Is Apple At One Trillion The Peak For FAANG?

Summary

• Last week, it looked like the FAANG stocks were dead.
• This week Apple hit one trillion in market cap!
• What is next for the tech stocks and who will hit one trillion next?

As a professional money manager, I was once again chest-deep in my waders as I fished the many tributaries of the market this past week. It is usually about a ten-hour process for me each trading day.

My trading day begins with a one-hour prep for my national Best Stocks Now Radio Show, and then the live one hour show itself.

I feel strongly that I have some valuable insights to add with my market observations each week, so here we go once again…

Monday 7/30/18=DJIA (-144) NASDAQ=(-107)

The week started off where it left off on Friday, weakness in the Dow over the ongoing trade war, and weakness in the NASDAQ due to worries over growth. Netflix (NFLX) and Facebook (FB) really put a chill in the FAANG stocks after very weak EPS reports.

Amazon (AMZN) and Google (GOOG) (GOOGL), on the other hand, had blowout earnings. Now it was up to Apple (AAPL) on Wednesday to break the tie.

Non-FAANG stocks Intel (INTC) and Twitter (TWTR) also disappointed on the previous Friday. The NASDAQ is still one of the strongest indexes in the world, however.

The market also began the week worried about Central Bank meetings during the course of the week. The U.S., Japan, the U.K., Brazil, Mexico, and India would all weigh in during the week on their monetary policy.

On the U.S. economic front, U.S. Treasury Secretary, Mnuchin stated that he saw 3% sustained growth going forward. This would be good news for the nine-year plus BULL MARKET.

Iran's rial hit a historic low of 100,000 rials to the dollar over the weekend. The currency has lost half of its value in four months as the economic crisis in Iran worsens. I guess tough sanctions do work after all. The sanctions are only going to get tougher…

The chart of the rial looks even worse than the chart of bitcoin. It too has lost half of its value since the beginning of the year. I have never been a bitcoin fan. Count me in the Warren Buffett camp on the cryptocurrency.

There was a time in our past when Iran had more leverage over us with their oil that we were so dependent on. I still remember waiting in long gas lines during the Iran oil embargo of 1979. Now, according to energy secretary Rick Perry, energy independence is within our grasp. Perry made this statement over the weekend.

In other news, Japan must not have much faith in peace talks going on between the U.S. and North Korea. They picked Lockheed Martin (LMT) to build a new powerful radar for a two multi-billion dollar ground-based Aegis ballistic missile defense station. The defense stocks sold off when the "peace talks" with North Korea began, but they are now climbing back.

I continue to own several defense stocks in my Growth & Income Portfolio.

The multi-national stocks continue to be held back with the ongoing trade disputes with China. Caterpillar (CAT) had a blow-out earnings report on Monday, however. But, as you can see from the chart below, the stock has been under pressure ever since "tariff talk" began.

Caterpillar is just one of numerous multi-nationals that remain under pressure while the two economic giants battle it out. It would seem to me that something has to give fairly soon, and then the BULL can continue on its merry way.

China continues to feel the pain as their market remains in a BEAR MARKET for now. When this trade war is resolved there will be some very good buys in the fast-growing Chinese market, but for now, they remain under pressure.

Tencent Holdings (OTCPK:TCEHY) would be a good example of a very good Chinese stock that is now dirt-cheap, but it currently remains under heavy pressure.

The $429B company is currently one of the cheapest mega-cap stocks in my Best Stocks Now database. I wish that the stock traded options. Some LEAPS would sure be nice right now.

Data from www.BestStocksNowApp.com

Tuesday 7/31/18=DJIA (+108) NASDAQ=(+42)

All throughout this nine-year plus bull market, I have had potential clients tell me that they are "waiting for a pullback to get in." Then when the pullback comes, they are afraid to get in because the market is weak.

Well, the NASDAQ went through a 4.2% pullback after some disappointing earnings from Netflix, Facebook, Intel, and Twitter. I wrote all about it in my "Is FAANG Over?" article last week.

Do you the think that the "waiting for a pullback" crowd took advantage of the pullback? I doubt it.

Japan continues to have the loosest monetary policy in the world as the BOJ made no change to its current rates on Monday.

An almost zero interest rate policy is producing about the same results that they achieved for the U.S.-very sluggish 1-2% GDP growth. Maybe Japan should follow our lead with a heavy dose of fiscal policy!

