The Long Term Investor

The markets today were running around like a chicken with it's head cut off. Just a random noise market day.

I had a perfect day....all nine stocks in the RED. Plus a loss to the SP500 today by 0.28%.

Actually by the close my medium loss was not as bad as I expected.

As long as the markets are caught up in the rate cut drama and this interest rate delusion.....we will probably simply linger. The financial news has totally given way to interest rate cut opinion, speculation, and fantasy.

The good news is that earnings will start in a couple of weeks and hopefully at that time we will be distracted from all the BS.

 

Looking good right now. Here is the economic news.

US private payrolls post largest gain in eight months in March

https://finance.yahoo.com/news/us-private-payrolls-beat-expectations-122457175.html

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

"WASHINGTON (Reuters) -U.S. private payrolls increased more than expected in March, pointing to continued labor market strength.

Private payrolls rose by 184,000 jobs last month, the most since last July, after advancing by an upwardly revised 155,000 in February, the ADP Employment report showed on Wednesday.

Economists polled by Reuters had forecast private employment increasing by 148,000 last month compared to the previously reported 140,000 in February.

Wages for workers remaining in their jobs increased 5.1% on a year-on-year basis, after a similar gain in February.

The leisure and hospitality industry led the nearly broad increase in hiring, with 63,000 jobs added. Construction payrolls increased by 33,000 jobs. But the professional and business services sector shed 8,000 positions.

Hiring increased in all four regions, and was spread across all business sizes. The ADP report, jointly developed with the Stanford Digital Economy Lab, was published ahead of the release on Friday of the Labor Department's more comprehensive and closely watched employment report for March.

It has deviated considerably from the official employment data, often grossly exaggerating the labor market slowdown.

The labor market is gradually cooling following 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022. Government data on Tuesday showed there were 1.36 job openings for every unemployed person in February compared to 1.43 in January.

"While we don't think the ADP report should be viewed as a particularly reliable signal about the upcoming BLS report, we do think that the ADP data are consistent with the trend for job growth remaining solid into March," said Daniel Silver, an economist at JPMorgan in New York.

According to a Reuters survey of economists, the Labor Department's Bureau of Labor Statistics is expected to report that private payrolls rose by 160,000 jobs in March after increasing 223,000 in February.

Total nonfarm payrolls are estimated to have increased by 200,000 jobs in March after rising 275,000 in the prior month. The unemployment rate is forecast unchanged at 3.9%, and annual wage growth is seen slowing to 4.1% from 4.3% in February."

MY COMMENT

PRIVATE.....is the key word here. The more private jobs we can create the better. This is yet another indication of a great performing economy.....that no one wants to acknowledge. It is amazing that we are in a booming and growing economy and most of the coverage is negative. Another example of us living in BIZZARO WORLD. Good is bad and bad is good.

 

Talk about BIZZARO WORLD......now we are wanting the FED to save the day.
Stocks bounce with Powell waiting in the wings
https://finance.yahoo.com/news/stoc...-rough-start-to-second-quarter-152031542.html

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

"US stocks were higher on Wednesday morning as investors looked to a coming speech by Federal Reserve Chair Jerome Powell for clues to whether interest rates will stay higher for longer.

The S&P 500 (^GSPC) rose about 0.4%, while the Dow Jones Industrial Average (^DJI) popped about 0.2%. The tech-heavy Nasdaq Composite (^IXIC) led the gains, rising 0.6% after the major gauges closed Tuesday in a sea of red.

Stocks had drifted away from their strong start to the year as robust economic data undermined hopes for three Fed rate cuts. Investors have scaled back their bets to the point where they expect a smaller, later easing than policymakers have projected.

Stocks reversed losses on Wednesday morning after a reading on prices paid in the services sector hit its lowest level since March 2020, indicating potential future declines in inflation. This data stood in contrast to a similar reading from the manufacturing sector on Monday, which showed inflation pressures were on the rise last month.

The focus is now on Powell, whose speech on the economic outlook later in the day will be weighed for hints to whether the Fed's June meeting will bring a policy pivot. Earlier in the day, Atlanta Fed President Raphael Bostic told CNBC he expects the Fed to make its first interest rate cut in the fourth quarter.

