And the winner is Cloud Computing going away! No I am not just talking about the Preakness, the fabled second leg of the Triple Crown of horse racing. I am talking about today's market where anything cloud computing trounced almost all other stocks by at least a half-dozen furlongs.
What happened today that made cloud computing break away from the pack?
I think some of it is a total delayed reaction. Last week Salesforce.com (CRM) reported one of the best quarters of the year, with exceptional growth in all of its verticals, especially its marketing cloud.
More important, CEO Marc Benioff spoke about the virtues of not being hamstrung by having all of your data and your hardware on premise and instead having it in the cloud, in this case the cloud of his partner Amazon (AMZN) . It's cheaper, it's better and it's possible to draw conclusions and make judgments about what is going to happen to your customers if you adopt the cloud and bring in outfits likes Salesforce to help you dive through the information.
Now when Salesforce reported the market still seemed to be all caught up in what would happen to President Trump. The focus was on Washington, not Wall Street and now Silicon Valley. But when we go over what Benioff said we recognize that companies that use artificial intelligence to make judgments about what customers want may be the only ones who can survive in an increasingly jarring retail landscape.
Specifically, Benioff was talking about how his Einstein-led marketing cloud puts Amazon-like powers in the hands of all retailers who will be able to tell you in their bricks and mortar stores as well as on their website, if you like this pair of shoes you might like that pair of shoes because those who bought one often bough the other.
Somehow this message didn't resonate last week. Today every company that helps manage businesses on the cloud, whether it is Workday for Human Capital (WDAY) , or Red Hat (RHT) for open source software, or Adobe (ADBE) for creative marketing, of Alphabet (GOOGL) and Amazon, two namesake cloud companies roared higher today.
I don't want to limit it just to the cloud though. There are some astounding moves in tech. The stock of Autodesk (ADSK) , the software company that gives you the ability to generate architectural models hasn't been able to stop going higher since its report last week.
Qualcomm (QCOM) which we featured as potential break-out in last week's off the charts with Tim Collins, has officially broken out. Tim's taking some profits at $59 which was his initial price target, up a quick four bucks.
The video game complex and the company that powers them, Nvidia (NVDA) , took another leap today led by TakeTwo (TTWO) which reports tomorrow. Remember our thesis, people like to sit at home playing video games, drinking alcoholic beverages -- there goes Constellation Brands (STZ) , parent company of Modelo and Corona to another all-time high -- and ordering pizza, as Domino's (DPZ) crashes through one more record barrier or munching on Fritos and Doritos. Shocker, Pepsico (PEP) , parent company of those iconic snacks, just broke through to an all time high.
And then there's Apple (AAPL) . This morning RBC Capital Markets put out a piece entitled "Apple, The Path to a Trillion Dollars -- Yes We Can," and it caught the fancy of many a market participant.
First, before we go crazy about whether this is a total impossibility, Apple has an $800 billion market capitalization so it isn't that big a leap.
Second, Apple is still selling at below a market multiple, meaning on an apples to apples basis -- speaking of fruit -- Apple is priced cheaper on its earnings growth than the average stock, even though I think all of us recognize that this is hardly an ordinary company given its incredible products and management and amazing balance sheet.
The thrust of the trillion dollar recommendation? Two fold: the new iPhone 8 cycle and the incredible service stream that has a high-teens growth.
Now, if we are going to compare Apple with the cloud computing winners I mentioned earlier, Apple's going to come up short. It's a workhorse compared to the cloud thoroughbreds.
But how about if we decide that Apple should be viewed as a consumer products company? Then how does it stack up? Well it's much cheaper than a Unilever (UN) or a Colgate (CL) or a Clorox (CLX) or and it's a little less expensive than Procter & Gamble (PG) , which is truly the analogue here because Apple makes a phone that's a Gillette razor and now it sells blades, that the service stream.
The only difference is that Gillette claims great innovation with each iteration while Apple actually delivers amazing innovation with each iPhone and I am gathering that the 8 is shaping up to be a dazzler. Don't forget that there could be a gigantic tailwind to the larger screen 8 if laptops are going to be banned on airplanes as we already consider the 7+ as the cord cutter because it has such an expansive screen.
Now if you took a snapshot of your screen at the end of the day I think you would ponder if this is what life is like when President Trump isn't around to do battle with his opponents and his friends. With the exception of Apple, these are all stocks that simply do not need any help from Washington. They are low tax payers who use every penny they have not to buy back much stock or pay dividends but to grow their businesses. That's what makes the three-year-old thoroughbred such an apt analogy.
Now we forget that when Trump was elected president he was considered to be great for business. All of that kind of got convoluted with the rising of the swamp. But Trump's been making a great case for American business overseas. The Saudis, no doubt grateful for his largesse showered orders on Boeing (BA) and Lockheed Martin (LMT) , amazingly two companies Trump picked on for the overruns on some Air Force Ones and Jet fighters, until their respective CEOs made deals with him. He no doubt also was able to influence the Saudis into making a huge investment in a Blackstone infrastructure fund. Blackstone is run by Steve Schwarzman, a close advisor to the President.
Clearly there's some terrific synergies in working with the president although they didn't extend to Mark Fields, the CEO of Ford (F) , who lost his job today.
The only other movers of note? The endless game that's being played with who will Kraft-Heinz by next? Today we saw spikes in the stocks of Campbell Soup (CPB) and Pinnacle Foods (PF) . I get the narrative, Campbell had a tough quarter and maybe the family behind the company is ready to cash out to the highest bidder. Pinnacle tried to sell itself before so its hat must always be considered in the ring.
But to me today's about how Cloud Computing's become the big winner both on the track and in the stock market. The bottom line? When the president's on the road, the market turns to what's been doing best. The companies that have reported the strongest earnings as a cohort are the ones that find themselves riding the fleetest horse in the Triple Crown: cloud computing both here and the Preakness, seemingly unstoppable. Now bring on the Belmont Stakes.