The Nikkei has more than tripled over the last nine years, however.

In the meantime, Europe continues to put up very sluggish growth numbers. Their GDP came in at a very tepid 1.4% on Tuesday. They are in bad need of Fiscal Stimulus, but that is highly unlikely.

While our market has quadrupled and Japans market has tripled over the last ten years, Europe's market has doubled.

Now there is talk of more possible fiscal stimulus in the U.S. as the Treasury Department is considering bypassing Congress to grant a $100B tax cut. This would come in the form of allowing taxpayers to adjust their cost basis by inflation, thereby reducing their capital gains.

Dow Component Pfizer (PFE) reported earnings on Tuesday. They beat both their revenue and earnings estimates. This has been a prevailing trend for the vast majority of companies during this earnings season.

So far 81% of the companies in the S&P 500 have reported Q2 2018 earnings and 80% have beat their earnings estimates.

The Pharmaceutical sector has really had a lid on it for the last several years as rising drug prices have come under fire.

The sector has been gaining some steam lately, however, as it is mostly unaffected by the ongoing trade war with China.

The Pharma sector is currently ranked #12 out of 66 sectors that I track in my Best Stocks Now Database. Pfizer is not my favorite stock in the sector, however.

Data from www.BestStocksNowApp.com

I like stocks that have been delivering alpha and still make sense from a value proposition. Although Pfizer has had a good one year return, it has basically been a market performer over the years. Where is the alpha? The stock earns a mediocre performance grade of "C+" in my proprietary grading system.

Data from www.BestStocksNowApp.com

There might be a chance for some alpha if the stock was grossly undervalued at the current time, but it is not.

Data from www.BestStocksNowApp.com

My overall grading system combines performance (alpha) and value. Pfizer has never been in my preferred range of 1-250. It is currently ranked at #771. I consider it to be a SOGGY stock. (Stodgy Old Stock of Yesteryear.)

Data from www.BestStocksNowApp.com

Here are my current top-ranked stocks in the very large Drug Sector. My ranking is based on performance and valuation.

Speaking of SOGGY stocks, another one reported earnings on Tuesday. Procter & Gamble (PG) beat by $0.04, but the stock has been VERY SOGGY over the years.

Data from www.BestStocksNowApp.com

It should be noted that the returns show above are total return numbers, they include the stock's dividend.

The Health Care Equipment sector continues to be a leading sector in the market. The sector is currently ranked at #3 out of 66 sectors.

One of my favorite stocks in the sector continues to be Illumina (ILMN). The San Diego company is a leader in large-scale analysis of genetic variation and biological function.

Illumina was one of 53 stocks that I featured in my book Best Stocks Now back in 2011. At the time, it possessed that rare combination of both performance and value. It was trading at $75 per share back then. It closed Friday at $332 per share. It is now a $48B market-cap company.

The company beat both their earnings and revenue estimates. For the quarter their revenues grew by 25% and their earnings grew by 63%. Take that Procter & Gamble! The stock still possesses that highly desirable mix of performance and value.

As you can see from the screenshot below, the stock has put up some stellar returns over the years.

Data from www.BestStocksNowApp.com

I can also make a decent valuation argument for it. I currently calculate a five-year target price of $600.

The stock is currently the top-ranked stock in my Best Stocks Now App.

Data from www.BestStocksNowApp.com

Wednesday 8/1/18=DJIA (-81) NASDAQ=(+35)

If you bought the pullback in the NASDAQ you began to be rewarded on Wednesday as the tech stocks firmed up. The DJIA remained under pressure, however, as the trade war continued to escalate. "I will see your 20% tariff and raise it to 25%!"

The market also anxiously awaited the decision by the Fed and Apple's earnings which would come after the close of the market.

While India was hiking rates to 6.5%, the FED stood pat at 1.75% but they noted the U.S. economy remained strong. In other words, there will be many rates hikes yet to come. I remain a big BOND BEAR.

I pretty much called the top in the bond market with my articles back in July of 2016. I believe that it only gets worse from here for the bond market. The MPT, asset allocation crowd is right in front of a continued assault on fixed income.

The U.S. ten-year treasury (IEF)is now down 3.6% year-to-date and has averaged just 0.5% per year over the last 3 years. I foresee negative returns over the next five year, but the asset allocation advisors continue to recommend that retirees should have a big chunk of their assets in bond funds!