Eyes are also on who will win the bitter proxy battle between Disney and activist investor Nelson Peltz, with the results of a shareholder vote due later Wednesday. Signs are that Disney has secured enough backing to fend off the board shake-up put forward by Peltz's Trian, sources told Reuters.

In single-stock moves, Intel (INTC) shares fell around 7% after the chip company posted sharper operating losses at its foundry business.

Meanwhile, its rival TSMC (TSM) was forced to halt some chipmaking in the wake of a huge earthquake that hit Taiwan, raising concerns about the supplier to Apple (AAPL) and Nvidia (NVDA). Its US-listed shares dipped slightly.

• The current mood of investors
• 
  It's fascinating to see how a tough start to April for markets has gotten investors into a tizzy.
  
  Keep in mind it was just last week we were near record highs for the S&P 500!
  
  To that end, smart insight into the current mood of investors out of JP Morgan's intelligence team today.
  
  Takeaway: investors are looking for a an excuse to take profits.
  
  Says strategist Andrew Tyler:
  
  “Yesterday’s move triggered a number of incoming inquires about whether this is the end of the rally, how worried people should be about markets, and whether the price action foretells something much worse in the economy. I think none of these; the market closed within 1% of its all-time high … set last week. It is possible that we could see a 2-3% pullback but think you need to see either deterioration in the macro story or an earnings season that shows negative sequential growth. Equities remain sensitive to bond volatility, more so than yield levels, which is what we have seen this week with the 10-year yield moving higher by 15 basis points and the S&P 500 selling off less than 1%.”"

MY COMMENT

This day to day "stuff" is simply meaningless. What people would really be focusing on is their long term future. Forget the day to day baloney. It is a total distraction.

 

As to the Ten Year Yield......simply BS. Number one....it will not stay high for long. AND....."high"....is a very relative term since it is still lingering near the low end of the historic data.

Number two......If you take the BIG CAP giants of our economy that make up the top stocks in the SP500.......most of them are NOT interest rate sensitive....especially in terms of day to day rate moves. This is ALL simply a BS story-line. It is NOT the truth and it is not reality. It is trader driven and drives short term trading profits. NONE of this rate "stuff" is meaningful to long term investors that are invested in rational and realistic investments.

 

We will see how the day ends for stocks.

I dont have a lot of confidence in the current crop of investors when it comes to the short term. Like everything in society right now.....people are very divided. One one hand we have the modern trading and market timing group and on the other hand we have the retail, long term, investors.

The winning side WILL be the long term people, as usual. The only way this changes is if the overwhelming number of investors embrace the trading and market timing model of investing and totally change and screw up the markets.....along with help from government.

 

As usual the REALITY today is that.......there is NOTHING going on, no news, just a normal market day.

 

Unfortunately....I have a feeling that the markets current GREEN color....will turn RED by the end of the day.

BUT....the good news....my "feelings" dont matter.......the short term does not matter......and.....the markets are having a BANNER YEAR. We have seen a historically positive start to the year and most investors can afford to give up a small amount of those gains....no sweat.

This little....skittish blip....is a long way from being a correction. And....corrections are simply part of the NORMAL market process. In fact it is likely we will have one at some point this year....just like EVERY year. TAKE HEART.....ignore the noise.....and count your money long term.

 

The turn of the wheel is complete. Ge used to be one of the most ICONIC American companies. a must hold in just about any portfolio. The ultimate American Conglomerate. A perfect example of free market capitalism at work.

The dismantling of GE, once America’s iconic ‘everything company,’ is now complete

https://www.cnn.com/2024/04/02/business/general-electric-split-explained/index.html

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

"New York CNN —
GE once did almost everything for the typical American family – from providing much of the television they watched, to the light bulbs and appliances they depended upon, the electricity needed to power those household staples, even the subprime mortgage that allowed many of them to buy their homes.

No longer.

With Tuesday’s split into two companies, the break up of the once mighty industrial icon is complete. The company was founded by Thomas Edison in 1892 and built into the world’s largest and most valuable company by the once legendary, but now oft-criticized CEO Jack Welch. But, during this century, the company became a struggling, bloated conglomerate, weighed down by poorly timed deals that left it with unaffordable levels of debt.

