SPECIAL ALERT: The May episode of the Zacks Ultimate Strategy Session will be available for viewing no later than Wednesday, May 13. Kevin Matras, David Bartosiak, Dr. John Blank and Sheraz Mian will cover the investment landscape from several angles in this popular event.
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▪ Sheraz and John Agree to Disagree on whether Coronavirus issues are the only things that matter to stocks or other issues matter
▪ Kevin answers your questions in Zacks Mailbag
▪ Sheraz and David choose one portfolio to give feedback for improvement
▪ And much more
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The market sold off a bit in the final hour of Tuesday’s session, but stocks still managed a second straight day of green as sections of the country begin to slowly re-open from this coronavirus shutdown.
Everybody loves the idea of this economy getting back on its feet sooner rather than later, but we all know the market can get ahead of itself from time to time.
The Dow soared by more than 400 points at its best, but couldn’t hold onto such a lofty advance amid all the uncertainty. However, it still gained 0.56% (or about 133 points) to 23,883.09. Meanwhile, the S&P (NYSE:SPY) was up 0.90% to 2868.44.
The NASDAQ again seems to be in a league of its own as tech continues to outperform. The index was up another 1.13% (or nearly 100 points) to 8809.12. Its now less than 2% away from being positive for the year.
Except for Netflix (NASDAQ:NFLX, -0.8), all of the FAANGs were higher on Tuesday with especially solid results from Alphabet (NASDAQ:GOOGL) (GOOG, +1.8%) and Apple (NASDAQ:AAPL, +1.5%). Also, Microsoft (NASDAQ:MSFT) was up more than 1%.
Today’s reminder of the economic damage from this shutdown came from ISM Services, which contracted for the first time in over a decade. The 41.8 reading for April crashed from 52.5 in March, though it was better than the analysts expected.
The big earnings report of the day was Disney (DIS), which released mixed results after the bell. Revenue for the media and entertainment giant beat in the quarter, but earnings missed. Needless to say, its theme parks and cruises are taking a huge hit in this coronavirus disruption.
Shares are off approximately 2.5% after hours, as of this writing.
A nice start to the first full week of May. Let’s see if we can keep it going!
Today's Portfolio Highlights:
Stocks Under $10: Earnings estimates for Sangamo Therapeutics (SGMO) have been moving sharply higher since this Zacks Rank #1 (Strong Buy) biotechnology company reported quarterly results. It earned 4 cents in that report, while the Zacks Consensus Estimate was calling for a loss of 31 cents. That’s a huge surprise! SGMO has actually beaten in three of the past four quarters, and Brian appreciates its topline growth of 104% on an annual basis. The stock is also part of the Medical – biomedical and genetics space, which places it in the top 4% of the Zacks Industry Rank. Meanwhile, the portfolio sold the underperforming Sharps Compliance (NASDAQ:SMED) position, which keeps the service “full” at 15 names. Read the full write-up for more.
Insider Trader: Banks and insurers are seeing a good amount of insider buying right now, so Tracey bought a new position from each of these areas on Tuesday. Trust
Co (TRST) is a small-cap New York bank that saw a cluster buy after reporting first-quarter results. SEVEN insiders bought shares of their own company between April 24 and May 1, including the CEO, a few VPs and even the usually-conservative General Counsel. TRST shares are down 31% year-to-date but have rebounded 22% in the past month. The editor warns that this name will be volatile.
The other addition is Cincinnati Financial (NASDAQ:CINF), an insurance company that’s down 44% year-to-date. However, it is still paying its dividend. A couple directors bought in the past week... and have actually been picking up shares throughout the coronavirus sell-off. Tracey considers that to be a bullish sign. The portfolio has a lot of cash, so TRST and CINF are joining with 10% allocations each. The editor also sold the underperforming Verizon (NYSE:VZ) position. Read the full write-up for a lot more on today’s moves. One more thing, this portfolio had one of the best performers of the day as Mosaic (MOS) advanced 7.3% on its earnings report.
Surprise Trader: This economic shutdown can be unhealthy all by itself, especially as millions of people reach for ‘comfort food’ a bit too often to ameliorate their stress. Perhaps that’s part of the reason why Dave added Esperion Therapeutics (NASDAQ:ESPR) on Tuesday, which is a Zacks Rank #2 (Buy) maker of cholesterol medication. The stock is part of a space (Medical – Drugs) in the top 3% of the Zacks Industry Rank and beat by more than 16% in its most recent report. But the main reason why the editor picked up ESPR is its Earnings ESP of 3.87% for the quarter coming after the close tomorrow. He added the stock with a 12.5% allocation and also sold the underperforming Compass Diversified (CODI). Read the full write-up for more.
TAZR Trader: The S&P found good support at 2800 recently, which had Kevin hunting for some good stocks just in case the market holds up better than he expects. He narrowed today's choice to a company seeing solid demand in the cloud/remote space in this work-from-home environment. Citrix Systems (NASDAQ:CTXS), a Zacks Rank #2 (Buy), is a provider of virtualization, networking and digital workplace solutions. The company has a better valuation than most competitors and Kevin expects it to move over $170 in the next three months. He would add on any dips under $140. But for today, CTXS was added with a 10% allocation. Read the complete commentary for a lot more on this move and the market in general.
Blockchain Innovators: Shares of Rambus (NASDAQ:RMBS) jumped 13.9% on Tuesday after the semiconductor products company reported better-than-expected revenue in its quarterly report yesterday. That performance was the biggest winner of the day among all ZU portfolios. RMBS was added back in February 2019 because Dave noticed that its security division “dived head-first into blockchain technology”. Since then, the stock has been one of the biggest gainers in the service with an advance of 41.7% since inception.
Zacks Short List: The portfolio swapped out four positions in this week's adjustment. The names that were short-covered on Tuesday were:
• Twitter (TWTR, +4%)
• T-Mobile US (NASDAQ:TMUS)
• Expedia Group (NASDAQ:EXPE)
• Etsy (NASDAQ:ETSY)
The new buys that filled these newly-opened positions were:
• Bio
Marin Pharma (BMRN)
• China Lodging Group (HTHT)
• Darden Restaurants (NYSE:DRI)
• Yandex N.V. (NASDAQ:YNDX)
Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.
Options Trader: "The main event this week will probably be the Employment Situation report on Friday. Although, I don’t think it’s that important. We all know it’s going to be ugly with an expected -21,250,000 unemployed, and a 16.3% unemployment rate. But that’s all rearview mirror stuff.
"The market is forward looking. When the market was down -35% in early March, it was likely pricing in that kind of carnage. And probably a lot more. But the outbreak, as tragic as it’s been, has been far less severe than the early dire predictions. And getting on the road to recovery has been much faster.
"If any of those frightening predictions were to have come true, we likely would have been on lockdown for several more months. And then the unemployment report would matter, because it would only be the tip of the iceberg.
"But we have already turned the corner. The worst is behind us. And the U.S. is on the path to recovery. Keep your eyes on the reopening, and what the economic reports look like once those stats are finally included. In the meantime, it’s great to see people and businesses getting back to work and getting their lives back. And that’s why the market has been rallying.
"And why there’s likely a lot more upside to go." -- Kevin Matras
Have a Good Evening,
Jim Giaquinto
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