Business
Don’t let the bears fool you, sometimes good news is actually…good
This weekend I read a number of negative articles attacking this market and the earnings reports of individual companies. The take: All the numbers hide something, and even companies like Amazon ( AMZN ) and Apple ( AAPL ) simply reported numbers that exceeded lowball analysts’ estimates that were meant to generate upside. This is an outrageously bullish sign. You now have the most important arbiters of stock prices who are completely skeptical of anything positive. And yet the stocks not only tell you otherwise, but make you feel like you̵[ads1]7;re being left out of a big race. What gives? Let’s start with nine months of reduction forecasts and price targets with no sign of recovery. It’s the exact reverse of what happened when stocks went higher when we had endless price targets. I think the analysts have finally turned negative and we are seeing a bottom. Maybe not the bottom, but low enough to buy the beaten downs — Honeywell’s ( HON ) and Carrier’s ( CARR ), Otis Worldwide’s ( OTIS ) and ServiceNow’s ( NOW ). We are not in a position to call a real bottom, mostly because we don’t know how the market will react to an increase of less than 75 basis points in September. We know that the bears believe that nothing is enough, but they have become a little furious. Historically, back-to-back 75-point hikes are enough to make even the late Paul Volcker, former chairman of the Federal Reserve, nervous, given how so many of the crude costs are falling and spending is being restrained by all but the wealthiest. I expect the Fed to signal something in a month that could lead to a selloff. Otherwise, I can see the market doing well through earnings season and then stalling near the next Fed meeting in late September. At that point, we’ll not only have the Fed to deal with, but also the midterm elections. Current predictions have Republicans winning thirty seats in the House, which would give them a majority in both houses and nearly end everything President Joe Biden wants to do. That could make his agencies lean even further to the left, as the possibility of a Republican presidential candidate who could win certainly seems plausible. His agencies have a leftist bias so far, but they can really go wrong against the banks, oil and drug companies. It’s unfortunate, but that and the Fed could cause a rocky moment in September. All that aside, this past week showed the power of larger companies. Let’s spend a second on Tim Cook and Apple. It was a very impressive quarter, but I’ve read a number of negative articles about how the numbers bode poorly for Apple. How on earth could they promise badly? Did they talk to Tim Cook and he gave them a negative reading? To be sure, it wasn’t the most impressive of quarters. There were ways to look at it with some concern. Firstly, I wanted higher service income. But $19 billion is certainly better than satisfactory. After speaking with Cook after Apple reported earnings last week. I was most excited about the real opening of India, Brazil and Indonesia, three of the biggest markets in the world. The company lures people there into the Apple world through the trade-in market, hooking them on the superior performance. I also liked that the company seems to be heeding my endless pleas to figure out the lifetime value of an Apple customer. This is key, given that the company now has 1.8 billion active units, and 98% of users say they are satisfied enough not to switch to another manufacturer. Looking at the current stream of Apple offerings, you feel like there could be a pot of gold here among every customer. However, I believe that there must be more. That’s why it intrigued me so much when Cook said “buy now, pay later” could be the beginning of a larger financial vertical. Can you imagine if Apple had a financial app that allowed you to do everything on it? No matter what, getting another “must have” seems great. The fact that Cook asked the question about getting the NFL ticket can be seen as something that is already well in the mix. Does American football play well abroad? It can be dispositive. But it could also be that Cook likes the way baseball is going. Anyway: the fact is that Apple is in an enviable position with the world’s most dominant phone. Amazon: What can I say? Amazon can grow with fewer people, and it will. The pull is from the customer who stayed with the company and who is now being used more as a trade down supplier. I think Amazon needs to crush Walmart (WMT). Shares of Walmart are all the way back to where they disappointed, and the company has yet to report. It wasn’t just big technology that did well. We also saw fantastic numbers from oil – Chevron (CVX) and Exxon Mobil (XOM) – and everything in aerospace and automotive. The club that keeps Ford (F) put on a real show, although the doubters were once again over it. The drug companies and healthcare names reported good numbers, but they are being sacrificed to political concerns which I expect will run their course in a couple of weeks. Of course there were disappointments. I plan to talk about some of them when we hold our monthly meeting this Thursday. But I think the naysayers are protesting too much. So far they are losing to the bulls, they just won’t admit it. They have the S&P 500 Short Range Oscillator on their side – plus 7.9 drives us to sell some stocks, not buy them. But I learned a long time ago that good is good when it comes to stocks and good-is-actually-bad-news rap is the stuff of idealists on the wrong side of the trade. (Jim Cramer’s Charitable Trust is long APPL, AMZN, CVX, WMT. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE INVESTMENT CLUB INFORMATION ABOVE IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY ALONG WITH OUR DISCLAIMER. NO OBLIGATION OR OBLIGATION EXISTS OR IS CREATED BY YOUR ACKNOWLEDGMENT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR REWARDS ARE GUARANTEED.
Apple CEO Tim Cook speaks during Apple’s annual Worldwide Developers Conference in San Jose, California, on June 6, 2022.
Peter Dasilva | Reuters
This weekend I read a number of negative articles attacking this market and the earnings reports of individual companies. The take: All the numbers hide something, and even companies like Amazon ( AMZN ) and Apple ( AAPL ) simply reported numbers that exceeded lowball analysts’ estimates that were meant to generate upside.
