|Written by Rob Goldman|
Download This Report in PDF
The Goldman Guide
INSIDE THE ISSUE
INDICES & CATALYSTS
It’s Back and It’s Even Better
Good morning! Our older subscribers will remember that from 2010-2016 we published this weekly newsletter when we highlighted the stock market, the economy, political policy, etc. It was a great run but it became difficult to publish each Sunday as it required us to work 7 days a week for seven years.
With the economy and stock market in disarray, and the advent of greater technology, we decided that it is time to bring this free offering back to our subscribers, albeit in an upgraded and different format.
A new and improved form of The Goldman Guide features an audio podcast which refers to key investment and economic theses of the day, along with our market opinions and idea-generated stock picks. Plus, it includes data and other information found in this companion print version.
From the statistics perspective, we endeavor to give you what you need at a glance in the text piece and in more detail in the audio version. These figures include YTD performances for key indices and other catalytic concerns such as oil price changes, the VIX (CBOE Volatility Index), Bitcoin, and the latest AAII Investor Sentiment Survey.
Given how prevalent crypto is in the news, for good and for bad, we felt it was imperative to have some commentary and exposure. As you can see in the disclosure section, we are long Bitcoin, Ethereum, and Shiba Inu. As the AAII Survey has been such a good contrarian indicator, much like the VIX, we will continue to highlight it, as we did previously.
Thanks for your continued interest and support. Have a great week!
The Stock Market Today
Source: Barchart.com, Yahoo!Finance, Goldman Small Cap Research
AAII Sentiment Survey (figures rounded)
ICI: Weekly U.S. Equity Fund Flows
Review and Comment
In our Top 23 Predictions for 2023, we predicted peak gains for the key indices. Who knew they would be reached already when we thought it might be later in the year? Anyway, the smaller you went, the greater the performance so far this year. A 3.5% rise in the DOW, 4% for the S&P, a nearly 6% gain for NASDAQ and a 7%+ for the Russell made for good feeling all around. It’s like the January Effect came to life again---after so many believed it was dead. Frankly, if I knew about the equity fund outflows recent performance, I would have been bullish early too. More on that later.
After this past week’s moves, one could infer that the indices are fairly valued. The Forward S&P P/E is 17.4, NASDAQ's is over 27x,and the Russell's P/E is 21.9. While these figures are not at nosebleed levels at all, they are what I would consider fairly valued.
Investors are probably unsure of what to make of the recent gains and what to do, if anything. Something a bit unusual has happened which could lead to this upward momentum sticking around for a little while longer. As you can see in this table, we are actually off our 52-week highs by only a small amount at least for equities. The four indices are down an average of 14.3% from the highs and up an average of 14.8% from their low! How crazy is that?
The figure that really struck me is the 200 day moving average performance. The four equity indices are up an average of 1% above their 200 DMAs. It not only shows how long things have been in the toilet. But, if the underlying index is above its 200 DMA, a bullish sign, then many of its components have to be above the index and at a rate higher than the index itself. So clearly the simple and exponential moving averages are all flashing buy signals while the RSI, (Relative Strength Index) is in the neutral range, for now, on an average basis for the key indices. That is still positive.
The AAII Investor Sentiment Survey, which is a totally contrarian indicator because pros believe that retail investors are usually too late or plain wrong, is showing some favorable data. The percentage of those bullish are 24% and bearish 40%. These figures are a tad higher from a week ago for bulls and down for bears but still pretty significantly different from historical averages. Especially bulls which are usually at the 38% level, or more than 50% higher than current levels. This is a good sign in the near term. Expect to see more bulls and fewer bears this week as well. Even if only modestly so.
Speaking of modestly bullish data, the equity mutual fund flows figures released by ICI are very interesting. US funds as of 1/4/23 enjoyed outflows of $6B which is actually less than 1/3 the recent peak weekly outflow of $19.5B, reported on 12/14/22, when tax loss selling and capitulation now appears to have peaked. It will be very interesting to see Thursday’s data. But this is another nice check mark for us.
Based on all of this info and data, we are in a modestly short term bullish sentiment. With an emphasis on short term.
A Critical Season
Sorry but we have to at least rain a little on your parade. We can’t look at this stuff in a bubble. We are at the start of earnings season. And I am not exactly in a favorable sentiment about it for the long haul. Sales will probably be strong but that is deceptive. Prices have gone up due to inflation so the comparisons are easy. And the top-line performances will narrow as the year continues and the comparisons become difficult, reflecting the 2022 inflation and 2023 inflation environments. So, for those that sell goods, we need to look at the units sold to determine efficacy and achievement.
