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Wednesday, February 14, 2024
This Is Like Sitting In on Private Board Meetings
Information leaks... The "smart money" buys ahead of major announcements... And analysts at the biggest investment banks have unprecedented access to what's happening.
Editor's note: Folks, we're right in the thick of another earnings season...
Investors are combing through these reports for hints about what to expect in the coming year. And notably, this earnings season is already shaping up to be a critical period...
Some big names have soared after great reports. Meanwhile, others have tumbled.
Take online-payments giant PayPal (PYPL), for example...
CEO Alex Chriss promised three weeks ago that PayPal would "shock the world." Then, the company delivered a mixed earnings call. And it left analysts scratching their heads.
Chaikin Analytics founder Marc Chaikin designed the Power Gauge for times like right now...
In short, the system can help investors navigate the turbulence of earnings season.
That's why we're resharing a classic essay from Marc today...
We've published this essay in the Chaikin PowerFeed twice before – including the first time in March 2022. But as you'll see, the message is timeless. And it's still as relevant as ever...
This Is Like Sitting In on Private Board Meetings
By Marc Chaikin, founder, Chaikin Analytics
Information leaks... The "smart money" buys ahead of major announcements... And analysts at the biggest investment banks have unprecedented access to what's happening.
That's just how the world works. There's no getting around it.
Now, don't get me wrong...
I'm not saying the reign of the "insiders club" is the way it should be. But it's the system we have.
The U.S. Securities and Exchange Commission has done a lot to clean things up over the years. But the investing world remains far from perfect.
That's why, early in my career, I developed an indicator to track the smart money. It's called the "Chaikin Money Flow."
And today, I'll share a bit about this powerful tool...
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I developed my proprietary Chaikin Money Flow indicator way back in 1982. And to be honest, I'm amazed that it works as well as it does 42 years later.
Obviously, I believed it would work when I built it. But what I mean is...
I didn't realize the tool would soon become such a major "stock analysis cheat code."
You see, the Chaikin Money Flow indicator works so well that hedge funds and billionaire investors now use it. It's even built into the Bloomberg Terminal. And Bloomberg's biggest competitor (Thomson Reuters) uses the indicator, too.
This tool focuses on what I call "accumulation."
The concept is easy to understand...
We want to know what the "smart money" is doing. Accumulation is simply the word for that. And as an investing tool, it works better than you might imagine.
Knowing what hedge funds and billionaires are doing with their money is like sitting in on private board meetings. This was made incredibly clear to me around 1989...
At the time, soft-drink maker Coca-Cola (KO) wasn't a popular stock.
The company had released "New Coke" in 1985. As you might remember, the wackos in management tinkered with Coke's formula to try to make it more appealing. They basically force-fed it to consumers.
But of course... the public didn't really want New Coke.
The whole thing bombed. Within three months, Coca-Cola went back to its original formula. And the event went on to become one of modern history's most famous marketing disasters.
Well, in the late 1980s, I noticed something odd in my analysis...
Coca-Cola's stock was accumulating money behind it. And importantly, the accumulation was persistent.
I learned early on that persistency matters. You don't open a position of 23 million shares overnight, after all.
That's how many Coca-Cola shares legendary investor Warren Buffett bought when he established a position through his holding company Berkshire Hathaway (BRK-B). And I spotted that persistent accumulation by using the tools I had developed in my career.
It was an amazing feeling. I had uncovered Buffett's massive position before it became public, just by watching as a ho-hum stock accumulated cash behind it.
Coca-Cola went on to become one of the best-performing stocks of the next decade. It returned around 27% per year over that span, roughly doubling the overall market.
Simply put, using the Chaikin Money Flow indicator can help you track the smart money in the market.
It's like sitting in on a private board meeting. And it's a tool that helps level the playing field with Wall Street.
Good investing,
Marc Chaikin
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
-1.35%
15
14
1
S&P 500
-1.38%
178
232
87
Nasdaq
-1.56%
46
40
14
Small Caps
-4.08%
493
1007
418
Bonds
-1.71%
— According to the Chaikin Power Bar, Large Cap stocks and Small Cap stocks are Bullish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Information Technology
+0.49%
Materials
+0.25%
Discretionary
+0.16%
Industrials
-0.05%
Communication
-0.1%
Energy
-0.16%
Financial
-0.26%
Utilities
-0.78%
Health Care
-0.78%
Real Estate
-1.39%
Staples
-1.41%
* * * *
Industry Focus
NYSE Technology Services
23
11
1
Over the past 6 months, the NYSE Technology subsector (XNTK) has outperformed the S&P 500 by +15.99%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #6 of 21 subsectors and has moved up 1 slot over the past week.
Top Stocks
AMAT
Applied Materials, I
QCOM
QUALCOMM Incorporate
TSM
Taiwan Semiconductor
* * * *
Top Movers
Gainers
ECL
+8.97%
WM
+5.97%
LDOS
+5.87%
HWM
+5.35%
INCY
+2.59%
Losers
MCO
-7.94%
BIIB
-7.39%
IVZ
-6.9%
ZTS
-6.71%
ALB
-6.57%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
CRL, MLM, PGR, WAB
ACGL
CME, GNRC, GPN, GRMN, IQV, KHC
CF, CSCO, ROL, TYL, ZTS
WMB
ALB, AWK, DVN, EXC, OXY, VTR
No earnings reporting today.
Earnings Surprises
GDDY GoDaddy Inc.
Q4
$8.53
Beat by $7.28
ABNB Airbnb, Inc.
Q4
$-0.55
Missed by $-1.25
MAR Marriott International, Inc.
Q4
$3.57
Beat by $1.45
WELL Welltower Inc.
Q4
$0.25
Beat by $0.04
INVH Invitation Homes Inc.
Q4
$0.13
Missed by $-0.03
* * * *
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This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.
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