Is there another leg down for S&P 500? $SPX

We are now in 1st October 2021.

Looking at the Daily S&P 500 Futures Chart, I’m seeing strong evidence of further bearish trend with the 20 EMA crossing over the 50 EMA.

Potentially, the index may dip to 4130 which is the daily 200 MA level.

Further downside is possible

Looking at the Weekly Chart, I’m seeing a possible further 5% downside for next week(s). Note that we are already -5% down. This would mean total of 10% correction. Beyond that, based on historical – it would seem that a bullish case is more likely over a bearish case. However it would be prudent to wait for a trend reversal sign.

High Impact Events – September 2021 Week 4

There are 3 high impact events in September 2021 Week 4

Expect Powell’s speech on 29 September to carry on the same narrative from Week 3.

I do not expect the Core PCI and PMI to have material impact on the markets

  1. FOMC have already stated their narrative of bond tapering to tentatively start from November.
  2. Correction has already started. $SPX is already down 5% . Technically the market has not rebounded yet.

For my readers, do not let your guard down in Week 4. The correction has started and $SPX is still down 5%. Notice the lower highs and lower lows. There is no sign that the correction has recovered yet.

All eyes are also now on the impending debt limit drama coming up which could accelerate further correction from next week

 

Monthly Market Movements For September 2021 #DJIA #SPX

First of all , with respect to the weekly chart ,

negative case wise,

for equities – Dow Jones has already dip about 2% last week. We are at the 20 MA level. This is the first major support level for DJIA.

If this is broken over the next weeks, we will be looking at another 5% dip to 50 EMA

If this is again broken over the next weeks, we will be looking at 10% dip to 100 EMA

i am not optimistic that we will be looking at another 17.6% dip to 200 EMA as we just recovered from a bear market. Usually it takes about 5-10 years between bear markets.

Of course, there is always the positive case that DJIA can rebound from its 20 EMA level and continue on its bullish run as the 20 / 50/ 100 / 200 EMA levels are still in order and overall trend is still bullish.

similarly for SPX,

negative case wise,

for equities – we are reaching the 20 MA level. This is the first major support level for SPX.

If this is broken over the next weeks, we will be looking at another 8% dip to 50 EMA

If this is again broken over the next weeks, we will be looking at 17% dip to 100 EMA

i am not optimistic that we will be looking to a dip to 200 EMA as we just recovered from a bear market. Usually it takes about 5-10 years between bear markets.

Of course, there is always the positive case that SPX can rebound from its 20 EMA level and continue on its bullish run as the 20 / 50/ 100 / 200 EMA levels are still in order and overall trend is still bullish.

Overall for equities , there are more drivers for negative case over the next few weeks/ months due to the uncertainty of the US debt ceiling . You can read my post here .

The inflation play news has been already trumpeted by main stream media for the large part of this year. The market would already have built in the fact that interest rates are going to go up sooner or later.

whatever it is, the time is closing in on using your warchest for a shopping spree.

Portfolio Spotlight Series 2 – Disney $DIS

In Portfolio Spotlight Series 2 – I will be going through each holding in my portfolio v2.0 and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free csh flow, strong competitive moats. These are core holdings.
2. Potential growth companies with breakout earnings, growing competitive moats. These are holdings which typically are kept within 5% of the portfolio.
3. Geographical / sector diversifications. These are meant for diversification purpose and are kept within 5% if they are from emerging markets (e.g. China/HK) .

Allocation as of August 2021

Next up in Portfolio Spotlight Series 2 is DIS. It currently occupies 8% of my portfolio and I have strong conviction in this stock mid to long-term.

The Walt Disney Co. is a diversified international family entertainment and media enterprise. It operates through the following segments: Media Networks, Parks, Experiences and Products, Studio Entertainment and Direct-to-Consumer and International (DTCI). The Media Networks segment includes cable and broadcast television networks, television production and distribution operations, domestic television stations, radio networks and stations. The Parks, Experiences and Products segment owns and operates the Walt Disney World Resort in Florida; the Disneyland Resort in California; Aulani, a Disney Resort & Spa in Hawaii; the Disney Vacation Club; the Disney Cruise Line; and Adventures by Disney. The Studio Entertainment segment produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings and live stage plays. This segment distributes films primarily under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm and Touchstone banners. The DTCI segment licenses the company’s trade names, characters and visual and literary properties to various manufacturers, game developers, publishers and retailers throughout the world. It also develops and publishes games, primarily for mobile platforms, and books, magazines and comic books. This segment also distributes branded merchandise directly through retail, online and wholesale businesses. The company was founded by Walter Elias Disney on October 16, 1923 and is headquartered in Burbank, CA.

