Can The Monster Rally Sustain?

[CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS]( Hello investor, Can The Monster Rally Sustain? We just witnessed a nearly $10 trillion rally for global stocks this year. Now, we are at the pivotal point. Can the rally sustain as companies begin to report their earnings over the next few weeks. The expectations are already low, though. The S&P 500 companies are expected to post a 9% drop in profits in the second quarter. A 12% drop for Europe. However, this sets expectations lower and makes it easier for companies to surprise on the positive side. (Source: Bloomberg) Evgenia Molotova of Pictet Asset Management isn’t too bullish on the results: - “I’m skeptical companies will be able to demonstrate the same degree of earnings resilience this quarter,” said Evgenia Molotova, senior investment manager at Pictet Asset Management. “Top-line growth and margin stability will be key to seeing whether profits will be able to rebound in the second half.” Remember the AI frenzy? Investors were dazzled by the potential of AI. But the check has arrived on the table. Companies must prove that they can translate AI technologies into actual profits. After all, investors already assigned lofty valuations in those AI companies, expecting a sensational jump in earnings. - “If enthusiasm for AI fails to adequately materialize in technology companies’ earnings, we could experience at least a temporary correction in share prices,” said Aneeka Gupta, director of macroeconomic research at WisdomTree. Bloomberg Intelligence expects mega tech stocks – Apple, Microsoft, Amazon, Nvidia and Alphabet – to post best earnings growth among US companies this quarter. Consumer spending: Another factor is whether consumers still have spending power to keep the economy afloat. Hints can be found in auto sales and the travel and hospitality sector. Analysts will pay attention whether there is any slowdown in consumer spending. - “Consumers have propped up the US economy for months, spurred by a strong labor market and excess savings, so any evidence of belt tightening, trading down or fading spend on services will be key,” said Ross Mayfield, investment strategy analyst at Baird. All in all, this week will be busy with earnings reports. We will be here with you all the way, providing updates and insights on the health of the economy and potential moves in the stock market.  Could This Be The #1 Trade For 2023? Today’s Stock Pick: Controladora Vuela Compania de Aviacion, B. de C.V ([VLRS]() Every portfolio should have exposure to emerging markets. Ray Ralio, the founder of Bridgewater Associates, usually has as much as 15% in emerging market ETFs. He believes that emerging markets offer diversification that reduces risk without impacting the overall return. Volaris is the dominant ultra-low-cost airline in Mexico, and it is the perfect stock for your emerging markets allocation. Here’s the main thesis: Many Mexicans still use buses to travel because they are usually cheaper. But now, flights with Volaris are two times cheaper and will save 13x in traveling time. Obviously, it’s a no-brainer to take the flight. Here is why this trend is important in Mexico. A 1% volume migration from the bus would represent a 67% growth in domestic airline volumes, according to Bank of America. (Source: Volaris) Good enough, the demand for ultra-low-cost flights (and for Volaris) has exploded. The demand for the luxury bus was relatively flat, along with Mexico’s population growth. On the other hand, Volaris saw its demand soar by 290% since 2012: (Source: Volaris) Believe it or not, 47% of Mexicans are non-flyers and still travel by bus. In fact, 16% of bus travelers took a flight for the first time during the pandemic. And you and I can be sure that they’ll never go back to buses, especially if air travels are two times cheaper. And Mexico remains one of the fastest growing countries for its airline industry. In the graph below, you will see that Mexico is still underpenetrated in terms of trips per capita, and there’s plenty of room to grow: (Source: Volaris) Moreover, Mexico would need to double its passengers’ trips per Capita if it were to equal to Colombia’s current level. Or 2.4x to reach Turkey’s level. Clearly, there is plenty of room for Volaris to grow with the demand in Mexico. (Source: Volaris) Low-cost is its competitive advantage: Volaris simply has a phenomenal competitive advantage – a low-cost model. It is not easy to operate in this segment. It is the same with Wal-Mart. The business concept is simple, but it takes extraordinary discipline to save on pennies in every area of the operations. You will see how much Volaris has mastered in this low-cost model. The popular metric for airlines is the cost per available seat mile (CASM). It divides the operating costs of an airline by available seat miles. Now, Volaris has a CASM of 7.2 which is more than two times lower than U.S. legacy carriers. It is even lower than Frontier, another ultra-low-cost airline based in the U.S.: (Source: Volaris) As a result, Volaris is perhaps the best-run airline in North America. The difference is stark between Volaris and the U.S. airlines. For example, Volaris had a 16% revenue CAGR from 2018 to 2021 while other ultra-low-cost airlines had negative CAGRs. And best of all, its total debt was also the lowest versus its North America peers: (Source: Volaris) Bottom line: Volaris’s shares saw a major hit, falling below its 2018 level. It is now more than 40% off its 2021 high. It is an insanely cheap stock when you consider the macro and cultural shift in Mexico from bus to air. The rapid growth of flying in Mexico, along with its financial superiority, makes this stock a must-own. The risk is low, but the reward can be large.   [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.