Capital 19 Catch-Up

Quiet week as markets prepare for Santa rally.

It was a fairly non-committal week on Wall Street, with positive vaccine news weighing against continued Congressional arguments around stimulus funding.

The Dow Jones Industrial Average fell 0.6% for the week, and the S&P 500 dipped nearly 1%. It marked the first weekly drop for the market benchmarks in three weeks. The Nasdaq Composite snapped a three-week winning streak falling 0.7%.

Lawmakers will seek to pass a rescue bill before the end of 2020, but disagreements over state and local stimulus, unemployment assistance and stimulus checks still exist. Democrats have also pushed back against the White House’s latest $916 billion aid offer, noting it doesn’t include any additional federal unemployment insurance money. The bill, however, was blessed by GOP congressional leaders.

“If a deal is to be reached this year, Democrats will likely have to accept a package without state and local aid, which would be worth roughly $750 billion,” wrote Aneta Markowska, chief economist at Jefferies. President-elect Joe Biden “will almost certainly push for it, having described this bill as a down payment on future relief.”

“What the economy needs right now is a short-term bridge to the other side of the pandemic, which is probably just months away. Only fiscal policy can provide such a quick injection,” Markowska added.

The continued stimulus argument has caused traders to scale back their expectations, which is a good thing for investors like us, because if we do get some kind of agreement this week, stocks could come roaring back.

It was a fairly quiet week for company specific news. The biggest came from Disney with their upgraded guidance for their streaming services of Disney+, Hulu and ESPN+. They intend to take on market leader Netflix in several areas including spending on content and the hunt for new subscribers around the world.

Disney announced plans for 100 new titles to debut annually and stated subscribers could hit 260million by 2024. That is up from a prior guidance of 90 million. By comparison, Netflix has 200 million, but isn’t growing as quickly. Other streaming upstarts like HBO Max and Peacock are far behind.

That news sent Disney stock to an all-time high on Friday with shares rising about 14% to around $176

Disney stock was hit hard mid-pandemic as investors took a pessimistic view of the year with closed theme parks and movie theatres. Then the much-published pivot to streaming in the past year was seized on during the coronavirus pandemic and has allowed the company to turn its Wall Street fortunes around.

It is now a clear two horse race for supremacy. Netflix investors shrugged the challenge off on Friday with the stock closing flat.

It is very hard to pick a winner here. Disney has all the brand names and will pump out proprietary content, whilst Netflix is further down the river and already expanding into new markets.

We think that instead of picking a winner, just own both. Streaming entertainment is a big industry and there is plenty of room for two players.

Lastly, the FDA said there are moving rapidly to clear the use of the Pfizer vaccine. “We could see people getting vaccinated Monday, Tuesday of next week” Health and Human Services Secretary Alex Azar said on ABC’s “Good Morning America”

But everyone knows supplies won’t be sufficient to make a serious difference this winter.

The game now will be picking which companies will see the fastest turnarounds in profit as economies re-open.  That fast increase in profits is exactly what our Top 30 model tries to pick, so if you want some names looking for explosive growth, then this list a great place to start looking. Last month we had 3 names increase around 40% just in that month.