Market Snapshot
briefing.com
| Dow | 33247.43 | +111.13 | (0.34%) | | Nasdaq | 10472.71 | +85.81 | (0.83%) | | SP 500 | 3854.35 | +30.21 | (0.79%) | | 10-yr Note | +4/32 | 3.71 |
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| | NYSE | Adv 2443 | Dec 598 | Vol 980 mln | | Nasdaq | Adv 3272 | Dec 1313 | Vol 5.0 bln |
Industry Watch
| Strong: Real Estate, Financials, Materials, Utilities, Consumer Discretionary, Communication Services, Industrials |
| | Weak: Energy, Information Technology, Consumer Staples, Health Care |
Moving the Market
-- Attempting to end the Santa Claus rally period with a gain
-- Encouraging inflation data out of Europe supporting the peak inflation narrative
-- Gains in many mega cap stocks helping to bolster broader market
-- FOMC Minutes for the December 13-14 meeting precipitating volatile price action
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Closing Summary
04-Jan-23 16:30 ET
Dow +133.40 at 33269.70, Nasdaq +71.78 at 10458.68, S&P +28.83 at 3852.97
[BRIEFING.COM] The major indices registered some decent gains at their highs for the session, but closed a good bit off their best levels of the day; however, a rally effort in the last 10 minutes saved them from a negative finish. The market was a little choppy early on due to some uneven performances in the mega cap space, but the main indices settled into a narrow range with sizable gains until the release of the FOMC Minutes for the December 13-14 meeting at 2:00 p.m. ET.
There wasn't anything too surprising in the release, but the market did experience some post-Minutes volatility with participants seemingly reacting to the following: "No participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023."
Despite the major indices closing off their highs, market internals reflected a decent positive bias. Advancers led decliners by a 4-to-1 margin at the NYSE and a greater than 2-to-1 margin at the Nasdaq. The Invesco S&P 500 Equal Weight ETF (RSP) was up 1.6% versus a 0.5% gain in the Vanguard Mega Cap Growth ETF (MGK) and a 0.8% gain in the S&P 500.
Ultimately, the S&P 500 was able to settle just a whisker above the 3,850 level, which has been a resistance point since mid-December. Additionally, it logged a net gain for the Santa Claus rally period (the last five trading sessions of the year and the first two trading sessions of the new year), which, historically has been regarded as a positive sign for the start of the new year.
Microsoft (MSFT 229.10, -10.48, -4.4%), which was downgraded to Neutral from Buy at UBS on concerns about weaker growth for the Azure and Office 365 businesses, Alphabet (GOOG 88.71, -0.99, -1.1%), and Amazon.com (AMZN 85.14, -0.68, -0.8%) were among the more influential drags on the market while Apple (AAPL 126.36, +1.29, +1.0%), Tesla (TSLA 113.64, +5.54, +5.1%), and Meta Platforms (META 127.37, +2.63, +2.1%) helped out the rebound effort.
Dow component Salesforce (CRM 139.59, +4.81, +3.6%) was another notable winner today following reports that it will be pursuing a restructuring effort that will include the elimination of roughly 10% of its staff and select real estate exits and and office space reductions.
All 11 S&P 500 sectors were able to register a gain with real estate (+2.3%) and materials (+1.7%) leading the outperformers. Meanwhile, the energy (+0.1%), health care (+0.3%), and information technology (+0.3%) sectors fell to the bottom of the pack.
The 2-yr Treasury note yield settled the session unchanged at 4.37% while the 10-yr note yield fell seven basis points to 3.71%.
- Dow Jones Industrial Average: 0.2% YTD
- S&P Midcap 400: +0.8% YTD
- S&P 500: +0.2% YTD
- Russell 2000: +0.7% YTD
- Nasdaq Composite: -0.4% YTD
Reviewing today's economic data:
- The MBA Mortgage Applications Index for the week ending December 31 fell 13.2% from two weeks earlier with purchase applications declining 12.2% and refinancing applications falling 16.3%.
- The December ISM Manufacturing Index dropped to 48.4% (Briefing.com consensus 48.5%) from 49.0% in October. The dividing line between expansion and contraction is 50.0%, so the sub-50.0% reading for December reflects a general contraction in manufacturing activity. The ISM for December hit its lowest level since May 2020, and marks the second straight month with a sub-50.0% reading.
