Great Start to November with Epic Election Week Rally
Stocks finally cooled off a bit on Friday after four straight days of sharp gains, but it didn’t make a dent in one of the strongest weekly performances of the year.
The NASDAQ soared 9% in these five days, while the S&P was up about 7.3% and the Dow increased around 6.9%. That’s a nice turnaround from last week, which saw each of the indices plunge approximately 6% or more.
The big news this week was the election, which finally put to rest a nagging uncertainty for investors. Well, it’s almost put to rest... probably... maybe. Biden appears on his way to victory, but the Trump camp plans to challenge several state results.
The market would certainly have loved an official winner on Tuesday, but it’s satiated by the likelihood of a Republican Senate to keep the government divided. However, we’re not exactly certain of that either since there will be a couple run-offs in the New Year.
For now though, the market is happy. But it’s anybody’s guess how long that will last amid a new wave of coronavirus cases without a new stimulus package.
On Friday, the Dow slipped 0.24% (or about 66 points) to 28,323.40, while the S&P was off 0.03% to 3509.44.
Not only did these slight losses end four-day winning streaks for these indices, but it also snapped four straight days with gains north of 1%. In fact, several times this week the advances were closer to 2%.
The NASDAQ, though, managed to push its winning run to five days just barely. It was up 0.04% (or around 4 points) to 11,895.23. This index surged 3.85% on Wednesday and 2.59% yesterday as tech really took off after the election on hopes for a split Congress.
The pullback may have been more severe but for a strong Government Employment Situation report. The economy added 638,000 jobs last month, which was better than expectations for around 550K.
Furthermore, the unemployment rate improved a full percentage point to 6.9% from 7.9% in the previous month.
Today's Portfolio Highlights:
Insider Trader: Restaurants were all the rage when the pandemic began, but their results started normalizing as restaurants slowly reopened. As a result, organic health food grocer Sprouts Farmers Market (SFM) saw shares drop 18.7% over the past three months. However, a new wave of coronavirus cases may have people cooking at home once again. Perhaps that’s why two insiders recently bought shares of their own company earlier this week. Tracey added two new positions on Friday, and one of them was SFM.
The other buy was Inovalon (INOV), which provides cloud-based data analytics and data-driven intervention platforms for healthcare sector. Shares are down 28.7% after the company lowered its full-year guidance due to expectations for covid-related weakness in the fourth quarter. On October 30, the Chief Administrative Officer, the CEO and a director all bought shares. The editor considers these moves to be both “greedy” insider buys AND votes of confidence that things aren’t as bad as they seem. SFM and INOV were each added with 10% allocations. Read the complete commentary for lots more on these companies.
Surprise Trader: Who could’ve known that the mattress and pillow business would be so lucrative? Well, actually, Dave did! He bought Sleep Number (SNBR) in early October and the company just reported a “monster” quarter. The stock is now up more than 28% in the service. The editor grabbed more exposure to the space on Friday by adding Purple Innovation (PRPL), a Zacks Rank #2 (Buy) that crushed the Zacks Consensus Estimate by 145% last time. Now it has a positive Earnings ESP of 5.82% for the quarter coming after the bell on Tuesday, November 10. The portfolio added PRPL today with a 12.5% allocation, while also getting out of the sluggish Cardtronics (CATM) position. Read the full write-up for more.
Marijuana Innovators: There’s a lot of good things happening in this portfolio right now after the “green wave” in Tuesday’s elections. You’ve probably heard about the “clean sweep” in state referendums on legalization. Five states took the question right to the voters this week... and all five passed! As a result, Aurora Cannabis (ACB) has more than doubled since Tuesday! It was the best performer yesterday with a surge of 41.5%, and stayed at the top of the mountain today with a further surge of 53.3%. Artelo Biosciences (ARTL) was also a winner on Friday with a rise of 14.9%. But that’s not all. Dave decided to buy GrowGeneration (GRWG), an upstart that owns and operates specialty retail hydroponic and organic gardening stores. Read the editor’s complete commentary for a lot more on GRWG and the brightening prospects for marijuana stocks.
Value Investor: You wouldn’t think that the $22 billion agribusiness company Nutrien (NTR) and the luxury homebuilder Toll Brothers (TOL) would have much in common, but they are similar in two ways. They both have solid value characteristics AND they were both added to this portfolio today. NTR launched its digital business at the perfect time... right before the pandemic hit. The company is now “blowing away estimates” with earnings expected to rise 25% this year, though shares remain down more than 17% year-to-date. Meanwhile, TOL is a Zacks Rank #1 (Strong Buy) and part of a strong industry. Shares are down 7% in the past month, but still up 15% this year. Read the complete commentary for a lot more about these moves, including specifics on their value credentials.
Options Trader: "It was another great jobs report and shows just how strong the economy has been bouncing back.
"And after Q3's unprecedented GDP growth, and forecasts for a strong Q4, not to mention expectations for 2021 to have the strongest full-year GDP in 38 years, you can see why stocks have been rallying, and why it looks like they will continue to do so.
"Let's also not forget about earnings season. It's been doing great. And that should come as no surprise given how strong Q3 GDP was. We have another 1,352 companies reporting earnings next week.
"And lastly, there's still hope for another coronavirus stimulus package by year's end.
"We've got an amazing rally underway. And we could see that extended next week." -- Kevin Matras
Have a Great Weekend!
Jim Giaquinto
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