Ignore the headlines (from Washington) and read an earnings report
Below is a list of 10 stocks owned by Dock Street clients showing the percentage increase in earnings over the last 12 months and next to that the increase in stock prices since last July. Not every stock on the list fits the pattern, but the average for the list shows an increase in profits of nearly 50% and a stock price increase of 37%.
The stocks are not keeping up with the businesses.
| Earnings | Stock Price | |
| Latest Qrt vs Year Ago | Change for 1 Year | |
| APPLE | 122% | 56% |
| BLACKROCK | 27% | 16% |
| CORE LABORATORIES NV | 20% | 40% |
| EXPEDITORS INT’L WA | 50% | 17% |
| FACTSET RESEARCH SYS | 18% | 25% |
| FASTENAL | 36% | 36% |
| FREEPORT-MCM CPR&GLD | 92% | 57% |
| 36% | 27% | |
| INTUITIVE SURGICAL | 33% | 17% |
| HALLIBURTON | 56% | 83% |
| Average | 49% | 37% |
When earnings rise faster than stock prices, investors are making money the hard way, but the gains are more likely to stick. When stock prices rise faster than business profits, investors are benefiting from the enthusiasm of other investors—that’s when the stock market is the most fun, and the most dangerous.
We said in December that we thought stock prices would only track earnings gains for the year, but so far prices have fallen behind. That’s the main reason for our optimism for the remainder of the year. We think some catch-up is likely and once the mess in Washington is resolved, investors might once again focus on companies and their fundamentals. That should be good news for our portfolios.
July has been a very good month in spite of all the nasty headlines. Several stocks have run up in response to strong earnings announcements—a pattern we expect will continue as the year progresses.
Best regards,
Daniel A. Ogden