What do you do if you missed it? What do you do if you have if you think it is too late? When I am asked the question, which is about as close to an inquiry as I get these days, I tell them of course you missed a lot of it, how could you not with the averages up here, with the Dow crossing century marks and the NASDAQ so far above what we've come to expect is high, too high for comfort?
These are not easy questions. When I look at my screen I think, holy cow, what the heck ARE we doing up here. But let me give you some reasons to think that you may have missed a great deal of upside but that there could be much more ahead.
Let's start with Washington. Those of us who like stocks are so used to being sickened by Washington that we really don't know what to make of it when it goes our way.
Just a few months ago it sounded inconceivable that we could ever get tax reform. The Republicans in Congress and the president himself ran against Obamacare, not the tax code and when the repeal and replace movement devolved into failure there seemed to be no reason to think that anything substantive could come from this Congress and we would have to rely on deregulation by the president as a reason for business optimism.
I remember the disarray when that health care bill failed and how it seemed almost foolish to go after tax reform given the abject failure of the Republicans to corral their own party to get things done.
We would interview congresspeople on air and they always seemed to have a different plan to raise revenues so there would be no budget busting. They wanted to tax retailers. They were reluctant to cut the corporate tax rate too far because of the hole it would leave. They could get no consensus with Democrats about what to do. It seemed like a colossal waste of time.
Somehow, though, perhaps because the president's endless harping, perhaps because of a realization that there could be hideous losses in the mid-term elections, they were able to cobble together a plan that's incredibly pro-business. Plus, any fiscal discipline that Republicans might have believed in, any orthodoxy, went right out the window, something, again that seemed inconceivable just a few months ago. It was almost like a religious conversion with the Republicans playing the role of Democrats in their lack of fear of gigantic deficits down the line.
Because so few saw this bill actually going into law, it wasn't discounted into the market as usual. Now I know that there have been tax cuts and tax increases that brought about gains in the market. We don't want to be too Washington-centric. The fact is, though, that one of the primary reasons stocks go higher is because earnings estimates are too low. Well, guess what, while it is true that we all saw this coming in the end, we haven't yet had the estimate bumps that can come from this bill. When we do, I think we will get another leg up as the market will seem cheaper than it is.
It's a windfall for any corporation with money overseas and for those with high domestic tax rates. In other words it's a windfall for the S&P 500. Now, let's go one step further. I am always asking CEOs what they will do with all their newfound riches. I always get the same answer: buybacks, dividends and spending to grow their businesses. Now under the previous regime that would be considered heresy. How could the money not be put to use to hire more workers, period.
Under this regime, though? All three are positive.
Second answer to why you have missed a lot but there could be more? Sentiment. Seventeen years ago if I went to a ball game all I would be asked about is stocks and more stocks. Nasdaq stocks. Penny stocks. Dotcoms. Big industrials. Anything and everything.
Yesterday I went to the Giants-Eagles game and do you know what? Not a single person asked me about a stock or the market. Yeah, I got a couple of questions about Bitcoin, of course. But nothing about stocks. How is that possible after these record runs? I think the answer is that this move hasn't even captured the fancy of most Americans. First, the asset class has been so debased by a couple of crashes and a lack of respect for individual companies. The indices are all that matter and it isn't like there is any passion for an index. Sure, you could argue that my observation is just anecdotal. I say, give me a break. I am a totally visible person who gives you about a good a sample as you are going to get.
Third, companies just won't stop making themselves more appealing. This morning Campbell's Soup (CPB) buys Snyder-Lance for about $4.9 billion and it instantly becomes a better stock to own because it goes from being a soup company with a bunch of disparate entities in the supermarket to a snack food company in a world where snacking has become an international pastime.
What does Campbell's get for its money? How about the largest share of the pretzel business? How about two of the fastest growing potato chip brands: Cape Cod and Kettle. What a terrific complement to the company's Pepperidge Farm unit.
These new prizes are in the perimeter of the store not the dreaded center.
Oh, and with the pick-up of Emerald which is also in the Snyder's Lance house of brands, who can resist noting that they are now a soup to nuts company with good exposure not only to the supermarket but to the convenience store where they've really made very few inroads.
Most people have recommended Campbell's as a takeover target. I think that this move makes them viable as an earnings story. It's a buy.
Then there's Hershey's (HSY) purchase of Amplify BETR, another snack food company famous for its Skinny Pop, the ubiquitous fresh popcorn that's taken over whole swaths of the snack food aisle. It's not a big deal: Amplify was only a $500 million company but today its stock is up 70% on this $921 million purchase. I think they paid a lot: Conagra (CAG) bought Boomchicka for $250 million last September. But Hershey needs scale and while I would not be a buyer of Hershey, I am making a point that stocks can give you an unfathomably great rate of return over a weekend. Not even the fabled bitcoin can do that for you.
If companies won't do what's right then the shareholders will do it for them. On Friday Elliott Partners took a 6.5% stake in Akamai (AKAM) the content delivery network's. I say three cheers as this company has a jewel of an asset, a network that simply could not be duplicated, which handles a gigantic amount of internet traffic. The company's stock has way underperformed and I think that either Elliott helps restructure the business to get it up to snuff or it succeeds in putting the company into play perhaps to be bought by a Cisco (CSCO) , or an Oracle (ORCL) or a Microsoft (MSFT) or an Alphabet (GOOGL) . Even up $7 I would buy the stock.
Finally we are just at the phase where analyst's recommendations are beginning to move stocks. This morning's push of Twitter's (TWTR) stock by JPMorgan shows you what I mean. The stock has rallied big on a simple upgrade!
Now, let's say none of these resonates with you as a reason to get into the market after this move. Can I suggest you do what I told members of the actionalertsplus.com club this morning with a recommendation to buy Honeywell (HON) ? We suggested a small buy to start with plenty of room left if the market does take a header. There's never a perfect entry point but at least this method doesn't bring about the disgust engendered by a top-tick, which has discouraged so many investors over the years.
So here's the bottom line: I would have no qualms telling you that you missed it if I thought that. I am saying the opposite: good things come to those who buy. But don't buy big here and don't buy all at once as it most likely WON'T be your first one. That's the only way I know to get involved here though, and I do want you involved both with index funds and individual stocks. There's just not enough alternatives to justify staying away and plenty of reasons to get in even if you haven't yet bought a share of stock in any company.
