3 Stocks to Invest in Before the Housing Market Crashes

Posted on by The INO.com Team

 

The housing market might crash in the near term as mortgage demand remains under pressure because of low housing inventory and high-average 30-year fixed mortgage rates.

Homebuyers locked into the sub-5% pandemic-era mortgage rates simply aren’t selling. The total number of homes on the market for the four weeks ending September 3, 2023, has declined 18% year-over-year, registering the biggest decline since February 2022. Meanwhile, new listings fell 9.3%.

Prospective home buyers have also been thwarted by rising property prices, which have increased for five months in a row. According to the National Association of Realtors (NAR), more than half of U.S. metro areas registered home price gains in the second quarter of 2023. It also reported that the median sale prices of existing homes are near record highs.

Last month, mortgage rates climbed to their highest level in 23 years. Mortgage rates have risen as the Federal Reserve undertook aggressive interest rate hikes since last year to curb high inflation. The weekly average of the 30-year fixed-rate mortgage as of September 7, 2023, stood at 7.12%.

The high mortgage rates led to mortgage applications reaching the lowest level since 1996. According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 1, 2023, mortgage applications fell 2.9% compared to the prior week.

MBA’s Vice President and Deputy Chief Economist Joel Kan said, “Mortgage applications declined to the lowest level since December 1996, despite a drop in mortgage rates. Both purchase and refinance applications fell, with the purchase index hitting a 28-year low, as prospective buyers remain on the sidelines due to low housing inventory and elevated mortgage rates.”

Freddie Mac’s chief economist Sam Khater said, “The economy remains buoyant, which is encouraging for consumers. Though inflation has decelerated, firmer economic data have put upward pressure on mortgage rates, which are straining potential homebuyers in the face of affordability challenges.”

Although nonfarm payrolls increased by 187,000 in August, the unemployment rate was 3.8%, up surprisingly from 3.5% in July. If unemployment keeps rising, it could lead to missed mortgage payments and foreclosures. With skyrocketing mortgage rates, high housing prices, and the possibility of a recession between now and July 2024 at 59%, a housing market crash is highly likely.

In the event of a housing crash, defensive stocks such as Walmart Inc. (WMT), American Water Works Company, Inc. (AWK), and Eagle Materials Inc. (EXP) will likely help cushion one’s portfolio. The products and services these companies provide are always in demand, irrespective of the economic cycles.

Let’s discuss these stocks in detail.

Walmart Inc. (WMT)

WMT engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club. 

WMT’s revenue grew at a CAGR of 5.2% over the past three years. Its EBITDA grew at a CAGR of 3.3% over the past three years. In addition, its EBIT grew at a CAGR of 4.6% in the same time frame.

In terms of the trailing-12-month Return on Common Equity, WMT’s 17.87% is 58.5% higher than the 11.28% industry average. Its 5.50% trailing-12-month Return on Total Assets is 28.1% higher than the 4.30% industry average. Likewise, its 2.51x trailing-12-month asset turnover ratio is 176.2% higher than the industry average of 0.91x.

WMT’s total revenues for the second quarter ended July 31, 2023, increased 5.9% year-over-year to $161.63 billion. The company’s adjusted operating income rose 8.1% over the prior-year quarter to $7.41 billion.

In addition, its consolidated net income attributable to WMT increased 53.3% over the prior-year quarter to $7.89 billion. Also, its adjusted EPS came in at $1.84, representing an increase of 4% year-over-year.

Analysts expect WMT’s EPS and revenue for the quarter ending October 31, 2023, to increase 0.7% and 4.5% year-over-year to $1.51 and $158.22 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 19.2% to close the last trading session at $164.52.

American Water Works Company, Inc. (AWK)

AWK provides water and wastewater services. It offers water and wastewater services to approximately 1,600 communities in 14 states, serving approximately 3.4 million active customers. The company serves residential customers; commercial customers, including food and beverage providers, commercial property developers and proprietors, and energy suppliers; fire service and private fire customers; etc.

AWK’s revenue grew at a CAGR of 3.1% over the past three years. Its net income grew at a CAGR of 11.9% over the past three years. In addition, its EPS grew at a CAGR of 10.9% in the same time frame.

In terms of the trailing-12-month gross profit margin, AWK’s 58.97% is 51.7% higher than the 38.86% industry average. Its 22.08% trailing-12-month net income margin is 133.6% higher than the 9.46% industry average. Likewise, its 10.35% trailing-12-month Return on Common Equity is 19% higher than the industry average of 8.70%.

For the fiscal second quarter ended June 30, 2023, AWK’s operating revenues increased 17.1% year-over-year to $1.10 billion. Its operating income rose 32.1% year-over-year to $432 million. The company’s net income attributable to common shareholders increased 28.4% over the prior year quarter to $280 million. Also, its EPS came in at $1.44, representing an increase of 20% year-over-year.

For the quarter ending September 30, 2023, AWK’s EPS and revenue are expected to increase 0.2% and 7.3% year-over-year to $1.63 and $1.16 billion, respectively. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 2.9% to close the last trading session at $137.56.

