Day 246: Damn The Torpedoes!


Mother's Little Helper portfolio was UP today +307.20 (+0.04%).

Overall GAIN YTD: +$190,554.78 (+32.64%).

According to CNN Money our benchmark index, the S&P 500 is up +9.27% Year To Date. http://money.cnn.com/data/markets/sandp/

I've been away for a few days, moving, getting kids to college and new high schools, so I thought I would take a look at what's impacting the markets lately. North Korea launches a missile over Japan, that's the eleventh missile test in 2017. Treasury yields are lower, the US Dollar was flat today, and Hurricane Harvey continues to create havoc in Texas and Louisiana. The disruption to the refining industry sent oil prices lower and gasoline higher. Bitcoin has risen about 70% in August and settled today at over $4,700. Did you know there are about 55 cryptocurrency funds now. Say what you like about Bitcoin and all the rest, but that's a lot of institutional interest in cryptocurrency. While gold has traditionally been the 'flight to safety' currency, Bitcoin is looking more and more like the new alternative. I won't drag this out, there have been a lot of fear mongering catalysts dredging up all sorts of concerns among investors, but in general the markets have focused on corporate earnings. That's impressively pragmatic.

While down from our highs, Mother's Little Helper has continued to deliver a great return, closing today at +32.64% YTD.

Corporate Earnings Deja vu is upon us. I realize that I'm now siting data that isn't normally thrown around at the dinner table but hang in there and pay attention to the bigger story. The MSCI AC World Index Consensus EPS has found its way back up to $30 for only the fourth time in 10 years. $30 is a upper level where the economy hinges on magical breakouts and dare I say exuberance at higher levels. What I find really interesting this time is that each time the MSCI EPS touched the $30 mark it was taken there by a different region of the globe. In 2008 it was Europe and emerging markets that got us to $30. In 2011 it was the U.S rebound. In 2014 Japan took us to $30. Now in 2017 it's the result of all regions rising corporate earnings. It get's harder and harder to spot a recession.

Shares of life sciences cloud software vendor Veeva Systems reported earnings on the 24th. Veeva's revenues and earning exceeded analysts estimates but investors were not impressed, or at least investors decided to listed to the analysts more than the numbers delivered by management. Veeva Systems was down $8.78, almost 14%, despite beating fiscal Q1 expectations, and forecasting higher. For example, Evercore’s Kirk Materne, who has an “In Line” rating on the shares, wrote in a note to clients that it was a “solid quarter,” but that "with shares up more than 59%, year to date, trading at 11x calendar 2018 revenue [estimates], expectations were high.” Indeed, he thinks the current share price reflects all the potential upside in Veeva’s newer product, called “Vault." Several other analysts had similar comments. To me this looks like the commentary of a short seller who is trying to get a better price to buy more shares. My own conviction is still high for this company to outperform by the end of the year.

Ulta Beauty once again delivered solid earnings, continues gaining share in beauty and has a sustained 25%+ earnings growth, but analysts think expectations are too elevated and Amazon.com represents too much risk to the business. The analysts commentary turned Ulta into the worst performing stock on August 25th, declining 9.1% on the day. Shares have nearly rebounded since then. Can we all please stop listening to these professional sellers of doom and misery.

Tomorrow Analog Devices reports, I'm looking to see if the acquisition of Linear Technology will add to revenues and earnings. ADI was selected for the portfolio because of its broad customer base in industrial, automotive and communications and a generally shareholder friendly attitude, check that 2.28% dividend. The deal has significantly expanded Analog Devices' total addressable market. However, given investors previous reactions to companies that beat expectations I would predict that Analog Devices will report an inline quarter and shares will drop on the news. But we don't care, we're holding until the end of the year.

PORTFOLIO COMPANIES REPORTING EARNINGS THIS MONTH

Analog Devices, Inc. is expected to report earnings on 08/30/2017 before market open. The consensus EPS forecast for the quarter is $1.15.

Stay Invested

Clay Baker

Disclosure: I am personally invested long in these stocks that appear in the MLH portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks that do not appear in the MLH portfolio: BA, BRK.B, CELG, CSCO, CTXS, CVX, DOW, DVAX, FB, IBM, NTES, NVDA, OMER, PFE, PG, RDHL, SCHW, THO, TWX, VEEV, VZ, XLNX, XOM

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice.
This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

© 2016 by Clay Baker all rights reserved