1)Consistent Revenue Growth

2)Consistent Free Cash Flow

DIS has been having consistent free cash flow for the past 3 years. FY2019 was red due to closure of its parks during COVID 19 pandemic. FY2020 has been a revelation due to the popularity of Disney+

3)Market Cap Growth

As of September 2021 Walt Disney has a market cap of $225 Billion.

DIS Market Cap since its inception

4)Consistent Net Income Multiple

DIS has had consistent net income multiple. FY20 was a one-off due to the closure of its parks and cruises as a result of the COVID 19 pandemic. However, this is only temporary and Disney will recover and resume its consistent trajectory. This indicates a management team which is efficient in handling its bottom line. A great management team is very important!

5) Future growth

This last factor is fundamental analysis. Does DIS have future market growth driver(s) ? The answer is yes !

Most of DIS future growth drivers will leverage on

  1. Theme Park , Cruise Line Reopenings
  2. Continued Business to Consumer business division expansion
    1. Disney+
    2. Hotstar
    3. Hulu, and
    4. ESPN+

Portfolio Spotlight Series 2 – Amazon $AMZN

In Portfolio Spotlight Series 2 – I will be going through each holding in my portfolio v2.0 and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free cash flow, strong competitive moats. These are core holdings.
2. Potential growth companies with breakout earnings, growing competitive moats. These are holdings which typically are kept within 5% of the portfolio.
3. Geographical / sector diversifications. These are meant for diversification purpose and are kept within 5% if they are from emerging markets (e.g. China/HK) .

Allocation as of August 2021

Next up in Portfolio Spotlight Series 2 is AMZN. It currently occupies 28% of my portfolio and I have strong conviction in this stock mid to long-term. I have since rebalance it to 5% of my portfolio weightage and taken profit.

Amazon.com, Inc. engages in the provision of online retail shopping services. It operates through the following business segments: North America, International, and Amazon Web Services (AWS). The North America segment includes retail sales of consumer products and subscriptions through North America-focused websites such as http://www.amazon.com and http://www.amazon.ca. The International segment offers retail sales of consumer products and subscriptions through internationally-focused websites. The Amazon Web Services segment involves in the global sales of compute, storage, database, and AWS service offerings for start-ups, enterprises, government agencies, and academic institutions. The company was founded by Jeffrey P. Bezos in July 1994 and is headquartered in Seattle, WA.

1)Consistent Revenue Growth

2)Consistent Free Cash Flow

AMZN has been having consistent free cash flow for the past 8 years !

3)Market Cap Growth

As of September 2021 Amazon has a market cap of $1.761 Trillion. This makes Amazon the world’s 5th most valuable company by market cap according to our data.  

AMZN Market Cap since its inception

4)Consistent Net Income Multiple

AMZN has had consistent net income multiple. This indicates a management team which is efficient in handling its bottom line. A great management team is very important!

5) Future growth

This last factor is fundamental analysis. Does AMZN have future market growth driver(s) ? The answer is yes !

Most of AMZN future growth drivers will leverage on

1. Amazon Web Services (AWS)

2. Amazon Prime

3. Amazon India

4. Amazon’s third leg of business (Other than AWS, E-Commerce)

  1. Amazon’s online pharmacy platform
  2. its fashion initiatives, or
  3. its Amazon Fresh grocery store footprint

https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/amazon-could-see-revenue-more-than-double-by-2025-as-retail-business-grows-62718086

Portfolio Spotlight Series 2 – Proctor & Gamble $PG

In Portfolio Spotlight Series 2 – I will be going through each holding in my portfolio v2.0 and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free cash flow, strong competitive moats. These are core holdings.
2. Potential growth companies with breakout earnings, growing competitive moats. These are holdings which typically are kept within 5% of the portfolio.
3. Geographical / sector diversifications. These are meant for diversification purpose and are kept within 5% if they are from emerging markets (e.g. China/HK) .

Allocation as of August 2021

Next up in Portfolio Spotlight Series 2 is PG. It currently occupies 12% of my portfolio and I have strong conviction in this stock mid to long-term.

