In today’s briefing:
- Russell 2000 Breakout Attempt Underway; Small-Cap Breadth Improving; KRE, KBE, XRT Test Key Levels
- WTI and Gold Targets
- Dell, HP, Qualcomm Signal AI-Driven PC Refresh Cycle, 2024E PC Growth, Accelerated Windows Upgrades
- Ball Corporation: What Is Its Biggest Competitive Advantage? – Key Drivers
- CTO Realty Growth: One Of The Few Investable REITs Out There
- Broadcom: Proceed With Caution
Russell 2000 Breakout Attempt Underway; Small-Cap Breadth Improving; KRE, KBE, XRT Test Key Levels
- The S&P 500 broke above 4200 and the 2-month megaphone pattern on Friday, and is already approaching the 4300-4325 area which we have anticipated would cap upside for 2023.
- While we would be cautious at these levels given our expectation for inflation to remain elevated, we cannot get too bearish if the S&P 500 is above 4165-4200.
- Breadth remains weak within the S&P 500, but we are starting to see breadth improvement within small-cap Russell 2000 (IWM). More on that below, IWM targets include $190 and $200-202.
WTI and Gold Targets
- Oil and gold remain under pressure due to a firm US dollar. Use strikes to the downside in oil to re cycle a short near 75 resistance.
- Our sell call in gold at 2,060 is pressing below 1,980 with a target of 1,900 where we start to probe for an intermediate cycle low.
- We view this as a tactical pullback within a more bullish macro cycle. USD counter play.
Dell, HP, Qualcomm Signal AI-Driven PC Refresh Cycle, 2024E PC Growth, Accelerated Windows Upgrades
- HP and Dell’s industry outlook after their results last week indicate a PC market stabilizing and set for growth in 2024E. Qualcomm provided AI comments at a recent conference.
- Both HP and Dell managed to beat earnings expectations despite experiencing 20%+ YoY revenue declines. Neither stock’s price has made a significant move since results.
- AI incorporated into Windows 11 and PC’s themselves could be a major reason for companies and consumers to buy new PC’s. PC’s are being designed to run AI capabilities locally.
Ball Corporation: What Is Its Biggest Competitive Advantage? – Key Drivers
- Amid tough year-over-year comparisons, largely driven by business divestments, Ball Corporation delivered a mixed set of results for the previous quarter with revenues well below analyst expectations but managed an earnings beat.
- The company’s aluminum beverage, as well as aerosol shipments, were in line with the regional expectations of the management.
- However, the sales of the quarter decreased because of the sale of the company’s Russian business, lower volumes, currency translation, and pass-through of lower aluminum prices.
CTO Realty Growth: One Of The Few Investable REITs Out There
- CTO Realty Growth, Inc. possesses the necessary characteristics to outperform the market.
- Diminishing credit spreads and more predictable inflation could result in tailwinds for best-in-class cyclical REITs such as CTO.
- Real Estate Investment Trusts (“REITs”) situated in the United States have underperformed the S&P 500 (SP500) by approximately 10% during the past year, which should not be a surprise as factors such as rising credit spreads, an unstable interest rate environment, and softening consumer sentiment have all dented the hopes of many cyclical assets.
Broadcom: Proceed With Caution
- Broadcom Inc. has been the best-performing semiconductor stock over the past 3-month period.
- Robust demand partially justifies the recent share price increase, but not all the way to a near double-digit revenue multiple.
- Just three months ago, I analyzed Broadcom Inc.’s (NASDAQ:AVGO) strong business model through the lens of profitability, competitive advantages and capital allocation.
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