But instead of dealing with that debt and fixing its myriad problems, it spent tens of billions on share repurchases and dividends in a desperate attempt to support its sagging stock price.

But that strategy did not work, and by 2018, it was booted from the Dow Jones Industrial Average, the index of 30 companies designed to represent America’s most significant stocks. It had been an original member of the index, and a part of it continuously since 1907. It was replaced by drug retailer Walgreens Boots Alliance.

Larry Culp was tapped as CEO in 2018, and he accelerated the company on a path of cutting debt by spinning off and selling many of its divisions.

GE had already gotten rid of the 49% of NBC it still owned by selling it to co-owner Comcast in 2013, and sold off its appliance business to China-based Haier in 2016. But the pace of divestitures picked up under Culp. In 2020, it sold its iconic light bulb unit, which had been one of the foundations of the company’s 19th century birth.

Other units such as its aircraft leasing business were sold to competitors, a move that closed the books on its once-powerful finance unit, GE Capital. GE Capital had played a large role in the company’sbroader decline with lending to a variety of customers and segments including subprime mortgages, and causing the company’s to lose its AAA credit rating in the midst of the Great Recession in 2009.

Finally in November 2021 GE announced plans to split into three separate companies – GE Healthcare, which was spun-off last year, GE Aerospace, which builds jet engines, and GE Vernova, which is comprised of its energy generation business. GE Healthcare started trading in January of 2023. Tuesday the stock for those two remaining companies started trading on US markets.

Culp’s moves helped to turn around shares of GE, which had fallen by 45% in 2017 and another 57% in 2018. Its shares nearly doubled, rising 95%, in 2023, and were up another 37% this year

GE Aerospace will retain the longtime GE stock symbol, and Culp as its CEO. How long he stays in that job is not clear. Some have suggested he could be the successor for Dave Calhoun, the retiring CEO of another troubled iconic US company, Boeing. In an interview on CNBC Tuesday, Culp dodged a question about whether he would be interested in that job, voicing confidence in Boeing, which is a major customer of GE’s engines.


MY COMMENT

I like many American Investors, owned this stock for a long time. It was a classic conglomerate and a dividend king for reinvesting. I rode along with GE all the way to the end of the Jack Welch era.

Welch retired in 2001 and was replaced by Jeffrey Immelt. At that point I sold ALL SHARES.

In hindsight it was a genius move. The company has gone steadily downhill since and has now been completely dismantled and basically no longer exists. A classic tale of selling off an entire company in the name of...." creating shareholder value". In addition......a classic example of the total failure of CELEBRITY CEO management......and the selling off of a failing company piece by piece to create the ILLUSION of management success.....along with big bonuses of management (of course).

 

As to the.....paper tiger.....the FED.

Stocks Rise as Powell Sticks to Wait-and-See Tone

https://finance.yahoo.com/news/stocks-asia-fall-rate-cut-223505399.html

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


(Bloomberg) -- Stocks rebounded after a two-day drop, with Jerome Powell reiterating the Federal Reserve’s wait-and-see approach before policymakers decide to embark on interest-rate cuts.

While the Fed chief didn’t break any major new ground, Wall Street got some relief from his views that recent inflation figures did not “materially change” the overall picture. Powell also reaffirmed that it will likely be appropriate to begin lowering rates “at some point this year.” Equities were already up when he started speaking after a report showed a slowdown in services and a slide in prices. Bonds rebounded from session lows.

In recent days, traders had scaled back their rate-cut expectations amid signs of economic resilience and a more cautious tone from a drumbeat of Fed officials. That has led to skepticism on whether the central bank would be able to deliver on its projection of three total reductions in 2024.

“Powell says recent data has not materially changed the picture,” said Krishna Guha at Evercore. “We read this as confirming that the spasm of concern in markets that the economy might be too strong for the Fed to cut in June was overdone — and the base case remains June and three cuts this year.”

The S&P 500 topped 5,200. Meta Platforms Inc. led gains in megacaps, while Intel Corp. sank after giving a disappointing outlook for its factory operations. Walt Disney Co. fell as shareholders rejected dissident investor Nelson Peltz’s bid for a board seat.

Treasury 10-year yields were little changed at 4.36%. Oil climbed after OPEC+ ministers affirmed current supply cuts.

