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Earnings season continues to reassure skittish investors that the economy is pushing through inflation and supply chain challenges. As a result, the S&P is now on a five-day winning streak (along with the NASDAQ) and within 1% of its all-time high (along with the Dow).
The S&P jumped 0.74% to 4519.63, while the NASDAQ advanced 0.71% (or about 107 points) to 15,129.09. These indices haven’t declined since last Tuesday, as a bevy of earnings reports and economic data have kept the market in a great mood. The Dow, which didn’t join its counterparts in the green on Monday, got in on the fun today by rising 0.56% (or nearly 200 points) to 35,457.31.
The S&P and Dow are both within 1% of setting new highs for the first time since early September and mid-August, respectively. The NASDAQ remains approximately 1.6% away from making its own history.
Positive earnings reports keep rolling in. For example, healthcare giant Johnson & Johnson (JNJ) eclipsed the Zacks Consensus Estimate by nearly 10% and rose 2.3% in the session. Furthermore, consumer products staple Procter & Gamble (PG) beat by 1.3%, but the stock slipped over 1% after warning of higher prices due to inflation and supply chain issues.
“I have not felt this good heading into an earnings season in years. The reason being, there is so much against us, I feel like good news will break out and create a paradigm shift. We are an earnings report away from serious FOMO,” said Dave Bartosiak in today’s Surprise Trader.
The first FAANG of the season continued the optimism. After the bell on Tuesday, streaming pioneer Netflix (NFLX) topped the Zacks Consensus Estimate by nearly 25%.
Perhaps more importantly though, subscriber growth came to 4.4 million, which trounced expectations of less than 4 million and marked a pronounced improvement over the 1.5 million adds in the second quarter. Looking forward, it sees 8.5 million adds in the fourth quarter.
Shares of NFLX were up 0.16% in the session but are down by more than 1% afterhours, as of this writing.
The big earnings report on Wednesday will be Tesla (TSLA) after the bell. Other releases to watch include Verizon (VZ), IBM (IBM) and CSX Corp. (CSX), among many others.
Today’s Portfolio Highlights:
Stocks Under $10: The portfolio had a few vacancies this morning, so Brian filled two of the open spots by adding Berry Corp. (BRY) and Veru (VERU). BRY is a Zacks Rank #1 (Strong Buy) oil play that looks to be headed much higher. Its valuation of 23x forward earnings is very respectable for a name that just posted 196% topline growth. VERU is a Zacks Rank #2 (Buy) healthcare products name focused on female health. It has beaten the Zacks Consensus Estimate in three of the past four quarters, while expectations call for topline growth of 60% for this year and another 30% for next. The stock is moving higher and Brian wants in. Read the full write-up for more info on today’s buys of BRY and VERU. The service is now only one position shy of being fully invested at 15 names.
Counterstrike: It was a busy Tuesday for the portfolio with Jeremy cutting three names (including a double digit winner) and adding a new position. First of all, a volatile commodity like natural gas is no place to be greedy, so the editor was more than happy to sell ProShares UltraShort Bloomberg Natural Gas (KOLD) for a 17.5% return in less than two weeks. Meanwhile, Ulta Beauty (ULTA) did not impress with its 2022-2024 targets at an investor’s day presentation, which could kill its momentum just as it was approaching all-time highs. Jeremy played it safe and sold the name for a 9.6% return in approximately four months. Finally, Duck Creek Technologies (DCT) was also sold after getting stopped out.
The new buy is RH (RH), a Zacks Rank #1 (Strong Buy) luxury furniture retailer that recently filled the earnings gap from June and now “looks like it wants all-time highs and beyond”. Jeremy added the name with a smaller 6% allocation and would pick up more on any move lower. He thinks RH will grind higher into its next earnings announcement in December. Read the full write-up for a lot more on all of today’s action.
Surprise Trader: This service needs a new pair of shoes, which is why Dave added Steven Madden (SHOO) on Tuesday. This Zacks Rank #2 (Buy) footwear company averaged a positive surprise of 56% over the past four quarters, including a 60% beat in the most recent report. And now SHOO has a positive Earnings ESP of 4.55% for the upcoming quarter, which should be released in the last week of October. The editor added SHOO today with a 12.5% allocation, while also getting out of Commercial Metals (CMC) after a strong quarterly report failed to lift the stock. Read the full write-up for more on today’s moves.
Marijuana Innovators: Marijuana stocks enjoyed a pretty good session on Tuesday, as evidenced by this portfolio capturing three of the top five winners today… including the only double-digit surge. Tilray (TLRY) jumped 15.8%, which made it the best performer among all ZU names by a wide margin. The runner-up was Canopy Growth (CGC) with a rise of 8.6%, while Akerna Corp. (KERN) also made the list with an advance of 7.3%.
Zacks Short Sell List: The portfolio replaced only one position in this week’s adjustment. It short-covered JOYY (YY) and then filled the open spot by adding Aptiv PLC (APTV). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide. By the way, this service had a top performer on Tuesday as the short in TaskUs (TASK) rose 7.4%.
Recommendations from Zacks’ Private Portfolios:
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