This week = “more trouble than calm”

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JOIN OUR FREE LIVE TRADING SESSION!]( Hello investor, This week = “more trouble than calm” The stock market called a “timeout” yesterday, as stocks traded virtually flat just before a string of key economic data that could determine if the current rally has more gas remaining in the tank. The most important economic data will be the Federal Reserve’s preferred inflation gauge (personal consumption expenditures price index) due to be out on Thursday. Economists expect the biggest gain in a year. A big jump would reinforce Fed officials’ insistence that they must be patient before they start cutting rates. - “Economic data will return to center stage,” said Chris Larkin at E*Trade from Morgan Stanley. “After hotter-than-expected CPI and PPI readings earlier this month, more people may be looking to the PCE to for insight into the reinflation threat — and how it may influence the Fed’s timing of rate cuts.” Wall Street is focused on when the first rate cut could happen, but the whispers about another rate increase could gain some traction if inflation data remains sticky. The central bank is unlikely to overreact on a single inflation data, so a higher-than-expected reading may not change anything. But if inflation keeps running hot over the next few months, the thinking could change. - “Inflation would have to really jump (and consistently) for more than a quarter before the Fed would even consider raising rates at this juncture,” said Arthur Laffer Jr., president of Laffer Tengler Investments. - “Inflation has always been erratic month to month. If inflation stays elevated for longer or starts to rise, the Fed will sit pat for a while before bringing back the possibility of a rate hike.” Arthur Laffer Jr., president of Laffer Tengler Investments (Photo: Fox Business) We’ve got a lot of economic data that will come out this week. - Tuesday: Conf. Board consumer confidence and durable goods - Wednesday: Wholesale inventories and GDP - Thursday: Consumer income, PCE deflator, and initial jobless claims - Friday: Construction spending, ISM Manufacturing, and University of Michigan consumer sentiment This week will also be busy with Fed officials scheduling to speak. Raphael Bostic, Susan Collins, John Williams, Austan Goolsbee, Loretta Mester, and Mary Daly will speak this week. So, this week could bring a bunch of trading opportunities. The #1 “Dream Business” To Invest In Right Now Listen, the best insurance you can own is a wonderful business. It is the same with clothes. When you buy high-quality clothes, it lasts forever. Go cheap on it, and it will look shoddy within six months. Then you’d have to buy another piece. In the long run, you actually save money. Better yet, you simply look better in high-quality clothes with less effort. Indeed, a wonderful business can do the same. It will last you for a decade, and it will make look far smarter than you are. An idiot can know nothing about stocks, but if he is smart enough to buy and hold only wonderful businesses, he can do far better than Wall Street professionals. That’s what I am offering you today with our stock pick. Today’s Stock Pick: The Toro Company (TTC) Toro manufactures landscape equipment products, such as mowing and maintenance equipment, and winter-related equipment, such as snow blowers and plowers. Its product lines are miles long. It has specialized equipment for homeowners, golf courses, professional contractors, sports fields, and agriculture. (Photo: Toro) The economies of the business are simply phenomenal. An investing veteran can look at financial statements and know within five minutes if a company is intriguing. The biggest thing is, can the company generate cash? It is vital for two reasons: - Cash-generative businesses can re-invest to protect and expand their competitive moat. - A high-return business is like buying Christmas gifts. Yes, it’s the thought that counts. But when you have money, you can buy nicer things for people you love. It’s the same with companies. When they can generate high returns, they have the cash to reward shareholders. Now, how do you know if a business can generate high returns? The common metric is Return on Equity (ROE). It is a good one, but a deeply flawed one. The issue with ROE is that it ignores debt, and it can deceive you. Let’s use Toro as a case study here. Toro averaged a whopping 23.7% ROIC since 2011 — along with steady sales and adjusted EPS CAGR. (Source: Toro) ROIC is much more important than ROIC. Why: ROE eliminates the debt aspect of the business. Let me explain how this can deceive investors. Imagine if you have two salespeople selling snacks on Miami Beach. Their names are Bob and Aubrey. Bob sells candy bars, while Aubrey sells diced fruits. You invest $1,000 worth of inventory for each Bob and Aubrey. Off they go to Miami Beach and hustle all day long. That night, Bob and Aubrey come back with their results: - Bob: $1,500 revenue - Aubrey: $1,200 An investor would look at these numbers and assume that Bob is the winner. Bob has an ROI of 50% while Aubrey has 20%. But it is not as simple as that. Let’s imagine if Bob secretly took out a loan of $1,000 (debt) and hire another salesperson to sell candy bars along with him. So, we will need to account for that $1,000 debt. We add it to our $1,000 investment in inventory. The total investment is $2,000 and Bob generated $1,500 in revenue. Well, Bob generated a negative ROI of -$500. You are better off investing in Aubrey, instead. That’s where ROE can trick you. It doesn’t account for debt, so a company’s earnings can look magnificent, but they actually failed badly with a negative ROI. A good formula is Return on Invested Capital (ROIC). It adds shareholder’s equity and debt. It measures invested capital into the business and sees how well you generate from it. ROIC usually shows lower number than ROE because it eliminates the leverage factor. And yet, Toro averaged 23.7% ROIC. This is an incredible number! That’s the ultimate measuring stick. Even with a higher volume of dollars, thanks to debt, Toro can find places to deploy them profitably. When you have money, you can buy nicer things for shareholders. That was precisely what Toro did. With extraordinary returns, Toro bought back shares that reduced total shares by 3% annually! But that’s not all. Toro also boosted its dividends by 21% annually since 2014! One more thing. We should find out if Toro is still sitting on aging products that they hit on a decade ago. Are they vulnerable to competing products? Vitality Index is a nice metric for this. It measures the percentage of sales from New Products introduced over the prior three years. (Source: Toro) About 30% of Toro’s sales came from new products that were introduced last three years. The consistency is good to see. And it’s aggressive with the R&D budget to create new products. About 4.8% of sales goes to R&D: (Source: Toro) Bottom line: Toro has every trait of a “dream business.” It can generate 20% on every dollar invested into the business. That’s simply an outstanding number. Through share buybacks, dividends, and organic revenue growth, Toro’s shareholders will be fabulously rewarded for many years to come. A business like this is very rare. Take the opportunity and buy this stock for your portfolio. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](