To Peter Williams at 22V Research, Powell seems to want to get some cuts done, but with growth and the labor market holding up, the spot incentive to do so is relatively minimal.

“Instead, the inflation data will have to give the Fed permission to start cuts,” Williams noted. “I continue to think that the odds they are able to cut in June are around or just a bit above 50%, but that cumulative cuts in 2024 lean more towards 2x than 3x at this point.”

The Fed could risk losing its credibility if it cuts rates too soon, according to Eric Veiel at T. Rowe Price Group Inc.

“Jerome Powell said very early on he is a student of what happened in the seventies,” he said on Bloomberg Television Tuesday. “If they go ahead and start cutting now, I think they are in danger of making the same mistake.”

In the 1970s, the central bank was too quick off the mark in easing policy before inflation was truly vanquished. That’s an error that even Paul Volcker committed in 1980 as the economy weakened, only to reverse course later and drive the US into a deeper downturn.

Amid a backdrop of mixed data and a question on how long the Fed intends to pause, “expect some churning in the market,” says Victoria Fernandez at Crossmark Global Investments.

“We expect more of a market consolidation instead of a correction,” said Yung-Yu Ma at BMO Wealth Management. “The stock market doesn’t need Fed rate cuts or even falling inflation, but it’s also not in a robust position to quickly digest risks that could arise from accelerating inflation, increasing geopolitical shocks to oil prices, or rising long-term interest rates.”

Despite a “solid” outlook for a US soft landing, stock investors’ expectations have gotten stretched. Morgan Stanley’s wealth management arm says that’s reason to seek opportunities outside the S&P 500, according to a note from the bank’s global investment committee.

The US equity benchmark’s rally was driven by multiples expansion, with investors expecting improving profits despite cooling growth, Morgan Stanley Wealth Management Chief Investment Officer Lisa Shalett wrote this week.

Investors appear to be showing “persistent” demand for US stocks, according to Citigroup Inc. strategists, suggesting there’s room for the rally to resume after the recent pullback.

More than $16 billion in net long positions was added to S&P 500 futures last week, while exchange-traded funds showed net inflows, strategists led by Chris Montagu wrote this week."

MY COMMENT

NO CHANGE from Powell. It is still three rate cuts and I expect that the first one WILL happen in June....even if it is only a small one.

As to the markets churning.....they are churning themselves......investors, that is. anyone that is selling and trading in the current markets is simply a FOOL. The massive BIAS is for a continuation of the BULL MARKET. At this point EVERYTHING is lined up for gains the rest of the year.

Of course....market gains come in spurts. AND.....as usual the primary market risk is for some BIG UGLY BLACK SWAN to emerge and kill the markets for a few months. fortunately true black swans are rare.

 

For a while there......I was afraid that my "feeling" of a red close was happening. Fortunately we seem to be closing with some strength over the past 30-60 minutes....especially here in the last 20 minutes.

 

I ended the day today with a small loss. I am happy with the result today. I also lost out to the SP500 by 0.35%.

My GREEN stocks were.....AMZN, SMCI, AAPL, and GOOGL. With NVDA being down today it was an impossible hurdle for my account to end up in the green. With NVDA being close to 30% of my entire account.....it counts as basically a DOUBLE position. I have no issue with that.....since I believe the company is just at the start to an EPIC TEN YEAR RUN.

As to AI which will drive the next TEN YEARS......I am positioned as well as I can. I own all the big cap companies that are established and going to take AI to the next level all through every aspect of society.....MSFT, AMZN, AAPL, GOOGL. I also own the one company that will provide the basic building blocks for the whole thing.....NVDA. I also own two of the supporting young companies that will help with the AI BOOM.....SMCI and PLTR.

AND.....even if the boom does not happen as expected......I am happy to own all he stocks that I own anyway. I did not intentionally position my portfolio for AI.....but.....the way it has all worked out is as though I did. I will take and and BE HAPPY.

 

A good open today. Not really a surprise after the last couple of days and the POWELL comments yesterday. So far we are hanging onto the gains......less than an hour in.

 

As I said above.

Tech leads market bounce as Powell soothes rate-cut nerves

https://finance.yahoo.com/news/stoc...powell-soothes-rate-cut-nerves-133121789.html

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

"Tech stocks led the markets higher on Thursday as investors hunting for interest-rate clues shifted focus to the coming US jobs report.

