Daily Sector Snapshot — 8/19/20
B.I.G. Tips – Earnings Season and Top Triple Plays
Walmart (WMT) wrapped up the Q2 2020 earnings reporting period on Tuesday with a huge beat on both the top and bottom line. It was a fitting end to what turned out to be a record-setting earnings season.
As we highlighted in our Q2 Earnings Season preview in early July, analysts were rapidly increasing earnings estimates leading up to earnings season. Normally when that happens, stocks have trouble performing well during earnings season because the expectations bar has been set higher. This season, even with analyst estimates on the rise in the four weeks leading up to the start of the reporting period, companies managed to beat bottom-line EPS estimates at the highest rate in the history of our database going back to 1999.
As shown below, 76% of companies reported stronger-than-expected EPS numbers this season, which eclipsed the prior record high of 73% seen during the Q3 2006 reporting period.
Long-term Bespoke subscribers know how much we like earnings triple plays, but for those that haven’t heard of the term, we came up with it back in the mid-2000s. An earnings triple play is a company that beats EPS estimates, beats revenue estimates, and raises forward guidance all in the same quarterly earnings report. Investopedia.com is one of the best online resources for financial markets education, and they’ve actually given us credit for coining the “triple play” term on their website. We consider triple play stocks to be the cream of the crop of earnings season, and we are constantly finding new long-term buy opportunities from this basket of names each quarter.
This earnings season there were a massive number of earnings triple plays. We went through the list of this season’s triple plays to find the ones that have the most attractive set-ups heading into the earnings off-season. Today we have identified 37 stocks that made the cut. To see these names, simply start a two-week free trial to Bespoke Premium today. Upon sign-up, you’ll unlock our Top Triple Plays report!
Industry Group Breadth Positive
While the S&P 500 moved to a new all-time high on a closing basis Tuesday, we wanted to check in on breadth with respect to S&P 500 industry groups and how they’re trading relative to their 50 and 200-day moving averages. While we hear a lot about the largest five stocks in the S&P 500 accounting for the lion’s share of the gains, it’s not as if everything else in the market is falling apart.
Looking first at S&P 500 industry groups versus their 200-day moving averages (DMA), while not extraordinary by any means, more than two-thirds are currently above their 200-DMAs, and the level continues to trend higher. A more worrying sign would have been if this reading was much higher and showing signs of rolling over. The seven industry groups that are currently below their 200-DMAs are Banks, Consumer Services, Energy, Insurance, Real Estate, Telecom Services, and Utilities.
On a shorter-term basis, the percentage of industry groups currently above their 50-DMAs is considerably higher at over 95%. In other words, the only industry group not above its 50-DMA is Energy. What else is new? Now that the S&P 500 has taken out its February highs, these breadth readings will be key indicators to watch for signs of participation (or lack thereof) in any rally. Click here to view Bespoke’s premium membership options for our best research available.
Chart of the Day: All Time Highs on Bad Breadth
Fixed Income Weekly – 8/19/20
Searching for ways to better understand the fixed income space or looking for actionable ideas in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit every Wednesday. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1 year return profiles for a cross section of the fixed income world.
In this week’s report we review the implications of the euro’s large rally in recent weeks.
Our Fixed Income Weekly helps investors stay on top of fixed income markets and gain new perspective on the developments in interest rates. You can sign up for a Bespoke research trial below to see this week’s report and everything else Bespoke publishes free for the next two weeks!
Click here and start a 14-day free trial to Bespoke Institutional to see our newest Fixed Income Weekly now!
B.I.G. Tips — A Market Round Trip in “Concorde” Speed
Bespoke CNBC Appearance (8/19)
Bespoke co-founder Paul Hickey appeared on CNBC’s Squawk Box on Wednesday to discuss markets after the S&P 500’s new high. To view the segment, please click on the image below. Click here to view Bespoke’s premium membership options for our best research available.
Bespoke’s Morning Lineup – 8/19/20 – Nasdaq New Highs Trouncing S&P 500
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“In business or in life, don’t follow the wagon tracks too closely.” – H. Jackson Brown Jr.
Yesterday, it was Home Depot (HD) and Walmart (WMT) and today one of each company’s chief competitors released earnings, and they did not disappoint. Lowe’s (LOW) reported a 34.2% increase in comp sales which was basically twice expectations while Target’s (TGT) comp sales came in nearly triple forecasts (24.3% vs 8.6%). Whether they’re the result of stimulus or not, the results were astonishing.
Outside of those big earnings reports, there’s not a lot of data today besides the Fed minutes and Nvidia’s earnings after the close. Futures were higher earlier following on the record closing high from Tuesday but have been drifting lower as we approach the opening bell.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, trends related to the COVID-19 outbreak, and much more.
The S&P 500 just broke a streak of nearly six months without making a new high on a closing basis, but the Nasdaq made its first post-COVID record high more than two months ago on June 8th and since then has made 18 record highs compared to the S&P 500’s one new high yesterday. For the entire year now, the Nasdaq (34) has made 20 more new highs than the S&P 500 (14). Going back to 1980, there have only been three other years where the spread was wider in the first 159 trading days of the year, and they were all in the 1980s. In other words, the gap between the number of record highs for the Nasdaq and S&P 500 hasn’t been this wide in more than 30 years. It’s time for the S&P 500 to play catch up, and don’t even get us started on the Russell 2000.
