Outplaying Big Banks; J.B. Hunt Bucks Up
Banks Can’t Dance
Regular Great Stuff readers know that music underpins many of our pop culture references. But, try as I might, I couldn’t come up with a good banking song for today’s issue. Not even a jingle.
The only banking-related pop culture reference that came to mind was the old 1970s Smith Barney commercial: “They make money the old-fashioned way. They earn it.”
It’s not musical at all. And considering that Smith Barney was bought out by Morgan Stanley (NYSE: MS) during the 2009 financial crisis, maybe Smith Barney could’ve used some samba lessons or something.
Today’s big banks certainly can’t samba worth a damn, but they can certainly jump, jive and wail.
The Brian Setzer Orchestra? Really?
Hey, you take what you can get when you’re out of coffee.
The biggest of banks, such as JPMorgan & Chase Co. (NYSE: JPM), Goldman Sachs Group Inc. (NYSE: GS) and Bank of America Corp. (NYSE: BAC) are well past the jump phase. They hit that point back when federal interest rates were rising many moons ago.
Now, with corporate earnings season underway amid a pandemic-driven economic lockdown, you get a heavy dose of jive.
Yesterday, analysts touted JPMorgan’s 32% jump in trading revenue — even though the company missed consensus earnings estimates. It seems JPMorgan earmarked $6.8 billion for potential loan losses and defaults.
We’re seeing the same jive story today from Goldman Sachs. The gold man whiffed on earnings expectations and saw profits tumble 46% year over year, but it had its strongest bond-trading performance in five years. Goldman set aside about $937 million for potential loan losses.
We can all but copy and paste this same story for Bank of America, which missed earnings expectations, posted a strong trading performance and set aside $4 billion for loan losses.
I see the jump and jive … but where’s the wail? You can’t just jump and jive with no wail! Where’s my wailing?
That absence of wailing you noticed is because the Federal Reserve already doled out trillions of pacifiers to the financial sector. Surely, you haven’t forgotten about Jerome Powell’s “unlimited stimulus” already?
But, if it makes you feel any better, just give them time.
Goldman, BofA, JPMorgan and a whole host of other banking giants are sure to wail about the economic fallout sooner or later … especially when it comes to those pesky regulations … but I digress.
The main takeaway here is that, despite their best efforts, the banking behemoths can’t trade their way out of rising loan losses in this economic disaster.
They can try, but they won’t be successful.
But you, dear readers, you aren’t like the big banks suffering massive loan losses. (At least, I hope you’re not. None of you have a $10 billion line of credit, right? Now, if you do … call me?)
The bottom line is this:You can trade your way out of this coronavirus debacle.
How? By not buying into this head-fake rally. By keeping your powder dry for the right opportunities at the right time. By finding the diamonds in the rough (or the N95 masks in the laundry … or the toilet paper at Costco … whatever, you get the point.)
But in this age of misinformation and hype, whom do you turn to for advice? (I mean aside from Great Stuff, of course!)
How about the guy who managed money for the same powerhouse investment banks — the Goldman Sachs, Citigroups and Credit Suisses of the world — that are setting trading records right now?
I’m talking about Banyan Hill’s own treasured Charles Mizrahi. You know, the guy who started his Wall Street career in the New York Futures Exchange pit — at age 20? Charles’s no-fuss approach to investing is how he managed to post 113% in gains in a single year, and 313% over a three year period.
Now that’s Great Stuff. Click here to learn more!
Good: Test Your Might
Aytu was set to deliver 100,000 COVID-19 rapid tests. How rapid? Can you say: “faster than Artax?” The company’s COVID-19 IgG-IgM Rapid Test can deliver results in as little as two minutes, with no laboratory needed.
Today, Aytu announced delivery of those 100,000 tests. Better still, it has 500,000 more on the way.
COVID-19 testing stateside has made great progress in the past several weeks, but more tests are always needed. That means more demand and ready buyers for those 500,000 inbound Aytu tests. That also means more revenue.
