Stock indices dipped in October 2023, with the S&P 500 falling a sharp 10% off summer highs. Looking at 13F filings of big institutional portfolios, we see that the big guns were busy last quarter taking advantage of that dip. Citadel Advisors went on a buying spree, adding to its $100 billion portfolio across a range of sectors. As did D.E. Shaw, adding to its $67 billion portfolio. Vickers Stock Research, a subsidiary of Argus Research Group, analyzes insider trading and institutional stock ownership. Form 13-Fs, which institutions must file to report their holdings, are due 45 days after the end of calendar quarters and have come in for 4Q24. We review 13Fs of major activists to determine core holdings and new purchases. Activist investing is now less about generating a short-term return and more about achieving long-term returns through an active management/investor partnership. Based on data from Vickers, here are some recent new purchases and key holdings of activist investors, as well as other high-profile money managers.

Monday Tee Up: Is Inflation Still Tracking Lower?

Management's ability to "raise guidance" can often be a catalyst for market-beating returns in the quarters ahead. The third-quarter earnings season is wrapping up, with blended earnings (actual results and the consensus for those still to report) showing a 6.3% gain, year-over-year, according to Refinitiv. That is considerably better than the 1.0% expected at the start of the earnings period, and should be enough to end the "earnings recession" that investors have endured over the past three quarters. Propelling the 3Q outperformance were strong gains in Communication Services, up 46%, while Energy again (like last quarter) is performing the worst, down 33%. Our analysts are always on the lookout for companies that boost their outlooks during earnings season. Here is an initial list of BUY-rated companies in Argus Coverage at which management raised guidance or increased its outlook during the 3Q23 EPS reporting season.

For a second week, insider-transaction data from Vickers Stock Research is generating bullish signals. Last week, insider-transaction volume was low as trading restrictions are in place during earnings season. But trades that did occur resulted in bullish insider-sentiment measures, especially open-market transactions (the most meaningful when considering sentiment).

Stocks were mostly lower on Friday morning following higher-than-expected producer price data. The Labor Department said that its producer price index for final demand rose 0.8% from the prior year in July, up from 0.2% in June and above the Reuters consensus forecast of 0.7% growth. Excluding food, energy, and trade services, the core PPI rose 2.7% from the prior year, in line with the increase in June. Meanwhile, the University of Michigan said that its preliminary consumer sentiment index slipped to 71.2 in August, down slightly from 71.6 in June but in line with the consensus forecast. The Dow rose 0.1%, the S&P fell 0.4%, and the Nasdaq fell 0.9%. Crude oil rose less than 1% to $83.50 per barrel, while gold rose slightly to $1949 per ounce.

Monday Tee Up: All Eyes on Last Week and Next Week

Small- and mid-cap stocks (SMID) have underperformed large-caps over the past 12 months, but may be in a better position to generate market-beating returns going forward. SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the fallout from the Russian invasion of Ukraine, high European inflation or other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps. SMID stocks can be risky, but diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 12%-15% of the U.S. stock market's capitalization is comprised of SMID stocks. For our purposes, we use a threshold of $15 billion to define a SMID stock.

Stocks fell sharply on Thursday as investors weighed new inflation, employment, and housing market data. Producer prices rose more than expected, raising concerns about continued aggressive rate hikes, while weak housing starts and building permits showed the impact of high mortgage rates. Meanwhile, weekly unemployment claims pointed to a still strong labor market. The Labor Department said that first-time claims for state unemployment benefits fell by 1,000 to 194,000 for the week ended February 11, below the Reuters consensus forecast of 200,000. The Dow fell 1.26%, the S&P 1.38%, and the Nasdaq 1.78%. Crude oil traded near $78 per barrel, while gold rose $3 to $1848 per ounce.

If one were to believe that the NYSE Composite represented "the" stock market (such as we look at the S&P 500 (SPX)), there seemingly would be a better than 50/50 chance that the market was completing its bear-market bottom (bullish reversal) and entering a new bull market.

Stocks surged on Thursday following positive inflation data, recording their strongest one-day advance since 2020. The Labor Department said that its consumer price index rose 7.7% from the prior year in October, down from 8.2% in September and below the consensus forecast of 7.9%. The core CPI, excluding food and energy, also rose at a lower-than-expected 6.3% rate. On the employment front, first-time claims for state unemployment benefits rose by 7,000 to 225,000 for the week ended November 5, slightly above the consensus forecast. Continuing claims rose to 1.493 million, also up from the prior week and above consensus. The Dow soared 3.70%, the S&P 5.54%, and the Nasdaq 7.35%. Crude oil rose slightly to $86 per barrel, while gold jumped $47 to $1760 per ounce.

