US Equity Market 2019 1st Quarter Review
The equity markets are by designed made to go up over time. The first quarter of 2019 was no exception. The S&P 500 rose 13% (red line) this quarter and had its best start to a year since 1998. The Dow gained 11% (blue line). Nasdaq rallied 16% (green line), while the small-caps Russell was up 14% (purple line).
Helping the Nasdaq rally was Apple and Microsoft, both up 20%.
And there is room of Apple to continue to rise to the daily supply at $205.
One of the unlikely winners of the quarter was Xerox, yes, the copier and fax company.
Xerox has decided to reorganize as a wholly-owned subsidiary of a new holding company to attain greater strategic, operational and financial flexibility.
A holding company structure helps to protect patents, reduce tax bill and diversify businesses efficiently. So, the move seems appropriate as Xerox is executing a Strategic Transformation program to achieve productivity and cost reduction. Also, the company has an aggressive product development program in new high growth markets.It is anticipated to be completed in the middle of the year.
The chart suggests Xerox has room to rise another 25%.
One of the winners of the quarters which wasn't a surprise was Chipotle, rising 64% for the quarter. I talked about Chipotle several weeks ago.
On Tuesday, Brian unleashed another trick he had in his sleeve, a loyalty program. If I didn’t make it apparent in my previous post, I love Chipotle, so much that I signed up for the loyalty as soon as I heard about it.
A loyalty program's main purpose is a cost-effective means to make more money from current customers by giving those customers reasons to come back and purchase more. In this case, you don’t even have to come back, just order it on your phone and have it delivered right to you via Doordash.
I anticipate the loyalty program to boost revenue and the stock price. Thus, the chart suggests price can continue to move higher at least to the $700 level.
The Moment Of Truth For Chipotle - Part II
The stock price has since gone on to hit my target at $700.
Another winner of the first quarter wasn't a stock, but a person. Bill Ackman, the famous hedge fund manager of Pershing Square had it’s best quarter ever, thanks to Chipotle and several other companies. Pershing Square is the second-largest holder of Chipotle shares according to the most recent government filings. Ackman first bought Chipotle stock in 2016 at an average price of $405 per share.
So why was this the best quarter since 1998. Well the Markets were over sold, we had Fed Powell's Put Play where rate hikes were put on pause and optimism over a U.S.-China trade deal. Because these two stories are baked into the stock market price now, I don't anticipate another double digit quarter. I think theme for the 2nd quarter will be earnings. Analysts expect first-quarter earnings per share growth to be negative year-over-year for S&P 500 companies, which will put pressure on the Markets moving forward.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
1998 also had the whole Thailand debacle as I remember it as well so debt can become front and center once again! Look out for that yiele curve!
Posted using Partiko iOS
Corporate debt will be the culprit that takes down the Markets.
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Xerox back from the dead! And yeah, earnings season will be interesting for the market