Eagle Materials Inc. (EXP)

EXP manufactures and sells heavy construction materials and light building materials. It operates in four segments: Cement, Concrete and Aggregates, Gypsum Wallboard, and Recycled Paperboard. The company engages in the mining of limestone for the manufacture, production, distribution, and sale of Portland cement; grinding and sale of slag; and mining of gypsum for the manufacture and sale of gypsum wallboards.

On May 3, 2023, EXP announced the completion of the acquisition of Martin Marietta’s cement import and distribution business in Northern California, including a cement terminal in Stockton, California. The acquisition bodes well for the company as it will help extend and strengthen its distribution reach across its heartland U.S. cement manufacturing system.

EXP’s President and CEO, Michael Haack, said, “Our Nevada Cement operations have long-standing customer relationships in Northern California, and this acquisition will uniquely position us to better serve these and new customers with complementary imported product.”

“Our entire cement system is currently ‘sold out’, and this acquisition will enable us to more actively participate in the strong US demand environment. Our experience as a cement importer elsewhere in the US is a transferrable expertise at Eagle, and we expect a smooth ownership transition,” he added.

EXP’s EBIT grew at a CAGR of 24.4% over the past three years. Its net income grew at a CAGR of 56% over the past three years. In addition, its levered FCF grew at a CAGR of 54.7% in the same time frame.

In terms of the trailing-12-month net income margin, EXP’s 21.82% is 230.7% higher than the 6.60% industry average. Its 13.32% trailing-12-month levered FCF margin is 269.3% higher than the 3.61% industry average. Likewise, its 34.36% trailing-12-month EBITDA margin is 98.7% higher than the industry average of 17.29%.

EXP’s revenue for the first quarter ended June 30, 2023, increased 7.1% year-over-year to $601.52 million. The company’s adjusted net earnings rose 17.2% over the prior-year quarter to $126.15 million. Its adjusted EPS came in at $3.55, representing an increase of 25.9% year-over-year. Also, its adjusted EBITDA increased 16.4% year-over-year to $214.29 million.

Street expects EXP’s EPS and revenue for the quarter ending September 30, 2023, to increase 13.5% and 4.9% year-over-year to $4.24 and $634.84 million, respectively. Over the past year, the stock has gained 48.4% to close the last trading session at $180.19.

Why Are Stocks Weak Again?

Posted on by The INO.com Team

Please enjoy this updated version of weekly commentary from the Reitmeister Total Return newsletter. Steve Reitmeister is the CEO of StockNews.com and Editor of the Reitmeister Total Return.Click Here to learn more about Reitmeister Total Return

SPY – The fun of the 2023 bull rally is over. Now we are in a more volatile period where what happens next for the S&P 500 (SPY) is not so clear. That is why 43 year investment veteran Steve Reitmeister shares his latest market outlook, trading plan and top picks in this fresh commentary below…

 

My expectation of a trading range forming is playing out right on schedule. That being where resistance was found at 4,600 for the S&P 500 (SPY) which was simply too high after an overextended bull run.

On the other hand, there was no need for stocks to sell off more than 5%. Thus, support was found just above the 100 day moving average currently at 4,344.

Moving Averages: 50 Day (yellow), 100 Day (orange), 200 Day (red)

In a trading range scenario, the market is overly susceptible to each new headline. One day that blows bearish…and the very next day gloriously bullish.

In short, almost every move inside a trading range is meaningless noise. And thus should mostly be ignored.

That is because the VAST MAJORITY of the time, the market breaks out of the range in the same direction it was going before the range formed. In the current case that means we should break higher out of this range unless there is truly a threat to the bullish thesis.

That would require that the preponderance of the evidence starts to show that the odds of a recession have greatly increased. That is currently not true.

What is true is that we find that the recent economic data is a bit better than expected. Normally that is awesome news that has stocks spiking higher.

Unfortunately, that is not so awesome when the Fed is worried about lingering high inflation not fading away quickly enough. Simply stated…

The more robust the economy looks > the stickier high inflation becomes > the more likely the Fed raises rates even higher > the more they risk creating a recession instead of soft landing

Indeed, the recently improved economic picture has also increased the odds of a Fed rate hike at the November or December meetings. Just a month ago only 28% odds were placed another 25 basis point from the Fed. As for today that is now up to 46%. This again explains the stock market weakness this week.

Let me be clear…The improved data for ISM Services and Jobless Claims this week, that sparked the most recent sell off, does increase the odds of more rate hikes. But as Goldman Sachs predicts, the odds of a new recession forming in the next 12 months is still only around 25%. That means we are much more likely to have a soft landing which keeps the long term bullish thesis in place.

At this stage investors are likely going to react strongly to other upcoming economic events coming into the 9/20 Fed Rate decision. The roll call of reports includes:

9/13 Consumer Price Index

9/14 Producer Price Index, Retail Sales & Jobless Claims

9/20 Fed Rate

Note that right now most investors are expecting the Fed to hit the pause button on rates at this September 20th meeting. The key for investors is focusing on what Powell says at his press conference. That will provide their intentions for future meetings. Again, the odds for a rate increase in November or December is getting ever closer to 50%.

