Cooler Heads, Higher Market

It’s about time we got some good trade news from the other side of the conflict!

We’re used to President Trump saying encouraging things about a deal (when he’s not talking tough or putting on new tariffs), but today China’s commerce ministry came out against further escalation.

The spokesman also said the two sides were talking about a possible meeting next month.

The market loved it! All three of the major indices jumped by well over 1% on Thursday for their third day of gains in the past four.

The NASDAQ advanced 1.48% (or about 116 points) to 7973.39, while the S&P rose 1.27% to 2924.58. The Dow surged 1.25% (or 326 points) to 26,362.25.

The most welcomed comment from the spokesman, though, was that China might not retaliate against the latest round of U.S. tariffs that are scheduled for Sunday.

So here we go again! Stocks head into Friday’s session with a fantastic opportunity to end its skid of four straight weekly losses.

It’s the same situation as last week. Only this time, the major indices are each up by well over 2% through Thursday, instead of just 1%.

Last Friday’s session ruined that week’s positive momentum as China retaliated with new tariffs on $75 billion worth of U.S. goods, which led to an increase in tariff rates on Chinese imports after the bell.

Of course, the most memorable event last Friday was probably President Trump’s tweet that ordered U.S. companies to look for alternatives to China.  

Hopefully, the cooler heads on display from both sides in recent days will keep us from another last-minute selloff. It would be great to salvage one week in August and start September with some positive momentum.

Today's Portfolio Highlights:

Stocks Under $10: The market is looking better these days, so Brian wanted to add another stock to the portfolio. He picked up Magic Software (MGIC), a Zacks Rank #2 (Buy) small cap that reported quarterly results a couple weeks ago. The editor likes that all of its quarters have been positive, which is important for a small cap that’s looking for attention from Wall Street. He also likes its valuation and its stable earnings estimates with the possibility of earnings growth next year. But Brian was especially pleased (and surprised) to see that this small cap software name pays a dividend that yields 3.4%! Read the full write-up to learn more about MGIC.  

Insider Trader: It’s rare to see insiders buy when their companies are near 52-week highs, so Tracey certainly noticed that a director at Johnson Controls (JCI) recently bought more than 6200 shares. This Zacks Rank #2 (Buy) creates intelligent buildings, efficient energy solutions and integrated infrastructure. Shares have jumped 43.6% year to date, so this insider must be pretty confident that the stock has further to climb. 

A much more ‘normal’ example of insider buying would be United Rentals (URI), which is down 13.4% in the last month. Earnings and sales for this equipment rental giant are expected to rise in the low double-digits this year, but the company is still ‘dirt cheap’. Three directors are wondering why Wall Street is ignoring URI, so they each bought shares of their own company over the past month. The editor put 10% of the portfolio into each name, which gets the service back to 100% invested. Read the complete commentary for a lot more on these new additions.

TAZR Trader: With the bulls seemingly in control for now, Kevin decided this was a good time to put some of his huge cash pile to work in a beaten down name. Shares of Splunk (SPLK) have been sinking this whole month and especially since its quarterly report on Aug 22… but not because this software platform provider had bad results. A change in its billing structure caused a big, but temporary, cut in its operating cash flow. Most analysts did not downgrade their ratings or price targets. The portfolio got a double-digit profit from SPLK earlier this year, and Kevin is expecting more of the same after adding the stock on Thursday with a 7% allocation. Read the complete commentary for more, including what several firms are saying about SPLK.

Technology Innovators: A strong quarterly report from Nutantix (NTNX) sent the shorts running for cover. It also convinced Brian to get back into this enterprise cloud platform provider, which brought the portfolio a gain of more than 100% when it was sold in March of last year. The stock beat on both the top and bottom lines recently, which the editor thinks could end the negative earnings estimate revisions that have been plaguing the name. NTNX is far from its high, but Brian plans to be patient with this one. Read the full write-up for a lot more on this new buy.

Healthcare Innovators: The portfolio crossed off one of the items on its “shopping list” on Thursday by picking up Tabula Rasa Healthcare (TRHC). This medical IT firm jumped to approximately $68 after a strong quarterly report on August 8. Now, shares have filled the August 9 gap from $59 and have been bouncing off $58 this week. TRHC was in the portfolio before and brought a gain of nearly 18% when sold earlier this month, and today Kevin bought it again with hopes of more double-digit gains moving forward. Read the full write-up for more.

All the Best,
Jim Giaquinto

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