This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
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May 21 – Stock mentions: Cisco, Visa, Mastercard, Starbucks, Netflix
Michael Kramer and the clients of Mott Capital own Cisco, Visa, Mastercard and Netflix
- S&P 500 Futures +17 points
- 10-Year 2.42%
- Oil $63.45
- Dollar Index 98.04
- VIX 15.36
- Shanghai +1.23%
- Japan Nikkei -0.14%
- Hong Kong HSI -0.47%
- South Korea Kospi +0.27%
- UK FTSE +0.66%
- German DAX +1.03%
Stock markets are getting a boost on May 21 after the US decided to lift the ban on Huawei for the next 90 days.
Shanghai has stabilized around technical support at 2,825, and the RSI is starting to trend to higher. It could, at the very least, suggests that a bottom is getting put into place in the Chinese equity market. There is still a strong chance the Shanghai composite rebounds to around 3,065.
Interesting article in Xinhua Triumph will be in China’s hands –Yikes! Getting all nationalistic now, aren’t we? Are we to interpret this as reverse psychology, to mean they are losing and move to propaganda? Maybe. Didn’t the Soviet parade fake rockets in those grand parades?
S&P 500 (SPY)
For now, the S&P 500 is pointing to a higher start on May 21. We will see if the S&P 500 can reclaim the uptrend we have been watching. It gets harder for the index because today the S&P 500 needs to close around 2,853 to get back into the uptrend. While it is possible for that happen, it won’t be an easy road. The 2850 region has offered strong resistance in recent days.
Anyway, to no surprise, the chip stocks are the stocks that are seeing the most significant benefit thus far. With stocks like Micron (MU), Nvidia (NVDA), AMD (AMD), Qualcomm (QCOM), and Broadcom (AVGO) all rising. It amazes me to some extent for the amount some of these stocks have dropped, given the companies, although having some exposure may not have a material amount to Huawei or tariffs at this point. Anyway.
You’d never know that Starbucks whole growth strategy is built around growing its brand in China by looking at the chart. The stock is at an all-time high and has managed to pretty much go up in a straight line over the past year. Pretty amazing.
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Cisco’s stock has performed well in the past few days despite all of the trade uncertainty. You want to know why? Read the conference call, and Chuck Robins comments:
And so last week when we saw the indication that the tariffs were going to move to 25% on Friday morning, the teams kicked in and we actually have executed completely on everything that we need to do to deal with the tariffs.
We are — operationally all that we needed to do is now behind us. And we see very minimal impact at this point based on all the great work the teams have done and it is absolutely baked into our guide going forward. So that’s the first question.
I wish every company could articulate how they are positions on tariffs like this. Should the stock rise above $57.25 the stock has room to run to $70, I think.
Visa has performed very well recently too, and why shouldn’t it? What do Visa and China have common beside nothing?! The stock is approaching a break out at $166 that could fuel an increase to $178.
It isn’t as clear how much higher Mastercard can rise, but it too is nearing a break out should it rise above $253.
Netflix has nothing to do with China or the trade war, so why is the stock down? Broader market sentiment? Probably. The stock continues to hold $341, and as long as that holds perhaps, we can bounce back to $380.
Oil prices appear to be breaking and look set to rise to around $66.
Good luck today, I have a feeling you may need it.
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results. May 21