Volatility has increased during the last week, be it measured by the Chicago Board Options Exchange Market Volatility Index, commonly referred to as the VIX, or by the swings in the major market indices. As I shared last week, this was one of my concerns heading into the reporting season for the March quarter’s earnings results. The drip of earnings reports started last week and became a steady stream this week as more than 400 companies shared their March quarter results and revisited their 2012 forecasts. The pace will accelerate further next week as more than 1,300 companies are expected to share results and prognostications. Next Thursday alone, more than 500 companies will go through this quarterly ritual.
The net effect of March quarter corporate earnings thus far, renewed concern over Europe and the reversal in direction for several economic indicators — including weekly jobless claims — has April tracking to be the first down month in 2012. This situation has curbed returns for the S&P 500 to +10%, compared to +12% at the end of March. As earnings reports accelerate even further next week, odds are that market volatility will rise, too.
While the financial media will continue to focus on earnings headlines, we as investors need to dig deeper into company results to understand what’s affecting a company’s performance in both good and not-so-good ways. By deciphering these inflection points, we’ll be better prepared to take advantage of overall market volatility as the 1Q 2012 earnings season continues.
If you want to hear about the proprietary PowerTrends that I use to choose investments, I invite you to listen to my free teleconference on Wednesday, April 25, at 2 p.m. EDT. The 60-minute, interactive call will let me talk in-depth about my eight hidden “PowerTrends”, which will drive trillions in market profits over the next several years. I will reveal what I believe lies ahead for the markets in the next couple of months. To participate, you MUST click here to sign up by providing your correct contact information. Once you do so, we will call you on April 25 at about 2 p.m.
Supporting PowerTrend Data Points
Each and every week, there are a number of supporting data points for my PowerTrend way of investing that help us steer in a choppy market. Here’s a recent handful of those data points that I found telling:
• Cashless Consumption — Strong March quarter results at eBay were driven by continued growth at its digital wallet offering, PayPal. Revenues and total payment value in the quarter climbed 32% and 24%, respectively, which outpaced the growth in active accounts and confirms the ongoing transition to non-cash, non-credit card forms of payment. At the end of the March quarter, PayPal had 109.8 million active accounts, up 12% from a year ago.
• Always On, Always Connected — Wireless Trade Association, CTIA, recently shared survey findings that confirm U.S. consumers’ growing demand for data. According to CTIA, the annual U.S. wireless data traffic grew 123% from 388 billion megabytes in 2010 to 866.7 billion megabytes in 2011. The survey also found a 43% increase in the number of active smartphones and wireless-enabled PDAs in 2011.
• Safety & Security — Confirmation for this PowerTrend was had this week when Palo Alto Networks, which delivers a firewall that enables more than 6,500 enterprises to safely run applications, filed an initial public offering with the Securities and Exchange Commission. No doubt the combination of strong revenue growth — six-month revenue growth ending this past January rose 141% — coupled with lofty gross margins between 70%-75%, will make this a company to watch in the coming months.
• The Cash Strapped Consumer — Spice and marinade provider McCormick & Company held an analyst meeting this week at which the company shared the following — 87% of U.S. consumers indicate that taste is the most important driver of food selection. However, the second driver is price at 79%. The conclusion — frugality is the new consumer reality — fits squarely in this PowerTrend and is supported by a decline in the average tax refund this year to $2,946 from $3,022 last year, according to Internal Revenue Service data. Through March 10, the IRS had issued 59.2 million refund checks totaling $174.4 billion
• The Rise and Fall of the Middle Class — L’Oreal SA, the world’s largest cosmetics maker, sees no sign of a slowdown in the global cosmetics market, which it expects to expand by 4% this year. The maker of Maybelline and other key cosmetic brands target faster growth in Eastern Europe and Asia, the latter of which offers the most favorable growth prospects, according to L’Oreal CEO Jean-Paul Agon. While best known for its strong presence in China, fast food maker Yum! Brands reported results from India, the ninth-largest economy, for the first time on a stand-alone basis. Same-store sales rose 8% in that market during 1Q 2012, far faster than the 5% delivered by the company’s U.S. operations. Yum! management sees further gains in India and targets opening 100 locations in that market during 2012.