Analysts only just started to notice Aytu. Zacks recently upgraded the stock to “Strong Buy,” citing a strong uptrend in earnings estimates. If you didn’t check out Aytu the last time that Great Stuff featured the stock, you really can’t afford to wait any longer.
Better: Roll on, 18-Wheeler, Roll On
Roll on highway, roll on along. Roll on J.B. Hunt Transport Services Inc. (Nasdaq: JBHT) until you get back home.
Transports are under heavy fire during the pandemic — mainly because the outbreak underscores the importance of our supply chains. During this crisis, J.B. Hunt revealed itself to be the kind of company that I really like.
The trucking firm reported earnings of $0.98 per share, missing Wall Street’s estimates. Normally, this would be a red flag, but J.B. Hunt’s reason for this miss is crucial: a one-time charge of $12.3 million to pay out employee-appreciation bonuses amid the COVID-19 crisis.
In fact, revenue jumped 9% year over year to $2.28 billion. Not only is J.B. Hunt among the few companies to see revenue increase, it also beat the consensus estimate.
So, we have a company that provides critical infrastructure services, has rising revenue and takes care of its employees. What’s not to like here?
So, roll on 18-wheeler, roll on.
With everyone locked in their homes … and nothing better to do, it was just a matter of time before people broke out their snarfblatts. After all, snarfblatts date back to prehistoric times, when humans used to sit around and stare at each other all day … very boring.
But Canada-based Aphria Inc. (Nasdaq: APHA), has just what you need to smoke in your snarfblatts: weed, ganja, the devil’s lettuce. I’m talking about cannabis here, and Aphria is selling kilos of the green sticky-icky.
So much sticky-icky, in fact, that revenue nearly doubled in Aphria’s fiscal third quarter to $102.8 million — easily beating Wall Street’s expectations. Earnings also bested the consensus targets, with Aphria earning $0.02 per share, compared to the average analyst estimate for a $0.04 loss.
The company did warn about uncertainty related to COVID-19’s impact. But, if Canadian pot smokers are anything like their American counterparts, I don’t think there’s too much to worry about.
In a study conducted by AmericanMarijuana.org, Americans overwhelmingly chose Mary Jane as their preferred method to stay calm while quarantined. I mean, 28% of respondents chose pot over face masks! (Why not both?)
If you were waiting for the right company to take advantage of the cannabis market, Aphria makes a great case to be your drug … err, investment of choice.
Now, with all those visions of earnings Armageddon out of the way, let’s shift into positivity mode, shall we? (Hey, I’m trying something different today … turning over a new, greener leaf. Serenity now, serenity now!)
Alright you kings and queens of wishful thinking — it’s time to get out your crystal ball for Great Stuff’s Poll of the Week! Even if we’re headed for the worst this earnings season, why not look for the best?
So, what stocks do you think will suffer the least damage during earnings season? Which sector do you expect to stand headandshoulders above the corporate rubble? Click on the envelope icon below to share your thoughts in our Poll of the Week.
Got more to say? Send us a quick (or rambling) message at GreatStuffToday@BanyanHill.com. Who knows? You just might find your email in tomorrow’s edition of Reader Feedback!
Great Stuff: Can’t Join ‘em? Beat ‘em!
“My daddy was a bankrobber, but he never hurt nobody. He just loved to live that way, and he loved to steal your money.” — The Clash, “Bankrobber.”
I have to say, as someone who lived through and invested during ’07 and ’08 … seeing big banks scramble sends a shiver of schadenfreude through my bones. Of course, there are economic implications of banking and credit slowdowns and yada yada yada…
But for a moment there, it felt like an idiot driver cutting you off and speeding away … only to get speed-trapped down the road. Oh JPMorgan, Goldman Sachs et. al., let me play you a song of sorrow on the world’s smallest violin…
Now, if you want to separate wheat from chaff for yourself this earnings season … out-trading the big banks at their own game … there’s only one approach you need.
Remember: Charles Mizrahi’s approach helped him see runs, where he picked 36 stocks in a row, that went up 50% or more. And that’s just one of the reasons why Barron’s once crowned Charles the No. 1 money manager.
Until next time, be Great!
Editor, Great Stuff