What to know today

  • It’s a winning streak.
  • The best there ever was, the best there ever will be. 
  • “Pitches we like…”
markets

Rollin’, Rollin’, Rollin’

There’s a spring in stocks’ steps.

All of a sudden we’re talking about the best three-day run of the year so far for stocks, the best three days since November.

The S&P 500 added 1.03 percent on Monday, extending a winning streak that started last Thursday and continued on Friday.

A negative April ended a stretch of consecutive positive months from November to March. But May is here to set things up and to the right again.

The S&P 500 has closed in positive territory nine of the past 10 Mays, with an average gain of 0.7 percent.

As data compiled by Ryan Detrick of Carson Group suggest, “Sell in May and go away? No way!”

April was difficult. But we’d just notched back-to-back 10-percent-plus quarters for the S&P 500, and a 5 percent correction after a 27 percent rally from November through March is normal. 

Investors looking to establish new longs certainly must see such price action as an opportunity.

I know traders and speculators do: Higher volatility, even springing from a low base, means more inefficiencies for disciplined short-termers with well-developed strategies to exploit.

The S&P 500 is now up 8.61 percent year to date, and 10 of 11 sectors were higher through the end of April. Energy, industrials, and financials led the way over the first four months of the year, taking over from “The Magnificent Seven.”

While people were pricing in first seven rate cuts and then one rate cut Federal Reserve Chair Jerome Powell was talking the entire time about being data dependent.

His words never changed. Investors’, traders’, and speculators’ expectations changed.

And you know what else? We’re in the middle of what’s shaping up to be the best earnings-reporting season in two years.

So, here’s the state of play, as of this very moment…

The major indexes continue to track the long-term trend. According to Detrick, this bull market is still pretty young too at just 18.7 months old and with a gain of just 43.4 percent against averages of 60.9 months and 167.3 percent.

The economy is fine, maybe a little hot on the inflation front but looking likely to settle down a bit there in coming months as shelter pressures ease and stable on the productivity front.

As Mish Schneider explains in her Weekly Market Outlook, her regular survey of the “Economic Modern Family” shows those indicators holding steady near critical technical levels.

And there’s optimism about the April jobs report signaling a rate cut, with the Fed already slowing the pace of its “quantitative tightening” program and the dollar selling off some. All of that, Mish notes, “is generally perceived as bullish.”

(And people are still crazy.)

deep dive

Why We Listen To Warren

It’s cool that a stock trades for $608,000 per share.

Maybe it’s not that big a deal, maybe it is.

But it is one of my favorite things about the way Warren Buffett runs Berkshire Hathaway $BRKA $BRKB.

It’s his insistence on releasing the company’s annual earnings report on Saturday so the market can have time to digest it before reacting to it.

The current iteration went over well, as BRKA closed at $608,795.00 on Monday, up $5,795.00, or 0.96 percent, from its closing price of $603,000.00 on Friday.

That’s another pet-fave, Buffett’s insistence on never splitting the A class stock and giving a true picture of its appreciation over time.

The value-creation it represents is surely a big deal.

Berkshire Hathaway $BRKA $BRKB has outperformed the S&P 500 over the last five years.

You won’t have to look hard if you want to find Buffett skeptics out there – which, of course, because “any jackass can burn down a barn…”

And he’s not the type of mogul to break through from financial to mainstream media, so we’re not talking about celebrity-level scale and the malevolent scrutiny on that territory.

But the guy has maintained a level of respect and admiration within what we might call the global financial community that hearkens back, full stop.

He’s really good at his job, and he has been for a really long time.

There are no sacred cows, except Uncle Warren, which is why literally tens of thousands of people make their way to Omaha, Nebraska, on the first Saturday in May to hear him talk.

The old school, for lack of a better word, is good. The old school is right. The old school works.

Ask Warren Buffett.

Better still, look at BRKA’s long-term chart.

deep dive |
May 7, 2024

Why We Listen To Warren

THE MAGNIFICENT SEVEN

AAPL vs. TSLA

Here’s a fun dichotomy.

From the Research Desk, we learn that JPMorgan Chase & Co. $JPM is up on Apple $AAPL but down on Tesla $TSLA.

JPM analyst Samir Chatterjee reiterated his “buy” rating on AAPL and raised his 12-month price target to $225 from $210, implying 43.29 percent upside from Monday’s closing price of $181.71.

Chatterjee cited customer loyalty and the device upgrade cycle as well as artificial intelligence prospects and near-term drivers for the stock.

AAPL remains a Wall Street favorite, with 27 other analysts rating it a “buy” and 13 rating it a “hold.” One analyst rates the stock a “sell.” The consensus expects AAPL to rise by 11 percent over the next 12 months.

At the same time, JPM analyst Ryan Brinkman is warning that management could revise downward its earnings guidance and add further drag to TSLA.

TSLA is No. 7 among “The Magnificent Seven” this year in terms of market performance, and it recently reported its steepest revenue decline in more than 10 years.

Brinkman is one of 10 Wall Street analysts who rate TSLA a “sell.” His 12-month price target for the stock is $115, which suggests potential downside of 37.75 percent from Monday’s closing price of $184.76.

Brinkman sees no way for TSLA to generate sufficient growth, no matter the initiative, to justify its valuation. Twenty analysts rate the stock a “buy,” while 21 rate it a “hold.”

Incidentally, CEO Elon Musk suggested over the weekend that Buffett and Berkshire should buy TSLA. “It’s an obvious move,” Musk posted on X, his social media site.

Apple $AAPL has outperformed Tesla $TSLA in 2024 but has underperformed the S&P 500.

As Mark Hulbert of MarketWatch.com notes, it’s not really an obvious move: TSLA satisfies “just one of the requisite criteria for these ‘cheap, safe, quality stocks’” that Buffett favors.

“Given this,” Hulbert writes, “it seems most unlikely that Tesla stock would be the ‘occasional big opportunity’ that Buffett mentioned in this past weekend’s Berkshire Hathaway annual meeting as what he’s looking for in order to put some of the company’s nearly $200 billion cash hoard to work.”

“We only swing at pitches we like,” Buffett said.

We’ll see how AAPL responds to the company’s “Let Loose” product event, which opens today at 10:00 a.m. ET and just might include the launch of a new iPad.

Existing and prospective shareholders are also looking forward to Apple’s annual Worldwide Developers Conference June 10 through June 14.

On their minds, in brief, are Tim Cook’s plans for China, artificial intelligence, and new hardware.

Incidentally, AAPL CEO Tim Cook was in the crowd at Omaha last weekend.

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