Happy Friday folks! It’s that time of the week again - which means we’ll do a deep dive into what we’re seeing in the markets as well as deliver you one long term pick. Read on for your daily dose of market inspiration and remember to follow our trades to the ‘T’ for maximum effectiveness!
“Natural ability without education has more often raised a man to glory and virtue than education without natural ability.”
Well folks, today’s close marked the fourth straight week of gains for the market - this has been the longest run since November for the S&P 500. Since breaking through the key 50-day moving average on the 20th of July, strong earnings data, a rate hike in-line with expectations and most recently, a positive inflation print have helped edge the market higher.
That said, with the 50-day MA having fully changed convexity, the market is now approaching the 200-day moving average - while this is likely to be a tough resistance level for the index, RSI hasn’t completely topped out, meaning there is possibly more room to run as we head into this decisive week. However, it's worth noting that investor sentiment is now at a high with this fourth week of gains pushing the proportion of investors feeling bullish to about a third and there is also still the rest of this Q2 reporting season looming as an upward catalyst for equities.
Lastly, here’s a review of how this earnings season has been progressing and a rundown of some of the most anticipated companies reporting on Monday next week... Earnings Scorecard: For Q2 2022 (with 87% S&P 500 companies reporting actual results), 75% of S&P 500 companies have reported a positive EPS surprise and 70% of S&P 500 companies have reported a positive revenue surprise.
Earnings Growth: For Q2 2022, the blended earnings growth rate for the S&P 500 is 6.7%. If 6.7% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q4 2020 (4.0%).
Earnings Guidance: For Q3 2022, 42 S&P 500 companies have issued negative EPS guidance and 30 S&P 500 company has issued positive EPS guidance.
Valuation: The forward 12-month P/E ratio for the S&P 500 is 17.5. This P/E ratio is below the 5-year average (18.6) but above the 10-year average (17.0).
Long Term Pick: Kinross Gold Corporation ($K-TSX)
Kinross has been one of the pre-eminent players on the global precious metals stage since its founding in 1993. The senior gold producer is both project and country-diversified, with active sites in the United States, Brazil, Chile, Mauritania and Canada that total a proven gold reserve of 32.6 million Au oz; Kinross has even managed to grow this figure by a further 2.7M oz over the 2021 FY and layed out guidance to hit a 2.15M oz production output, which 6 months into the year at this point is likely to be achieved. Furthermore, at $1800 USD/oz gold prices, Kinross is an FCF powerhouse with an all-in-sustaining cost (AISC) of $1240 per gold oz.
Kinross is highly undervalued to their NAV as well as to peers and with the graph above outlining the price correlation between $K and $GOLD, now is the time to get paid a 3.4% dividend to wait out any fears within the market manifesting in higher precious metals prices.
Chart of the Day - Natural Gas Prices Slated to Trend Higher...