These stocks / chart might not be the classic “Fly Me To the Moon” that is the Frank Sinatra / Count Basie and His Orchestra version, but we like the encouraging action shown below. We’ve been on the phone quite a lot with clients talking about their simultaneous and homogeneous pick-up and what we’re seeing also helps the Non-Growth portion of our Growth Relative to Non-Growth Ratio work better. Since May 15, our Ratio shows that Non-Growth is better than Growth by 8%. We continue to believe that the Non-Growth relative to Growth trade has room to work. That includes airlines.
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“Fistful of Dollars” was a 1964 Spaghetti Western (that’s what they were called) that had Clint Eastwood in his first starring role. The plot of the movie involves gold – likely why we remembered it – but it was more the action in the US $ Index (DXY) that had us recalling the title and the movie. US $ momentum is weakening enough for us to call attention to the action. The chart here makes note of the action the last time the US $ Index had a Fake Breakout and also calls attention to the current version, too. Fake Breakouts are among the more problematic price setups because (a) they make you feel like Charlie Brown just as Lucy pulls the football away and (b) they usually are followed by sharp moves in the opposite direction. AUD, CAD, and EUR have all strengthened sharply vs. the USD. Also, we think it’s worth nothing that since the late 1960s gold has had its biggest advances when the US $ Index is weakening. But you already know how we feel about gold.
Thanks to the help of our Technology Strategy Team – Steve Milunovich and Ryan Krieger – we’ve compiled a list of the 50 most expensive stocks within their Tech Strat universe to produce The Rich Index. The title of our index, and this note, is a reference to a once popular comic book about “the poor little rich boy, Richie Rich.” How rich was Richie Rich? So rich that his middle name was $. Some might say that the stocks in The Rich Index, where we’re using NTM EV/Sales as our fundamental criteria, are so rich that their middle name is $, too. We’ll leave any fundamental criticisms to others, but we made this index because we’ve wondered (a lot) how much valuation matters? We don’t have a definitive answer, but we know it matters a lot less when the item is going up. We also made the index because we don’t want to miss it when it tops. The Rich Index has an average NTM EV/Sales of 16.3x and a median figure of 14.3x. The richest stock in the index is Zoom (ZM), its NTM EV/Sales is 40x.
AmerisourceBergen Corporation (ABC) has built a potential Brobdingnagian BASE and it continues to show up positively in our stock screens / reviews. The stock’s Technical Score = 4 and other technical inputs – momentum indicators, ABC’s position relative to its moving averages, and the slopes of those moving averages – are all positive inputs. There’s no doubt that the stock has more work to do before breaking out, but if we liked it at these levels in early 2020 we figure it’s right to like it at the same levels today. A breakout above the 98 level would imply a move to a new all-time high for ABC. Let’s hope it’s as simple as Do-Re-Mi.
“Barbarians At the Gate – The Fall of RJR Nabisco” is a late ‘80s book, by WSJ columnists Bryan Burrough and John Helyar, about the LBO of RJR Nabisco. It’s among the books in the Wall Street canon and its main characters are F. Ross Johnson, CEO of RJR Nabisco, Henry Kravis, George Roberts, and Teddy Forstmann. Kravis, Roberts (of KKR & Co.) and Forstmann (of Forstmann Little & Co.) were Street legends and so was the deal – at $24 Billion it was the biggest of its time.
Queen Gertrude’s actual line in Act III, Scene II from Hamlet is, “The lady doth protest too much, methinks.” We thought of the shortened version – used in our title – as we listened recently to Fed Chair Jay Powell’s claim that it is unlikely that the Fed will use negative interest rates as a next step to help the economy. He said, “We do not see negative policy rates as likely to be an appropriate policy response here in the United States.” And the protestations grew more curious to us because earlier today the UK’s Debt Management Office sold nearly £4b of 3-year gilts with a yield of -0.003%. This means investors are paying to lend money to the UK government with the understanding that they will get back less than what they paid for them when the gilts mature in 3 years.
Everyone likely remembers 1st, 2nd, and 3rd BASE. And home plate, too. But today we’re going to introduce you to a 5th BASE. In the chart below we’ve identified four prior BASES for silver and the current fifth version which has been in force since March 2014.
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