Day: October 21, 2024

• Jobless claims, Fed speakers, Q3 earnings will be in focus this week.

• GE Aerospace is a buy with upbeat profit and sales growth expected.

• UPS is a sell with weak earnings, soft guidance on deck.

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U.S. stocks closed higher on Friday to cap off their sixth winning week in a row, with the S&P 500 and Dow Jones Industrial Average rallying to new records.

For the week, the benchmark S&P 500 rose 0.9%, the blue-chip Dow climbed 1%, and the tech-heavy Nasdaq Composite gained 0.8%.

Source: Investing.com

The week ahead is expected to be an eventful one as investors assess the outlook for the economy, inflation, interest rates and corporate earnings.

Most important on the economic calendar will be Thursday morning’s release of initial jobless claims figures at 8:30AM ET, as well as a pair of flash PMI surveys.

That will be accompanied by a heavy slate of Fed speakers, with the likes of district governors Neel Kashkari, Lorie Logan, Mary Daly, and Patrick Harker all set to make public appearances during the week.

Source: Investing.com

Some 88% of market participants expect the Federal Open Market Committee to cut its benchmark interest rate by 25 basis points at its November 7 policy meeting, while nearly 12% expect no change, according to Investing.com’s Fed Monitor Tool.

Meanwhile, third-quarter earnings season shifts into high gear, with reports expected from several high-profile companies, including Tesla (NASDAQ:TSLA), IBM (NYSE:IBM), and Boeing (NYSE:BA).

Some of the other notable reporters include United Parcel Service (NYSE:UPS), Coca-Cola (NYSE:KO), General Motors (NYSE:GM), AT&T (NYSE:T), Verizon (NYSE:VZ), GE Aerospace (NYSE:GE), 3M (NYSE:MMM), Honeywell (NASDAQ:HON), Lockheed Martin (NYSE:LMT), American Airlines (NASDAQ:AAL), and Southwest Airlines (NYSE:LUV).

Regardless of which direction the market goes, below I highlight one stock likely to be in demand and another which could see fresh downside. Remember though, my timeframe is just for the week ahead, Monday, October 21 – Friday, October 25.

Stock To Buy: GE Aerospace

I foresee a strong performance for GE Aerospace stock this week, with a potential breakout to a fresh multi-year high on the horizon.

The primary catalyst for GE Aerospace is its third-quarter earnings report, set to be released before the market opens on Tuesday at 6:30AM ET.

Market participants expect a sizable swing in GE stock after the print drops, according to the options market, with a possible implied move of 5.3% in either direction.

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Wall Street analysts are optimistic about the company’s performance, with consensus estimates predicting earnings of $1.14 per share on revenue of $9.05 billion.

Source: Investing.com

Several key factors are expected to drive GE Aerospace’s earnings and sales growth. First, the company is benefiting from a surge in demand for aftermarket services, which includes maintenance, repair, and spare parts. This is a high-margin business for the company and should provide a strong boost to its profitability.

Additionally, there is strong demand for new plane engines, particularly for narrow-body aircraft. GE Aerospace, which manufactures the LEAP engine used in many of these aircraft, stands to benefit as airlines continue to replace older fleets with more fuel-efficient models.

GE Aerospace stock ended at $192.61 on Friday, not far from a recent peak of $194.80, which was the highest level since May 2008. At current levels, the Evendale, Ohio-based company has a market cap of $210.7 billion.

Source: Investing.com

Since its spinoff in April, GE has been on a strong upward trajectory, with its stock up 40%. General Electric (NYSE:GE) split into three separate companies between November 2021 and April 2024, adopting the trade name GE Aerospace after divesting its healthcare and energy divisions.

InvestingPro highlights GE Aerospace’s promising outlook, emphasizing its favorable positioning in the Aerospace & Defense industry, which has allowed it to leverage a resilient business model and strong profit growth.

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Stock to Sell: UPS

On the flip side, United Parcel Service is facing a more challenging outlook, making it a strong sell this week due to a worrying combination of rising costs and weakening demand.

UPS is scheduled to release its third-quarter earnings report before the market opens at 6:00AM ET on Thursday, but the forecast is not promising.

Several headwinds are weighing on UPS’s performance. One of the most significant challenges is the slowing global economy. As inflation persists and interest rates remain elevated, consumer and business spending has slowed, leading to a drop in package volumes for UPS.

According to the options market, traders are pricing in a swing of 4.9% in either direction for UPS stock following the print.

Earnings have been catalysts for outsized swings in shares this year, as per data from InvestingPro, with UPS stock gapping down 11.5% when the company last reported quarterly numbers in July.

Analysts have been steadily revising their estimates downward in recent weeks, with all 21 analysts surveyed by InvestingPro cutting their profit forecasts by roughly 35% from initial expectations.

