Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, July 15. The Bottom Line segment of today’s podcast starts at (3:27) for listeners who want to skip ahead. Be sure to check out the brand new ‘Stocks on the Contrarian Radar’ segment at the bottom of this page and (5:37) on the podcast.
State of Play
‘Twas an eventful weekend in the US where some will say the election will have been decided (if it wasn’t already). As we look at our board of indicators for signs of direction at 0620, risk on appears to be the mood of the day:
Stock index futures are pointing to gains led by small caps again, with the Russell 2000 up 1.1%. Nasdaq and S&P 500 futures are about 0.4% to the good;
Cryptos are gaining ground as well with Bitcoin up 4% to trade around $62,700;
Commodities aren’t doing much. WTI crude oil is trading around $81/barrel, unchanged. Copper is down about 0.8%, this likely due to overnight economic data out of China;
Bonds are also flat. The 2-year yields 4.45% whilst the 10-year yields 4.22%.
Today’s Known Events
Some more earnings to start us off:
Blackrock (BLK 0.00%↑) just beat an top- and bottom-line estimates and that stock is moving a bit higher in the pre-market;
Goldman Sachs (GS 0.00%↑) is imminent
Fed Chair Jerome Powell returns to the spotlight today, this time at the Economic Club of Washington, D.C., where he will have a conversation with David Rubenstein. That will be broadcast live on the organization’s website here. Would not expect Powell to say anything groundbreaking here though you can certainly keep an eye on Fed fund futures, now pricing in a 90% chance of a rate cut at the Sept. 18 FOMC meeting.
The Bottom Line©️
Small caps continue to be the place to be for some reason. This time large caps are coming along for the ride. Earnings should be the driver though for today it looks like we have this Trump bounce also affecting things. The concept here is that the events of the weekend will help Trump’s popularity, leading him to be re-elected, which presumably is good for markets. Trump Media (DJT 0.00%↑) is as good a gauge of that as anything, and that stock is up 50% in the pre-market.
Bears and permadoomers can point to an overnight report from Burberry ($BURBY), which just issued a profit warning while scrapping its dividend. That stock is down 15% in London trading. The counter-argument is that fashion is cyclical and when was the last time you saw somebody in a Burberry coat? So this could be company-specific rather than a more secular trend.
Don’t fight the tape. If investors want to take on risk then that is what investors are going to do. Cryptos are once again a good gauge of that. When it comes to earnings, these don’t really get interesting until the middle of the week when we get Johnson & Johnson (JNJ 0.00%↑), Netflix (NFLX 0.00%↑), Taiwan Semiconductor (TSM 0.00%↑), and ASML (ASML 0.00%↑).
Stocks on the Contrarian Radar
Guns and ammunition stocks, for reasons that should be obvious after the events of this weekend. There are about a dozen of these that trade publicly in the US, about half of which appear to be pure plays:
Storm Ruger (RGR 0.00%↑) is a ‘pure play’ gun manufacturer and one of the most prominent names. The stock has gone nowhere in years so it could surely use the kick in the rear end. (Full disclosure: this is one of The Contrarian’s major portfolio holdings).
Smith & Wesson Brands (SWBI 0.00%↑) and Vista Outdoor (VSTO 0.00%↑) are two other ‘pure plays’ on weapons manufacturing.
Ammunition manufacturers are Olin (OLN 0.00%↑) and the appropriately-named AMMO Inc. (POWW 0.00%↑).
Then there are retailers like Sportsman’s Warehouse (SPWH 0.00%↑ ), Big Five Sporting Goods (BGFV 0.00%↑), and Outdoor Brands (AOUT 0.00%↑), which get lumped with guns and ammos just because they happen to sell, well, guns and ammo (along with a lot of other stuff. So hardly a pure play).
The rest are mostly ancillary. Axon Enterprises (AXON 0.00%↑) is best known as a provider of Tasers, making it the only one of the bunch that can claim to have successfully morphed into a verb. National Presto Industries (NPK 0.00%↑) manufactures some “defense products” but also does a bunch of housewares. SoundThinking (SSTI 0.00%↑) is more of a security firm that detects guns and gunfire (wouldn’t gunfire kind of be obvious? Loud and smoky. Anyway…)
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.
If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.
Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).
Earnings Season