What's able to go up?
Companies that have dividend growth, pricing power and are beneficiaries of a weaker dollar. Companies that transport goods that can charge a premium. Companies that drill and move oil. Retailers that sell goods for the home and for going to work. Financials that can raise their dividends and buy back more shares.
It's an eclectic mix. You don't often see PepsiCo (PEP) going up with JB Hunt (JBHT) . It's odd to see Clorox (CLX) flying along with Chevron (CVX) . BestBuy (BB) , Home Depot (HD) and Lowe's (LOW) are all doing well, but that well? Not clear, although the later can be big beneficiaries of the garden season. There were so few plants at my Lowe's and Home Depot, principally because I got to both in the afternoon, which is way too late. Everything gone.
At the same time, you have total anomalies. The quarters we got from 3M (MMM) and Honeywell (HON) were widely panned. Yet both are up substantially from when they reported, as if both reported spectacular earnings. This is incredible to me, but then again look at the drug stocks. It's hard to find a worse quarter than the one had by Bristol-Myers Squibb (BMY) , except Eli Lilly (LLY) and that stock has had one of the great runs for the ages.
On June 30, we get the results of the stress tests, which will most likely allow all the banks to raise their dividends, perhaps substantially. That's meant an endless run for JPMorgan (JPM) and Wells Fargo (WFC) and Bank of America (BAC) , as well as the strong regionals like PNC Financial Services Group (PNC) and First Horizon (FHN) . The group is being painted with one brush, because it is, like so many others, dominated by exchange-traded funds.
With raw material costs spiraling upward, how can Procter & Gamble (PG) and PepsiCo and Clorox, to name three examples, go higher? Because these companies have staying power and pricing power. They will raise their prices accordingly.
Shouldn't Alphabet (GOOGL) and Facebook (FB) be included in this group? How about Microsoft (MSFT) or Apple (AAPL) ? The first have tremendous pricing power and huge buybacks and the second have buybacks and dividends?
That's a tougher call. They are widely considered too expensive, even though only Amazon (AMZN) is valued too highly. Given their growth they should be valued well in excess of the consumer products goods companies but they aren't.
I think they come back.
What's not coming back are the price-to-sales stocks. They are awful. There are too many of them and there are no buybacks to speak of and no dividends. If it is hard to find buyers for FAANG or Microsoft, what are we going to do with these endless software as a service for everything and data analytics companies that are being printed and offered to no end? How are we going to buy SPACs -- special purpose acquisition companies -- with no real prospects other than the ones that are touted and not to be trusted?
I have no idea.
To me it seems like the stocks that are most vulnerable are the stocks that are owned by Cathie Wood, the ones that often have no earnings or in some case minimal sales.
That's the real vulnerability.