Ada Nya Begini: Here are top 4 and bottom 4 Club stocks in just-ended March to June quarter

Tuesday, July 5, 2022

Here are top 4 and bottom 4 Club stocks in just-ended March to June quarter - CNBC

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The S & P 500 last week wrapped up the first half of the year, and it was a real doozy for the market, with the index posting its worst six month start to a year since 1970. After another troublesome quarter in the books, one in which the S & P 500 fell roughly 16%, we thought it would be helpful to look back and highlight what went right, what went wrong, and point out the common themes on both ends during the three months of March to June. Here's a snap-shot of the best and worst stock performers in the Investing Club's 33-stock portfolio for the second quarter, starting with our four top performers. Top Performers Taking the crown was Eli Lilly (LLY) , with a gain of about 13.3% in the second quarter. At a time when investors grew concerned about rising inflation and the impact of a Fed-mandated slowdown, many circled back to large-cap pharmaceutical stocks for their defensive qualities. Lilly owns one of the industry's most valuable pipelines. It features the revolutionary diabetes drug Mounjaro, which is in trials for use to fight obesity as well, and a potentially groundbreaking Alzheimer's treatment. In the second quarter, results from the phase 3 trial of Mounjaro, also called tirzepatide, as an obesity treatment showed it was highly effective, tolerable, and superior to a competitor. The runner up was Humana (HUM) , which pushed 7.6% higher in the quarter. The company beat earnings expectations in the first quarter and raised its full year outlook in late April. Humana is a 100% domestic company, meaning it gets all of its revenues from the United States. Concerns about a recession in Europe due to the war, the lockdowns in China over Covid, or foreign exchange headwinds from a strong dollar have nothing to do with this health insurer. In third was Constellation Brands (STZ) , which tacked on 1.2% in the quarter. History shows beer sales have been resilient during economic downturns, and Constellation Brands is a market-share gainer in the category through its leading Mexican beer portfolio . The company is profitable, pays a dividend, and repurchases stock. The company bought back $1.3 billion worth of stock through the first four months of its fiscal year through June. Fourth was Johnson & Johnson (JNJ) , which squeaked out a gain of 0.2%. The company's pharmaceutical, medical device, and consumer product businesses make this a defensive growth company that investors want to buy (or at least not sell), when they are concerned about rising inflation and the impacts of a Fed-mandated slowdown. J & J fits the profile of what we want to buy in this market—it is profitable, pays a dividend, has a pristine balance sheet, and trades at reasonable multiple. What are the common denominators of these four companies? All are high quality, profitable businesses that are among the leaders of their respective industries. They have minimal economic sensitivity and stable earnings growth. They all pay a dividend to shareholders. These are the themes we have been harking to for months and in times of volatility. Worst Performers The worst performer for the club was Bausch Health (BHC) , which plummeted 63.4% in the second quarter. The frozen IPO market and a complete rethinking of valuations of equities (due to higher interest rates) caused Bausch Health to IPO Bausch + Lomb (BLCO) at a significantly reduced valuation, leading to less cash proceeds then initially anticipated. The company also shelved the IPO of Solta Medical due to unfavorable market conditions. Bausch Health's heavy debt load presents challenges in a rising interest rate environment and economic slowdown. Second from the bottom was Nvidia (NVDA), which saw shares drop 44.4% amid a rout in semiconductor stocks. The company's elevated price-to-earnings multiple in a market that clamped down on high valuations due to rising rates was a major drag on the stock. So were concerns about the slowdown in the video gaming industry and a glut of graphic processor units (GPUs). Nvidia provided current quarter revenue outlook that was about $300 million below consensus estimates. However this was attributed to Nvidia stopping all product sales to Russia and the Covid related lockdowns in China. Marvell Technology (MRVL) was our third worst performing stock , falling 39.3%. Marvell actually made it through the quarter without any major downgrades from the big sell-side analysts or concerns from the industry about a slowdown in a major end market. However, all semiconductors struggled in the quarter and the good was tossed out with the bad. It also didn't help that the stock entered the quarter with a lofty price-to-earnings multiple that compressed significantly as the Fed raised rates. The fourth worst stock was Amazon (AMZN) , which declined 34.8% in the quarter. The company reported an ugly first quarter (at the end of April) and provided a weaker than expected outlook, citing inflationary pressures in fuel and freight, lower productivity due to overstaffing, and higher costs tied to excess capacity from overexpanding. The retail business also saw an impact from consumers shifting buying habits from goods to more experiential services like travel & leisure. What are the common denominators here? For Nvidia, Marvell, and Amazon it's all about expensive valuations, lack of dividend and share repurchases to support the stock, and economic sensitivity. It didn't matter that Nvidia provided only a slight guide down or that Marvell's outlook for the second quarter was higher than expected partly because it has very little consumer exposure. They all got thrown out. Fortunately, we recognized the need of selling technology, semiconductor, and other economically sensitive stocks early in the quarter when the most dovish members of the Fed turned hawkish and trimmed our positions in all three of these stocks within the first two weeks of the quarter. One big asterisk : Bausch Health was a special situation gone awry, as the negatives of a weak balance sheet in a rising rate environment/economic slowdown and the frozen IPO market more than offset the defensiveness of health care. When the economic future looks bleak, investors prefer to move up in quality, meaning they stick to companies with better balance sheets and cash flow generation. It was a bad house that could not be saved because it was in a good neighborhood. Looking back , some of the names have changed from when we did this exercise three months ago after the first quarter ended. However, the themes were largely the same: oil and health care outperformed and tech got crushed. It's worth noting that oil has plunged at the start of the third quarter . We think this collapse represents great value. (Jim Cramer's Charitable Trust is long LLY, HUM, STZ, JNJ, BHC, NVDA, MRVL and AMZN . See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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Tuesday, July 5, 2022

Here are top 4 and bottom 4 Club stocks in just-ended March to June quarter - CNBC

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