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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June 5 – Stock Mentions SPY, SMH, AAPL, NVDA, CSCO, ROKU, SQ
Michael Kramer and the clients of Mott Capital own AAPL and CSCO
So the big news is that I am now calculating my own S&P 500 earnings estimates, turns out it isn’t so hard to do. When thinking about how it works, it is a circular reference to back into the “E.” Essentially, you take the market cap of the S&P 500 divided it by the aggregate of the earnings estimates for all the components. Then you simply, put that number under the price of the S&P 500. It looks like this:
“E” = SPX/(S&P 500 MC/S&P 500 aggregate earnings).
So anyway… it is what it is. So the next time you hear someone talk about the S&P 500 P/E you should ask yourself how this works since the P is critical in determining the E. Certainly, not what I was expecting to find out, and a bit disappointing.
Anyway, I am modeling for the S&P 500 earnings estimates of $165.18 in 2019, with a standard deviation that places the earnings in a range of $160.26 to $170.10. Meanwhile, I have 2020 earnings estimates at $183.36, with a standard deviation putting in a range of $174.42 to $193.91. I like the idea of the standard deviation and creating a band because it will value both the best and worst-case scenario. Anyway, thought I’d share that with you. So if you ever wonder what I do during the day, this is the type of stuff I fill my free time with. Exciting –right?!
Random Economic Thoughts
Tariffs are cute and make for great headlines, but at the end of the day, the Fed is far more critical to the stock market than any damage the tariffs are likely to cause. Again, tariffs that may be potentially levied are a one-time event, and in a $20 trillion economy are not big enough to push the economy into recession. Can it slow growth? Sure. But a recession? Most likely, No.
Remember tariffs even if they are everlasting, which they won’t be, are a one time hit to the economy, and then growth resets.
In my opinion what Trump is doing is pulling forward an economic slowdown, so that he get rates lower and when he removes the tariffs by the end of 2019 the economy will see a big pop heading into 2020 to help his re-election bid. If he has a strong economy and American families are doing well, he will likely win re-election. I’m not sure that people would want to make a change at that point.
Stocks Rally on June 5
Stocks continued to rally on June 5, and it appears that the S&P 500 has broken out with index rising above the May downtrend and crossing resistance at 2,812. That sets up the next big test at 2,836, which could prove to be a challenge. However, given how steep and powerful the downtrend has been, I believe that 2,836 will likely be broken.
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If I must complain, it is that semis paused today. However, they managed to test and hold support at $100.80. So I believe that the rally is likely to continue tomorrow.
Apple continues to act well rising above resistance on June 5 at $182 and holding it all day long. I had noted on June 3 in my premium room AAPL appeared to be poised to rebound to around $195. Apple May Be Overdue For A Bounce
Nvidia also broke out and managed to rise above resistance on June 4. Today, the stock retested that break out at $139, and it held. I think NVDA is getting ready to move higher back to $150.
Cisco may be putting in a double bottom, but we need to see it rise above $57.25 to confirm. That could be a very bullish indication for CSCO.
Roku has hit our target around $102 and now we need to think about what happens next. There is a good chance Roku fills the gap back at $93.
It had looked like Square was finally breaking down, but it managed to survive. I had thought SQ could fall to around $56. But I’m not sure anymore. The chart is tough to interpret at this point. So I will have to watch and see how it develops before making any more assessments.
Back in the AM
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. AAPL, CSCO, SQ, June 5, Stocks