Procter & Gamble Co. engages in the provision of branded consumer packaged goods. It operates through the following segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. The Beauty segment offers hair, skin, and personal care. The Grooming segment comprises of shave care like female and male blades and razors, pre and post shave products, and appliances. The Health Care segment includes oral care products like toothbrushes, toothpaste, and personal health care such as gastrointestinal, rapid diagnostics, respiratory, and vitamins, minerals, and supplements. The Fabric and Home Care segment consist of fabric enhancers, laundry additives and detergents, and air, dish, and surface care. The Baby, Feminine and Family Care segment sells baby wipes, diapers, and pants, adult incontinence, feminine care, paper towels, tissues, and toilet paper. The company was founded by William Procter and James Gamble in 1837 and is headquartered in Cincinnati, OH.

1)Consistent Revenue Growth

2)Consistent Free Cash Flow

PG has been having consistent free cash flow for the past 5 years

3)Market Cap Growth

As of September 2021 Procter & Gamble has a market cap of $349.79 Billion. This makes Procter & Gamble the world’s 21th most valuable company by market cap according to our data. 

PG Market Cap since its inception

4)Consistent Net Income Multiple

PG has had consistent net income multiple. This indicates a management team which is efficient in handling its bottom line. A great management team is very important!

5) Future growth

This last factor is fundamental analysis. Does PG have future market growth driver(s) ? The answer is yes !

Most of PG future growth drivers will leverage on

Procter & Gamble’s Generic Strategy (Porter’s Model)

Procter & Gamble uses differentiation as its generic strategy for competitive advantage. Differentiation involves developing the uniqueness of the business and its products to attract target customers. In this case, Procter & Gamble highlights quality and value in its consumer goods. For example, the company offers high quality cleaning agents, like Tide laundry detergent, at affordable prices. Based on this generic competitive strategy, a suitable strategic objective is to maintain P&G’s high investments for R&D to ensure high-quality and valuable products. Another strategic objective based on Procter & Gamble’s generic strategy of differentiation is to maintain effective marketing strategies that emphasize the uniqueness of such products. Such product uniqueness determines pricing and promotional activities. These considerations are included in Procter & Gamble’s marketing mix or 4Ps.

The cost leadership generic strategy (also known as the low cost provider strategy) is partially applied on some of Procter & Gamble’s products, focusing on cost or pricing to achieve competitive advantage. For example, Pantene hair care products are priced relatively lower compared to competitors like Unilever’s Dove hair care products. Procter & Gamble’s marketing mix also considers this generic competitive strategy. A strategic objective based on the cost leadership generic strategy is to develop Procter & Gamble’s competitive advantage based on cost-minimization approaches. For example, automation is increasingly used to minimize cost and maximize efficiency in Procter & Gamble’s production processes.

Procter & Gamble’s Intensive Strategies (Intensive Growth Strategies)

Market Penetration (Primary Intensive Strategy). The Procter & Gamble Company’s primary intensive growth strategy is market penetration. In this intensive strategy, the main aim is to increase the company’s market share. Procter & Gamble does so through marketing campaigns to increase consumer awareness about the company’s consumer goods. This strategy is especially significant for low-performing products in the market. In addition, Procter & Gamble implements this intensive strategy through beneficial agreements with retailers. For example, P&G grows its market share by offering higher retail profit margins for some large retailers. In return such retailers display Procter & Gamble’s products in prominent locations or shelves in their stores. The differentiation generic strategy creates competitive advantage that helps increase success in applying the market penetration intensive strategy. A strategic objective based on this intensive growth strategy is to increase Procter & Gamble’s market share through aggressive marketing.

Product Development (Secondary Intensive Strategy). Product development is used as a secondary intensive growth strategy in Procter & Gamble’s business. This intensive strategy involves design and production processes for products that attract target customers. Procter & Gamble applies product development to support continuous business growth, while addressing competition. For example, P&G develops new products to increase its share of the global consumers goods market. In addition, Procter & Gamble increases its competitiveness by continually enhancing current products. The differentiation generic strategy directly determines the kinds of products that the company develops, especially in terms of competitive advantage based on quality and value. A strategic objective associated with this intensive strategy is to grow Procter & Gamble through continuous innovation.

