Wyatt Research Week in Review: June 14-20

If investing were a sprint, Fitbit (NYSE: FIT) would be leading the pack.
Shares of the maker of wearable fitness-tracking devices opened at $30.40 on the secondary market Thursday, following an initial public offering price of $20. The stock peaked at $31.90 before retreating to $29.68 to close its first daily trading session – good enough for a 48% gain from the IPO price.
The 36.6 million shares sold through the Fitbit IPO raised about $732 million. According to Dealogic, that represents the third-largest U.S. IPO in 2015.
In what marked a banner day for technology stocks, the tech-heavy Nasdaq Composite Index climbed 1.3% to reach a record intraday high Thursday of 5143.32, buoyed by gains from the biotech sector. The Dow Jones Industrial Average and the S&P 500 index each gained 1% for the day.
The across-the-board gains can be partially attributed to favorable investor reactions to the Federal Reserve’s decision to move slowly on raising interest rates.
According to an official press release from the Federal Open Market Committee, “The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”
Fed Chairwoman Janet Yellen, speaking at a press conference Wednesday following the FOMC’s two-day policy meeting, stated, “No decision has been made by the committee about the right timing of an increase, but certainly an increase this year is possible.”
Based on data released as part of the FOMC “dot plot,” 15 of the 17 members of the committee predict that the fed funds rate will be raised this year. At this juncture, signs point toward a quarter percentage point rate hike, which could come as soon as the Fed’s September policy meeting.
While the Fed and Fitbit stole the large-point headlines this week, there were plenty of other goings-on in the investment world that were analyzed by the Wyatt Research team. Here are some of my favorite articles from the week:
Lessons From a Late Great Billionaire Investor – Billionaire investing legend Kirk Kerkorian died Monday at the age of 98. Though the reclusive financier always did things his way, investors can learn a lot from the man who bought and sold MGM three times, and whose hotel properties once accounted for over half the rooms on the Las Vegas Strip.
Is Dow Theory Signaling Future Stock Market Declines? – Dow Theory stipulates that for a bull market to be sustainable, any rally to new highs in the Dow Jones Industrial Average must be accompanied by a new high in the Dow Jones Transportation Average. The Dow transports index is down approximately 10% since its all-time high, reached in late December 2014. Is the recent poor performance of railroad and airline stocks a harbinger of things to come for the broader market?
The Best Stock to Play the Bottled Water Craze – Beverage Marketing Corporation forecasts that bottled water will overtake soda and become the No. 1 packaged beverage sold in the U.S. by 2016. And according to the market research firm Canadean, global sales of plain bottled water are set to surpass those of soft drinks in 2015. Unlike Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP), the best bottled water stock isn’t saddled with the baggage associated with the soft drink industry and is rapidly expanding its sparkling water business.
How the Greek Debt Crisis Affects Your Portfolio – The Greek debt crisis has been around since 2009, when the worst of the Great Recession was being felt around the world. Is it reaching a boiling point, and should U.S. investors be concerned?
The World’s Best Commodities Stock – The best commodities company in the world is also the biggest and most diverse. It mines coal, copper, silver and gold in Australia; extracts aluminum, manganese and nickel in South Africa; mines iron ore in Brazil; drills crude oil in the North Sea and the Gulf of Mexico; and fracks oil and natural gas in the United States. And the best part? It pays a 5.8% dividend yield.
Will Warren Buffett and 3G Capital Quench Their Beverage Company Thirst? – A short blog post on a Brazilian news website sent shares of Diageo PLC (NYSE: DEO) soaring last week on rumors that private equity firm 3G Capital might buy the London-based beverage company. 3G co-founder Jorge Paulo Lemann has teamed with Warren Buffett and Berkshire Hathaway (NYSE: BRK-B) on several blockbuster deals – most recently their co-orchestration of a merger between Kraft Foods Group (NASDAQ: KRFT) and H.J. Heinz. Could Lemann and Buffett team up again to acquire the global spirits powerhouse?
This Asset Class Is Leading the Market in 2015 – In a reversal of the 2014 market trend, stocks in this asset class have jumped higher by 5.6% year-to-date and are leading the market.
Bull’s-Eye: CVS Buys Target’s Pharmacy Business – CVS Health (NYSE:CVS) announced Monday that it plans to buy Target’s (NYSE: TGT) entire pharmacy division for $1.9 billion. The deal comes less than a month after CVS agreed to purchase pharmacy-services provider Omnicare (NYSE: OCR) for $12.7 billion – a move that will allow CVS to expand its reach to nursing home and assisted-living facility residents. Wyatt Research analyst Jay Taylor explains here why the most recent deal is a win-win for CVS and Target.
Will the S&P 500 Double by 2024? – Jeffrey Saut, the chief investment strategist at Raymond James, believes the S&P 500 could double within the next nine years. That’s right, he told Barron’s in a recent interview that the S&P could reach 4300 by the year 2024. Does he accurately see the future, or is he nuts?
The Best Blue Chip Growth Fund – Eighty years ago, a little-known blue chip mutual fund bought equal amounts of stock in 30 major U.S. companies. It hasn’t purchased any new stocks since, but an investment of $10,000 in the fund in 1970 would be worth $1.2 million today. Get the name here.
Have a great weekend!