Mike Zigmont Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $12B AUM, offering volatility management solutions to its investor base worldwide. Mike has been publishing his daily newsletter (Monday-Friday) privately for the firm’s investors and his personal contacts in the investment business

since 2008, sending it daily shortly after the market close.

The opinions expressed below are my own and do not necessarily represent those of Harvest Volatility Management, LLC.

Trade. The US and Canada came to a trade agreement just before

midnight

Sunday

and it looks like the NAFTA problems are no more. The new agreement is the United States-Mexico-Canada Agreement (USMCA). The differences from NAFTA didn’t strike me as massive but there are some interesting ones. The major difference is that USMCA is renewable every 6 years and elapses after 16 years if not actively renewed or renegotiated.

If this is what we ended up with, the way we got here had a whole lotta drama and unnecessary frictions with our closest ally.

That said, the NAFTA headache is over and the markets were clearly relieved. US equities were up on the open and topped out at 2937 (up 23 points). That was another impressive victory for the bulls. The market faded over the rest of the session and tempered this morning’s enthusiasm. The China-US trade problems remain and who knows whether they get resolved as cleanly.

Looking ahead, the next earnings season has snuck up on us. PepsiCo announces

tomorrow

morning and JP Morgan unofficially kicks off the season on

October 12

. Earnings seasons have been wellsprings for the bulls this year and there are probably a lot of investors counting on history repeating itself.

Let’s see what the bottoms-up picture is at the moment.

Show me the money

S&P 500 bottoms-up estimates

Earnings…

  • '17 estimates are $130.42
  • '18 estimates are $161.33
  • '19 estimates are $178.07
  • '20 estimates are $196.03

with the S&P ~2,920:

  • '17 PE is 22.4
  • '18 PE is 18.1 and earnings growth is ~24% YoY
  • '19 PE is 16.4 and earnings growth is ~10% YoY
  • '20 PE is 14.9 and earnings growth is ~10% YoY

and revenues…

  • '17 rev estimates are $1,355
  • '18 rev estimates are $1,462… rev growth +7.9% YoY
  • '19 rev estimates are $1,543… rev growth +5.5% YoY
  • '20 rev estimates are $1,610… rev growth +4.3% YoY

Book value is $813

  • '17 PxBE is 16.2
  • '18 PxBE is 13.1
  • '19 PxBE is 11.8
  • '20 PxBE is 10.7

Profitability

First « 1 2 » Next