When the major indices are all higher by around 1% percent on a given day, it should be a good day. (Especially after what investors have endured so far in 2022.) But sometimes, statistics can be deceiving. Markets that truly are coming out of a major corrections or bear markets respond with consistent strength from a price perspective and also achieve very strong market breadth statistics. Unfortunately, yesterday just wasn't one of those days.

Small- and mid-cap stocks (SMID stocks) have underperformed large-caps over the past 12 months, but still may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the fallout from the Russian invasion of Ukraine. As well, the prices of SMID stocks generally are lower than the prices of large-caps. SMID stocks can be risky -- and large-caps outperformed SMID stocks in 11 of the 19 years in our test period. Still, despite the risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 12%-15% of the U.S. stock market's capitalization is comprised of SMID stocks. For our purposes, we use a threshold of $20 billion to define a SMID stock.

Small- and mid-cap stocks (SMID stocks) performed poorly last week, as the Russell 2000 (ETF is IWM) declined 6% and is close to its year-to-date lows. Thus far in 2022, the index is down 25.2%, slightly worse than the S&P 500 ETF SPY, which is off 22.5%. But looking ahead, SMID stocks may be in a better position than large-caps to regain lost ground. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the fallout from the Russian invasion of Ukraine. For another, the prices of SMID stocks generally are lower than the prices of large-caps, as the P/E ratio on the Russell 2000 Small-Cap Index is 16 compared to a P/E of 27 for the S&P 500. Finally, the long-term record has favored SMID stocks over large-caps. From 2003-2021, the Russell 2000 had climbed 511%, compared to an advance of 450% for the S&P 500. Here are a handful stocks with market caps below $20 billion that are on the Argus BUY list.

The outlooks of purchasing managers -- and the manufacturing sectors they represent -- have turned negative recent months, due in part to supply-chain woes, the Russian invasion of Ukraine, and higher interest rates. In fact, most manufacturing sectors now are contracting, compared to earlier this year when they were still expanding. Consider the Eurozone, which had a Purchasing Managers Index reading of 58.4 in 1Q22 and is now down to 49.6 (a reading below 50 indicates a contracting manufacturing segment). Manufacturing stalwart Germany has slipped to 49.8 from 58.4. And the latest UK reading is 47.3 versus 54.6 in the prior quarter. China manufacturing is also contracting; the most-recent PMI reading in the world's second-largest economy was 49.5. Japan also reported a PMI of 49.5. The one economy that is holding on? That would be the U.S., with a PMI reading of 52.8 in August, marking the twenty-seventh consecutive month of expansion. Drilling deeper into the U.S. report, the New Order Index is holding on, with a reading of 51.3, but the Backlog Index remains uncomfortably high at 53.

They don't call it "King Dollar" for nothing! The U.S. Dollar Index continues to soar at the expense of many other currencies. We have been looking for a break in this very strong uptrend, but have been on the wrong side of this forecast. There are some positive things about a strong dollar and, of course, there are some negative things.

Stocks were mostly higher on Thursday morning following new weekly employment data and mixed results from major retailers. Kohl's shares fell more than 5%, despite above-consensus 2Q EPS, after the company cut its full-year sales and earnings forecasts. On the positive side, BJ's Wholesale Club reported better-than-expected results and raised its full-year guidance, sending the shares up 8%. The Dow fell 0.1%, the S&P rose 0.2%, and the Nasdaq rose 0.4%. Crude oil rose 2% to $90 per barrel, while gold fell $4 to $1773 per ounce.

Stocks fell on Thursday morning amid continued inflation concerns as investors awaited the May CPI report on Friday morning. Employment data was weaker than expected. The Labor Department said that first-time claims for state unemployment benefits rose to 229,000 for the week ended June 4, up from a revised 202,000 a week earlier. The reading was the highest since mid-January and above the Bloomberg consensus forecast of 206,000. The Dow fell 0.5%, the S&P 0.6%, and the Nasdaq 0.6%. Crude oil traded near $122 per barrel, while gold fell $12 to $1845 per ounce.

Market breadth has deteriorated a bit over the past seven trading sessions, as the major indices try to hammer out an intermediate-term bottom. On the S&P 500, 40% of stock are above their 50-day average (all breadth data as of 2/11 close), while 48% are above their 200-day. The recent low reading of 42% was the weakest since 10/2020. Major market declines generally happen when this measure falls below 45%.

