Market. He thinks it has been a tough season with companies that have not been rewarded for good earnings. Even though companies are reporting 18% revenue bumps before the tax reform benefits, companies are only getting about 1% stock price increases. However, if you miss earnings, stock prices fall by 5% on average. He thinks forward guidance has been very conservative, leaving investors wondering if recent earnings are peak. He thinks there is a range on the S&P500 of about 2600-2800 right now. This is a healthy consolidation of the market. He would put positions on in “leadership areas” at the lower range.
He has not done a lot of work on this company, but is aware they have been putting up monster earnings results. They are consistent earnings beaters, but when there are not on guidance, it is usually earnings lower than target. This makes the stock too risky for his conservative investments, but would consider it a speculative buy.
The technical chart is not showing any upward momentum. Policy factors and other issues are not fundamentally supportive. The sector is a bond proxy and this is not the time to be investing in this space as interest rates are moving up. He questions if the dividend is safe. This is not a defensive stock with rising interest rates, which he expects will rise to 4%. Yield 6%.
They completed a $5 billion buyback recently. They put up a beat on recent earnings, but there were concerns about future earnings. He does not like the space as there is a wall of sellers to overcome and bio-tech is running out of technical momentum. They have great forecasted cash flow, but watch out if they miss their guidance.