The Prudent Speculator Weekly Commentary is expertly curated every week as a valuable resource for stock market news, investing tips, business insights, and economic trends as it relates to value stock investing. In this week’s market commentary, we discuss the Equity Support, an Economic Update and Value Stocks. We also include a short preview of our specific stock picks for the week; the entire list is available only to our community of loyal subscribers.
Buckingham European Train Journey – Value Rally Continued…Until the Rail Travel Concluded
The Case for Value – Return Gap vs. Growth, Historical Propensity for Outperformance & Valuations
Headlines – Last Week’s a Little More Dramatic than Usual; But Stocks Have Overcome All Prior Disconcerting Events
Equity Support – Corporate Profits and GDP Expand Over Time
Econ Update – Mostly Better-than-Expected Numbers
Stock News – Updates on thirteen stocks across five different sectors
Buckingham European Train Journey – Value Rally Continued…Until the Rail Travel Concluded
So, maybe the secret to success in stocks is to keep Buckingham on trains! The fantastic northbound run for Value stocks peaked (for the time being) on July 16, the day the Russell 3000 Value index (R3KV) outperformed the Russell 3000 Growth index (R3KG) by more than 180 basis points, just as your Editor’s summer European rail travel concluded with what might have been the highlight of the journey, the Bernina Express in Switzerland.
The Case for Value – Return Gap vs. Growth, Historical Propensity for Outperformance & Valuations
Of course, given that the Value benchmark outperformed its Growth rival by more than 400 basis points last week, it isn’t as if fans of inexpensively priced stocks need be too disappointed that the last few days of the week were in the red. After all, the performance gap between the R3KV and R3KG still has tons of room to shrink,
and history has shown that a falling tide does not always sink all boats,
while Value has won the long-term performance derby, albeit with some sizable selloffs along the way, since the launch of The Prudent Speculator in 1977.
We also note that despite the recent gains, Value stocks remain reasonably priced relative to interest rates,
and earnings,
while our stocks are even less expensively priced than the R3KV.
Headlines – Last Week’s a Little More Dramatic than Usual; But Stocks Have Overcome All Prior Disconcerting Events
To be sure, the one just ended was an event-filled week, starting with the aftermath of the assassination attempt on Donald Trump and ending with the worldwide global IT outage that wreaked havoc on commercial aviation and other commerce.
Speaking of the former, we are working on the first of our Election pieces and should have a Special Report ready go in the next two weeks. Here is a sneak preview: It is best to stay disciplined with a long-term investment approach centered on undervalued stocks no matter who occupies the Oval Office!
And speaking of the latter, while we can’t blame CrowdStrike for a missed flight out of London (note to self: don’t ever book a connection through Heathrow again), the Buckingham travel adventure saw its Saturday afternoon flight from LaGuardia to Des Moines cancelled; its Saturday night flight from Newark to Minneapolis arrive after 1:00 AM; its Sunday flight from Minneapolis to Des Moines cancelled, its one-way rental-car reservation cancelled and a 1o-foot U-Haul box truck rental saving the day!
Obviously, headlines like those witnessed last week are disconcerting, but such has been the case month after month and year after year, yet equities have proved to be rewarding for those that stick with them through thick and thin.
As we keep saying, the reason stocks have provided handsome long-term returns well in excess (7% per annum on average) of inflation,
Equity Support – Corporate Profits and GDP Expand Over Time
is that corporate profits have grown over time,
as the economy has expanded over time, despite some hiccups (recessions) along the way.
Econ Update – Mostly Better-than-Expected Numbers
Certainly, there is always a chance of an economic downturn,
but the near-term real (inflation-adjusted) GDP growth outlook improved last week, at least according to the Atlanta Fed which raised its Q2 estimate to 2.7%, up from 2.0% the week prior.
No doubt, a modestly more optimistic economic stance was bolstered last week by better-than-projected numbers on the health of the manufacturing sector in the New York area,
and the Philadelphia region,
not to mention estimate-beating (0.0% growth vs. -0.3% forecast) readings on retail sales,
housing starts (1.353 million vs. 1.300 million forecast),
building permits (1.446 million vs 1.400 forecast),
and industrial production (0.6% growth vs. 0.3% forecast).
True, there was a jump in first-time filings for unemployment benefits in the latest week,
and the Leading Economic Index, though better than expected, declined 0.2%,
but the data on the whole did little to alter the so-called economic soft-landing scenario, while not changing much the chances of Federal Reserve interest rate cuts over the balance of the year.
Stock News – Updates on thirteen stocks across five different sectors