I am sorry, but I don't care what the asset allocation software says, that makes no sense at all.

Listen up Bernie Sanders supporters: The province of Ontario ended their basic income experiment. They called it expensive and unsustainable. Do you think?

The big news on Wednesday came after the close of the market when Apple reported earnings. The company beat both their earnings and revenue estimates. They also declared a $0.73 per share dividend.

I also featured Apple in my 2011 book. The stock was trading at $51.40 (split-adjusted) at the time. It is now over $200 per share.

The stock has obviously been a top performer over the years. I continue to own it in my Growth & Income Portfolio.

Data from www.BestStocksNowApp.com

While Apple's earnings report was terrific, the report of the week, in my opinion, belonged to Molina Healthcare (MOH). The company beat earnings by a whopping $2.00 per share and the stock exploded to the upside. The HEALTHCARE sector continues to heat up.

The stock has been highly rated in my app, but I ignored my own algorithm.

Data from www.BestStocksNowApp.com

Another healthcare stock had a blowout quarter on Thursday as Amedisys (AMED) crushed their EPS estimates by $0.22.

This is another one that got away from me. I was guilty of "waiting for a pullback" that never came.

I have 52,000 followers on Stock Twits. I send out about 5 tweets per day. These tweets can also be found on Twitter. My app keeps track of any tweets that I sent out. Here is what I have had to say about AMED recently. "Woulda, Coulda, Shoulda!"

Data from www.BestStocksNowApp.com

Thursday 8/1/18=DJIA (-7) NASDAQ=(+95)

The NASDAQ rode Apple's coattails to a whopping 95 point gain on Thursday. I told you that the FAANG trade was not over. In fact, I believe that it is not even close to being over. The Dow, on the other hand, was weak on Thursday as President Trump warned China of 25% tariffs on $200B worth of Chinese goods. Ouch!

In the meantime, Initial Jobless Claims came in at a very low 218K. If you are looking for a looming recession in the U.S. economy, you will not find one here.

In fact, in a very early reading, the Atlanta Fed Tracker is now guessing at 5% GDP growth in Q3.

I am not a fan of Tesla (TSLA) the stock. I like companies that are growing their earnings at a nice clip. Maybe Tesla will reach that status someday, but until then I refuse to drink the Elon Musk Kool-Aid.

Musk did reaffirm profitability and production targets Thursday, but the company still lost $3.06 per share on Thursday. The stock has been extremely "choppy" over that last twelve months.

The cold, hard facts are that the stock has been a fairly mediocre performer over years, despite the high performance of its cars.

Data from www.BestStocksNowApp.com

My biggest winner on Thursday was a stock that I own in both my Premier Growth and Income & Growth portfolios (I run four portfolios for investors.) Zoetis (ZTS) beat earnings by $0.07 on Thursday and the stock exploded to the upside.

The stock has been a steady producer of Alpha over the years Elon, without all the hype.

Data from www.BestStocksNowApp.com

I found the stock using my Best Stocks Now App.

Data from www.BestStocksNowApp.com

Friday 8/3/18=DJIA (+136) NASDAQ=(+9)

The Dow had a very good day on Friday, but the NASDAQ could not follow through on Thursday's big move.

The monthly jobs report came in a little weaker than expected and that may have cooled off the trillion dollar celebration at the NASDAQ. The Dow is beginning to break out, however, and it looks like it wants to go higher.

This has been a terrific earnings season so far with overall earnings growth now coming in at 24% for the quarter. This is the second best quarter since this whole BULL MARKET began!

China was dethroned by Japan at world's No. 2 stock market on Friday. The Shanghai Composite has lost more than 16% YTD to be among the world's worst performers.

I had a few nice winners on Friday after they delivered better than expected earnings report. Callaway Golf beat their estimates by $0.16, and they also beat on revenue. Their investment in Top Golf continues to pay off.

I own the stock in my Ultra-Growth portfolio. The stock exploded to new 52 week highs on Friday.

Another stock in my Ultra Growth Portfolio also had a good day on Friday. Take-Two Interactive (TTWO) beat their bookings expectations and the stock had a very good day.

Once again, just when a lot of folks were worried that the FAANG stocks would bring an end to the 9 year-plus bull market, Apple hit one TRILLION dollars.

Amazon is next…

Analyst’s Disclosure: I am/we are long TCEHY, AAPL, ZTS, ELY, TTWO, AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.