Warren Buffet, Earnings, Economic Outlook and More

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 Warren Buffet, Earnings, Economic Outlook and more. 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.

Executive Summary

Newsletter Portfolio Trades – Trimmed ALIZY and Sold FLG

Volatility – 40th Rally of 10%+ since 1977

Sentiment – Main Street Still Very Pessimistic

Buffett – Perspective from the Oracle of Omaha

Earnings – Solid Q1 Numbers; Guarded Outlooks; Overall EPS Growth still the Projection

Econ Outlook – Mixed Numbers, But Modest Growth Still Forecast

Recessions – Risk Has Jumped, But History Shows Staying the Course the Right Move Even if a Contraction Were to Occur

Inflation – PCE Growth Below Projections

Valuations – Patience Always Important, but We Like our Inexpensive Stocks

Stock News – Updates on fourteen stocks across seven different sectors

Volatility – 40th Rally of 10%+ since 1977

While the average member of the Russell 3000 index is still down 9.0% on the year and it was just a month ago that the S&P 500 had entered a Bear Market on an intraday basis,

with many indexes having eclipsed the 20%-down threshold on a closing basis,

the equity markets continued to remind last week that volatility is a two-way street as the rebound in stocks gathered more steam, pushing higher the 40th rally of 10% or greater since the launch of The Prudent Speculator in March 1977.

Happily, stocks have won far more during advancing markets than they have lost in declining markets and long-term returns have been terrific,

with all prior disconcerting events overcome in the fullness of time,

Sentiment – Main Street Still Very Pessimistic

but we respect that there remain numerous issues about which to be worried and fear levels continue to be off the charts, at least on Main Street, as evidenced by an incredibly pessimistic reading for the latest weekly Bull-Bear Sentiment Survey from the American Association of Individual Investors.

While we realize that we live in a highly charged political climate and social media has strong influence, we continue to be perplexed that folks today seem as frightened as they were at the bottom of the Great Financial Crisis and the COVID-19 lows,

though the contrarian in us is thrilled to see extreme Bearishness on the AAII gauge,

given that the indicator provides plenty of support for Warren Buffett’s admonition to be greedy when others are fearful.

Buffett – Perspective from the Oracle of Omaha

And speaking of the 94-year-old Oracle of Omaha, the soon-to-be-ex-CEO of Berkshire Hathaway offered more wisdom over the weekend at the annual Woodstock for Capitalists shareholder meeting. Mr. Buffett reminded that volatility is normal, with the recent market gyrations, “really nothing,”

and that despite its flaws, one should never bet against America,

as the charts in the slides above of long-term equity market appreciation, including the Bear and Bull Markets along the way, vividly illustrate.

Earnings – Solid Q1 Numbers; Guarded Outlooks; Overall EPS Growth still the Projection

No doubt, there will always be trips south for stocks, some scarier than others, but history suggests the “dramatic Bear Markets” that Mr. Buffett referenced this past weekend, like those following the bursting of the Tech Bubble in 2000, the Great Financial Crisis in 2008 and COVID-19 in 2020, usually correspond with a significant contraction in corporate profits, something that today does not seem to be in the cards.

Keeping in mind that stock prices and earnings are based on nominal dollars and not inflation-adjusted (i.e. real) figures, we understand that we learned last week that the first estimate for real U.S. GDP growth for Q1 2025 showed a decline of 0.3%. Of course, the difference between what the U.S. imports and exports accounted for a massive near-five-percentage-point hit to growth and the number was quite a bit better than what the Atlanta Fed had been projecting via its GDPNow real-time forecast.

Econ Outlook – Mixed Numbers, But Modest Growth Still Forecast

True, the economy is not exactly booming, as Consumer Confidence for April dropped to 86.0, well below expectations and the lowest level since May 2020 (which was a good time to be buying stocks),

True, the economy is not exactly booming, as Consumer Confidence for April dropped to 86.0, well below expectations and the lowest level since May 2020 (which was a good time to be buying stocks),

Interestingly, the Atlanta Fed’s GDPNow forecast for Q2 also calls for real U.S. GDP to expand by 1.1%,

…with that estimate offered before Friday’s announcement of the better-than-projected creation of 177,000 new nonfarm payrolls in March,

and continuation of a historically low jobless rate of 4.2%.

Obviously, the future is uncertain, and the latest weekly read on first-time filings for unemployment benefits saw a surprising jump to 244,000,

while the odds of recession, as tabulated by Bloomberg, remain elevated,

Recessions – Risk Has Jumped, But History Shows Staying the Course the Right Move Even if a Contraction Were to Occur

so we continue to take comfort in what the historical evidence shows for how stocks have performed, on average, prior to and during economic contractions,

and especially in the years following recessions.

Inflation – PCE Growth Below Projections

So, with inflation, as measured by the Federal Reserve’s preferred Personal Consumption Expenditure Core Index dropping to 2.6% in March, down from a revised 3.0% increase the month prior,

suggesting that Jerome H. Powell & Co. will have some cover to lower interest rates (three 25-basis-point cuts in the Fed Funds rate are expected this year) should it be needed to bolster the economy,

Valuations – Patience Always Important, but We Like our Inexpensive Stocks

we see no reason to alter our enthusiasm for the long-term prospects of our broadly diversified portfolios of what we believe are undervalued stocks.

Yes, we must be braced for additional downside (and the equity futures were sharply lower on Sunday evening) as trade and geopolitical developments have the potential to precipitate significant market moves, but we continue to like that history shows that the longer we hold stocks the greater the likelihood of positive returns.

Stock News – Updates on fourteen stocks across seven different sectors

Keeping in mind that all stocks are rated as a “Buy” until such time as they are a “Sell,” a listing of all current recommendations is available for download via the following link: https://theprudentspeculator.com/dashboard/. We also offer the reminder that any sales we make for our newsletter strategies are announced via our Sales Alerts. Jason Clark, Chris Quigley and Zack Tart take a look at earnings reports and other market-moving news of note out last week for more than a few of our recommendations.