Source: InvestingPro

Wall Street sees UPS earning $1.63 per share, up 3.8% compared to EPS of $1.57 in the year-ago period. Meanwhile, revenue is forecast to tick up 5% year-over-year to $22.1 billion.

The company’s heavy reliance on global trade and shipping means it is particularly vulnerable to these macroeconomic pressures, which have been impacting revenue.

In addition to weaker demand, UPS is facing rising costs, particularly in fuel and labor. These rising expenses are squeezing margins and making it more difficult for UPS to maintain profitability.

Given these challenges, UPS is expected to issue weak guidance for the upcoming quarters, further dampening investor sentiment.

UPS stock closed Friday’s session at $135.93, not far from a recent low of $123.12, which was the weakest level since July 2020. At its current valuation, the Sandy Springs, Georgia-based shipping giant has a market cap of $116.4 billion.

Source: Investing.com

Shares are down 13.5% in the year to date.

Not surprisingly, UPS has a below-average InvestingPro ‘Financial Health’ score of 2.3 out of 5.0 due to mounting concerns over its near-term profit and sales growth outlook.

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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF, and the Invesco QQQ Trust ETF. I am also long on the Technology Select Sector SPDR ETF (NYSE:XLK).

I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies’ financials.

The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.

Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.

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Ken Griffin has made big bucks primarily from picking stocks for his Citadel Advisors hedge fund. His net worth stands at roughly $43 billion. Big bucks indeed.

However, Griffin’s fortune doesn’t stem exclusively from investing in individual stocks. The billionaire has also poured money into exchange-traded funds (ETFs). Here are two ETFs that Griffin is buying hand over fist.

1. SPDR S&P 500 ETF Trust

Citadel’s largest holding isn’t a stock; it’s an ETF. Griffin’s hedge fund owned 5.6 million shares of the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) valued at $3.05 billion as of June 30, 2024. This total was much lower three months earlier. Griffin bought around 2.03 million additional shares of the ETF in the second quarter of 2024, increasing Citadel’s stake by 56.7%.

The SPDR S&P 500 ETF Trust became the first ETF listed in the U.S. in January 1993. Today, it’s the largest ETF based on assets under management (AUM) with assets of $603.7 billion. The SPDR ETF also ranks as one of the most actively traded ETF.

This ETF attempts to track the performance of the S&P 500 Index. Its top holdings include several of the largest companies around: Apple, Nvidia, Microsoft, Amazon, Facebook parent Meta Platforms, and Google parent Alphabet.

Why does Griffin like this ETF so much? There are several likely reasons.

The billionaire is a fan of diversified portfolios, as evidenced by the 5,800+ holdings in Citadel’s portfolio. The SPDR S&P 500 ETF Trust provides an easy way to invest in the 500 biggest U.S. companies in one fell swoop.

This ETF has also been a big winner. Since its inception in 1993, the fund has delivered an average annual return of nearly 10.5%. In 2024 alone, it’s up close to 23%.

2. Invesco QQQ Trust

Citadel’s second-largest holding is also an ETF, the Invesco QQQ Trust (NASDAQ: QQQ). As of June 30, 2024, the hedge fund owned 3.3 million shares of the fund valued at $1.58 billion. And Griffin aggressively added to Citadel’s position in the Invesco QQQ Trust in Q2, buying roughly 2.82 million shares that boosted his hedge fund’s stake in the ETF by nearly 585%.

The Invest QQQ Trust ranks as the fifth-largest ETF based on AUM. Over the last three months, its average daily share volume trailed only the SPDR S&P 500 ETF Trust.

This ETF attempts to track the performance of the Nasdaq-100 Index. It owns shares of the 100 largest stocks traded on the Nasdaq Stock Market. The fund’s top holdings include Apple, Microsoft, Nvidia, Broadcom), Meta Platforms, and Amazon.

Story continues

Griffin probably likes the Invesco QQQ Trust for the same reasons he likes the SPDR S&P 500 ETF Trust. The ETF provides a simple way to invest in a large basket of stocks. It has been an even bigger winner than the SPDR ETF, with Lipper ranking it as the best-performing large-cap growth fund based on total return over the past 15 years.

Are these ETFs good picks now?

The main knock against both the SPDR S&P 500 ETF Trust and Invesco QQQ Trust is valuation. The stocks owned by the SPDR ETF trade at an average price-to-earnings ratio of 28.1. The average earnings multiple for stocks owned by the Invesco ETF is even higher at 37.7.

However, I think both of Griffin’s favorite ETFs remain good picks for long-term investors. These funds own the biggest and arguably best stocks on the market. They regularly rebalance to replace laggards with other stocks that are on the rise. I expect both the SPDR S&P 500 ETF Trust and the Invesco QQQ Trust will continue to be big winners over the next decade and beyond.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Nasdaq and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

2 ETFs That Billionaire Ken Griffin Is Buying Hand Over Fist was originally published by The Motley Fool