by Louis Navellier
May 7, 2019
It is starting to get bumpy, but I was encouraged by wave after wave of strong sales and earnings announcements last week. So far, the S&P 500’s annualized earnings are 5.6% above estimates.
We had an incredible April, which is a seasonally strong month that benefits from pension funding and the fact that some of the best earnings surprises tend to be released in April. However, in May, earnings surprises tend to be not quite as strong, so the overall market could get bumpy in the upcoming week.
Last May was incredible, however, fueled by wave after wave of stock buy-backs. Specifically, companies suspend stock buy-backs in this “quiet period” (during earnings announcement season), but immediately after their first-quarter results are announced, they are free to commence more stock buy-backs. Since there were $227 billion in stock buy-backs in the first quarter and bond yields have since fallen, I expect stock buy-back activity to pick up in the second quarter, so May could be a great month, just like last year.
Speaking of buy-backs, Apple confirmed on Tuesday that it is boosting its stock buy-back program by $75 billion. Big multinational companies like Apple can issue debt at ultralow interest rates to buy back more shares. With rates so low, it appears that the second-quarter buy-back frenzy may be stronger than in 2018!
(Navellier & Associates owns AAPL in managed accounts and our sub-advised mutual fund. Louis Navellier and his family own AAPL in personal accounts.)
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