- The key takeaway from the report is that manufacturing activity contracted in December for the second straight month, demonstrating that the cumulative effect of rate hikes around the globe is adversely impacting demand while at the same time curtailing inflation pressures.
- JOLTS - Job Openings increased to 10.458 million in November from a revised total of 10.512 million in October (from 10.334 million).
Looking ahead to Thursday, market participants will receive the following economic data:
- 08:15 ET: December ADP Employment Change Report (Briefing.com consensus 148K; Prior 127K)
- 08:30 ET: Initial Jobless Claims for week ending Dec. 31 (Briefing.com consensus 225K; Prior 225K) and Continuing Jobless Claims for week ending Dec. 24 (Prior 1710K)
- 08:30 ET: November Trade Balance (Briefing.com consensus -$76.4B; Prior -$78.2B)
- 09:45 ET: December Final IHS Markit Services PMI (Prior 44.4)
- 10:30 ET: EIA Natural Gas Inventories (Prior -213 bcf)
- 11:00 ET: EIA Crude Oil Inventories (Prior 0.718M)
S&P 500 finds resistance at 3850
04-Jan-23 15:30 ET
Dow +41.59 at 33177.89, Nasdaq +36.87 at 10423.77, S&P +17.78 at 3841.92
[BRIEFING.COM] The S&P 500 is finding some resistance at 3,850, but maintains a decent gain.
The 2-yr Treasury note yield settled the session unchanged at 4.37% while the 10-yr note yield fell seven basis points to 3.71%.
Looking ahead to Thursday, market participants will receive the following economic data:
- 08:15 ET: December ADP Employment Change Report (Briefing.com consensus 148K; Prior 127K)
- 08:30 ET: Initial Jobless Claims for week ending Dec. 31 (Briefing.com consensus 225K; Prior 225K) and Continuing Jobless Claims for week ending Dec. 24 (Prior 1710K)
- 08:30 ET: November Trade Balance (Briefing.com consensus -$76.4B; Prior -$78.2B)
- 09:45 ET: December Final IHS Markit Services PMI (Prior 44.4)
- 10:30 ET: EIA Natural Gas Inventories (Prior -213 bcf)
- 11:00 ET: EIA Crude Oil Inventories (Prior 0.718M)
Market trying to reclaim gains seen before Minutes release
04-Jan-23 15:00 ET
Dow +111.13 at 33247.43, Nasdaq +85.81 at 10472.71, S&P +30.21 at 3854.35
[BRIEFING.COM] Following the choppy post-Minutes action in the stock market, the main indices are attempting to climb towards levels seen before the Minutes were released.
There is still more strength under the surface than index level gains might suggest. Just like earlier in the session, the Invesco S&P 500 Equal Weight ETF (RSP) is outpacing the S&P 500 (+0.5%) and the Vanguard Mega Cap Growth ETF (MGK) (+0.3%).
Separately, energy complex futures settled in mixed fashion. WTI crude oil futures fell 5.2% to $72.97/bbl and natural gas futures rose 2.3% to $3.76/mmbtu.
Markets split after FOMC minutes
04-Jan-23 14:30 ET
Dow -34.16 at 33102.14, Nasdaq +10.99 at 10397.89, S&P +8.93 at 3833.07
[BRIEFING.COM] The major averages jostled around immediately following the release of the FOMC's minutes from its December meeting. As it stands trading is dipping in the last few minutes, the benchmark S&P 500 (+0.23%) holding a modest lead atop the standings.
Participants noted that, because monetary policy worked importantly through financial markets, an unwarranted easing in financial conditions, especially if driven by a misperception by the public of the Committee's reaction function, would complicate the Committee's effort to restore price stability.
Importantly, with inflation staying persistently above the Committee's 2 percent goal and the labor market remaining very tight, all participants had raised their assessment of the appropriate path of the federal funds rate relative to their assessment at the time of the September meeting. No participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023.
Further, participants noted that foreign economic activity grew at a moderate pace in the third quarter, but more recent data pointed to weakening growth, weighed down by the economic fallout of Russia's war against Ukraine and a COVID-19-related slowdown in China.
In recent trading the yield on the benchmark 10-yr treasury note is down about two basis points to 3.709%.
