What traders are getting wrong about Yum!

Good morning! 👋

Jobs are hot, but traders have yet to prove they’re not.

Futures are green as I type, but that could easily change by the time you read this.

Try not to read too much into things.

MyPOV is that it’s simply short-term computers making up lost ground. As usual, traders are getting ready to shake the weak money out of the game (again).

Remember...

A. Wall Street can see retail orders stack up overnight, so they know exactly which buttons to push and at what price points.

B. The best way to beat Wall Street is to pick battles they have no interest in fighting. Do that by sticking to the very best names you can buy and using tactics they can’t use against you to separate you from your money.

Here’s my playbook.

Jobs hotter than expected

Headlines like this always amaze me... than who expected??!!

Private payrolls rose 296K because companies need workers.

CEOs know that for a fact, but economists and analysts are nothing more than speculators under the circumstances. Stick with the former.

Anyway, not to beat a dead horse, but leisure, hospitality, education, health services, and construction all gained. Financials lost as did manufacturing.

Two key takeaways: a) We are becoming a nation of burger flippers… and, for the record, there’s nothing wrong with that; and b) The ongoing shift plays directly into the emergence of AI-driven talent.

OBA Takeaway: Reinforces the jobs shift while also bolstering the case for going way up the value chain. Businesses that don’t adapt will die, so buy stocks in the companies making the tools needed by the changing labour pool.

Fed schmed

Team Powell will undoubtedly announce another rate hike this afternoon. My two cents is that they’re still hellbent on the wrong course of action, but there’s not a lot I can do about that.

Continue to play it close to the best with quality names, low-beta stocks, and “must have” choices capable of plowing a path through this mess anyway. Upgrade to Paid

Meanwhile, the hair on the back of my neck tells me there could be a juicy, quick speculative move on tap, so a few S&P 500 putskies could be appealing. Probably right outta the gate.

Not in a rush, though; I find it takes me a week or so to spool up after vacation, so I generally don’t trade while my mind is coming back up to speed. Investing, though, never goes outta style.

An Apple a day thrown hard enough will keep anybody away

Apple reports tomorrow, so today’s price action will be something I watch closely.

I’d love to see a quick counter move into earnings because that’d allow me to set up in the other direction. Selling Cash Secured Puts could be smart given how cheap the stock is.

People are totally underestimating India and the company’s move into personal finance. I’m also expecting a dividend increase and more aggressive share buybacks.

U-rah!

Life-Changing Drugs

There’s not a lot that terrifies me, but Alzheimer's qualifies because it runs in the men in our family.

That’s why I am particularly excited to see news from Eli Lilly & Co. (LLY) that the company’s late-stage trial drug, donanemab, slowed cognitive decline in patients with Alzheimer's by 35%. (Read)

Imagine what happens when the world’s top pharma companies learn how to customize specific medicines to every patient’s unique needs!!

Life as we know it will change in ways that many people cannot yet imagine. And, not for nothing, share prices don’t even remotely reflect the possibility or profits that will emerge.

Many investors will play this with an ETF like the iShares Biotechnology ETF (IBB), but that’s like buying cable TV in that you’ve got to pay for the channels you don’t want to get those you do. This is a stock picker’s market, and individual stocks almost always provide higher returns for those who know what they’re doing.

LLY is a great place to start, but I think there’s a number of other pharma companies that could do even better! Upgrade to Paid

YUM Brands miss, traders diss

Yum! Brands’ (YUM) EPS for the quarter of $1.06 fell short of Refinitiv estimates of $1.13, which has sent shares trading down around –2.80% in the pre-market as I type. (Read)

As usual, the numbers tell a different story.

Too many analysts focus on the wrong numbers. Case in point, revenue for the quarter came in at $1.66 million, which is a 6.33% increase YoY. That tells me consumers are switching to the Taco Twelve Pack or the KFC Family Meal.

Just because the CPI number is declining doesn’t mean goods are priced cheaper. In fact, and case in point, it’s more difficult for consumers to switch away from value meals than it is for them to find their way to them.

As for YUM itself, I’m not particularly worried. Margins will come back in time... and when they do, the stock will reflect that on much higher revenue.

Oh, and lest you think the bottom is going to drop out, YUM shares hit an all-time high yesterday of $142.90.

Alone we’re delicious... together we’re Yum!

Indeed!!

Bottom Line

Take care of what is difficult while it is still easy, and deal with what will become big while it is yet small. ~Lao Tsu

Now get out there and MAKE it a great day!

Keith 😊

PS: Don’t forget that the May issue of One Bar Ahead® drops this Friday! I’ll be re-recommending two exceptional choices because both are poised for rock-solid moves at a time when prices don’t yet reflect the potential I see. One is decidedly growth-oriented, while the other is all about income and anxiety-reducing stability. If you’ve got this covered, awesome! If not, I’d be honoured to earn your business. Upgrade to Paid