Stock picking pilots please notice: tailwinds abound.
Every time I see an earnings report that's not truly related to Chinese issues, I get excited.
I get excited because many companies have tailwinds totally separate from the economy that is talked about endlessly, the economy that's dictated by surveys, sentiment and Federal Reserve blather.
Cases in point? Two large indicators - real canaries in the coal mine that show you can still make a lot of money if you simply position yourself to benefit from the tailwinds, knowing which way the wind blows. The two: Jabil (JBL) and KB Home (KBH) .
Here are two companies I have always been fond of even as they have never been the darlings of the industry community. KB Home, in fact, is the most hated of the group given its very high debt position. This underdog has a stock that is now up 70% because it positioned itself in the most important sector of the market: relatively inexpensive starter homes.
Jabil is a company that makes things in the health care, consumer packaged goods, e-commerce, 5G, energy and retail sector. You get something sent via via e-commerce it's a good chance that Jabil helped with the packaging. You need something for 5G, it will have first dibs to manufacture it for you. Health care on the wrist? Jabil.
I think the gloom that surrounds Washington and the quarter point-half point horse that's beaten to death daily misses the real point of the economy, which is its domestic health away from trade.
That's why I like this quote from Jeffrey Mezger, chairman and CEO of KBH: "Market conditions remain favorable supported by low mortgage interest rates, strong economic growth, high consumer confidence and positive demographic trends, while demand is healthy, supply continues to be insufficient to meet homebuyers needs particularly at affordable price points where we operate which is a key element of our success."
Given that net order growth is an astounding 24% for their below $400,000 homes, and the home glut from earlier in the year has now run off, you have higher gross margins and more runway than I have seen in that industry in ages.
What's really in play is affordability for young families and that's going to stay because mortgage rates are so low.
Five G is in is infancy. Internet of Things is exploding. The need for less packaging to please environmentalists is now a must. Those all play into Jabil's sweet spots.
Too many windbags who opine on the Fed are missing the big picture. Housing which is 10% of the economy, yet punches above its weight, can drive a domestic economy even when autos flounder. Assembling products after they are designed by other companies on a drawing board is only accelerating.
In other words the tailwinds from the economy right now triumph over the headwinds that fill the headlines but you need to read the conference calls from these two once less successful now thriving companies. If you do you won't writhe in negativity, you - and your stocks - will soar with the wind.