Gold continues recent run ahead of FOMC minutes
04-Jan-23 14:00 ET
Dow +152.35 at 33288.65, Nasdaq +100.05 at 10486.95, S&P +35.96 at 3860.10
[BRIEFING.COM] With about two hours to go on Wednesday the tech-heavy Nasdaq Composite (+0.96%) remains atop the standings. As a reminder, FOMC minutes from the December meeting are due out at the top of the hour.
Gold futures settled $12.90 higher (+0.7%) to $1,859.00/oz, extending recent gains with the dollar and yields holding losses.
Meanwhile, the U.S. Dollar Index is down about -0.2% to $104.30.
Page One
Last Updated: 04-Jan-23 09:04 ET | Archive
Trying again for a rebound effort (and Santa Claus rally)
The Santa Claus rally period encompasses the last five trading sessions of the year and the first two trading sessions of the new year. Today is the last day of that "rally period," and Santa Claus is hanging on by a thread. When the period began, the S&P 500 stood at 3,822.39. It closed yesterday at 3,824.14.
A net gain over the seven-session stretch is considered to be a good sign for how the market will trade in the early part of the new year. Of course, 2022 did not live up to that standard, so it is perhaps best not to have any pre-conceived notions about 2023 based on what happens -- or doesn't happen -- today.
What's happening now is that there is a modestly positive bias in the futures trade.
Currently, the S&P 500 futures are up 20 points and are trading 0.6% above fair value, the Nasdaq 100 futures are up 78 points and are trading 0.8% above fair value, and the Dow Jones industrial Average futures are up 122 points and are trading 0.4% above fair value.
That disposition looks a lot like yesterday, which did not live up to the pre-opening hype. Sellers were quick to come in and squash the opening rally effort, recognizing the vulnerability of current 2023 earnings estimates and expressing continued valuation concerns.
Those views were wrapped up in worries about economic growth prospects. Dow component Salesforce (CRM) didn't assuage those concerns today with an announcement that it plans to reduce its workforce by approximately 10% and make select real estate exits and office space reductions.
From a micro standpoint, that restructuring move will help underpin corporate profitability, so shares of CRM are up 4.4%. From a macro standpoint, however, it is a step in the weakening direction.
The Treasury market should draw a measure of support from that connection, but to be fair, the bulk of today's early gains were forged overnight following some relatively pleasing December Services PMI readings from the eurozone and some encouraging inflation reports out of Germany and France that supported the peak inflation narrative.
Here again, though, the improved inflation readings stemmed in part from weakening demand. Still, it is much better to see disinflation at this point than more inflation, but if weakening demand is a driver of disinflation, one must also account for the likelihood of weaker earnings growth.
The 2-yr note yield is down five basis points to 4.32% and the 10-yr note yield is down 10 basis points to 3.68%.
The drop in long-term rates is providing a little clearance for some rebound-minded activity in the growth stocks, but the issue there is one of duration, as in how long will the rebound last? It didn't last long yesterday.
Some gains in the mega-cap stocks are helping to underpin the equity futures market this morning (just as they were yesterday), but Dow component Microsoft (MSFT) has been excluded from the mix. It is down 2.7% on a UBS downgrade to Neutral from Buy that was attributed to concerns about weaker growth for Azure and Office 365.
Separately, market participants will soon have some additional insight on growth prospects with the release of the November JOLTS - Job Openings and December ISM Manufacturing Index reports at 10:00 a.m. ET. Those reports will be followed at 2:00 p.m. ET by the release of the FOMC Minutes for the December 13-14 meeting, which could offer some new insight on when a pause in the Fed's tightening efforts could be likely.
Today's trading action, then, is bound to be interesting, and not only because it will determine if Santa Claus came to town.
-- Patrick J. O'Hare, Briefing.com
Ulta Beauty as 2023 Investment Idea; operating in a defensive mid-range cosmetic industry (ULTA)
As the largest beauty retailer in the United States, Ulta Beauty (ULTA) is a company we want to highlight as an Investment Idea for 2023. Although shares already ran roughly 12% higher in 2022, with most of the gains coming during the last two months, we see plenty of upside potential for ULTA. The company has shown its resilience during the past year, which carried a series of challenges, including inflationary pressures, labor shortages, and supply chain disruptions.
- ULTA made it clear over the past year that the cosmetic industry is well-shielded from the severe drop-off in discretionary spending fueled by decades-high inflation. ULTA put up solid numbers, growing revs double digits in the past four quarters despite lapping unfavorable comparisons from 2021.
