Each week (sometimes more often) I write notes for the various producers in the media.
For this long weekend, I am offering them to you as food for thought.
In the overall macro theme, I am sticking to this for time being:
Stagflation… the Federal Reserve can’t fix it. With a huge reduction in rates, that will spike inflation and with a small reduction in rates, it will not do much to help the economy grow.
The latest round of economic stats is mixed.
GDP 3% PCE 2.6% but housing starts were far worse and at this point, the jobs numbers look flat.
And of course, the big news last week was the NVDA earnings.
- NVDA -The CEO says best ROI out there as far as computing infrastructure yet even with the beat, the beats are getting smaller-Q1 was 6% and Q2 4.5%. Blackwell is the new anticipation for Q4. NVDA is buying back OVER 50 BILLION OF THEIR STOCK-so now? Like the hold at 118-want to see NVDA clear 130 and then the recent highs-otherwise, expect some chop. Overall, it’s the consumer that needs to buy into GEN AI.
- The current P/E Ratio for NVDA is 58.9, while the benchmark SPY is 27.6. This represents a 113% premium versus the benchmark P/E Ratio. The current P/E for NVDA is lower than both the 3-year and 5-year averages.
- 87 a share many say is fair value which right now it is 35% overvalued at 118
The weekly charts we follow are below, with analysis after.
The most interesting is the Retail Sector ETF (XRT). After strong consumer confidence, XRT looks like a move over July highs should be followed. However, consumer discretionary XLY is underperforming and must also recent highs around 189. Hence, this is the key area right now and if rallies, small caps, transportation will follow. That will be the best indicator for a soft landing or not. All semiconductors have to do is hold and not fall.
Speaking of the consumer-the vanity trade sleeps still but LLY is now reducing costs of Wegovy. This is the place to be as 2024 ends and 2025 begins, all things beauty, makeup, skincare, athletic wear. All these areas of the market are beat up could come alive-my guess the move begins in February 2025.
And along with LLY and Novo Nordisk, the Biotech space also looks hot. IBB thru 150 is a solid breakout. We anticipate that lots of stocks in that space will follow.
On the inflation front, the picture is even more nuanced. While so many stats support inflation over, the cost of living remains elevated.
How will we know when inflation (or if) picks up?
5. Commodities-the TRIFECTA to watch
A. Silver to gold-has to outperform-not yet
B. Oil-has to clear $80 a barrel-not yet
C. Sugar-has to clear 21 cents a pound-not yet
D. But in all the not yets-their prices are holding firm so worth watching
6. Housing prices high, copper bottomed, Lumber (WOOD basing) with new home sales down.
Where besides the consumer do I see tech growing? As I wrote this past week, we are very interested in alternative energy and EVs:
7. Exxon says renewables will grow fastest, but all energy is needed to fuel the world-still very bullish EVs (Rivian) and solar (FSLR) (TAN-waiting a bit longer to buy)
I leave you with a few more stocks to look at:
Stock Ideas:
Mosaic (MOS) is basing with potential
Novo-Nordisk (NVO) on Diet Drugs
Blockchain (BLOK) a long term hold
RIVIAN (RIVN) – Will look to add over 15
Teekay TK-Canadian company that ships crude oil
SL Green (SLG) in real estate
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
