So, the market is breaking out, and it’s decided that the Fed will be accommodative. There may be a trade deal, and maybe there won’t. The market isn’t moving to all the nuances of this saga, such as stories of tougher negotiators and China not following through on promises. For this week, all eyes will be shifting to earnings season.
Big banks will dominate, and they will get another chance to live up to two years’ worth of and positive anticipation. However, the message of the market last Friday was loud and clear: investors are looking for deep value, which means buying shares of companies that haven’t delivered, perhaps the ones that paid too steep a price. Plus, it may be that they are going to turn the corner.
Case in point is trucker J.B. Hunt (JBHT), which shifted into overdrive, leading the Industrial sector well ahead of the pack.
S&P 500 Index | +0.46% | |
Communication Services (XLC) | +0.73% | |
Consumer Discretionary (XLY) | +1.15% | |
Consumer Staples (XLP) | +0.28% | |
Energy (XLE) | +0.42% | |
Financials (XLF) | +0.68% | |
Health Care (XLV) | -1.11% | |
Industrials (XLI) | +1.75% | |
Materials (XLB) | +0.99% | |
Real Estate (XLRE) | -0.40% | |
Technology (XLK) | +0.73% | |
Utilities (XLU) | -0.66% |
Looking for a Ride?
The Transportation stocks have struggled mightily with each niche dealing with individual issues that have hampered stock performance. It is possible that turns around today. The first test will be J.B. Hunt (JBHT), which reports after the close. The company has missed in each of the last three quarters, and the stock was always lower a week after the initial reaction. Even when management posted a beat one year ago, the stock sagged a week later.
Release Date | Earnings Surprise | Reaction | |
One Day | One Week | ||
April 15, 2019 | -$0.18 | -4.9% | -6.5% |
January 17, 2019 | -$0.67 | +6.2% | +2.8% |
October 15, 2018 | -$0.20 | +2.0% | -0.5% |
July 16, 2018 | +$0.09 | -0.6% | -0.5% |
If the recent earnings history wasn’t sobering enough, look at what Wall Street thinks of the stock.
Date | Firm | Old Rating | New Rating |
July 11, 2019 | Credit Suisse | Outperform | Neutral |
June 18, 2019 | UBS | Buy | Neutral |
May 28, 2019 | Bank of America | Buy | Sell |
May 17, 2019 | Argus | Buy | Hold |
May 16, 2019 | Stifel | Hold | Hold |
So, despite a terrible near-term track record of earnings and Wall Street slamming the stock all year long, shares of J.B. Hunt were up almost 6% (+5.90%) last Friday, trading more than the average volume. This is what bargain hunting looks like when so many professional investors are so far behind the market.
If truckers can pick up steam, investors will be looking to jump on for the ride, and it will give this rally another thumbs up.
Portfolio Approach
We are just about fully vested in the model portfolio, although some positions are looking delicious enough to ring the register - we’ll see.
Communication Services | Consumer Discretionary | Consumer Staples |
1 | 4 | 1 |
Energy | Financials | Healthcare |
1 | 2 | 1 |
Industrial | Materials | Real Estate |
2 | 3 | 1 |
Technology | Utilities | Cash |
3 | 0 | 1 |
Today's Session
Citigroup (C) is the first U.S. bank to report second quarter results, and the bank didn't fail to disappoint, as the bank's CFO said last month that trading revenue in the quarter would likely decline by a "mid-single-digit." The bank posted earnings and revenues better than what analysts expected. Earnings were $1.95 vs. $1.80 expected. Revenues climbed 2% to %18.76 billion, surpassing $18.5 billion estimate. The results were driven by a $350 million pretax gain on the Tradeweb IPO.
Other news came from Symantec (SYMC). Symantec (SYMC) and Broadcom (AVGO) are no longer negotiating, as Symantec would not accept less than $28 shares, and Broadcom unwilling to go to that price. Symantec(SYMC) shares dropped 14% in premarket.
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