| Homepage / Portfolio / Special Reports Semi Stocks Hit a Bump, But Here Comes the Strength If you're following the news at all, you're probably hearing talk about an "October surprise." That's the term given to an unexpected development or story that could influence the election outcome.
We got a little October surprise of our own this week – one that had to do with semiconductor stocks instead of politics. Our TradeSmith Investment Report stocks continue to do exceptionally well, but we got a little bruised on a few of them because of it.
We talked about it in the special update I sent you on Tuesday, but to recap, ASML Holdings (ASML) reported earnings – posting them a day early by mistake – and a couple of areas were weaker than expected.
Earnings and revenue actually beat expectations, but the company booked fewer orders in the third quarter than expected, and management forecasted 2025 sales at the low end of previous guidance. They cited strength in AI, but some lingering softness in other areas.
ASML supplies equipment to make semiconductors, so it is a foundational company in the tech revolution. Most chip companies in the world today rely on ASML to at least some degree.
That same day, Bloomberg reported that the Biden administration was considering limiting the number of computer chip exports to certain countries.
Most semiconductor companies were down that day. ASML dropped sharply, and some of our other chip stocks felt the heat, like Applied Materials (AMAT) and KLA Corp. (KLA).
It was an unpleasant October surprise, but it doesn't derail the portfolio, and I fully expect those stocks to climb higher as the market and economy strengthen into the end of the year.
As I mentioned in the update, I am watching ASML closely, but it remains an excellent, important, and growing company. This setback is obviously frustrating, but we do not want to sell it here. I know it closed below its Risk Point, but that's not an automatic sell. It's a reevaluation point, and the data clearly shows a high probability of a bounce.
We ran a signal study on ASML after its 16% drop on Tuesday. The stock has fallen that much or more in a single trading day eight times before, and the average gains going forward are impressive – as in 34% just one month later. 
What's more, the odds of a bounce are nearly nine in 10 in the first two weeks after the drop, and three in four the first two months. Continue to hold ASML, and I will monitor the data and trading behavior.
Overall, our TradeSmith Investment Report stocks dipped 1% in the last week, primarily because of those three semiconductor stocks. Our success rate actually increased, with 21 of our 24 stocks now in the green (87.5%), and our stocks are up a juicy 25.3% on average.
I expect us to build on those gains in the coming months, as the market is heading into its strongest half of the year. In fact, most or all of the annual gains technically occur in the next six months. 
Notice in particular the strength in technology stocks, with the 9% average return in the Nasdaq 100 (NDX). That's the 100 largest companies listed on the Nasdaq, and 10 of our current stocks are on the list. That includes AMD, ASML, and KLA, as well as our newest stock, The Trade Desk (TTD).
As you can see, small and midcap stocks also perform very well, and are especially well positioned in a time of falling interest rates. We focus on those stocks in my Quantum Edge Pro service.
Earnings were the big story for us this week, and that will remain true for several more weeks. The quarterly results are starting to pour in, including one today and several more scheduled for next week. ISRG Kicks Off Earnings with More to Come Intuitive Surgical (ISRG), the leader in robotic surgery systems, just reported its results this afternoon after the market closed. I'll dig deeper into the numbers later, but at first glance, they look great.
Intuitive earned $1.84 per share in the quarter, 26% more than a year ago and well ahead of estimates for $1.63. Sales grew 17% to $2.04 billion, pretty much in line with expectations. The number of procedures using the company's da Vinci robotic system increased 18%, and the number of systems installed around the world grew 15%. This boosts not just system sales but instruments and accessories as well.
The conference call starts in a few minutes, but shares are up nicely after hours as I write this. They have consolidated between $475 and $495 the last couple of months. If the enthusiasm holds, they look set to break above $500 sooner than later.
Looking ahead to next week, five more of our companies are set to report results.
PulteGroup (PHM) leads things off Tuesday after the close. As you know, I see homebuilders in a unique situation right now with few existing homes for sale and interest rates coming down.
Estimates are for profits to increase nearly 8% to $3.12 per share with revenue growing more than 6%. PHM is up 24.6% since we added it in May, and it still has a terrific 77.6 Quantum Score.
Boston Scientific (BSX) steps up Wednesday morning before the market opens. Analysts expect this medical technology and device leader to grow earnings 18% on a 14.5% increase in sales.
Old Dominion Freight Line (ODFL) also reports Wednesday morning, and this is an important one for the company. The trucking industry has been a little sluggish longer than expected, but data in recent months has been more positive. Investors will be looking for that to continue. ODFL's fundamentals still rate exceptionally well with a 79.2 score in my system.
ServiceNow (NOW) continues Wednesday's earnings after the market closes. This is a great software company operating in some of the hottest trends, so it's no surprise that earnings are expected to grow 18% with sales up closer to 20%. Since its low back on May 30, NOW has been our biggest gainer with a 43% run in less than five months.
S&P Global (SPGI) wraps up our week Thursday morning. As you know, this is a financial information and analysis company, but with most of that now done with software, it's really more of a tech company.
Growth resembles a tech company. The Street is looking for 13.4% earnings growth with nearly identical sales growth. Shares have been in a solid uptrend since the end of May, lifting our gains to just under 36%.
I'll update you next week, and I will reach out again if there is important information to get to you right away. In the meantime, keep enjoying those profits, and get ready for more. 
Talk soon,  Jason Bodner
Editor, TradeSmith Investment Report | 
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