Inflation, inflation, inflation

[CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS]( Hello investor, Inflation, inflation, inflation Today is going to be all about inflation. The June consumer price index report will be out today at 8:30am which will reveal whether the price gains are slowing down enough for the Fed Reserve to adjust its interest-rate strategy. Investors have no doubt that the central bank will hike rates by 25 basis-point at its July 25-26 meeting, but the inflation report may have a big implication for its September meeting. - “I think [on Wednesday] you’re going to see further evidence that the CPI-measured inflation is continuing its descent. And a lot of that was because of the impacts of Covid. But that’s not good enough for the Fed. The Fed worries about there being [a] wage price spiral,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company. Moreover, Schutte believes that the central bank won’t stop until the labor market finally “crack” and for wage gains to slow down to the below-4% level. Meaning? A recession is likely, in his eyes. - “I think there’s going to be a recession, because the Fed [will] keep going until they see the labor market crack and until wage [growth] goes well below 4%,” Schutte continued. Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company (Photo: Bloomberg) Schutte is hardly the first Wall Street professional to anticipate a recession, though. Many investors agree, but they also don’t want to miss out on the recent rally. Many fund managers are terrified of the idea of underperforming for the year because they were too bearish, so they brought the money back into the markets. In other words, it’s a classic FOMO scenario. - “I think what’s happening is that more and more people are sort of throwing in the towel. And what we’re seeing is a shift from ‘Oh, no to FOMO,’” said CFRA’s chief investment strategist Sam Stovall. - “People [are] really scared about what could be happening with the market, [but] the market just keeps going up,” Stovall continued. “I think people are putting money to work that had been on the sidelines.” At the same time, some analysts argue that the economy may not experience a traditional recession. Rather, we could see a “rolling” recession where sectors could experience a recession in different time periods. For example, the manufacturing is contracting but could recover by year-end. However, other rate-sensitive sectors could struggle as the central bank raises interest rates. - “We should not expect a standard recession in this unorthodox cycle; e.g., the manufacturing sector has already mildly contracted and could start recovering by year-end. The economy may instead experience rolling recessions across different segments,” Jason Draho, UBS’s head of asset allocation Americas, wrote in a Tuesday note. Lastly, we urge you to join our live streams today to learn how we’re trading after the inflation data is released.  This Company Uses Apple’s Best-Used Strategy To Deliver Incredible Annual Returns Today’s Stock Pick: KLA Corporation ([KLAC]() One of Tim Cook’s favorite books is Competing Against Time. The basic premise of the book is that top companies move faster than competitors. They innovate faster. Product cycles are faster. Products move through the factory faster. Because of the speed, the company learns faster and cuts costs faster. Going fast becomes a flywheel that drives the business to the stratosphere. The author of that book wrote: - “When a timebased competitor can open up a response advantage with turnaround times three to four times faster than its competitors, it will almost always grow three times faster than the average for the industry and will be twice as profitable as the average for all competitors.” Indeed, that was one of the secrets behind Tim Cook’s extraordinary success with Apple. Apple just released its iPhone 14 lineup, and let’s look at how huge its selection is for the customers: - Two different models – iPhone 14 and iPhone 14 Plus - Five different colors - Four different memory capacity – 128GB, 256GB, and 512GB. (Source: Apple) It is not easy to offer these options. Color options bring a new level of headaches to the production process. It is far easier to offer one model for everything. Henry Ford stuck with one color – Black – for this reason. You also see it with Tesla. Elon Musk focused on a small number of models and colors. However, Apple brings a big advantage with its quick product cycles (once a year) and wide-ranging options. Today’s stock pick, KLA Corporation, is a time-based company that owns its competitors. KLA offers the process diagnostic machines that scan chips and wafers for imperfections and mistakes. That is the final step of semiconductor production. And it is running far away from the competitors in this space. It owns a whopping 50% of the market share in process control – four times higher than the nearest competitors across all regions: (Source: KLA Corporation) Listen, nearly all megatrends require a whole lot more semiconductor chips. The surge in demand puts pressure on the industry’s ability to supply semiconductors. Gartner recently published that process control was one of the fastest-growing segments of WFE in 2021, growing 43% in the year to $10.4 billion. Within process control, KLA is all over the fastest-growing segment in the optical inspection, outpacing WFE by 40%, and KLA’s market share is more than 80% in that segment! Innovation: Competitors copying your methods is a fact of life in business. That’s why a business can’t rely on a single innovation. If you come up with a new improvement, competitors will copy and release similar features soon enough. Therefore, you must innovate constantly to stay ahead. Competing Against Time quoted an executive from Sun Microsystems saying that you must move so fast that competitors will always lag behind. When they copy your methods, you are already on the next innovative one. - “Copying something that moves faster than you can copy it isn’t a good business to be in,” said Bernard Lacroute, executive vice president of Sun Microsystems. Precisely, KLA Corporation invests an incredible amount of money into R&D. It averaged 14% of the sales, which is far higher than a typical budget of 10% or below. It is now easy to see why KLA owns such an enormous market share in the process control industry. It introduces new products at two times faster than competitors. (Source: KLA Corporation) Shareholder-friendly company: Often, an innovative company retains all of its earnings and plows back into the business. Not KLA. You will get a generous return. The company is committed to returning more than 85% of its FCF to shareholders through dividends and share repurchases. Last year, $4.48 billion of shares were repurchased. (Source: KLA Corporation) If you invested in KLA back in 2015, you would own shares at about $50. Its current dividend per share is $5.20. In only seven years, your dividends will now yield at 10%+ annually! That’s the power of growing dividends per share. KLA boosted its dividends per share by 15% CAGR since 2006: (Source: KLA Corporation) Absurd margins: You wouldn’t believe how profitable KLA is. It has an operating margin of 38.8%! The FCF margin is also impressive at 30%. It is a cash machine business. In other words, it has a perfect structure to reward shareholders fabulously for a decade or more. (Source: KLA Corporation) Bottom line: There is so much to like about KLA: dominant market share, absurdly high margins, shareholder-friendly, and big growth. Buy this stock, and enjoy its compounding growth in dividends. [CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS](       © All Rights Reserved, Trade Alliance If you no longer want to receive these messages, you may [click here]( to unsubscribe.