Trading Plan and Next Steps

Nobody knows when this trading range will end. But likely it will be before the holidays when the seasonal good tidings help to create a Santa Claus rally.

Thus, it is important look past the day to day fluctuations to appreciate that the long term picture is still bullish. This makes it wise to use meaningful dips in the range to buy the best looking stocks.

Which stocks are those?

More on that in the next section…

What To Do Next?

Discover my current portfolio of 7 stocks packed to the brim with the outperforming benefits found in our POWR Ratings model.

Plus, I have added 4 ETFs that are all in sectors well positioned to outpace the market in the weeks and months ahead.

This is all based on my 43 years of investing experience seeing bull markets…bear markets…and everything between.

If you are curious to learn more, and want to see these 11 hand selected trades, then please click the link below to get started now.

Steve Reitmeister’s Trading Plan & Top Picks >

Wishing you a world of investment success!

SPY shares were trading at $444.98 per share on Friday afternoon, up $0.13 (+0.03%). Year-to-date, SPY has gained 17.23%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

Wall Street's D-Day on Sept. 13 Brings High Stakes – 5 Stocks to Consider in the Aftermath

Posted on by The INO.com Team

August’s Consumer Price Index (CPI) report, due to be released on September 13, 2023, holds immense significance as it will influence the Federal Reserve’s upcoming policy decision. The Fed’s decision on raising interest rates at the next FOMC meeting scheduled on September 19-20, 2023, could be a significant determinant of the market movement.

August’s CPI figures are important, especially after a surprising rise in prices in July, with the headline CPI rising 3.2% year-over-year, the first acceleration in more than twelve months. August’s inflation numbers would offer insight into whether inflation is easing and July’s rise in prices was a one-off.

The central bank had last raised rates by 25 basis points in late July, pushing the benchmark interest rate to the 5.25% - 5.50% range. The recent economic data has been mixed with the U.S. consumer spending in July rising the most in six months, and nonfarm payrolls increased by 187,000 in August.

However, the unemployment rate rose 3.8% in August, the highest since February 2022. Additionally, job openings edged down to 8.8 million, falling to their lowest level since March 2021. Towards the end of last month, Fed Chair Jerome Powell said that inflation is still too high and could require additional interest rate increases. However, he noted that policymakers would carefully proceed as they assess the incoming data.

A rise in energy prices is expected to have driven the increase in headline inflation last month. Economists forecast headline inflation to rise 3.6% year-over-year and 0.6% sequentially in August. Federal Reserve governor Christopher Waller said he currently sees nothing that would force the Fed to raise the short-term borrowing rates again.

In an interview with CNBC, he stated, “The biggest thing is just inflation. We got two good reports in a row.” The key now is to “see whether this low inflation is a trend or if it was just an outlier or a fluke.”

When asked if rate increases can stop, Waller said, “That depends on the data.” “We have to wait and see if this inflation trend is continuing. We’ve been burned twice before. In 2021, we saw it coming down, and then it shot up. The end of 2022, we saw it coming down, then it all got revised away.”

“So, I want to be very careful about saying we’ve kind of done the job on inflation until we see a couple of months continuing along this trajectory before I say we’re done doing anything,” he added.

The CME FedWatch Tool indicated a 93% probability of the Fed keeping interest rates unchanged in September, while there is just a 53.5% probability for another pause at the November meeting.

Usually, interest rates and the stock market have an inverse relationship. If the prices rise higher than expected in August, the Fed might be compelled to raise interest rates, which could hurt the performance of stocks. In this scenario, investors may consider investing in stocks that are less sensitive to inflation, such as Unilever PLC (UL), Dominion Energy, Inc. (D), and Thermo Fisher Scientific Inc. (TMO).

On the other hand, if inflation shows signs of easing in August, the Fed may keep the benchmark interest rate steady. This could help stock prices to rise. In this scenario, investors may consider investing in cyclical names like Microsoft Corporation (MSFT) and NIKE, Inc. (NKE). They are deemed cyclical due to their sensitivity to rising interest rates. Without rate increases, these stocks are likely to perform well.

Let’s discuss these stocks in detail.

Microsoft Corporation (MSFT)

MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.

On April 17, 2023, MSFT and Epic announced the expansion of their strategic collaboration to develop and integrate generative AI into healthcare by combining the scale and power of Azure OpenAI Service with Epic’s electronic health record (EHR) software.

MSFT’s corporate vice president of AI platform, Eric Boyd, said, “Our expanded partnership builds on a long history of collaboration between Microsoft, Nuance, and Epic, including our work to help healthcare organizations migrate their Epic environments to Azure. Together, we can help providers deliver significant clinical and business outcomes leveraging the power of the Microsoft Cloud and Epic.”

MSFT’s revenue grew at a CAGR of 14% over the past three years. Its net income grew at a CAGR of 17.8% over the past three years. In addition, its EBIT grew at a CAGR of 18.7% in the same time frame.