The Dow Jones Industrial Average (^DJI) rose roughly 0.4%, coming off three losing days in a row for the blue-chip index. The S&P 500 (^GSPC) put on 0.7%, while contracts on the tech-heavy Nasdaq Composite (^IXIC) popped about 0.8%, with both gauges building on slight closing gains.

The market is shaking off stocks' rough start to the second quarter after Chair Jerome Powell soothed concerns the Federal Reserve would lose its nerve for making rate cuts.

Recent signs of acceleration in the economy raised the odds of further rate hikes — a so-called "no landing." By sticking to the same tune — that the Fed will cut rates this year, but will choose its moment given inflation's bumpy path downward — Powell appears to have put the debate to rest for now.

Focus is now shifting to the March jobs report, due out Friday morning, a key economic input for the Fed's data-dependent policy decision-making. By and large, experts don't expect to see any sign of cracks in the strong US labor market story. Department of Labor data released on Thursday showed initial jobless claims rose by 9,000 to 221,000 last week, their highest level since January.

On the corporate front, Levi Strauss (LEVI) shares jumped 18% after the jeans maker boosted its full-year earnings forecasts. Meanwhile, BlackBerry's (BB) US-listed stock popped as the Canadian company's cybersecurity unit helped deliver a surprise quarterly profit."

MY COMMENT

As usual all the fear mongering of the past few days is out the window. SO.....of course......NOW we move on to the jobs report on Friday. BLAH, BLAH, BLAH.

Notice how every week there is some report or meeting or this or that.....that is the CRITICAL EVENT of the decade. it is constant and unrelenting. It is ALSO nothing more than the media fishing for clicks and/or people trying to push their little trades.

AND....think back over the past five years.....how many of these "important" weekly events do you remember as really being "critical"? In fact how many of them do you even remember at all? What was important to stocks and funds over the past five years.......earnings.....and fundamentals.

 

On an irrelevant but related topic.......(how can that be?). I see this headline today......
Forecasters predict ‘extremely active’ 2024 Atlantic hurricane season
You know what? I see this same prediction....EVERY YEAR. Yet every year for the past 3 or 5 or 7 years......we have not seen much in the way of hurricanes. It is the same with everything in society.....constant media fear mongering for clicks. This is just the default mode in modern society.....STUPIDITY.....and shameless promotion of fear. BUT....you have got to love the "experts".

 

OK....over the last few days we have seen the TYPICAL market freak-out over a small blip in the Ten Year Yield. AND....the big impact is usually on the BIG CAP TECH stocks. We are constantly told these companies are rate sensitive. Well as usual I call.....BS. Here is why these companies could not care less about short term rates.

Amazon Investors Eye Bigger Returns With Cash Pile Growing

https://finance.yahoo.com/news/amazon-investors-eye-swelling-cash-110741586.html

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

("Bloomberg) -- For years, Amazon.com Inc. has been the stingiest among tech megacaps to give back capital to shareholders. Now, it’s generating so much cash that some on Wall Street are anticipating more generous returns.

After a record haul of $32 billion in free cash flow last year, Amazon is projected to nearly double that in 2024, according to data compiled by Bloomberg. With Big Tech acquisitions increasingly facing regulatory opposition, Amazon has fewer options on how it chooses to deploy that cash, according to Robert Schiffman, a senior credit analyst at Bloomberg Intelligence.

“This suggests not only rising share buybacks, but a more aggressive capital return policy that could include a dividend,” said Schiffman. “If returns don’t increase, cash balances could soar above $100 billion later this year.”

Amazon had more than $86 billion in cash at the end of 2023.

For most of its three decades in existence, Amazon has opted to plow its cash back into the business. The last buyback was for $10 billion in 2022, which is a pittance compared with similar sized peers.

In 2023, Alphabet Inc. repurchased more than $60 billion in shares, according to data compiled by Bloomberg. Facebook-parent Meta Platforms Inc. spent more than $20 billion on buybacks in the same period and in February pledged an additional $50 billion, while initiating its first-ever quarterly dividend.