Market Development. The Procter & Gamble Company uses market development as a supporting intensive growth strategy. Market development contributes to the company’s growth through entry into new markets or market segments. For example, Procter & Gamble could enter new market segments when it creates an entirely new product line or when it changes its market focus. In this way, Procter & Gamble can expect a new revenue stream. The generic strategy of differentiation makes it easier for P&G to enter new markets or market segments when implementing this intensive growth strategy. Also, a strategic objective based on market development is to increase Procter & Gamble’s R&D investment for new product lines, or to reform its marketing strategies to enter new segments in a growing or stable consumer goods market.

Diversification. Diversification is one of Procter & Gamble’s supporting intensive growth strategies. This intensive strategy involves establishing new business operations. For example, every acquisition and corresponding business diversification in Procter & Gamble’s history has led to considerable growth. However, this intensive growth strategy is considerably difficult to implement because of its large-scale effects on P&G’s business organization. For instance, each acquisition leads to adjustments in Procter & Gamble’s organizational structure. The differentiation generic strategy helps build competitive advantage the company needs to succeed in new business operations. Also, this intensive strategy leads to the strategic objective of using an aggressive approach to acquire other firms to grow Procter & Gamble’s business.

Portfolio Spotlight Series 2 – Lockheed Martin $LMT

In Portfolio Spotlight Series 2 – I will be going through each holding in my portfolio v2.0 and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free csh flow, strong competitive moats. These are core holdings.
2. Potential growth companies with breakout earnings, growing competitive moats. These are holdings which typically are kept within 5% of the portfolio.
3. Geographical / sector diversifications. These are meant for diversification purpose and are kept within 5% if they are from emerging markets (e.g. China/HK) .

Allocation as of August 2021

Next up in Portfolio Spotlight Series 2 is LMT. It currently occupies 16% of my portfolio and I have strong conviction in this stock mid to long-term.

Headquartered in Bethesda, Maryland, Lockheed Martin Corporation is a security and aerospace company. It operates through four segments. Aeronautics segment is engaged in the research, design, development, manufacture, support and upgrade of military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies. Missiles and Fire Control segment provides air and missile defense systems; fire control systems; manned and unmanned ground vehicles, and energy management solutions. Rotary and Mission Systems segment provides design, manufacture, service and support for various military and commercial helicopters, surface ships, sea and land-based missile defense systems, radar systems, sea and air-based mission and combat systems, command and control mission solutions, cyber solutions, and simulation and training solutions. Space segment is engaged in the research and development, design, engineering and production of satellites, missile systems and space transportation systems.

1)Consistent Revenue Growth

2)Consistent Free Cash Flow

LMT has been having consistent free cash flow for the past 5 years

3)Market Cap Growth

As of September 2021 Lockheed Martin has a market cap of $98.58 Billion. This makes Lockheed Martin the world’s 159th most valuable company by market cap according to our data.

LMT Market Cap since its inception

4)Consistent Net Income Multiple

LMT has had consistent net income multiple. This indicates a management team which is efficient in handling its bottom line. A great management team is very important!

5) Future growth

This last factor is fundamental analysis. Does LMT have future market growth driver(s) ? The answer is yes !

Most of LMT future growth drivers will leverage on

1) Ramping Geopolitical Tensions

Global geopolitical tensions have been ramping up even before the current pandemic. With violent protests springing up all around the world, global instability appears to be on the rise. The US-China relationship, in particular, is growing even more unstable as these two nations’ interests continue to diverge.

The trade war, Hong Kong protests, and coronavirus outbreaks are just a few of the major events putting the US-China relationship under strain. Many experts even think that the US and China are headed towards a Cold War. Such a scenario will put Lockheed Martin in an increasingly vital position.

2) Proposed Acquisition of rocket engine maker Aerojet Rocketdyne

LMT’s proposed acquisition of  rocket engine maker Aerojet Rocketdyne will only serve to increase its moat and competitiveness against its competitors such as Northrop Grumman’s merger with Orbital ATK. There are signs that the merger may be approved by FTC (Federal Trade Commission) with influence by Congress.

https://www.reuters.com/business/aerospace-defense/exclusive-lockheeds-aerojet-deal-gets-support-13-members-congress-letter-2021-09-01/

3) Fairly priced PE

PE vs Industry: LMT is good value based on its PE Ratio (13.8x) compared to the US Aerospace & Defense industry average (21.9x).