In terms of trailing-12-month gross profit margin, MSFT’s 68.92% is 43% higher than the 48.20% industry average. Likewise, its 48.14% trailing-12-month EBITDA margin is 432.7% higher than the industry average of 9.04%. Furthermore, the stock’s trailing-12-month Capex/Sales came in at 13.26%, compared to the industry average of 2.42%.

MSFT’s total revenue increased 8.3% year-over-year to $56.19 billion for the fourth quarter ended June 30, 2023. Its net cash from operations increased 16.8% year-over-year to $28.77 billion. The company’s net income increased 20% year-over-year to $20.08 billion. Also, its EPS came in at $2.69, representing an increase of 20.6% year-over-year.

Analysts expect MSFT’s EPS and revenue for the quarter ending September 30, 2023, to increase 12.5% and 8.8% year-over-year to $2.64 and $54.51 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. The stock has gained 39.4% year-to-date to close the last trading session at $334.27.

Thermo Fisher Scientific Inc. (TMO)

TMO provides life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products, and biopharma services.

On August 14, 2023, TMO announced the completion of the acquisition of CorEvitas, LLC, a provider of regulatory-grade, real-world evidence for approved medical treatments and therapies, from Audax Private Equity.

TMO’s Chairman, President, and CEO Marc N. Casper said, “CorEvitas expands our clinical research business with highly complementary real-world evidence solutions, which is an increasingly important area and will help to enhance decision-making as well as the time and cost of drug development.”

“We are excited by the opportunity to further accelerate innovation and advance productivity for our pharma and biotech customers in their new work to deliver new medicines and therapeutics to benefit patients,” he added.

TMO’s revenue grew at a CAGR of 18.4% over the past three years. Its net income grew at a CAGR of 15.6% over the past three years. In addition, its EBITDA grew at a CAGR of 15.5% in the same time frame.

In terms of trailing-12-month net income margin, TMO’s 13.14% compares to the negative 5.71% industry average. Likewise, its 24.43% trailing-12-month EBITDA margin is 373.9% higher than the industry average of 5.15%. Furthermore, the stock’s 10.09% trailing-12-month levered FCF margin is significantly higher than the industry average of 0.23%.

For the fiscal second quarter ended July 1, 2023, TMO’s revenues declined 2.6% year-over-year to $10.69 billion. Its adjusted operating income decreased 9% over the prior year quarter to $2.37 billion. The company’s adjusted net income declined 8% year-over-year to $2 billion.

Also, its adjusted EPS came in at $5.15, representing a decline of 6.5% year-over-year. On the other hand, its non-GAAP free cash flow rose 21.9% year-over-year to $1.26 billion.

Street expects its EPS and revenue for the quarter ending September 30, 2023, to increase 11.5% and 0.5% year-over-year to $5.66 and $10.73 billion, respectively. Over the past three months, the stock has gained 0.6% to close the last trading session at $518.27.

NIKE, Inc. (NKE)

NKE is engaged in the designing, marketing, and distributing athletic footwear, apparel, equipment, and accessories for sports and fitness activities. Its brand product offerings are in Running, Basketball, the Jordan brand, Football, Training, and Sportswear.

Over the last three years, NKE’s revenue grew at an 11.1% CAGR, while its EPS grew at a 26.4% CAGR during the same time frame. Its net income grew at a 25.9% CAGR over the past three years.

In terms of trailing-12-month gross profit margin, NKE’s 43.52% is 22.8% higher than the 35.45% industry average. Likewise, its 11.55% trailing-12-month EBIT margin is 58.7% higher than the industry average of 7.28%. Furthermore, the stock’s 7.56% trailing-12-month levered FCF margin is 49% higher than the industry average of 5.08%.

NKE’s revenues for the fourth quarter ended May 31, 2023, increased 4.8% year-over-year to $12.83 billion. Its gross profit increased 1.7% year-over-year to $5.60 billion. The company’s net income declined 28.4% year-over-year to $1.03 billion. In addition, its EPS came in at $0.66, representing a decline of 26.7% year-over-year.

Analysts expect NKE’s revenue for the quarter ended August 31, 2023, to increase 2.5% year-over-year to $13 billion. Its EPS for the same quarter is expected to decline 19.3% year-over-year to $0.75. It surpassed consensus EPS estimates in three of the trailing four quarters. Over the past three months, the stock has declined 8% to close the last trading session at $97.67.

Unilever PLC (UL)

UL is based in London, the United Kingdom. It operates as a fast-moving consumer goods company. Its segments include Beauty & Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream.

UL’s revenue grew at a CAGR of 5.7% over the past three years. Its net income grew at a CAGR of 12% over the past three years. In addition, its EPS grew at a CAGR of 13.2% in the same time frame.

In terms of the trailing-12-month EBIT margin, UL’s 16.32% is 106.7% higher than the 7.89% industry average. Likewise, its 18.29% trailing-12-month EBITDA margin is 60% higher than the industry average of 11.43%. Furthermore, the stock’s 42.06% trailing-12-month Return on Common Equity is 273% higher than the industry average of 11.28%.