Stocks were mixed on Thursday amid continued inflation concerns. The Technology and Materials sectors finished higher while Industrials, Communication Services, and Utilities declined. Disney shares fell sharply following weaker-than-expected 4Q results and disappointing subscriber growth in the Disney+ streaming service. Electric vehicle maker Rivian jumped 22% and has now risen more than 50% since its Wednesday IPO. The Dow fell 0.44%, the S&P rose 0.06%, and the Nasdaq rose 0.52%. Crude oil fell slightly to $81 per barrel, while gold rose $16 to $1865 per ounce.

Stocks were mixed on Thursday amid continued inflation concerns. The Technology and Materials sectors finished higher while Industrials, Communication Services, and Utilities declined. Disney shares fell sharply following weaker-than-expected 4Q results and disappointing subscriber growth in the Disney+ streaming service. Electric vehicle maker Rivian jumped 22% and has now risen more than 50% since its Wednesday IPO. The Dow fell 0.44%, the S&P rose 0.06%, and the Nasdaq rose 0.52%. Crude oil fell slightly to $81 per barrel, while gold rose $16 to $1865 per ounce.

Over the weekend, the House of Representatives approved the largest public works bill since the 1950s. The bipartisan trillion-dollar bill, which was passed by the Senate in August, now goes to President Biden's desk for signing. The plan focuses on improving the country's infrastructure, from roads and bridges to water systems and electricity grids. It also targets the auto industry, with a focus on electric vehicles and charging stations. In the power sector, Biden's goal is to achieve a carbon-free power industry by 2035. To improve energy efficiency in buildings, he is looking to retrofit four million buildings in the four years. Elsewhere, business Services companies also stand to benefit; bond issuance should pick up given that the infrastructure spending plan will be financed at least in part by bonds; and payroll companies could get a boost processing more paychecks as the infrastructure plan creates "millions of good paying jobs." All-in-all, some of the companies that we think may benefit include the following.

This edition features opportunities in the great outdoors; a smart but pricey water play; sustainable air travel; and notes from Align, Tesla, and Conagra.

Last week, we detailed positive trends in insider sentiment, even in the face of light transaction volume (the result of trading restrictions during earnings season). This week, Vickers Stock Research reports that insider transaction volume has started to increase as earnings season comes to a close. Broadly put, the positive short-term trends from last week have not held, though the current data is not bad enough to damage longer-term trends.

The Argus Research Fundamental Universe of Coverage includes approximately 500 leading U.S. and international companies. We cover the waterfront -- from Technology to Utilities, from Energy to Healthcare. We generally follow the Top 200 most widely held stocks, sourced from our sister company Vickers Stock Research, which collects institutional ownership data from the US Securities and Exchange Commission. From there, we look to identify the next 200-300 leading U.S. and international companies to add to our list. Our Universe of Coverage is dynamic and growing. We are adding stocks to coverage continually and often get ideas from our clients. Here are five of our most-recent additions.

Many investors are beginning to focus their investment funds on companies that follow sustainable business practices and/or are addressing global impact issues. At Argus, we are a portfolio advisor to a Unit Investment Trust that is built around ESG criteria. We also have launched a separately managed account based on ESG and Impact investing principles. Two times a year, we screen our Universe of Coverage to highlight the stocks that score highest on ESG criteria. We note that Impact Investing addresses issues such as climate change, hunger, poverty, shelter, and clean water. Clean water is not only a personal issue; many industries, including oil, gas, semiconductors, chemicals, electric utilities, food products, beverages and metals and mining, are heavily reliant on clean water. According to the 2030 Water Resources Group, by 2030 "demand for water will be 40 percent higher than it is today, and more than 50 percent higher in the most rapidly developing countries. Historic rates of supply expansion and efficiency improvement will close only a fraction of this gap. Unless local, national and global communities come together and dramatically improve the way we envision and manage water, there will be many more hungry villages and degraded environments-and economic development itself will be put at risk in many countries." The companies in our list this week are working on systems and providing products to reduce global and domestic water risks.

Stocks closed mixed on Thursday as investors digested the Fed's policy decision. Interest rates will remain near zero but 13 of the FOMC's 18 members expect at least one rate hike by the end of 2023. The central bank will continue to purchase at least $120 billion a month in agency mortgage-backed securities and U.S. Treasuries. Yields on the U.S. 10-year Treasury rose to 1.59%, but subsequently slipped to 1.5%. In other news, initial jobless claims rose to 412,000 for the week ended June 12. The Dow fell 0.6%, the S&P was down less than 0.1% and the Nasdaq was up 0.9%. Crude oil traded near $71per barrel, while gold fell $7 to $1774 per ounce.