Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, Aug. 19. The Bottom Line segment of today’s podcast starts at (3:27) and Stocks on the Contrarian Radar at (6:18) for listeners who want to skip ahead.
State of Play
As we look at our board of indicators for signs of direction at 0700, all is pretty quiet:
Stock index futures are mostly unchanged. Only the Russell 2000 which tracks small caps is moving at all from the break-even point, up 0.2%;
Cryptos are dropping a bit, with Bitcoin down 3% to trade around $58,000;
Commodities are mixed, with WTI crude oil down 1% to trade below $75/barrel while copper futures are up 1%;
Bonds aren’t doing anything. The 2-year yields 4.05% whilst the 10-year yield is 3.87%.
Today’s Known Events
It’s a very slow start to a relatively quiet week with just Friday’s Jackson Hole kickoff looming on the calendar as a (potential) major catalyst. We do get some earnings scattered throughout the week, including from some big-box retailers.
For today, the only thing on the calendar are earnings:
Estee Lauder (EL 0.00%↑) just beat on top- and bottom-line estimates but appears to have delivered some unwelcome news in the outlook as the beleaguered stock is down 7% in the pre-market.
ZIM Integrated Shipping Services (ZIM 0.00%↑), which appears closely watched for some reason, beat on top- and bottom line estimates and is surging in the pre-market, to the tune of 12% at the time of this writing;
After the close we’ll hear from cybersecurity company Palo Alto Networks (PANW 0.00%↑) and Fabrinet (FN 0.00%↑), which provides IT services of some kind to the manufacturing industry.
The Bottom Line
Stocks had their best week of the year last week. Who could have anticipated that after the previous Monday’s sell-off? Economic data certainly helped, with two straight jobless claims below forecasts and retail data showing the crucial US consumers continuing to spend like drunken sailors. Walmart (WMT 0.00%↑) earnings also bore this out, even at the lower end of the socioeconomic spectrum.
You can expect to hear a lot about politics this week, what with the Democratic National Convention starting today. Vice President Harris’ economic plans are mostly (or entirely) out, with the key point being credits for first-time homebuyers. As with all things political, there are sure to be a lot of promises that have no hope of getting signed into law. A long with a lot of other BS that makes this mostly safe to ignore for our purposes.
Stocks on the Contrarian Radar©️
Advanced Micro Devices (AMD 0.00%↑) announced a deal to acquire ZT Systems in a $5 billion cash and stock deal. ZT Systems is not public. It provides AI infrastructure of some sort. A $5 billion acquisition is hardly major news these days (AMD’s market cap is some $240 billion) but it does shine the focus back on the AI hardware industry, which had lost some limelight over the last couple of weeks.
A good opportunity to take a look at our ‘undiscovered’ AI chip names. ACM Research (ACMR 0.00%↑), Camtek (CAMT 0.00%↑), FormFactor (FORM 0.00%↑) Ichor Holdings (ICHR 0.00%↑), Kulicke and Soffa Industries (KLIC 0.00%↑), Photronics (PLAB 0.00%↑), Ultra Clean Holdings (UCTT 0.00%↑) and Veeco Instruments (VECO 0.00%↑). Who knows, maybe some of these will emerge as acquisition targets? That premise is a very bad one to build any investment case around, but it’s worth noting how these eight names have rebounded over the last fortnight:
As you can see these are all still down considerably over the last month, even after this recovery. Buying opportunity? You tell me.
Full disclosure: The Contrarian is long Camtek (CAMT 0.00%↑).
Housekeeping
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