UL’s turnover for the first half ended June 30, 2023, increased 2.7% year-over-year to €30.43 billion ($32.55 billion). Its operating profit rose 22.6% year-over-year to €5.52 billion ($5.90 billion). The company’s net profit increased 20.7% year-over-year to €3.88 billion ($4.15 billion). Also, its EPS came in at €1.40, representing an increase of 23.6% year-over-year.

In addition, its net cash flow from operating activities increased 10.4% over the prior-year period to €3.37 billion ($3.61 billion).

For the quarter ending September 30, 2023, UL’s revenue is expected to increase 4.7% year-over-year to $16.53 billion. Its EPS for fiscal 2023 is expected to increase 4.9% year-over-year to $2.89. Over the past year, the stock has gained 12.2% to close the last trading session at $50.45.

Dominion Energy, Inc. (D)

D produces and distributes energy in the United States. It operates through four segments: Dominion Energy Virginia, Gas Distribution, Dominion Energy South Carolina, and Contracted assets.

On September 5, 2023, D announced that it concluded a robust and competitive sale process and executed three separate definitive agreements to sell its three natural gas distribution companies to Enbridge (ENB). The three LDCs include The East Ohio Gas Company, Public Service Company of North Carolina, Incorporated, Questar Gas Company, and Wexpro Company.

D's Chair, President, and CEO, Robert M. Blue, said, “The transactions announcement also represents another significant step in our business review, which is focused on repositioning the company to create maximum long-term value for shareholders, employees, customers, and other stakeholders.”

D’s net income grew at a CAGR of 62.4% over the past three years. Its EBITDA grew at a CAGR of 3.5% over the past three years. In addition, its EPS grew at a CAGR of 69.4% in the same time frame.

In terms of the trailing-12-month gross profit margin, D’s 46.31% is 19.2% higher than the 38.86% industry average. Likewise, its 45.90% trailing-12-month EBITDA margin is 40.2% higher than the industry average of 32.74%. Furthermore, the stock’s 50.59% trailing-12-month Capex/Sales is 73.2% higher than the industry average of 29.20%.

For the fiscal second quarter ended June 30, 2023, D’s operating revenue increased 5.5% year-over-year to $3.79 billion. Its adjustments to reported loss came in at $131 million, compared to adjustments to reported earnings of $1.11 billion. Its reported income per common share came in at $0.69, compared to a reported loss per common share of $0.58 in the prior-year quarter.

Street expects D’s revenue for the quarter ending September 30, 2023, to increase 3.4% year-over-year to $4.53 billion. On the other hand, its EPS for the same quarter is expected to decline 32.6% year-over-year to $0.79. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 4.4% to close the last trading session at $47.12.

Are Stocks Ready to Make New Highs?

Posted on by The INO.com Team

Please enjoy this updated version of weekly commentary from the Reitmeister Total Return newsletter. Steve Reitmeister is the CEO of StockNews.com and Editor of the Reitmeister Total Return.Click Here to learn more about Reitmeister Total Return

SPY – The recent sell off is over for the stock market…but are stocks really ready to make new highs above 4,600 for the S&P 500 (SPY)? 43 year investment veteran Steve Reitmeister shares his latest market outlook, trading plan and top picks in this fresh commentary below…

 

It’s been a couple weeks since my last commentary thanks to a much enjoyed vacation. Gladly most of that time stocks were in the plus column as the market rightfully bounced from recent weakness.

This fits in with my theory that we will be playing around in a trading range for a while. 4,600 for the S&P 500 (SPY) being the top end of the range and 100 day moving average (currently at 4,337) framing the bottom.

How long will we be in the range?

And what will be the catalyst to finally break out of the range?

And what are the best trades for this market environment?

Those key questions and more will be explored in this week’s Reitmeister Total Return commentary.

Market Commentary

As expected, the early August downturn was nothing more than a healthy round of profit taking after the tremendous bull run that started in March. Thus, after seeing a fairly customary 5% pullback investors were ready to hit the buy button again pushing stocks the S&P 500 higher.

Moving Averages: 50 Day (yellow), 100 Day (orange), 200 Day (red)

The recent bounce is nice…but are investors truly ready to break out of the range and make news highs above 4,600?

I believe the answer lies in a review of the recent slate of economic events. This should tell us if we have the proper catalysts in place to race to new heights:

8/25 Jay Powell @ Jackson Hole:  Remember that last time in 2022 Powell scared the pants off investors with his hawkish rhetoric. The key line being to expect economic pain (recession and job loss) before their war on inflation was over. This led to stocks going on a severe two month sell off to bear market lows in October 2022.

This time around Powell gave the usual sound bites. Inflation is too high…more work to do…may need to raise rates.

At first, investors were still in correction mode and hung on the words about “may need to raise rates”. This initially put some red arrows on the board. But as the day progressed investors realized that it was truly no different than any speech given by the Fed in the last several months. From there stocks leapt higher and have not looked back.

