Displaying items by tag: stocks

(New York)

Equity investors need to accept a new truth, says the Wall Street Journal—that earnings and fundamentals have given way to a new “boss” of the markets. Instead of stocks trading based on the performance of companies, they are now trading almost squarely on movements in rates. Recent equity performance could not have made the new reality more clear—companies saw outstanding earnings performance, yet stocks have simply muddled through. The reason why—yields have been moving higher on Treasury bonds.

FINSUM: The current obsession with yields reminds us of the 2014-2015 mode for stocks, when everyone was tied up on whether the Fed would start hiking or not.

(New York)

If there was ever a counterintuitive sentence about stocks, it is the title to this article. However, that is what has proven to be true in the past. According to research produced by the Wall Street Journal, stock markets tend to perform poorly after great earnings seasons. The study found that over the last seven years, both US and European stocks tend to perform poorly following great earnings. Perhaps even more interestingly, when earnings undershot estimates, stocks tended to perform better than average.

FINSUM: This is a tough one to explain except by taking account of markets’ pre-pricing of earnings. Nonetheless, something of which to be mindful.

(New York)

Morgan Stanley has put out a unique list of stocks. The bank has published a piece outlining what it sees as the thirty best stocks for the medium term. The picks are based on having a sustainable competitive advantage and were viewed as having the best chance in this sideways-moving market. Some of the picks include: Accenture, Alphabet, BlackRock, BNY Mellon, Charles Schwab, Dollar General, JP Morgan, Microsoft, Salesforce.com.

FINSUM: This is a very interesting list, especially because it is cross-sector (which does not happen as much given the sector-first structure of equity research). It was also particularly useful that many of these names are in wealth or asset management, allowing advisors special insight.

(Seattle)

How Amazon plans to use Whole Foods as part of its broader strategy is becoming clearer today. The company has announced that it will begin to offer significant discounts on hundreds of products, in addition to special offers, for Amazon Prime members who shop at Whole Foods. The company already has great Prime penetration of Whole Foods shoppers (75%), but less than 20% of Amazon Prime members shop at Whole Foods. The perks are a way to lure more Prime members into Whole Foods. The company seems likely to use the increased sales to offset any cost rises to its Prime service.

FINSUM: This seems like a good idea as the move will feed both its Prime business and Whole Foods.

(New York)

There have been a lot of fears over the supermarket sector over the last couple years. Especially since Amazon’s acquisition of Whole Foods last year, investors have been shy about grocery stocks and how that model may be disrupted. This has led to some steep discounts, but perhaps none is more attractive than Kroger. Despite fears, the grocer seems to have a solid position in the market, especially given that supermarkets are still consumers’ favorite channel. One market analyst says that “People are overly concerned about Amazon and groceries … The industry has faced disruption for 25 years, with companies like Costco Wholesale (COST) and Trader Joe’s, and it has been positive for Kroger. Disruption stirs things up and creates opportunities”. Kroger is currently the number two grocer in the US.

FINSUM: One of the very interesting things to note is that Amazon is now scaling back its grocery delivery business as consumers have not liked it as much as the click and collect services of Walmart and Kroger. Has grocery delivery died before it really began? Good news for traditional grocers.