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Fourth Week in the Green Thanks to Earnings, Trade

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Stocks were well on their way to a fourth straight session of gains on Friday afternoon, and then some potentially positive trade news boosted the major indices even further.

By the closing bell, the market had jumped by more than 1% and completed a fourth straight week in the green.

The Dow advanced 1.38% (or 336 points) today to 24,706.35, while the S&P increased 1.32% to 2670.7. The NASDAQ was up 1.03% to 7157.23. Each of the indices climbed approximately 3% for the week.

The big news was a Bloomberg report that China offered to increase U.S. imports over the next six years with a goal to bring the U.S. trade deficit to zero by 2024. Again, it’s just a media report for now, but this newly-optimistic market took it as a sign of progress on the trade conflict with China.

When it came to Friday’s session though, we really didn’t need the happy talk on trade to stay on positive ground. Investors have been enjoying a solid first week of earnings season with good reports from most of the big banks. And while Netflix may have slightly disappointed a demanding market with last night’s report, there’s not a lot of concern about the streaming giant moving forward.

What we truly need right now is an actual trade deal. These news stories over the past couple of days are fun because the market is choosing to respond positively to them, but that just means it’s all the more important now that we see the bigwigs shake hands after signing a real agreement. The market is expecting it now… so anything short of that would be crushing.

It would also be a big boon to the bulls to have a good earnings season… and this week’s reports suggest that we may just get it. Remember, earnings growth is expected to be down from previous quarters, but still high enough to keep away any real concerns of a recession. So far, so good…

The editors were active today, so let’s get right to their moves and get this three-day weekend started!

Today's Portfolio Highlights:

Counterstrike: The market’s been feeling pretty good of late and today’s China news only helps, so Jeremy wanted to make a few moves heading into the weekend. Earlier this month, he cashed in half of the portfolio’s position in Lululemon (LULU) for a nice return of 14%+ and held onto the rest just in case the momentum continues. That was a great decision because half of the remaining position was sold today for an even better return of 29.3% in just a little over a month. And he still has a little LULU left for more potential profit.

Meanwhile, if the tense relationship with China really is thawing a bit, then Jeremy thinks a luxury furniture company like RH (RH) should be able to “get its groove back”. Therefore, he added the stock on Friday. This was a positive stock for the portfolio in 2018, but the editor is hoping for a lot more in 2019. Continue reading about these moves in the complete commentary.

Value Investor: Did you hear that Dell Technologies (DELL) went public again a few weeks ago? You probably haven’t because the market isn’t paying it much attention right now. But Tracey noticed, and she’s willing to give this company a chance based mostly on its previous reputation. Plus, the portfolio needs some technology. In addition to its classic value fundamentals, the editor likes that DELL is a large-cap and that it has expanded into the cloud. She’s getting in while it’s still under the radar, which may change when it reports in March. Get a lot more info on this new buy in the full write-up.

Technology Innovators: By now you know the deal with Netflix (NFLX). The streaming giant reported “good-but-not-good-enough” results yesterday, sending the stock 4% lower on Friday. No problem, though. Shares have been soaring of late, especially after increasing its membership fees earlier this week. Brian Bolan thinks this is a good time to take a nice gain in the name, so he sold NFLX today for a 14.8% return in less than 2 weeks.

The editor replaced the position by adding Cloudera (CLDR), a Zacks Rank #1 (Strong Buy) developer and distributor of software for business data. Last month, the company reported a huge 72% earnings beat, so there’s no need to wait for results this earnings season. If tech continues to rally, Brian thinks that CLDR will get back to $20. Read the full write-up for more on these moves.

Blockchain Innovators: It’s time to take another shot with NVIDIA (NVDA). The portfolio suffered a sharp loss on this one last year as investors turned sour after a “terrible” earnings guidance. But the market looks to have bottomed since then, and Dave believes that the negativity in this graphics chip maker has bottomed as well. After today’s 3.4% advance, the stock passed its 50-day moving average for the first time since early October… and the editor expects that there’s more to come. See the full write-up for more on this new addition.

Stocks Under $10: Now that we’re in recovery mode, Brian Bolan doesn’t need so many safety plays anymore. He bought grocery store chain Smart & Final Stores (SFS) back in December during the thick of the correction… and it certainly paid off as it entered today as the second best performer in the portfolio. On Friday, the editor sold SFS for a 13.5% return in exactly one month. The plan is to add one or two new stocks next week.

Surprise Trader: The first week of earnings season was great and now Dave wants to prepare for next week before the three-day weekend. On Friday, he picked up a 12.5% allocation in Rollins (ROL), a Zacks Rank #1 (Strong Buy) pest control company known primarily for its Orkin brand. It reports before the bell on Wednesday and has a positive Earning ESP of 3.03%. Analysts are expecting year-over-year earnings growth of 21.43% for the upcoming quarter. Read the complete commentary for more.

Home Run Investor: Shares of Intelsat (I) have been drifting lower amid news of its CFO leaving and a secondary offering at only $25.75. Brian Bolan feels that the tide may be turning with this provider of satellite communications services, so he wants to get out before any more ground is lost. I was sold on Friday for a 34.1% return.

Have a Great Weekend!
Jim Giaquinto

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