Election Day is finally here!
The months of campaigning and near constant drumbeat of media coverage all boil down to this moment, when voters who haven’t already done so get to cast their vote for the next President of the United States.
The stock market rebounded nicely Monday following last Friday’s big selloff, and soared again today on a “relief” rally. The Dow led the charge higher, climbing more than 300 points on Monday and another 600 points today.
I believe Wall Street is excited to move past the presidential election. Based on the record turnout for early voting, a decisive outcome is more likely —and that is what investors are anticipating, too.
An uncontested presidential election —no matter who wins— all but guarantees that we should experience a huge “relief rally,” which actually started today. The reality is that Wall Street fully expects the political infighting to ebb and for the cloud of uncertainty to lift.
Historically, these presidential “honeymoons” tend to last about 100 days. I actually anticipate that this year’s post-election rally could persist through yearend and even through May 2021. This is especially likely when you consider the stunning third-quarter earnings and sales growth currently being reported and the positive guidance being issued for the upcoming quarters.
Speaking of which, FactSet reported on Friday that about 64% of S&P 500 companies have announced results from the latest quarter, and 86% of these companies have topped analysts’ expectations. The average earnings surprise is a stunning 19.3%. Given these earnings beats, the average third-quarter earnings decline is only 9.8%, which is much, much better than previous estimates for a more than 20% decline in earnings.
Our own Growth Investor companies are doing even better and have posted wave-after-wave of earnings surprises. We’ve had 41 Growth Investor Buy List stocks release results so far, and only three have missed analysts’ expectations. Our average earnings surprise is a whopping 30%. And thanks to better-than-expected results, our Growth Investor stocks have exhibited tremendous relative strength amidst the market’s gyrations lately.
Case in point: The Clorox Company (CLX).
This is a dividend growth stock that reported blowout results on Monday, and shares climbed over 4% on the news. Obviously, Clorox is benefitting from the pandemic because everyone wants to sanitize as much as possible.
Sales of $1.9 billion represented a 27% increase from a year prior and were broadly based, with double-digit growth across in all of the company’s segments. Earnings rose a remarkable 103%, year-over-year, to $3.22 per share, and beat analysts’ estimates by a healthy $1 per share.
Company management doesn’t see business slowing down in the future, either, as it expects revenue to rise from 5% to 8% in 2021, and earnings from $7.70 per share to $7.95 per share.
Or take a look at a pair of our Growth Investor Elite Dividend Payers that also reported on Monday: Medifast Inc. (MED) and Insperity Inc. (NSP)
Health and wellness company Medifast Inc. (MED) announced after the market close that revenue jumped 42.8% from the prior year to $271.5 million, beating estimates by $29 million, while earnings of $2.91 per share climbed 120.5% from last year, and beat expectations by $0.42 per share.
MED soared as high as 16% today following its earnings beat. But this stock has been on a roll since its March 18 low, up a whopping 217%. Plus, it has a dividend yield of 3.09%, so investors are getting an extra helping of income, too.
Human resources and services provider Insperity Inc. (NSP) posted its most-recent results before the market open, and it beat analysts expectations on the top and bottom lines. Revenue of $1.01 billion bested Wall Street’s expectations by $27.7 million, while earnings per share of $0.91 rose 21% year-over-year, beating estimates by a whopping $0.46 per share.
The stock popped 8.2% yesterday and tacked on another 2% today. It is up over 220% since the recent bottom on March 18.
This just goes to show what my fundamentally superior stocks can do during earnings season and why earnings season is so important.
The reality is we’re in the midst of a phenomenal third-quarter earnings season. While Wall Street has been distracted by the presidential election and rising coronavirus cases in Europe, companies have been unveiling better-than-expected results. So, once the election is determined this week, I look for Wall Street to refocus and for positive earnings to drive my Growth Investor stocks higher in the upcoming weeks.
And considering our blowout results so far, our Growth Investor stocks should lead the charge higher through yearend.
My Long-Term Outlook
Over the longer term, I believe stocks are poised to go much higher. In fact, I’m predicting the Dow will hit 200,000 in the coming years.
I know that sounds crazy, but history proves otherwise.
Remember what happened after the huge run-up in stocks in the 1980s until 1991? The Dow went on a 234% tear during the ‘80s. And by the end of the decade, analysts and the media were calling for a market crash in the early ‘90s, much like some naysayers are today. Instead, the Dow surged almost twice as high in the ‘90s as it did in the ‘80s.
In my special Financial Foreshock Summit, I’ll talk more in-depth about what will drive stocks higher. (You can watch my free briefing here.) I also share where I see the best opportunity to play the growth.
Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
The Clorox Company (CLX)