9/1 Government Employment Situation: Pretty much right on the money at 187K jobs added. The big surprise was how the unemployment rate unexpectedly jumped from 3.5% to 3.8% as the participation rate also went up. The best part of the report was that wage inflation continues to moderate with a lower than expected +0.2% month over month increase (that is only about 2.4% annualized…not far off the Fed’s target).

This all fits in with the narrative that the Fed is making serious headway with inflation and that more rate hikes are likely not needed. The bigger question is when rates can start to head lower. They say that is a 2024 issue…perhaps true. But it is still possible to start in late 2023. Either way it was welcome news to stocks that rallied hard on this news to end a strong week of price action.

Note that back on 8/29 the JOLTs report gave clues that the jobs market is softening with fewer and fewer job openings (see chart below). This trend also speaks to the likelihood of moderating wage growth which is one of the stickier parts of the inflation picture.

9/1 ISM Manufacturing: This has been the weakest part of the economic picture with 9 straight readings under 50. Make that 10 months now with the 47.6 reading. Gladly that is the 2nd straight month of improvement. Note the PMI version of this monthly report was even more optimistic.

And now a glimpse of the key reports that lie ahead:

9/6 ISM Services: This is the larger, and healthier part of the economy where we got a 52.7 reading last month. Right now expectations call for a fairly similar reading of 52.4. Yet I suspect the strength of the most recent Retail Sales report may say there is some upside to that number.

9/13 Consumer Price Index (CPI): Investors like to focus on this inflation report even though the Fed has consistently said they find the Core PCE reading to be the much more reliable inflation indicator. Regardless, this has been trending nicely lower and mostly coming in under expectations for the past several months.

Too much focus is given to the year over the year # which has a lot to do with inflation many months ago. That is why experts like to drill down to the month over month readings which gives a sense of the current pace of things. That is expected to modulate to +0.2% which again is getting much closer to the Fed’s 2% annualized target. And will have folks readjusting odds for what happens  on the next item…

9/20 Fed Rate Announcement: Right now it’s a forgone conclusion the Fed will stay put on rates at this meeting. What is not as certain is whether they have one more rate hike up their sleeves…and when they finally start lowering rates as the longer they leave these restrictive policies in place…the more they risk a recession forming.

Right now the CME calculates 40% odds of 1 more hike by the end of the year (either at November or December meeting). Honestly, with the facts in hand, I don’t see that happening. The nails are already in the inflation coffin. Just better to apply some patience to see it through as Fed policy typically has 6+ months of lagged effects.

Expectations & Trading Plan

We are in a young bull market…but still not out 100% out of the woods. Meaning the Fed has a history of going too far with their policies thereby creating a recession.

I sense this group is wiser than some of their predecessors and will manage the soft landing from which they can lower rates…which will be an elixir for economic growth…earnings growth…and share price growth.

So for as positive as recent economic news has been, for right now I expect a bit more time in the aforementioned trading range (4,337 to 4,600). And that time will likely be volatile with no seeming direction. That is the very nature of trading ranges.

All you have to do is keep your eyes on the long term horizon which is bullish which gives you ample reason to load up on the best stocks now for WHENVER the catalysts come to push them higher. Meaning don’t stay on the sidelines any longer. The time to get on the bull train is now.

The next section will discuss a bit more about which are the best investments to stay a step ahead of the pack.

What To Do Next?

Discover my current portfolio of 7 stocks packed to the brim with the outperforming benefits found in our POWR Ratings model.

Plus I have added 4 ETFs that are all in sectors well positioned to outpace the market in the weeks and months ahead.

This is all based on my 43 years of investing experience seeing bull markets…bear markets…and everything between.

If you are curious to learn more, and want to see these 11 hand selected trades, then please click the link below to get started now.

Steve Reitmeister’s Trading Plan & Top Picks >

Wishing you a world of investment success!

SPY shares . Year-to-date, SPY has gained 18.36%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

3 Stocks to Buy as Repairing Hurricane Idalia’s Damage Begins

Posted on by The INO.com Team

On August 30, Hurricane Idalia made a devastating entrance on the coastline of Taylor County, Florida, near Keaton Beach. With sustained winds estimated at 125 mph, Idalia was classified as a Category 3 hurricane according to the Saffir-Simpson Hurricane Wind Scale. Hurricane Idalia traversed inland across the eastern expanse of Florida's Big Bend region, advancing toward South Central Georgia.

The coastal regions of Taylor and Dixie County experienced a surge in water levels, reaching an alarming peak of eight feet above the ground level and encroaching nearly one and a half miles inland.

Accompanied by fierce winds, the storm left the area littered with fallen trees, displaced power lines, and debris. Widespread power outages are reported. Also, in Florida’s Pasco County alone, approximately 4,000 to 6,000 homes were inundated.

Idalia Wreaked Havoc

Risk analytics company Verisk anticipates that the onshore property insured losses from Hurricane Idalia's carnage will fall within the daunting financial bracket of $2.5 billion to $4 billion.

