Wyatt Research Week in Review: April 24-30

May is but a day away. Will cries of mayday soon be ringing through the trading pits?
It’s no secret that May traditionally marks the beginning of the stock market’s worst six months of the year. According to the “Stock Trader’s Almanac,” “A $10,000 investment compounded to $838,486 for November-April” over the past 65 years, “compared to a $221 loss for May-October.”
Heading into the traditional season of warm-weather selling, the market had a hot and cold week, with shares of a pair of Silicon Valley tech titans bucking the prevailing winds after their respective earnings announcements.
Apple (NASDAQ: AAPL) shares fell 6.3% on Wednesday in response to an earnings report that saw the company post its first quarterly sales decline since 2003. The trinity of the iPhone, iPad and Mac all saw revenues dip for the quarter, with weak Chinese demand contributing to an 18% decline in iPhone sales.
The broader market, as measured by the S&P 500 index, eked out a 0.2% gain Wednesday, while the Nasdaq Composite was down a modest 0.5%.
Facebook (NASDAQ: FB) shares, in contrast, surged 7.8% on Thursday and hit an all-time high after the sultan of social media blew top and bottom line expectations out of the water. Facebook earned 77 cents per share on $5.38 billion of revenue for the quarter. The consensus analyst estimate from Thomson Reuters called for EPS of 62 cents on $5.26 billion in revenue.
The S&P 500 lost 0.9% on Thursday, while the Nasdaq shed 1.2%.
I mention these percentages because they call to mind a conversation I had this week with Wyatt Research’s resident options trader, Andy Crowder, about the overinflated weight put on so-called market-moving stocks when the market deviates from an accustomed range.
While the market waged an uphill battle Thursday, the big story in the popular financial media outlets was billionaire Carl Icahn announcing that he had bailed on his Apple investment after proclaiming a $240 price target in May 2015. Apple shares closed Thursday at $94.83.
Meanwhile, many time zones away, the Bank of Japan and its governor, Haruhiko Kuroda, stood pat on the BOJ’s monetary policy of a negative 0.1% deposit rate, reaffirming the looming specter of negative interest rates on the global economy.
While the egg on Icahn’s face makes for compelling press, in terms of Thursday’s biggest market mover among the talking heads, my money’s on Kuroda. (Not literally, of course.)
Here are some of my favorite Wyatt Investment Research articles from the past week:
Is the Zell Recession Prediction About to Come True? – When one of the world’s highest-profile investors speaks, the entire financial world listens. Last week, billionaire investor Sam Zell – who famously called the top of the U.S. real estate market just prior to the financial crisis and housing crash – said the U.S. economy would enter a recession within the next year. Is Zell right to say the U.S. is on the brink of recession, or is his call off base?
China’s Answer to the FANG Stocks – Most U.S. investors are very familiar with the FANG stocks – Facebook, Amazon, Netflix and Google – but have you heard of China’s BANT stocks?
Bargain Hunting for Energy Dividends? Size Matters. – The Wall Street Journal reports that several major banks are declining to renew, or are clamping down on, many oil and gas companies’ ability to tap credit lines for cash. Yet despite the carnage in the oil and gas industry, the big boys continue to maintain their energy dividends and still offer respectable payouts and yields.
New Life for a Pair of Old Tech Companies – Due to the huge shift away from hardware to software in recent years, a number of older tech companies have started downsizing to help save money and facilitate their shift to faster-growing markets. During the first quarter of the year, tech companies cut more than 17,000 jobs. That’s a 150% increase from 2015. And while many major tech giants aren’t offering enticing dividends, a pair of companies that yield more than 3% could be on the road to share-price salvation through aggressive layoffs.
Don’t Cry for Argentine Stocks Anymore – If President Mauricio Macri’s reforms continue to work their economic magic and draw in big-name hedge funds, several Argentine stocks will have the last laugh.
Dishing the Dirt on the Viacom Deal – After months of difficult negotiations, cable network operator Viacom (NASDAQ: VIAB) and satellite-TV provider Dish Network (NASDAQ: DISH) finally came to a deal that will keep Viacom’s 18 networks available to Dish’s 14 million customers. Viacom shares leapt 11% on the day the news broke, but it’s been a rough ride for both companies over the past year. Is the deal enough?
How to Generate Big Profits From the Low-Income Housing Boom – The homebuilding market has sagged a bit recently, given the threat of higher interest rates and slowdown in mortgage lending. Still, there’s an underrated part of the housing market that targets people that can’t get conventional mortgages which could lead to the next boom.
Have a great weekend!