| Homepage / Portfolio / Special Reports Charging Higher with the Best to Come Remember a few weeks ago when investors feared we were headed for a recession after all?
I'm sure you do. The S&P 500 fell 6% in just three trading days as it seemed like everyone decided to sell everything.
Which is exactly why we did not sell anything.
Since the brutal sell-off on Aug. 5, the S&P 500 has charged more than 7% higher. It is not only back above where it was on Aug. 1 when the selling escalated, but it is also within 2% of its all-time high from mid-July.
Our TradeSmith Investment Report stocks have done even better, gaining 8.5% on average. Every single one of our 23 stocks is up since Aug. 5, with 10 posting double-digit gains in the last 13 trading days.
Three of our stocks even hit new all-time highs this week: Arch Capital Group (ACGL), Monolithic Power Systems (MPWR), and Intuitive Surgical (ISRG).
After the crazy start to August, we now see slower trading more typical for this time of year. Below is the image my algorithms generate showing Big Money activity in stocks and ETFs. These are not buy and sell signals, which are the green and red bars on other charts. This is composite of all unusual activity summed up in one yellow bar per day. 
Source: MAPsignals.com I've circled the burst of activity in late July and early August. It peaked on Aug. 5, the day of the wipeout, with 1,471 Big Money signals. That number was 78% lower yesterday at 326 signals. That's around and even slightly lighter than last year at this time.
That doesn't mean smooth sailing. In fact, lower volume trading lends itself to volatility, especially as algorithms take over more and more of daily volume. Light volume provides the perfect conditions for algos to push stocks down – only to buy them back a short time later.
That's yet another reason to not sell in broad volatility… and another reason to know the behavior of Big Money.
So we can expect some bumps in the coming weeks thanks to both seasonal patterns and election-related volatility, but I am more bullish than ever on the end of the year. Big Money may stay cautious as the election polls remain close, but whenever it becomes clearer who will occupy the White House, those insitutions and hedge funds will open the faucet and money will flow back into stocks.
Just as important, those recession fears faded away about as fast as they surfaced. Recent data has been positive, and earnings from Target (TGT) and Walmart (WMT) helped diminish fears that consumers aren't spending. Both beat expectations and raised guidance.
Recession worries are all but off the table and an interest rate cut is all but certain at the next Federal Reserve meeting in mid-September. Tomorrow could be more volatile because Fed Chair Jerome Powell speaks at 10:00 a.m. ET at the annual economic symposium in Jackson Hole, Wyoming.
We know his phrasing may not always be exactly what investors want to hear – the same is true with every Fed chair – but I think it's practically a foregone conclusion that the Fed will cut. The central bank is under increasing pressure to do so from the data, the market, their peers, and a gross disparity between the Fed's effective rate and market rates.
So as we look to the end of the year, we see no recession, strong employment, lower interest rates, and seasonal strength to drive stocks higher. The navigation system may throw a few turns in there, but there's little doubt about our destination.
That's great news for us and the stocks we invest in – those superior fundamentals, strong technicals, and Big Money flowing in. That's how 21 of our 23 current stocks are positive, with our average return up to 27.1%. And it's how we can look forward to big and better returns in the future. 
SNPS Keeps the Beats Going Synopsys (SNPS) beat analysts' expectations and its own guidance when reporting results yesterday after the market closed.
The electronic design automation (EDA) company grew the bottom line 27% to $3.43 per share, well ahead of estimates for $3.28. Sales increased 13% to $1.53 billion, a smidge above estimates.
Management expects earnings between $3.27 and $3.32 per share in the current quarter, above the Street's consensus for $3.23. Synopsys expects full-year earnings of $13.07 to $13.12 per share, with most of that range above analysts' forecasts for $13.08. (The fiscal year ends Nov. 2.)
SNPS got caught in the rotation out of large tech stocks in July and the huge selling in early August, but it is a good illustration of why we don't overreact to broad selling that has little to do with the companies themselves. Shares have rallied since the Aug. 5 wipeout, and Synopsys rates well with its 72.4 Quantum Score.
As the world continues marching forward to AI, demand for Synopsys' chip design software should remain strong. And it's not just AI; it's also driverless cars, edge computing, 5G mobile networking, the Internet of Things (IoT), and more.
We're up more than 50%, so hang on to your shares for additional upside. Portfolio News and Notes Advanced Micro Devices (AMD) made a bit of a splash by announcing its plan to acquire ZT Systems, a privately held maker of specialized servers and data center equipment that use AI chips, including those made by AMD and Nvidia (NVDA). AMD will pay $4.9 billion for ZT, making it one of the company's largest deals ever.
AMD is not getting into the server business, so it plans to sell ZT's manufacturing operations. Instead, AMD wants ZT's designers, which it considers to be world class, to expand its offerings to customers.
Shares gained 4.5% on Monday after the announcement got out, continuing their March from $130 toward $160. We've gained 25% so far. Continue to hold.
Applied Materials (AMAT) went ex-dividend today. If you own the stock, look for the next dividend payout of $0.40 per share on Sept. 12.
S&P Global (SPGI) goes ex-dividend next Tuesday, Aug. 27. If you own shares by the close of that day, you're eligible for the $0.91 per share payout on Sept. 11.
Talk soon,   Jason Bodner
Editor, TradeSmith Investment Report | 
No comments:
Post a Comment