Amazon, by contrast, didn’t buy back any shares in 2023. A change in its capital-return policy would signal a shift as the company evolves under Chief Executive Officer Andy Jassy, who took the reins from co-founder Jeff Bezos in 2021.

Amazon shares have managed to outperform even in the absence of big buybacks. The stock has climbed 21% this year, including a 0.7% gain on Thursday, pushing its market value above $1.9 trillion as analysts continue to hike profit estimates and traders grow increasingly optimistic about artificial intelligence helping to reinvigorate growth at Amazon Web Services.

The Nasdaq 100 has gained 8% over the same period.

Still, while Amazon is on the cusp of setting a new all-time high, it’s alone among the five biggest US tech companies that isn’t yet in record territory. Microsoft Corp., for example, is trading about 20% above its 2021 record, while Meta is up more than 30% from its previous peak in the same year.

Naveen Jayasundaram, senior research analyst at ClearBridge Investments, expects Amazon to announce a buyback in the tens of billions of dollars sometime this year, but sees a dividend as unlikely.

“I think Amazon views itself as being earlier in the growth cycle compared with Alphabet and Meta, so I would be surprised if we got a dividend this year,” said Jayasundaram. “However, it does seem like something that could come in the next four to five years.”

Amazon is expected to report first-quarter earnings later this month. Even though the company is still cutting costs, it has plenty to spend on. Amazon plans to pour almost $150 billion in the coming 15 years on data centers to handle an anticipated explosion in demand for digital services related to AI.

That type of spending is critical to Amazon defending its turf from competitors and should take precedence over capital returns, according to Cyrus Amini, chief investment officer at Helium Advisors.

“I wouldn’t be disappointed if it did a buyback, but I would be surprised,” he said. “Amazon is still growing, and it needs to keep spending to protect its moat.”"

MY COMMENT

Dont even get me started on companies doing buy-backs. What a joke and a waste of corporate money.

ALL these companies should do one of two things....return unneeded money to shareholders in a dividend....or better.....invest that money in capital assets, business growth or the acquisition of companies with needed or complimentary tech and business assets to grow the company into the future.

Hopefully Amazon will use this money to grow the company. I am STILL not a big fan of the new management.....but would give them a current grade of "C". Not great considering they took over with an "A" company when they started.

I WILL continue to own this company....however.

 

Here is a good example of what I advocate above. Good move or not....I would much rather see a company do this than a bunch of BS share buybacks.

Home Depot's $18 Billion Acquisition: Genius Move or Waste of Money?

https://finance.yahoo.com/news/home-depots-18-billion-acquisition-114500990.html

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

"Home Depot (NYSE: HD) isn't known as a prolific acquirer, but every once in a while, the company makes a needle-moving acquisition. In 2020, it acquired HD Supply, a supplier in the maintenance, repair, and operations field, for $8 billion, and last year it bought Temco Logistics and International Designs Group for an undisclosed amount.

The company just announced its biggest acquisition ever, taking over SRS Distribution for $18.25 billion, including SRS's debt. Home Depot said the deal would expand its addressable market by around $50 billion, and CEO Ted Decker called SRS "An industry leader with a proven track record of profitable growth across verticals."

Investor reaction to the acquisition has been underwhelming thus far. The stock slipped 0.3% last Thursday and then fell 4.1% on Monday even as Wall Street's response to the news has generally been positive.

So is the SRS purchase a smart move or is this another example of "diworsification," as famed money manager Peter Lynch used to call it? Let's take a look at what SRS does and see what makes it appealing for Home Depot before answering that question.

What is SRS Distribution?

SRS Distribution is one of the nation's largest building materials distributors, focused on roofing materials and building products. It was founded in 2008 and has grown to cover more than 760 locations across 47 states. It also has more than 4,000 delivery trucks and over 2,500 sales representatives.

The company is known in particular for its strength in roofing, a large category with appealing unit economics. In fact, home services marketplace Angi made a play for the roofing market with its 2021 acquisition of Total Home Roofing, though it ended up selling it.

SRS started out as a seller of roofing and building products in 2008 before entering landscaping products in 2019 and the pool products market in 2021. SRS brought in $10 billion in revenue in 2023 and $1.1 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), meaning the deal values SRS at approximately 16 times adjusted EBITDA.