• Scarce Resources — Executives from the world’s largest automakers met Wednesday at a summit near Detroit to find alternative sources of resin used to make brake- and fuel-system components. The executives are searching for options after a March 31 explosion at chemical maker Evonik Industries AG halved the global source of PA-12, an ingredient used to make the resin. TI Automotive Ltd., a company that supplies brake and fuel lines, as well as fuel tanks and pumps, to all major automakers warned its customers of severe shortages interrupting production “in the next few weeks.”
Sincerely,
Chris Versace
Editor, PowerTrend Brief
P.S. Because you’re already an Eagle Financial reader, you get the first look at Chris’ brand new research brief… It’s about the multi-trillion-dollar Power Trends that’ll soon rock the market — and how you could leverage them for enormous wealth. Click here, to get started. If you want to read the first newsletter, we will give you a free preview of the inaugural issue.
Next Week
As the onslaught of earnings surges next week, here are some of the announcements and government economic reports that I’ll be monitoring:
Monday, April 23
Case-Schiller 20 City Housing Index (February)
Conference Board Consumer Confidence Index (April)
New Home Sales (March)
FHFA Housing Price Index (February)
Ameriprise Financial (AMP)
BE Aerospace (BEAV)
Crane Co. (CR)
DR Horton (DHI)
Eaton Corp. (ETN)
Ethan Allen Interiors (ETH)
Hasbro Inc. (HAS)
Netflix Inc. (NFLX)
Texas Instruments (TXN)
Tuesday, April 24
MBA Mortgage Index (Weekly)
Durable Orders (March)
Apple Inc. (AAPL)
ARM Holdings plc (ARMH)
AT&T Inc. (T)
Buffalo Wild Wings (BWLD)
Capella Education (CPLA)
Coach Inc. (COH)
Delphi Automotive (DLPH)
II-VI Inc. (IIVI)
iRobot Corp. (IRBT)
Kansas City Southern (KSU)
Paccar Inc. (PCAR)
Parker-Hannifin Corp. (PH)
Taser International (TASR)
Wednesday, April 25
FOMC Rate Decision
American Railcar Industries (ARII)
Boeing Co. (BA)
Caterpillar Inc. (CAT)
Citrix Systems (CTXS)
Corning Inc. (GLW)
Equinix Inc. (EQIX)
InterDigital Inc. (IDCC)
Jarden Corp. (JAH)
Nielsen Holdings NV (NLSN)
Siemens AG (SI)
Trinity Industries (TRN)
Tupperware Brands (TUP)
Thursday, April 26
Weekly Initial & Continuing Jobless Claims
Pending Home Sales (March)
Aixtron SE (AIXG)
Amazon.Com Inc. (AMZN)
Cabela’s Inc. (CAB)
Callaway Golf Co. (ELY)
Carbo Ceramics (CRR)
Colgate Palmolive (CL)
Dow Chemical (DOW)
Fortune Brands Home & Security (FBHS)
GATX Corp. (GMT)
Kellogg Co. (K)
Mead Johnson Nutrition (MJN)
NU Skin Enterprises (NUS)
NXP Semiconductors (NXPI)
PepsiCo Inc. (PEP)
Safeway Inc. (SWY)
Friday, April 27
Employment Cost Index (1Q)
University of Michigan Consumer Sentiment Index – Final (April)
Helen of Troy Ltd (HELE)
IMAX Corp. (IMAX)
Libbey Inc. (LBY)
Newell Rubbermaid Inc. (NWL)
Proctor & Gamble Co. (PG)
VF Corp. (VFC)
Zebra Technologies (ZBRA)
