The following is an excerpt from the Stocks Under $10 Weekly Roundup originally sent to Stocks Under $10 subscribers on Aug. 5. Click here to learn more about this dynamic portfolio managed by David Peltier.
At this rate, investors are hoping that we're experiencing an endless summer. U.S. stocks rebounded on Friday, buoyed by a better-than-expected July jobs report, to close fractionally higher for the sixth straight week.
The economy added 255,000 non-farm payrolls last month, including 217,000 in the private sector. In addition, readings from the past two reports were revised higher by 17,000 and average hourly earnings increased 0.3% month over month. Traders reacted positively to the upbeat news, even though the chances of a near-term interest rate hike increased. Fed funds futures are now pricing in an 18% chance of a boost at the September FOMC meeting and 47% by the end of the year.
This is the first time in recent history that investors have reacted favorably to the increased chance of an interest rate hike. In other words, good news may be a positive for the market once again. In fact, just 48 hours ago, global markets rallied when the Bank of England cut interest rates and announced a quantitative easing strategy.
We faced a busy week for earnings reports in the model portfolio, but did not make any trades. Despite the relatively small move in the broader market averages this week, several names in the portfolio made sizable moves. Kratos Defense & Security (KTOS) gained 22%, Datalink (DTLK) and Cott (COT) both moved 11% higher this week, while Unilife (UNIS) declined 13%.
Nimble is an enterprise storage play that is a fallen angel -- a busted IPO from three years ago that is trading at just 3.1x cash but has never achieved profitability. The company received an upgrade from BMO Capital this week, on the prospect of higher all-flash array demand and we are intrigued by recent insider buying in the name.
Speaking of earnings, according to S&P Global Market Intelligence, aggregate second-quarter S&P 500 results are running 2.3% lower than a year ago. While nearly three percentage points higher than expectations at the beginning of the reporting season, this would mark the fourth consecutive quarterly decline.
To date, 85% of S&P 500 index members have reported earnings and 64% have exceeded expectations, which is below the historical average. According to S&P 500, excluding an 86% drag from the earnings sector, second-quarter profits are trending 2.7% higher than the previous year.
-- Peltier is also manager of Dividend Stock Advisor, a newsletter service that seeks solid stocks that are likely to both increase dividends and appreciate in value. Click here to get access to a portfolio that lays out a strategy for safe, sound, money-making solutions from companies you will recognize.