We're not that far through earnings season, but we are far enough to be able to make some serious judgments about what industries are in ascendance and what secular trends might be playing out that can infuse some successful investing.
To put this concept in context, what you are looking for are themes that are working DESPITE the turmoil in Washington, and despite the definitively slowing world and the damage that's been done by Jerome Powell in his credit-freezing statements in the fourth quarter of 2018.
1. If your company is involved with aerospace, then you may very well report a monster upside surprise. When you see Pratt & Whitney, a huge United Technologies (UTX) division, report North of 20% organic growth, you know that aerospace has accelerated mightily now and that, even though there will be worries about China, the demand flow is just too strong NOT to make fortunes.
This bodes very well for GE (GE) -- there is enough business to go around and for Honeywell (HON) , which makes parts for all planes and, of course, for Boeing (BA) . UTX is best positioned because of its disruptive new engine, but these others aren't reflecting enough good. If we weren't worried about long-term care and power, you would just go buy shares in GE ahead of the quarter, because of aerospace.
2. 5G is starting to make an impact. There is a reason why Xilinx (XLNX) reported the best quarter of any semiconductor -- it has the most to gain from early adoption of 5G and it already has substantial orders. Xilinx feels like the new Nvidia (NVDA) as it has Artificial Intelligence, machine learning and autonomous driving chips, but it also has the best chips for the blocking and tackling portion of giant telco providers, especially the Chinese. China needs them more than they need China.
3. Cancer remains the single-biggest challenge for so many health care companies. The Bristol-Myers Squibb (BMY) buy of Celgene (CELG) for blood cancer, the GlaxoSmithkline (GSK) buy of Tesaro for ovarian cancer and the Eli Lilly (LLY) purchase of Loxo Oncology (LOXO) all make me think that if you have a company with any breakthrough possibilities -- that's right, just possibilities -- against cancer, it might be worth the speculation.
4. The digitization trend is relentless -- and still early, judging by how many big wins are still happening in all sorts of fields. That's a message we are getting from IBM (IBM) , which is doing some very powerful work in healthcare, it is finally happening. When you think digitization I urge you to think VMWare (VMW) and Cisco (CSCO) .
5. Anything housing or auto must be avoided like the plague. These are no growth industries globally and there's nothing good happening here, unless we have a great spring selling season. Numbers have come down for anything and anyone in either cohort from 3M (MMM) and Toll Brothers (TOL) to Masco (MAS) and Lowe's (LOW) .
6. If you aren't in the low end of retail, you are going nowhere. Walmart (WMT) , Costco (COST) , Dollar Tree (DLTR) , Dollar General (DG) , Five Below (FIVE) , Ollie's Bargain Outlet (OLLI) , Burlington Stores (BURL) , Ross Stores (ROST) and TJX (TJX) are the winners. Everyone else? Sold to you.
7. There's a resurgence in Procter & Gamble (PG) that is beyond the whole category and it is led by spending in China. So don't write off those companies that are coming on strong there -- and I would include Nike (NKE) and Starbucks (SBUX) which reports tonight.
I know it's not enough yet to go on, but those seven trends are powerful and can be guiding lights in a time of turmoil and unreason, the likes of which, as the trade talks go on and off and the government shutdown continues, I haven't seen in a very long time.