Assessing the severity of claims linked to Idalia necessitates considering the implications of inflation and the lingering repercussions stemming from Hurricane Ian. Certain aspects of the damage, such as fallen trees, carry the potential for accruing significant costs associated with clean-up initiatives and roof replacement endeavors.

Fast-moving and rising coastal surges accounted for substantial damage to manufactured homes, a major constituent of the residential inventory within the Big Bend region. These homes experienced extensive roof losses, siding damages, and, in some instances, near-total destruction due to wind and surge, especially within coastal vicinities.

Residential homes built on slab foundations endured significant water-related damages affecting various building components and interior contents. Yet, elevated beachfront properties managed to hold up relatively well under the circumstances.

According to Moody’s, Idalia was the ninth named storm of the 2023 North Atlantic Hurricane Season. Idalia’s impact of damage and lost economic activity is expected to be between $12 billion and $20 billion.

While construction expenses have seen reductions from their peak levels in recent years, they are still leveled above their long-term averages. Moreover, Florida's stringent regulations stipulate that state-certified contractors must undertake roof repair operations.

Given the vastness of wind damage brought by the hurricane, there exists a potential for exacerbating Florida's already fragile labor situation, potentially leading to an unexpectedly protracted recovery phase.

Despite Hurricane Idalia not reaching the destructive intensity of Hurricane Ian, its raging floodwaters have unmoored boats in coastal neighborhoods. Many residents are now grappling with locating their displaced vessels and managing the damage wreaked by the storm.

Home improvement retailers are springing into action to support their Florida employees and customers affected by Hurricane Idalia.

Well-established retailer The Home Depot, Inc. (HD), as one such proactive response, has set up a command center to ensure uninterrupted communication between its merchandise and operations teams and its outlets and suppliers on the Gulf Coast and other areas struck by the storm.

Many staff from its merchandising, operations, and supply chain teams are busy ferrying truckloads of essential products, including generators, water, tarps, plywood, batteries, and flashlights, to their stores.

Likewise, Lowe's Companies, Inc. (LOW) is channeling its resources towards ensuring an adequate stock of storm-related products like generators and clean-up supplies at its stores. The company is diligently striving to provide relevant products where they are needed most, whether for wind-related or flood-related support.

To ensure this, LOW’s merchant associates are on the ground, pinpointing the most crucial products in specific areas. The company had taken the precautionary measure of stocking hurricane-related items at its distribution centers well before the onset of the hurricane season.

As Florida initiates restoration actions post-hurricane, home improvement retailers are projected to book sales. With a proven tendency for a rise in comparable store sales relative to the severity of such natural disasters, the industry has inevitably captured attention.

Given this backdrop, let’s turn our focus toward the fundamental analysis of three home improvement stocks that could be worth buying under the current circumstances:

The Home Depot, Inc. (HD)

HD, a pioneering force with over four decades of legacy in the retail home improvement sector, offers an unparalleled selection of lumber, building materials, and home improvement products. Their offerings, priced competitively, maintain a robust standing in the service-focused retail landscape.

The company's unwavering commitment to innovation and upgrading its product range, service proficiency, and sound financial performance bolsters its commanding market position.

Achieving international presence through strategic acquisitions, HD's sales outside the United States reached $3.73 billion for the quarter ending July 30, 2023, accounting for approximately 8.7% of its net quarterly sales.

HD’s revenue grew at 9.1% and 8.2% CAGRs over the past three and five years, respectively. Over the past three years, the company’s EBITDA and net income rose at CAGRs of 8.4% and 11.1%, respectively.

During the second quarter, the company opened two new stores in the U.S., bringing its total store count to 2,326 as of the end of the quarter. As of July 30, 2023, 317 stores, or 13.6% of HD's global network, were in Canada and Mexico. For the second quarter of fiscal 2023, sales per retail square foot were $684.65, and for the first six months of fiscal 2023, it was $638.50.

For the six months that ended July 30, 2023, HD’s net cash provided by operating activities stood at $12.21 billion, up 69.9% year-over-year, indicating that the core business activities are thriving. For the same period, the company returned approximately 11.4% of sales to shareholders in a mix of dividends and share buybacks, indicating reasonable sustainability.

HD continues to boost shareholder value, evidenced by a fresh authorization of a $15 billion share repurchase program and a dividend declaration of $2.09 per share for the second quarter, payable to shareholders on September 14. This marks the company's 146th consecutive quarter of dividend payment.

HD expresses optimism towards the medium-to-long-term outlook for the home improvement sector and remains confident about capturing a larger market share in an expansive yet fragmented market. For fiscal 2023, it projects an operating margin rate between 14.3% and 14%.

Changes have been observed concerning institutions' holdings of HD shares. Approximately 70.5% of HD shares are presently held by institutions. Of the 3,472 institutional holders, 1,546 have increased their positions in the stock. Moreover, 158 institutions have taken new positions (3,417,304 shares), reflecting confidence in the company’s trajectory.

