Before we can enjoy the quiet that the Thanksgiving holiday week brings, we must first face three very important economic reports this week: the latest Consumer Price Index (CPI) and Producer Price Index (PPI) readings and the October retail sales report.
The CPI reading for October was released this morning. CPI was flat in October and increased 3.2% in the past 12 months. This was below economists’ expectations for a 0.1% rise month-over-month and a 3.3% increase in the past 12 months.
Core CPI, which excludes food and energy, rose 0.2% in October and 4.1% in the past 12 months. Economists had anticipated core CPI to rise 0.3% in October and 4.1% in the past 12 months. I should also add that core CPI now stands at a two-year low.
The PPI reading for October will be published tomorrow, and economists are calling for the PPI to turn negative in October. The October retail sales report, also slated to be announced on Wednesday, is expected to decline 0.1%.
We want results that are in line (or below) economists’ expectations. Remember, the Federal Reserve turned very dovish at its most recent Federal Open Market Committee, even acknowledging that inflation is cooling. So, further proof that inflation has cooled might be enough to persuade the Fed to begin cutting interest rates in December. We’ll see about that, but I am confident that the Fed will lower interest rates early next year.
Now, because Wall Street wants the Fed to cut interest rates (and sooner rather than later), cool inflationary data and a deceleration in consumer spending could spark a broader market rally… and that’s just what we got today.
Following the soft CPI report, the S&P 500 and NASDAQ surged more than 2% higher and the Dow soared more than 1% higher today.
If you want your portfolio to participate in the market strength, then you want to consider investing in fundamentally superior stocks. The fact of the matter is a great defense is a strong offense of fundamentally superior stocks. So not only should they climb higher in the market rallies, but they’ll also provide your portfolio some protection if the broader market sells off.
So, in today’s Market 360, I’ll reveal 10 stocks with weak fundamentals that you should avoid. And then, I’ll share where you can find the best fundamentally superior stocks.
This Week’s Ratings Changes
After taking a closer look at the latest institutional buying pressure and each company’s financial health, I decided to revise my Portfolio Grader for 85 big blue chips. Of these 85 stocks, 21 were downgraded from a B-rating (Buy) to a C-rating (Hold), and 25 were downgraded from a C-rating to a D-rating (Sell).
I’ve listed the first 10 stocks to sell below, but you can find the full list – including the stocks’ Fundamental and Quantitative Grades – here.
Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and adjust accordingly.
|Ticker||Company Name||Total Grade|
|CHK||Chesapeake Energy Corporation||D|
|CPNG||Coupang, Inc. Class A||D|
|DGX||Quest Diagnostics Incorporated||D|
|HD||Home Depot, Inc.||D|
|HDB||HDFC Bank Limited Sponsored ADR||D|
Now, if you’re not sure where to find fundamentally superior stocks, then look no further than my Growth Investor service.
My Growth Investor Buy Lists are chock-full of fundamentally superior stocks. They are characterized by 3.5 times the sales growth and a whopping 41.8 times the earnings growth of the S&P 500. In addition, my Growth Investor stocks trade at only 14.1 times median fiscal 2024 forecasted earnings.
And after posting an average earnings surprise of 14.1% this earnings season, my Growth Investor stocks are more than likely trading at only 12.1 times median forecasted 2024 earnings if my earnings surprises persist. My average Growth Investor stock has had its earnings revised 7.6% higher in the past three months, which bodes well for future earnings surprises.
So, if you want to make sure that your portfolio is filled with fundamentally superior stocks, then join me at Growth Investor today. You’ll receive instant access to all my Buy List stocks, as well as all my Growth Investor Monthly Issues, Weekly Updates, Special Market Podcasts – and much more.
(Already a Growth Investor subscriber? Go here to log in to the members-only website.)
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Quest Diagnostics Incorporated (DGX)