- Although there are exceptions to the beauty industry's defensive characteristics, like Coty (COTY) and Estee Lauder (EL), these cosmetic manufacturers encountered company-specific issues, such as supply chain woes and high exposure to China, where lockdowns have hampered the beauty industry.
- Although physical locations are a vital part of ULTA's ecosystem, its digital offerings are a crucial component to stay competitive against more prominent players in this space, such as Amazon (AMZN) and Walmart (WMT), as well as drugstores like CVS Health (CVS) and Walgreens Boots Alliance (WBA). Therefore, ULTA's digital tools, such as its Skin Advisor and hairstyle tool, are beneficial in keeping users flocking to its site over these rivals.
- Furthermore, ULTA's partnership with Target (TGT), where many Target locations house a "mini" Ulta within the store, bolsters UTLA's physical presence. TGT also noted in OctQ that ULTA nearly tripled its total sales volume yr/yr. Also, ULTA remarked that it is seeing members bounce back to its locations after becoming a member at an Ulta Beauty at Target shop. Cosmetics are unique because consumers want to try out different makeup, fragrance, and skincare products before buying, giving ULTA a crucial differentiating factor.
- On that note, competing physical beauty retailer Sephora may seem poised to steal market share away from ULTA. Parent company LVMH (LVMUY) touched on the excellent performance of Sephora over the past three quarters. Sephora even has its own partnership with Kohl's (KSS), where a slice of many locations house a section dedicated to Sephora.
- However, ULTA and Sephora cater to different clientele, with prices at Sephora, in many cases, being twice as high as competing brands at ULTA. As such, we believe these two companies can enjoy success separately without materially infringing upon each other's market share.
- ULTA also boasts a popular loyalty program, possessing 39 mln members as of Q3 (Oct), a 9% bump yr/yr. ULTA tends to see higher overall spending, visitation frequency, and average ticket with its membership base, making its loyalty program a strategic asset and a fundamental component of its long-term growth.
Overall, despite an already-impressive run over the past couple of months, we view 2023 as another favorable year for ULTA. Inflationary pressures on wage rates and consumer products remain a primary concern. However, ULTA has proved its ability to circumvent this headwind, with sales increases outpacing inflationary costs pressure. Lastly, ULTA expects growth to continue in 2023, even if at lower rates, underscoring strong consumer engagement within the beauty category, and anticipates delivering comps within its longer-term range of +3-5%.
Salesforce latest tech name to announce layoffs; could be a tough earnings season for tech (CRM)
Salesforce (CRM +3%) is trading higher today as investors are taking the news of a workforce reduction as a positive although it was more than just that. CRM announced a restructuring plan that includes a 10% workforce reduction (mostly over the coming weeks), select real estate exits and office space reductions within certain markets. CRM expects it will incur $1.4-2.1 bln in charges, of which $0.8-1.0 bln will be incurred in Q4 (Jan).
- The company included its letter to employees in a 6-K filing. In that, CRM concedes that the environment remains challenging and customers are taking a more measured approach to their purchasing decisions. It also concedes that as revenue accelerated through the pandemic, it hired too many people.
- There has been a lot of change at Salesforce recently. Just last month, co-CEO Bret Taylor suddenly announced he would step down on January 31 to return to his entrepreneurial roots. Marc Benioff will be Chair and CEO. We have to wonder if this decision/outlook played any role in Taylor's decision to step aside.
- We got a hint of possible troubles ahead on the earnings call last month. CRM had noted that it was seeing more measured customer buying behavior beginning in July, which led to elongated sales cycles, additional deal approval layers and deal compression particularly in enterprise. As Q3 (Oct) progressed, CRM saw an even more challenging buying environment, driving intense customer scrutiny on every investment dollar, especially in the US and major European markets.
From a bigger picture perspective, this adds to our concerns about the tech space generally as we approach earnings season. We think a lot of tech companies probably hired too many people during the pandemic boom, just like CRM did. A number of companies have already announced layoffs in recent months including META, but we expect to see additional layoffs announced in the coming weeks. Layoffs are likely to be accompanied by cautious guidance as we get our first look at 2023. Of note, PEGA also announced a 4% workforce reduction last night.
