Time for bears to EAT their words?

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After stocks were down (slightly) in the last few days, bears came out and began talking about how overvalued the market was. But the S&P 500 closed yesterday at a record high. More impressively, all 11 sectors posted gains on the day. What’s driving the rally? It’s all about corporate earnings. Wall Street believes that companies are poised to post strong earnings after several economic data painted a picture of a robust economy. Consumers are still spending. The labor market is doing good. So, a sticky inflation hasn’t worried investors too much yet. - “The S&P 500 continues to defy all of the naysayers and closed at another record,” said Chris Zaccarelli at Independent Advisor Alliance. “Despite the fact that inflation has remained stubbornly high, investors are more impressed with the state of the economy and the resilient consumer than they are worried about Fed rate cuts being pushed of farther into the future.” Chris Zaccarelli at Independent Advisor Alliance (Photo: Bloomberg) The S&P 500 is on pace to post its best first-quarter gain since 2019 with a 10% gain for the quarter. The Nasdaq is up by about 9.3% for the quarter. This indicates that other sectors are starting to rally — rather than just tech stocks. We will get data on jobless claims, GDP, and consumer sentiment. These are important economic data to gauge the potential earnings growth for Corporate America. On Friday (when the market will be closed), we will receive personal income, consumer spending and personal consumption expenditures. The inflation data, of course, is likely to garner the most attention. Economists expect inflation to keep accelerating. Investors expect the road to 2% to be a rocky one, so hot inflation may not be enough to pour ice water on the rally. Top stock with a simple business model to own for years Today’s Stock Pick: Cactus Inc ([WHD]( Cactus is a simple business but wildly profitable. It is a pure-play pressure control equipment solutions provider for onshore markets. It helps gas and oil companies to control the pressure coming from drilling, completion and production. Also, it offers field service, installation and maintenance. (Source: Catcus) And Catcus is good at what it does. Its market share growth was phenomenal. In 2011, it only had a 0.8% market share. Fast forward to just a decade… …its market share exploded to more than 40%. Naturally, Cactus’s earnings growth followed. It was red-hot until the pandemic killed the demand for drilling. But it is already back on its growth track: (Source: Catcus) International expansion: Even though Catcus has been growing like crazy, it has barely scratched the surface of its potential. The bulk of the land rig count exists outside the U.S. and Australia, but Cactus hasn’t entered these markets yet. All in all, Cactus operates in just 24% of the market opportunity. (Source: Catcus) Owner’s mentality: The company is founder-led and family-owned. Scott Bender is the CEO, while Joel Bender is the COO. Another family member, Steven Bender, is the VP of operations. On the conference call, Scott Bender said, "management are long-term investors in this business and highly aligned with our shareholders." And its philosophy is unusual for a corporation. 72% of the CEO’s pay is in long-term incentives (tied to ROCE). Cactus had a tough year in 2020, so executives took a base salary cut of between 33% to 80%. The board also took a 25% compensation cut. Top-flight margins: Boy, you wouldn’t believe how profitable Cactus is. It is almost absurd. The company had the highest adjusted EBITDA margin versus its peers. (It’s not even close.) At the same time, it has far, far higher ROCE. Just look at the graph below to see how far ahead Cactus is versus its peers: (Source: Catcus) Cactus refused to trade market share for margins. It has made it clear to the customers. And yet, no competitor has a lower product cost basis than Cactus because of its deep relationship with the suppliers. What else can you ask for? Cactus can sell its products at a premium while having the lowest product cost basis. Scott Bender said: - "We've never traded market share for margins and we're not going to start,” said Bender. "No one has a lower product cost basis than Cactus. We have the most leverage with suppliers. We probably have the deepest relationships." Cactus took a long-term focus on relationships, and any time an engineer moves to a new company, he/she is likely to take the relationship with Cactus with them. - Gaining share is like a snowball as Scott stated, "I think that market share sort of begets market share. And then as those engineers as well moved to other companies, they take, they tend to take us with them. So, I would have to say most of this is - the impetus for most of this is a renewed focus on efficiency and productivity." Bottom line: Cactus has it all. It has a ridiculously high market share in its niche, and it boasts absurdly high ROCE and margins. Its balance sheet is pristine. And yet, it has not entered 76% of its market. Buy this stock immediately. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](