Given higher COGS, opex, and other costs, earnings may not be so great either. Still, what I want to know is what the future looks like. What will the 2023 guidance look like? If the forecasts are reduced materially for 2023 it’s a negative for stocks. If they are still too high future disappointments will hurt stocks. So, damned if you do and damned if you don’t. I suspect mgmt. teams are really unsure about this coming year since a recession could be in the cards. I suspect consumer-focused companies have little faith in their own forecasts these days. With consumer debt at nosebleed levels and more layoffs ahead, things should be choppy for a while. Let’s enjoy the next few weeks before we get anxious that spring turns into investing winter as we teeter on the edge of a recession.
Once earnings season is over, we can do a deep dive and see what industries and then what stocks offer the best opportunities. For now, we consider the small biotech and med device space to be the best. It has endured a two-year winter from the valuation perspective and a groundswell of belief that M&A could occur this year is just the catalyst the sector needs. It is under the radar but could be a big performer.
We mentioned this in our 23 predictions for 2023. There is still some time so we will be performing due diligence and try to come up with 3-5 names on a staged basis over the coming weeks.
We hope you have a great week and look forward to providing you with some out-of-the-box ideas next week!
1498 Reisterstown Road, Suite 286 Baltimore Maryland 21208 Phone: 410.609.7100
Originally launched in May 2010, and re-introduced in January 2023 after a hiatus from 2016-2022, The Goldman Guide is a free weekly audio podcast and newsletter produced by Goldman Small Cap Research and is written by Founder Rob Goldman with contributions from the GSCR contributor team. This non-sponsored investment newsletter seeks to provide investors with market, economic, political and equity-specific insights via an action-oriented, straight to the point approach. No companies mentioned in this newsletter are current sponsored research clients of the Company or its parent, With key exceptions such as Top 50 cryptocurrencies, some of which are noted as current holdings of Founder Goldman, all companies or investment ideas mentioned in this audio podcast and companion publication are publicly traded stocks listed either on the NYSE or the NASDAQ. Goldman Small Cap Research leadership bios and experience can be found on our website: www.goldmanresearch.com .
This audio podcast and companion newsletter was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces non-sponsored and sponsored (paid) investment research. Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
The Firm’s non-sponsored research publications category, Select Research, reflects the Firm’s market commentary and internally generated stock ideas, along with economic, industry and market outlooks. In virtually all cases, stocks mentioned in Select Research, offerings are listed on the NYSE or the NASDAQ. Publications in this category include the weekly The Goldman Guide, Market Monitor blogs, Special Reports, and non-sponsored company reports. Goldman Small Cap Research analysts are neither long nor short stocks mentioned in this newsletter. Founder Rob Goldman is currently long cryptocurrencies Bitcoin, Ethereum, and Shiba Inu and may publish commentary or news regarding these securities. .
Content produced under the banner include reports, updates, sector spotlights, and CEO Roundtable interviews, reflect sponsored (paid) research. It is important to note that while we may track performance separately, we utilize many of the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in company-specific Opportunity Research reports, updates and articles. Goldman Small Cap Research has not been compensated for any content in this audio podcast and publication.
All information contained in this audio podcast and companion newsletter were provided by the companies mentioned via news releases, filings, and their websites or generated from our own due diligence. Economic, market data and charts are provided by a variety of sources and are cited upon publication. Stock performance data and information are derived from Yahoo! Finance, BarChart.com and other websites or sources, as noted. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, other firms, or other financial news outlets. Goldman Small Cap Research relied solely upon information provided by companies through filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research company or industry report, update, article, blog, note, audio podcast, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed. This podcast and publication do not take into account the investment objectives, financial situation, or particular needs of any particular person. This podcast and publication newsletter do not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with the FINRA or with any state securities regulatory authority. Statements herein may contain forward-looking statements and are subject to significant risks and uncertainties affecting results.
Separate from the factual content of the content in the podcast or companion newsletter, we may from time to time include our own opinions about the companies profiled herein, their businesses, markets and opportunities. Any opinions we may offer about the companies are solely our own, and are made in reliance upon our rights under the First Amendment to the U.S. Constitution, and are provided solely for the general opinionated discussion of our readers. Our opinions should not be considered to be complete, precise, accurate, or current investment advice. Such information and the opinions expressed are subject to change without notice
ALL INFORMATION IN THIS REPORT IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com .