In his Daily Market Notes report to investors, while commenting on stock picking, Louis Navellier wrote:
Q4 2021 hedge fund letters, conferences and more
Tech Giveth And Taketh
Mega tech giveth & taketh away.
Last week, Apple Inc (NASDAQ:AAPL)'s surprisingly strong earnings lifted the whole market. Today, the reverse is happening with Meta Platforms Inc (NASDAQ:FB)'s (formerly known as Facebook) surprisingly weak earnings, which this morning is having its worst trading day since going public after reporting its first-ever decline in users.
Today, we hear about Amazon.com, Inc. (NASDAQ:AMZN) and we will likely see volatility from their results too. The market is dishing out withering punishments for companies that are disappointing on earnings much more than rewarding companies with positive surprises.
Stock Picking is Back
This makes simply buying the market indexes not the easy bet it has been since the meteoric rise following the pandemic bottom. Stock picking is back in style and the recent pullback and ongoing volatility has created many opportunities.
In the current earnings season, we've seen record revenues overall and slightly lower profit margins. Earnings beats have been far smaller than the last few quarters and perhaps more importantly 2022 estimates are not getting raised. Longer-term, taking some of the froth out of the markets is a good thing; GAAP earnings, free cash flow, and dividends should be rewarded more than primarily forecasted earnings.
Not that growth has lost value, just that companies with strong growth plus current cash flow generation should be valued much higher than companies without current cash flow. At the same time, the earnings multiple compression brought on by the prospects of higher interest rates by central bank intentions to bring down inflation trends is also a good thing long term as runaway inflation hurts everyone.
The adjustment from the pandemic economy to the reopened economy will create many winners and losers, and astute stock picking should result in another year of very attractive returns.
Jobs Report
The biggest shock so far this week happened on Wednesday when ADP reported that private payrolls declined by 301,000 in January, which was substantially below economists’ consensus estimate of a 200,000 gain. This is the first time that ADP reported negative private payroll growth since December 2020.
According to ADP, the leisure and hospitality sector was hit hardest and lost 154,000 jobs, due to fears of the Omicron variant. Interestingly, the trade, transportation and utilities sector lost 62,000 jobs in January.
Currently, economists are expecting 150,000 January payroll jobs on Friday’s payroll report from the Labor Department, but I am sure in the wake of the ADP report that most economists are revising their January payroll estimates lower. Naturally, if the workforce continues to shrink, it may put the Fed in a bit of a pickle, since unemployment is one of their Congressional mandates.
The Labor Department on Thursday announced that new weekly unemployment claims came in at 238,000, down from a revised 261,000 in the previous week. Continuing unemployment claims came in at 1.628 million, below a revised 1.672 million in the previous week. Overall, weekly and continuing claims were better than economists’ consensus expectation, which may provide some hope for Friday’s payroll report.
Coffee Beans
A sealed copy of 1990 video game John Madden Football for the Sega Genesis sold for $480,000, setting a new world record for the highest price paid for a sports video game. This particular copy is especially extraordinary as it comes from the offices of its famous namesake. The buyer's premium of the sale will be donated to a charitable foundation created in Madden's honor, who died in December at the age of 85. Source: UPI. See the full story here.
