Everything that needs to be said about the overall market has been stated, restated, regurgitated, dissected, reconstituted, and elaborated upon in my commentary the last few months, says Steve Reitmeister, editor of Reitmeister Total Return.
Nothing has really changed. The solution is to have a pretty short market commentary section so we can give our full attention to the slew of strong earnings reports enjoyed by our stocks the past week, which led to solid outperformance.
Current Portfolio Holdings
Market Commentary
As stated up top...no need to spend lots of time rehashing the obvious about the market. The short version = bull market because of low rates + improving economy.
However, that doesn’t mean it will go up every day, week, or month. Instead, the easy money has been made with over 100% gain from March 2020 lows. Now we will do a dance of two steps forward and one back (sometimes two steps back). And then move forward again.
As such our job is not to be tricked into thinking that the bull market is over. We need to stay locked and loaded with a portfolio filled with stocks with the right ingredients to outperform...like the 118 factors measured in the POWR Ratings.
Indeed that focus has been working in our favor as earnings season takes center stage. That’s because stocks that score well in the POWR Ratings are simply more fundamentally sound companies. And those types of companies are much more likely to impress during earnings season leading to raised estimates and target prices for the future.
This fact is on full display with our array of earnings season winners. Let’s press on to the next section to dig into all the delicious details that point to further upside in the days ahead.
Portfolio Update
Nine of our stocks have reported earnings with seven being downright stellar. The other two were not bad...just not good enough to stay in the mix. This strong edge between winners and losers helped us outpace the S&P by a healthy margin this week:
+1.73% for RTR portfolio
+0.49% for S&P 500
Now let’s dig into the details of our earnings season winners and what it tells us about their future potential.
Virtus Investment Partners Winners (VRTS):
Virtus is a clear winner on top and bottom line. The laughable part was seeing shares open up in the red. That was quickly rectified and shares just kept advancing throughout the day finishing up +2.4%. And since then, it just keeps pushing higher.
Analysts are fawning over the results with a parade of increased earnings estimates and target prices. Right now, the average target stands at $361. Yet the street high is $400, which is not out of the question given their earnings picture. Long story short, we should stay in shares a lot longer with great expectations for more gains to come.
Schneider National (SNDR): Shares swirled around breakeven for the first few weeks in the portfolio. But we got our reward with a stellar earnings report on Thursday that was nearly 50% above estimates. This had shares trucking ahead +5.3% on the news and now firmly in the plus column since inception.
Estimates are impressively on the rise. Thus, not surprising that analysts are happy to reiterate Buy ratings with increased target prices. The Morgan Stanley analyst was happy to motor ahead of the pack with a $35 target, which seems more appropriate after a monster 50% beat. For this, and many other reasons, we will keep trucking with these shares.
Brunswick (BC): The decline of this shares over the past couple months, along with other related outdoorsy consumer discretionary products, always defied logical explanation. Gladly, BC put an end to the nonsense with yet another spectacular earnings report that left no doubt that there is plenty of gas in the tank of this growth stock. With that, the share powered ahead +3.6% on Thursday allowing it to break above $100. And since then, it has motored up to a dock just a few ticks below $105.
The 5-star analyst from B. Riley, Eric Wold, was happy to be the first analyst to praise BC for their stellar earnings. Reiterating the buy rating was easy. But he also lifted the target price to a street high of $135. That is a strong statement that shares are still a screaming steal at this price.
Group 1 Auto (GPI): Remember that they already preannounced stellar earnings a couple weeks back. So, the report on Thursday only corroborated that story and gave some clues of more good times ahead. That is why shares rallied another +2.6% on the day. And since then, analysts are saying that’s NOT ENOUGH!
In particular the 5-star analyst, Michael Ward, from Benchmark says the $226 average target is a joke. He has no problem saying $300 is the proper value for these shares, which actually sounds light when you consider they are expected to earn nearly $28 per share this year. Once again, we will stay buckled into these auto dealer shares expecting to ride the price further north.
MKS Instruments (MKSI): Their earnings results were in typical solid fashion as they beat on both top and bottom line with expectations for continued growth ahead.
So why did shares fall? Because they made a tactical mistake in the creative way they showed guidance, which was to display the midpoint of the earnings range for next quarter followed by how much it could be above or below that. Given that so much of trading these days is done by computers, then no doubt it looked like they were guiding lower. But as I learned at Zacks, companies expect to reach or exceed the top end of guidance. And that was higher than estimates in MKSI’s case, which should get rectified in time with more investors flooding to shares.
Note that the first two updated targets from analysts stand at $256 and $285. Yes, 60-80% above current levels. Note that analysts don’t like to look foolish. And thus they rarely give targets more than 30% above current levels. Thus, to be more than double that is a STRONG STATEMENT that these shares are as attractive as they come and that we need to be a bit more patient to see that current red arrow on shares change to a more joyous shade of green.
Columbia Sportswear (COLM): They served up a MONSTER beat and raise after hours Monday coming in at 61 cents when they were expected to lose 12 cents. Most impressive was the 14% revenue beat, which is not easy to do. And yes, they put a cherry on top with raised guidance for the coming year.
To be honest, shares should have been up 8-10% today as it was after hours yesterday. Perhaps that triggered some sell orders to lock in profits, which brought the price back down. Regardless, shares should be able to zipper up some nice gains in the weeks ahead given that they gave upward guidance for the future that should give investors great confidence of more good times ahead.
Insperity (NSP): Shares indeed made it to $100 coming into earnings as we predicted. And indeed, they delivered a very healthy 40% beat allowing shares to close above $100 for the first time. However, just like COLM I think the response today was far too tepid versus the actual impressiveness of the results.
I am not alone in that feeling. The 5-star analyst from Truist, Tobey Sommer, says this is one of his top ideas for investors and easily sees it worth $125 on this report and likely more if the positive trends for employment stay in place.
Next Up for Earnings Season is KLIC 8/4 after the close and JCOM 8/5 after the close...then way at the end of August will be BBY. The earnings history of each skew heavily in our favor...but never a guarantee of success. But hopefully helps us close out earnings season on a high note.
Learn more about Steve Reitmeister at StockNews.com