Home Depot's justification

Home Depot has long seen the pro market as a significant growth opportunity and a way to differentiate itself from rival Lowe's. The retailer aims to gain market share in the professional market and sees SRS' model as being complementary to Home Depot's pro ecosystem, giving it a significantly deeper product assortment and penetration in areas like roofing and pool supplies.

SRS will operate under Home Depot and retain its current leadership. The retailer will pay for SRS with a mixture of cash on hand, commercial paper, and new unsecured notes. It expects its debt-to-EBITDA leverage ratio to reach 2.5x at closing, and plans to deleverage over the next two years, pausing share buybacks to bring its leverage ratio down to 2.

Will the SRS deal pay off for Home Depot?

The logic for the acquisition makes sense, but it's also true that Home Depot is paying a fairly steep price for SRS, which has a slightly higher EBITDA multiple than Home Depot stock based on the acquisition price. Investors are also likely disappointed in the two-year pause in Home Depot's share buybacks, which had been a reliable source of capital returns.

However, the acquisition looks like a smart move for long-term growth. Home Depot has essentially stopped opening stores, and its ability to grow within its current business model is somewhat limited as the Home Depot brand only serves one corner of the home improvement market.

From that perspective, expanding the business through acquisitions makes sense, and SRS looks like a rock-solid, profitable business that can bring something new to Home Depot.

It may take time for the business to deliver results for Home Depot, but expanding downstream in the pro market with SRS should pay off for Home Depot. Investors should trust management here."

MY COMMENT

The last sentence above is exactly what I was thinking before I read this article. I TRUST THE HD MANAGEMENT to make the right choices. HD is superbly managed. Based on their long history of great management I trust them to do the right thing.

The markets might not like this move.....or.....wants to throw a fit because it is going to cut into their addiction for buybacks. But....screw the short term markets. I TRUST management to know how to grow the business of HD for the long term.

 

A key factor in the markets today.

10-year Treasury yield moves lower as investors study Fed remarks and look ahead to Friday jobs report

https://www.cnbc.com/2024/04/04/us-...in-focus-as-traders-monitor-fed-speeches.html

The reality.....the short term traders can not maintain higher rates for very long......no matter how they try to manipulate things for their trades. In addition.....if the markets simply move higher and ignore the Treasury short term NOISE......the rates tend to fall back.

 

No surprises here.

Top 15 Wealth-Creating Stocks of the Past Decade
These stocks have excelled at creating shareholder value in dollar terms.

https://www.morningstar.com/stocks/top-15-wealth-creating-stocks-past-decade

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

"If you invest in individual stocks, you’re probably used to seeing headlines about the top-performing stocks over shorter periods, such as for the year to date or even weekly or daily returns. There are two drawbacks to this approach. First, it’s difficult to create long-term wealth by focusing on short-term performance. In addition, even a strong-performing stock has less impact if few shareholders are around to benefit from it.

To find investments that have created the most value in dollar terms, wealth creation is a better measure. A few months ago, I sifted through Morningstar’s fund database to highlight funds that created the most wealth based on market appreciation in dollars. This time, I conducted a similar exercise on the equity side, focusing on stocks that created the most wealth based on the change in their market capitalization (which reflects the current stock price multiplied by total shares outstanding) over the 10-year period from 2014 through 2023. To get a more complete picture of wealth creation, I added in the total value of dividends paid and share repurchases over the same period.

The Results
The graph below shows the 15 stocks that have created the most value for shareholders based on these metrics.

Top 15 Wealth-Creating Stocks Over the Past Decade

Source: Morningstar Direct and author's calculations. Data as of Dec. 31, 2023.
The stocks on my list created an estimated $15.9 trillion in shareholder wealth over the past 10 years. That’s more than 4 times my estimate of about $3.5 trillion for the top 15 funds. Owning shares in an individual stock is a lot riskier than owning a broadly diversified fund, and the odds of experiencing a loss are much higher. However, if you manage to invest in a profitable stock, the upside can be much greater.

That’s especially true given that companies with outstanding financial results and share-price performance can continue to outshine their competitors over many years. Most of the companies on my list were already mega-cap stocks 10 years ago. Tesla TSLA is one exception. The company has been around since July 2013, but it didn’t reach mega-cap status until a couple of years ago.

