Inflation to heat up again?

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Well, the Iran-backed Houthi militant group damaged a ship offshore Yemen, leading the ship’s crew to abandon the vessel. The attack showed how the Middle East conflict remains high-risk for investors, since the marine traffic through the Red Sea accounts for about 12% of global maritime transit. As a result, major shippers (like Maersk) have rerouted vessels to take longer and costlier routes. Freight rates skyrocketed since the conflict, with the rate per 40 foot box jumping from around $2,000 in December to about $4,750 now. That’s more than two times higher in rates. (Source: Bloomberg) Naturally, investors are worried about its inflationary impact. This impact won’t likely be felt until months later, but any uptick in inflation complicates the Federal Reserve’s interest rate decision. Fed officials are unlikely to cut rates aggressively if inflation is heating up. But Wall Street has largely ignored the recent uptick in inflation, though. Earnings have been too strong to become bearish. Big Tech companies expect strong growth this year, and the GDP grew above the historical average in the fourth quarter. Stocks, of course, follow earnings growth. As long as companies keep profit growth rolling, there’s no reason for investors to pull back. Cost-cutting moves also led to higher profit growth, and share buybacks are back in style now. - “The seesaw market is really reflective of this tug-of-war between high sticky inflation — which suggests no near-term rate cuts — and strong earnings and other signs of a robust economy, which underscores investors belief that there’s more growth ahead for stocks,” said Greg Bassuk, chief executive officer at AXS Investments. The catalysts are in favor of traders lately, and it will be on future economic data to determine whether the bullish case continues. A Sneaky Turnaround Story That Peter Lynch Would Have Loved Today's Stock Pick: Modine Manufacturing (MOD) Peter Lynch, an investing legend, wrote in his book encouraging investors to allocate their investing into six categories: - Slow Growers - Stalwarts - Fast-Growers - Cyclicals - Turnarounds - Asset opportunities Today, we will talk about a company that is a perfect turnaround story. Modine Manufacturing is more than 100 years old, making cooling devices for two key segments: Performance Technologies and Climate Solutions. For example, it creates thermal systems and components for electric vehicles. Batteries are prone to overheating, and cooling devices are key to keep them cool. Modine also makes liquid-cooled heat exchangers for engine, stationary power and industrial applications. (Source: Modine Manufacturing) However, exciting growth exists in data centers. You know that data centers have been a monster revenue generator for Amazon, Microsoft and Alphabet. Modine is brilliant to tap into this fast-growing segment by offering software-optimized free cooling solutions for data centers. And guess what? The data centers segment soared 117% in the recent quarter. Its EV division also grew 30%. These two show that Modine is tapping into some of the fastest-growing segments in the world by offering its niche of cooling components. Modine recently raised its outlook for data centers to grow by 60-70% this fiscal year. Listen, Modine is a slow-grower. There’s no doubt about it. But data centers and EV play as a hidden growth driver for the company that Wall Street hasn’t fully priced in. This leads to the next point... Modine undergone a turnaround strategy where Modine simplified the business. Now, they are focusing on maximizing share of target markets and exiting unprofitable segments. Their focus will be on EV systems, data centers, IAQ + heating + coolers, heat pumps and stationary power. Why? These offer the highest margins. Sure enough, Modine expects its EBITDA margin to double from FY2022 through FY2025-27. (Source: Modine Manufacturing) That is an attractive story since Modine projects its revenue to grow between 4% to 7% for Fiscal 2024. This is very good number since rising margins can accelerate earnings growth, making it far above revenue growth. (Source: Modine Manufacturing) Bottom line: Modine is a sneaky growth stock since Wall Street may write it off as an old company. Its revenue growth isn’t so exciting. However, its transformation program can accelerate earnings growth that Wall Street loves. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](