Is There A Bullish Factor We're All Overlooking?

This company is crushing the Nasdaq right now You are receiving this message because you have visited Daily Picks 365 and requested to receive daily market updates, If you no longer wish to be contacted, please click the removal link [here](. [A Key Bullish Factor People Are Overlooking: Morning Brief]( [Click here to read full article.]( There are a few places you can go if you need a dose of bullishness, and one of the best is BMO’s Brian Belski. But when I opened his mid-October note, which landed in my inbox, it was filled with a dose of realism. It’s always been very trendy to be a little negative — it makes you sound smart, of course — but when you read it coming from someone like Belski, it feels more like a warning. In this case, there’s a little optimism thrown in. The gist: He was revisinghis end of year target for the S&P 500 and earnings-per-share down around 10%, from 4,800 and $245 to 4,300 and $230, respectively.Belski said that his team had underestimated the inflation problems and that with these problems likely to stay for a while, “we decided we need to be more realistic.” Realistic, however, is relative. The new number — 4,300 is Goldman Sachs’s old number — is now just 3,600. In other words, the “realistic” picture from BMO is actually quite nice, a 17% increase from when he typed it. “While this is a departure from our longstanding bullishness — we now expect a calendar year loss of roughly 10% — we remain more optimistic than many of our counterparts who seem to be feeding into the negativity with recent revisions,” Belski wrote. Since that note, the market has gone up almost 5%, and in another note on Monday, Belski revisited the topic to point out a key trend that’s being overlooked. “At the broader S&P 500 level, we think it is important to note that market P/E [multiple] tends to exhibit moderate…expansion in the months following bear market troughs,” Belski wrote. “With the current bear market price low occurring on 10/12/22, the subsequent 14-month period would roughly bring us to the end of calendar year 2023.” Belski’s team estimates an expansion of 5.6 multiple points for the P/E ratio, on average in the 14 months after a bear market trough — which Belski says we are either in or will be in very shortly. This is “something that many investors seem to be missing, based on our client conversations,” Belski noted. The driver of this change in the P/E ratio? A smaller E, historically speaking. “On the earnings front, we found that in the 14-month post-bear periods, LTM EPS for S&P 500 companies has declined during seven of the past 11 bear markets with an average change of 2.3% and a median change of -3.7%,” Belski wrote. This should be somewhat intuitive: earnings go down thanks to bear markets and then an expansion sees prices going up — and a bigger numerator and smaller denominator mean a bigger ratio. Managing expectations of measured growth In his mid-October note, Belski also lamented that his peers are “increasingly academic” in their prognostications and that they chose “what we believe are the ‘easy’ and ‘scary’ options,” which Belski says is “fear mongering” that’s “being taken out of context.” On the contrary, he noted, there’s plenty of historical precedent that economic data should precipitate some “P/E collapse.” Nothing, Belski continued, has been “textbook” and there’s no reason why that wildcard quality the markets have had should change. “Although we have tempered our enthusiasm, we truly believe that stocks can and should rebound from current levels,” he wrote. Going forward, however, Belski has added a strong caveat, which, from an optimist, shouldn’t be ignored. “[The] future trajectory is likely to follow more normalized patterns, a sharp departure from the pandemic stimulus-fueled gains of 2020-21, and the resulting YTD losses that unwound much of that excess,” he wrote. In other words: despite calling for what would be a 20% Q4, the rocket-ship-like gains we’ve gotten somewhat used to might be in the rear-view mirror. Of course, that might just be a healthy thing, too. [Continue reading article here.]( [This Monster Stock is Crushing the Nasdaq, and it's Still a Buy]( KEY POINTS - Interactive Brokers stock has soared 20% in the last month thanks to a positive Q3 earnings report. - The company delivered its highest quarterly revenue result of 2022 (so far), and its EPS doubled. - Interactive Brokers stock has potential to keep outperforming, even if the broader markets remain weak. This year’s brutal sell-off in the technology sector hasn’t hit all companies equally. Finding investment returns when the stock market is volatile could be as simple as asking one question: Which companies benefit from volatility? Online financial brokerage firm Interactive Brokers (IBKR 3.40%) certainly fits the bill. The company offers clients an opportunity to invest in thousands of financial instruments, and when market gyrations are particularly large, trading activity tends to spike. Since Interactive Brokers earns commissions on those transactions, its business does well in volatile conditions. The Nasdaq-100 technology index has declined by 29% this year whereas Interactive Brokers stock is performing far better with a loss of just 2.6%. And in the last month, its stock has soared by nearly 20% thanks to better-than-expected financial results for the third quarter of 2022 (ended Sept. 30). Here’s why it might continue to outperform. New customers are flocking to Interactive Brokers Financial markets soared during 2021, which spurred interest from many first-time investors, and it led to one of the strongest years ever for Interactive Brokers. With such heavy losses in 2022 (broadly speaking), it would be natural to assume people would now steer clear of the markets — especially as the cost of living is rapidly increasing, which leaves consumers with less investable income. But that wasn’t the case in the third quarter. Interactive Brokers saw a whopping 31% increase in the number of client accounts year over year, to 2.01 million. It appears those clients were also more willing to make risky bets, with trading volume on futures contracts soaring by 37% whereas volume in direct equities (stocks) fell by 56%. But for Interactive Brokers, that’s not a bad result because it earns significantly more commission per transaction on the former. Client equity, which is the amount of cash and financial assets held with Interactive Brokers, fell 19% year over year to $287 billion, but that’s mainly due to the stock market’s steep decline in value in 2022. Typically, a fall in client equity would lead to a fall in revenue for Interactive Brokers because its fee base becomes smaller, but the drawdown was offset by the surge in new accounts and increased net interest income, so that wasn’t the case. Interactive Brokers offers credit and margin lending to clients, which allows them to borrow money to buy more financial assets. Interest rates have been rising throughout 2022, which benefited the company, leading to a jump in its net interest margin to 1.67% in the third quarter, from 1.13% a year ago. Interactive Brokers’ financial results soared in Q3 The increase in Interactive Brokers’ net interest margin led to a whopping 73% year-over-year increase in its net interest income during the quarter, to $473 million. It helped push the company’s overall revenue to $790 million, up 70% compared to the year-ago period, and it marks the highest result of 2022 so far. Interactive is a highly scalable business, so its fixed costs don’t rise a great deal when its business grows. That means when it has an influx of new customers and its revenue soars, much of that benefit flows through to the bottom line. As a result, the company’s earnings per share (profit) more than doubled to $0.97 in the third quarter. [Click here to read full article.]( , 1919 Taylor Street STE F, Houston, TX 77007, United States You may [unsubscribe]( or [change your contact details]( at any time. Powered by:[GetResponse](