Finimize - 🇺🇸 Pro investors choose America

Fund managers profess their love of US stocks, Home Depot posted strong earnings, and a really hard Rubik's cube |
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Hi Reader, here's what you need to know for November 13th in 3:10 minutes.

  1. Home Depot didn’t just nail its latest quarter, it made an improvement on its outlook for the year
  2. A model portfolio that can deliver stock-like returns, but with way less risk – Read Now
  3. Bank of America said professional investors are more ga-ga over US stocks than they’ve been in over a decade

🤖 Change is good (at least, that’s what our future robot overlords keep saying). So join us for AI’s Impact on Investment Platforms: A New Era for Retail Investors with Prospero and pick up some portfolio tips for the brave new world. Grab your free ticket

Did It Itself
Did It Itself

What’s going on here?

On Tuesday, Home Depot announced third-quarter revenue and profit that beat investors’ expectations – and nailed a higher annual forecast to the wall, too.

What does this mean?

The DIY retailer – which sought to lower folks’ expectations earlier this year – had two things to thank for the improvement. First was its splashy $18 billion acquisition of building supplies seller SRS Distribution, which boosted revenue. Second was weather: hurricanes caused a surge in demand as folks scrambled to prepare and make repairs – and a long, balmy summer sparked a frenzy for barbecue and patio fare. Together, they helped Home Depot hike its annual growth forecast – even though sales in existing stores will fall short of last year’s.

Why should I care?

The bigger picture: Temperature check on US consumers.

Folks don’t shell out for improvement projects unless they’ve got money to spend and confidence about the future. So updates from Home Depot can be a pretty useful way of checking out how US consumers are feeling. And while a strong three months from the firm seems encouraging, those boosts from severe weather and its acquisition might make Americans appear more flush than they actually are.

For markets: Mind the valuation gap.

Analysts expect Home Depot’s earnings to jump by 5% next year and 9% in 2026. And they see profits for rival Lowe’s expanding 7% and 9%, respectively. Right now, investors can pick up Home Depot’s stock for 27 times next year’s predicted profit – and Lowe’s stock for just 23, despite its higher growth forecasts. But investors don’t necessarily think that’s unfair. In the past five years, Home Depot’s stock has been worth 25% more than Lowe’s on a price-to-earnings ratio basis. But right now, it’s only worth 17% more – and that narrower gap could explain the difference in expectations for the next year.

You might also like: How to value stocks.

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TODAY'S INSIGHT

Buy-And-Hold Won’t Always Cut It: Here’s What You Could Do Instead

Stéphane Renevier, CFA

Buy-And-Hold Won’t Always Cut It: Here’s What You Could Do Instead

Holding just stocks would’ve been a winning move over the past ten years, but that doesn’t mean it will be over the next ten.

Shares have taken huge hits before (like drops of 80% or more) – and could again.

And, with today’s record-high valuations, stretched margins, and an investing audience that’s maxed out on the market, the margin of safety is now perilously slim.

Ideally, you’ll want a portfolio that can deliver returns even if the future fails to meet everyone’s lofty expectations. So that’s what I had in mind when I designed the Finimize Momentum Rider Portfolio.

That’s today’s Insight: a momentum-based model portfolio for stock-like returns but with much less risk.

Read or listen to the Insight here

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America First
America First

What’s going on here?

According to Bank of America’s latest survey, investors haven’t been this into US stocks since 2013.

What does this mean?

Last week, the bank asked a group of professional investors – who, together, are sitting on half-a-trillion dollars worth of assets – what they’re doing with their money. Roughly a fifth answered after the US election results. And in short, they said they’re feeling confident: a net (what you get when you subtract the naysayers from the yeasayers) 23% said they expect stronger global economic growth in the next year – a wide swing from the net 10% who said they predicted a weaker global economy just a month earlier. Most said they see the high-flying US stock market being the top performer next year too. So it’s no wonder that almost a third of them said they’re holding an “overweight” – or disproportionately big – amount of US shares.

Why should I care?

For you personally: Potential opportunities if you go against the grain.

US stocks have rallied to record highs, and investors seem to be holding out for more good news. But these sentiment surveys are potentially useful as “contrarian” indicators: if people are overly optimistic, that could – so the thinking goes – be a sign that the market’s due to head in the other direction. And investors themselves admit that a return of high inflation would dent their current cheerfulness.

For markets: Mighty oaks from little acorns grow.

Beneath the surface of a stock market rally, you can usually find a few tales of individual companies that are winning thanks to positive news. On Tuesday, for instance, retail investor favorite Shopify saw its US shares jump 25% after announcing a better-than-expected quarter. Entertainment company Live Nation popped 5% after its update, and industrial conglomerate Honeywell rose 5% after an activist investor offered suggestions on how it might unlock a higher share price.

You might also like: How to be a contrarian.

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QUOTE OF THE DAY

"What people say, what people do, and what they say they do are entirely different things."

– Margaret Mead (an American cultural anthropologist and author)
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A recipe for standing out from the crowd

Stocks and bonds are the meat and potatoes of most people’s portfolios – but often it’s the alternative assets that make it all worthy of a chef’s kiss. 

And that’s where our latest panel at the Modern Investor Summit comes in. See, success can be just a conversation away.

You’ll engage with experts giving advice on alternative assets – specifically those in healthcare, renewable energy, and real estate.

So Join speakers Richard Lum, managing partner and co-chief investment officer at Victory Hill Capital Partners, and Chris Ragland, CIO of 4fi. 

They’ll take you through how these assets can help diversify your portfolio and reduce risk, key opportunities in these sectors, and what to expect from alternatives in the ever-changeable economic environment. 

Grab your free ticket now and you’ll also get access to the rest of our star-studded line-up at the Modern Investor Summit.

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🎯 On Our Radar

1. Grim and grisly. How tragedy becomes true crime.

2. There’s more to ETFs than index tracking. Read our free guide to using Leveraged and Inverse ETFs for three real-world examples.*

3. Keeping your mouth shut. Luxury travel’s new obsession is… silence.

4. Don’t leave your options to chance. Master two powerful strategies that can give your portfolio a serious edge.*

5. A real puzzle. Scientists have invented a Rubik’s cube that’s “infinitely” hard.

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