Lowe's Companies, Inc. (LOW)

LOW is a prominent American retail company that operates a home improvement and appliance store chain.

Even though LOW is a non-pet retailer, it has recently announced an expansion of its commercial ties with Petco, bringing more veterinary care and pet supplies to almost 300 of its locations by the end of the year.

This strategic move comes in response to the upsurge in pet ownership since the onset of the COVID-19 pandemic, which led to a substantial increase in demand for pet products and veterinary services. Consequently, retailers are seizing this profitable opportunity by establishing their platforms as comprehensive shopping destinations for pet owners.

LOW’s revenue grew at 5.1% and 5.7% CAGRs over the past three and five years, respectively. Over the past three years, the company’s EBITDA and net income rose at CAGRs of 10.6% and 1.8%, respectively.

Maintaining a disciplined emphasis on its top-tier capital allocation strategy, LOW persists in creating sustained value for its shareholders. In the second quarter of 2023 alone, the company invested in a share buyback program, purchasing approximately 10.1 million shares at $2.2 billion. Additionally, they delivered $624 million in dividends.

Last month, the company declared a quarterly dividend of $1.10 per share, payable to the shareholders on November 8, 2023. Its annualized dividend of $4.40 per share translates to a 1.92% yield on the current share price. Its four-year average dividend yield is 1.62%. The company’s dividend payouts have grown at a CAGR of 24.5% over the past three years and 20% over the past five years.

For the second quarter that ended August 4, 2023, LOW posted better-than-expected results, surpassing the top and bottom-line estimates. Its net sales reached $24.96 billion, while net earnings stood at $2.67 billion. Its earnings per share came at $4.56.

LOW's chairman, president, and CEO, Marvin R. Ellison, said, “Our ability to reduce expenses while improving customer service is the result of excellent execution by our team, and we remain confident in the mid-to long-term outlook for the home improvement industry. In recognition of the contributions of our front-line associates, we are awarding over $100 million in discretionary and profit-sharing bonuses to them this quarter.”

For fiscal 2023, LOW expects revenues to be between $87 billion and $89 billion, while EPS is expected to come between $13.20 and $13.60.

Ownership data indicates institutional holders have a significant interest in LOW, accounting for approximately 74.9% of LOW shares. Of the 2,464 institutional holders, 1,013 have increased their positions in the stock. Moreover, 167 institutions have taken new positions (1,363,818 shares), reflecting confidence in the company’s trajectory.

Marine Products Corporation (MPX)

MPX, specializing in designing, manufacturing, and selling recreational fiberglass powerboats, offers clients a suite of products, including Chaparral sterndrive leisure boats, Chaparral outboard leisure boats, and Robalo outboard sports fishing vessels.

MPX’s revenue grew at 26.3% and 8.9% CAGRs over the past three and five years, respectively. Over the past three years, the company’s EBITDA and net income rose at CAGRs of 37.1% and 41.7%, respectively.

Leveraging a strong previous quarter's sales performance, MPX aims to harness this ongoing momentum throughout the year. As a long-term objective, the enterprise plans to diversify its product suite and enhance its dealership network.

MPX reported formidable sales of $116.16 million for the fiscal second quarter that ended June 30, 2023, marking a 21.2% year-over-year rise. The company's ability to ensure the delivery of completed boats to its network of 206 domestic and 92 international accredited independent dealerships assisted in satisfying its dealers' inventory needs during peak retail selling seasons.

The growth in net sales can be attributed to an 11% increase in the number of boats sold during the quarter, a 10% uptick in the average selling price per boat, and a surge in parts and accessories sales. An increase in unit sales within both the Chaparral and Robalo brands was observed.

Gross profits saw a jump of 24.6% from the prior-year quarter, amounting to $28.66 million, while net income stood at an impressive $14.32 million, a 43.9% year-over-year increase.

While international sales currently comprise approximately 7% of the company's sales demographic, growth is evident with a 4% year-on-year increase. The 92 non-U.S. dealerships form more than 30% of the company's total dealership count, signaling a substantial potential for further expansion in international markets.

As part of its steadfast dedication to providing shareholder returns, MPX recently declared a quarterly dividend of $0.14 per share, scheduled for payment on September 11. Its annualized dividend of $0.56 per share translates to a 4.04% yield on the current share price.

Its four-year average dividend yield is 3.82%. The company’s dividend payouts have grown at a CAGR of 11.9% over the past three years and 8.6% over the past five years.

Bottom Line

The global economy is straining under various interrelated challenges and crises as the world navigates a critical juncture. Current and impending climatic obstacles exacerbate the threats, further intensifying the strain on global stability.

Amid these turbulent times, there is a silver lining. The global home improvement services market signals a beacon of economic resilience. Experts anticipate robust growth in this sector, projecting it to achieve $423.90 billion by 2027, growing at a CAGR of over 5%. This market prompts an intriguing opportunity for investors.

Given the industry tailwinds, investors might consider turning to dividend-paying home improvement stocks with robust fundamentals and trading at attractive valuations that offer consistent returns and bolster portfolios during uncertain times.