More broadly, all of the members of the “Magnificent Seven” group of large-cap tech stocks have also generated significant shareholder wealth over the past decade. As a group, Apple AAPL, Amazon.com AMZN, Microsoft MSFT, Alphabet GOOGL, Nvidia NVDA, Meta Platforms META, and Tesla, created about $12.0 trillion in shareholder value over the 10-year period, making up about three fourths of the total for the top 15.

From a sector perspective, technology-related stocks dominate the list. That shouldn’t come as a surprise, given that tech stocks have generated excess returns of more than 8 percentage points versus the broader market over the past 10 years.

Other sectors, including consumer cyclicals, financial services, and healthcare, also show up in the top 15. Notably absent are old-economy sectors, such as utilities, basic materials, industrials, and real estate.

Another common thread that ties together the top 15 wealth creators: an economic moat, or sustainable competitive advantage. An economic moat is a structural feature that allows a firm to sustain excess profits over a long period of time. Morningstar’s equity analysts define economic profits as returns on invested capital over and above our estimate of a firm’s cost of capital, or weighted average cost of capital. Only 15% of the companies we cover have a wide Morningstar Economic Moat Rating, while 30% have a narrow moat, and the remaining 55% have no moat. However, 13 of the top 15 wealth-creating stocks have wide economic moat ratings based on our analysts’ assessments, while the remaining two have narrow moats. In other words, economic moats have been key to shareholder value creation.

Economic Moat and Growth Statistics

Source: Morningstar Direct. Data as of March 31, 2024.
Growth has also been an important trait. Growth stocks have had a massive performance advantage over the 10-year period in the study, outperforming value issues by more than 4 percentage points per year, on average. So, it probably should come as no surprise that most of the stocks on the list are growth-oriented rather than value-oriented. As shown in the table above, the value-creation winners generated significantly better growth in revenue, operating income, and free cash flow than the market over the past 10 years.

On average, they also sport a value-growth score, which reflects the aggregate expectations of market participants for future growth and required rates of return, nearly double that of the overall market. The only exception is JPMorgan Chase JPM, which has been slower-growing but has parlayed its dominant position in many types of banking into above-average profitability and financial health.


Looking Ahead
Shareholders in these 15 companies have been amply rewarded over the past decade. But when it comes to equity investing, the past may or may not be prologue. What really matters for investors considering a new purchase is a company’s future prospects and whether the current stock price offers a margin of safety.

Morningstar Ratings and Valuations

Source: Morningstar Direct. Data as of April 1, 2024.
On that front, the wealth creators are a mixed bag. While the companies on the list might continue to dominate their peers, none of them is currently trading at a low enough price to garner a Morningstar Rating of 4 or 5 stars. Ten of the 15 have ratings of 3 stars, indicating that they’re neither significantly undervalued nor overvalued based on our analysts’ assessments. Four others—Broadcom AVGO, Eli Lilly LLY, JPMorgan, and Meta Platforms—are currently trading above our estimates of their fair value, earning them 2-star ratings. Finally, The Home Depot HD is trading at a significant premium to our fair value estimate. Depending on their tax circumstances and other factors, investors may want to consider selling."

MY COMMENT

Obviously I am not a "pure" value investor. I would call myself a "modern" value investor. I look for BIG CAP GROWTH potential and staying power. I dont care if a stock is cheap or a bargain deal or selling for less than the sum of the parts. I look for quality growth and appreciation prospects going forward.

I do like the concept of........an economic moat, or sustainable competitive advantage........which is a catch phrase in the financial media lately.

This has been the basis for my investing for the past 5+ decades. I look for AMERICAN, BIG CAP GROWTH, ICONIC PRODUCT, GREAT MANAGEMENT, DOMINANT, WORLD WIDE MARKETING, ETC, ETC....companies. Companies that fit these criteria WILL thrive. That is my definition of an "economic moat".

Although at the moment I do have a couple of......."junior members".....in my portfolio at reduced share balances compared to my other holdings.....PLTR and SMCI. I will see how they perform over the next year or two and see if one or both makes the cut to stay for the long term. My PLTR shares are basically "free shares".....so no pressure there. My SMCI shares are limited to an initial investment of $50,000 at $1030 per share. I try to read everything I can find....every day....on these two companies.