased from $35.83 billion in the year-ago period.

Home Depot has faced a tougher sales backdrop over the past year. The home improvement retailer is following a more than two-year period when Americans had more time and money to spend on painting and fixing up their homes during the Covid-19 pandemic.

The company has also felt a pullback in consumer spending, particularly on big-ticket items, as some families postpone discretionary purchases because of inflation, put off buying a new home because of higher interest rates or choose to spend on experiences rather than goods.

Throughout the past year, McPhail and CEO Ted Decker described 2023 as “a year of moderation” after the outsize gains during the pandemic. About half of Home Depot’s business comes from home professionals and about half comes from do-it-yourself shoppers.

On Tuesday, McPhail said customers are still putting off bigger projects — especially the large-scale projects that may require a loan — because of higher borrowing costs.

Yet, he said sales throughout the fourth quarter were pretty consistent, except for a decline in January due to colder and wetter weather.He said that temporary drop did not factor into the company’s outlook for the year ahead.

Average ticket and customer transactions both declined in the fourth quarter compared with the year-ago period. The average ticket dropped to $88.87 from $90.05 in the year-ago quarter, reflecting a more typical pricing environment, McPhail said.

Prices of items are lower than a year ago, a time when Home Depot and its suppliers dealt with higher costs of products and transportation rates, he said. Since August, however, prices have remained steady.

“Our observation is prices will likely remain at current levels for some time,” he said.

As of Friday’s close, shares of Home Depot were up nearly 5% this year. That roughly matches the gains of the S&P 500 during the same period. The company’s shares closed at $362.35 on Friday, bringing Home Depot’s market value to about $360 billion."

MY COMMENT

A basic earnings BEAT on the primary numbers....but at the same time a bit mixed. A good honest outlook from the company.

I am satisfied with these numbers and especially the outlook. I see the current time span as the bottom of the pandemic distortions for HD. From here there is good potential to get back to normal and for the company to continue to BEAT expectations.

A good solid company with great management. The number one company in the world in their business area.

 

The market today.

Stocks fall to start the week, Home Depot slides after earnings

https://www.cnbc.com/2024/02/19/stock-market-today-live-updates.html

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

"Stocks were lower Tuesday as the market comes off its first losing week in more than a month and traders pore over the latest batch of earnings.

The Dow Jones Industrial Average dipped 68 points, or 0.2%. The S&P 500 slipped 0.3%. The Nasdaq Composite
lost 0.4%.

Home Depot shares were down more than 1% in early trading after the home improvement giant issued mixed full-year guidance.

Financial stocks were in view Tuesday following a blockbuster announcement that Capital One Financial is reportedly purchasing Discover Financial Services in an all-stock deal worth $35.3 billion, which is expected to close in late 2024 or early 2025. Capital One slumped more than 4% following the announcement, while Discover
jumped 10.5%.

In separate deal news, Walmart announced it will acquire TV maker Vizio for $2.3 billion, or $11.50 a share, leading shares of Vizio to climb above 15%. Walmart shares added more than 5% after the big-box retailer also beat quarterly earnings and revenue expectations, fueled by double-digit growth in the company’s global e-commerce sales.

The moves follow a losing week on Wall Street after economic data raised concerns that the Federal Reserve may not begin cutting interest rates as soon, or by as much, as market participants expected this year.

Tuesday kicks off the shortened trading week after U.S. markets were closed Monday in observance of the birthday of George Washington. Investors will watch for leading economic indicators data due at 10 a.m. ET.

All three of the major indexes snapped five-week winning streaks. The technology-heavy Nasdaq Composite led the way down with a drop of more than 1.3%, while the benchmark S&P 500 slipped about 0.4%. The blue-chip Dow saw the narrowest loss, shedding just around 0.1%."

MY COMMENT

A good day to go away and ignore the markets. In fact a good couple of days....till after the NVDA earnings tomorrow.

 

I am going to do what I pasted....screw the markets today. It is not worth my short term time to watch the current happenings. They are NOT relevant to real investors. I will check in at the close with no real expectations for the day....so if we get better as the day goes on....I will be surprised.

In other words....I will simply do NOTHING. Of course.....when the market is BOOMING and when the market is DISMAL....I do the same thing.....NOTHING.