Corporate America Rocking, Opp In The Dow & SpaceX Update
With almost six weeks of earnings behind us, it’s important to note that more than 75% of companies beat Wall Street estimates and 15% of companies raised forward guidance. This says that corporate America is very, very strong. A skeptical eye could almost say, too strong, meaning an earnings growth peak. I am not in that camp, at least not yet. There should be more to come.
Both pieces of inflation data came in as expected or a little bit cooler this week which should temper some of the rate hike frenzy. I just don’t understand those on the FOMC who are still pushing the inflation narrative. The economy is softening. Inflation hasn’t been an issue since 2023. It’s just trading in a range around its historical average.
When stocks rally strongly I usually try to find some laggard with very discernible risk/reward to stop me out if I am wrong. The venerable Dow Industrials is below. It is supposed to go to new highs. If it closes at new lows for August, then I am wrong and I stop out. Reward looks 2:1 better than risk.
Someone asked if my opinion on SpaceX has changed since I trashed it at the IPO. My opinion on high profile IPOs has absolutely not changed. Just like we bought and sold the previous high profile, Cerebras after it soared and crashed, we are doing the same thing with SpaceX, having bought it three times after it soared and crashed. So far, we have sold it twice and maintain a half sized position. This remains a shorter-term trade.
My next comment may seem like “I told you so”, but I promise it is not. Rather, it’s a teaching moment on getting caught up emotionally in the media frenzy. As with some, many or most high profile IPOs, the initial excitement and attention usually overwhelm investors and they just buy at any price into the greed and giddiness, only to be punished shortly thereafter. SpaceX is no different at $110 than it was at $230 except the initial bloom was off the rose. The emotional buying ended.
On Wednesday we bought TQQQ, more SPLV, more KMB and more MQQQ. We sold EMB, GDX, SSO and some SPCX. On Thursday we bought PCY, EMB and more VGK. We sold some QLD.