Recall that many tech names did not report great Q3 results and offered cautious guidance for Q4. In particular, we saw weak results/comments from cloud-related companies, most notably from Amazon's AWS and Microsoft's Azure, among others. And there likely will be more weakness. For example, in its downgrade of Microsoft (MSFT) today, UBS cited risks that Azure growth will decelerate more than estimates. Overall, we think investors should brace for a tough tech earnings season.
SMART Global shines brightly following upbeat Q1 numbers fueled by its solid diversification (SGH)
SMART Global (SGH +5%) is shining brightly today after topping Q1 (Nov) earnings estimates by double-digits and posting a smaller yr/yr revenue declince than analysts anticipated. Although SGH experienced macroeconomic-related challenges during the quarter, its diversity helped offset areas of weakness, leading to upbeat Q1 numbers and sufficient Q2 (Feb) guidance that met analyst expectations.
SGH focuses on high-performance computing (HPC) semiconductors, AI and ML applications through its Intelligent Platform Solutions (IPS) segment, memory-related semiconductors through its Memory Solutions segment, and application-optimized LEDs through its LED Solutions segment.
- SGH's diversified business model was on display in Q1, as its enterprise-related businesses were able to offset declines in its more consumer-facing businesses. As a result, adjusted EPS of $0.79 cruised past SGH's guidance of $0.45-0.75. Meanwhile, even though sales fell 1.0% yr/yr to $465.48 mln, it was toward the higher end of the company's forecast of $425-475 mln.
- SGH's largest segment, IPS (45% of total revs), grew 78% yr/yr and 46% sequentially, underscoring healthy demand within HPC and AI applications. SGH added that IPS should see a strong 1H23 (Feb) fueled by large customer hardware installs. However, the company remained cautiously optimistic, noting that overall visibility for demand through CY23 remains uncertain.
- Still, with the largest semiconductor foundry Taiwan Semi (TSM), noting in October it expects HPC to be a primary driver of growth over FY23, HPC may continue to provide kindling for strong IPS growth throughout 2023.
- SGH's other two segments did not share similar success in Q1. Memory Solutions sales fell sequentially as demand slowed and global memory pricing weakened. With a significant portion of SGH's sales derived from Brazil, the souring demand backdrop surrounding PCs and mobile phones in the region is setting up Q2 to experience further softening in Memory Solutions.
- SGH remarked that it remains focused on the long term. It also is seeing sustained demand for locally-produced SSDs (solid-state drives), as well as initial shipments of memory for 5G phones, with the expectation of increasing market adoption in CY23.
- Meanwhile, in LED Solutions, China's COVID-related policies disrupted SGH's supply chain and adversely impacted demand for the entire industry. At the same time, SGH is noticing weakness in the U.S. and Europe. These headwinds will seep into Q2, causing SGH to expect lower revs in this segment.
- Despite these woes, SGH still guided Q2 numbers in line with consensus, expecting adjusted EPS of $0.45-0.75 and revs of $410-460 mln.
Overall, investors are shrugging off the few hurdles standing in SGH's way and focusing on substantial growth in its primary IPS business. Still, initial enthusiasm today could face selling pressure as macroeconomic conditions continue to weigh on SGH's other segments, which made up 55% of Q1 revenue.
Coty avoids the market sell-off after an upgrade at Piper Sandler (COTY)
Beauty product manufacturer Coty (COTY +2%) is avoiding the current market sell-off today after receiving an upgrade to "Overweight" from "Neutral" at Piper Sandler. Shares of COTY, which fell roughly 18% in 2022, have not seen the same outperformance as its less-expensive competitor, e.l.f. Beauty (ELF), which saw its stock soar by over 65% in 2022.
Briefing.com notes that although COTY's brands tend to command a premium price compared to competing products, these higher price points have not weighed significantly on results during the current inflationary environment. In fact, this premiumization has demonstrated resilience over the past year. Instead, supply chain hiccups and weaknesses in particular areas like China have clipped some sales growth.
Therefore, with supply chain woes continuing to improve and China returning to growth in Q1 (Sep), COTY may be staring at much prettier numbers in the quarters ahead.
- COTY noted last quarter that its presence in China makes up only 4% of its net revenue, so the weakness throughout much of FY22 (Jun) did not have a glaring negative effect on results. Furthermore, with such a small footprint in the region, COTY is looking to possibly step on the throttle, capitalizing on a massive total addressable market and a robust rebound as COVID-19 restrictions ease.
- COTY already saw positive results with its Lancaster skincare brand, where sales exploded by 400% yr/yr in Q1, underscoring the brand's desirability toward the most demanding Chinese consumers.
- Even though ELF has had great success given its lower price points, COTY commented in early November that it has yet to see any trade-down. In fact, the company remarked that retailers ordered in advance during Q1 for the Q2 (Dec) season. Additionally, COTY's Consumer Beauty business saw like-for-like sales growth of +12% in Q1.
- COTY added that it has also not seen any volume decline despite implementing low-to-mid single-digit price hikes, which has helped drive gross margin expansion by 70 bps in Q1.
- Supply continues to be outstripped by demand, but COTY noted in Q1 that it is seeing some improvements in specific segments, like skincare. There are also fewer suppliers producing quality glass used to package many of COTY's products. This will likely remain the case for the foreseeable future. However, the good news is that despite the glass shortage, COTY noted that during Q1, it was not any worse off than its peers. Its reaffirmed FY23 earnings and adjusted EBITDA guidance is also encouraging that this shortage will not materially dent profitability.
Bottom line, 2023 may bring lingering supply chain woes and some demand pressure as inflationary pressures remain elevated. However, COTY's possible aggressive penetration into the enormous Chinese market and its brands' defensive premium characteristics give it a solid footing to overcome these headwinds.
Carter's (CRI) as Investment Idea for 2023; dominant market share and insider buying
With the new year upon us, we will be posting several profiles we call Investment Ideas for 2023. These are longer term buy-and-hold ideas that we post around this time every year. See 2022 Recap. Importantly, we recommend using a 20-25% stop loss limit. Today we wanted to profile Carter's (CRI).
Carter's is the largest branded marketer in North America of apparel exclusively for babies and young children. It owns the Carter's and OshKosh B'gosh brands, two of the most recognized brands in the marketplace. These brands are sold in department stores, national chains, and specialty retailers. They are also sold through 970 company-operated stores and online. Here is why it sparks our interest:
- Carter's has an enviable market position as the leading brand in the zero to 10-year-old market in the US. Its 10% market share is roughly double that of the next largest brand, according to the company. It is particularly dominant in the 0-2 age group with a 21% share, nearly 4x larger than the #2 brand.
- The company focuses on essential core products, which families have to buy. This includes bodysuits, towels, bibs, blankets, blanket sleepers and pajamas. Also, children grow through these rapidly in the early years of life, which drives traffic. The company notes that all major retailers carry the Carter's brand because it is a traffic driver. CRI has also launched exclusive brands with Target and Walmart and more recently with Amazon.
- The company concedes that 2022 was a bit of a down year as inflation has been weighing on the consumer, including gas, groceries and shortages in baby formula. However, the hope is we see improvement in 2023.
- Profit margins have increased meaningfully since 2019 after CRI made what it describes as significant structural changes. This includes reducing SKUs to focus on fewer but better and higher-margin merchandise. It also focused on higher-margin stores and accelerated the closure of underperforming stores.
- CRI concedes it had significant supply chain delays in the second half of last year. However, the supply chain is meaningfully better this year, although still not back to the pre-pandemic levels due to backups at the ports. But the inventory levels and mix of inventory was much better going into the holidays. At the same time, gas prices are falling, which should also help.
- The company also cites birth rates trending higher as a potential catalyst. During the pandemic, there was a reversal of a 14-year trend of declining births in the US. Also, with so many weddings delayed during the pandemic, there was a 40-year high in weddings in 2022. And more weddings tend to lead more births.
CRI hit our radar because it has been a recent member of our YIELD rankings. It is clear that management sees value in the stock down here as they have stepped up share buybacks in hopes of a turnaround. CRI sports a hefty buyback yield of 11.4%, plus it pays a healthy 4.0% dividend yield, for a total shareholder yield of 15.4%, good enough for a Top 10 ranking in our most recent report.
The stock has been in a downtrend over the past year, although it has stabilized since June, mostly trading sideways since then. We like to see that pattern, namely a multi-month consolidation following a downtrend. The hope is that it is building a foundation for a possible leg higher. It is not clear when business will improve, but the buyback activity, its strong market position, the recent uptick in birth rates all make us think the risk-reward looks good down here. With these being longer term ideas, we recommend using a 20-25% stop loss limit, which gives them room to trade around a bit.
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