You Really Need to Know these Backstories Now
Another long, grueling week at the ranch I assume. I feel ya, so wanted to provide these easily digested true stories that have likely gone overlooked. Since I am sharing them with you first, feel free to give me a #HighFive on Twitter today (@BrianSozzi).
True Story #1: There is a Ton of Psychology Behind Apple's Dividend
Goodie goodie, Apple's (AAPL) stock has regained momentum followings its oh so dreary quarter and guidance (being sarcastic). It couldn't come at a more welcome time for shareholders (basically any fund manager that wants to keep the doors open and lights on) as the final day to score Apple's first dividend payment was August 8. Don't let the passing of this options trader favorite type of event detract you from buying Apple. One has to understand the psychology: (1) the dividend check is likely to be reinvested in buying additional Apple shares in front of, and after, major second half product releases; and (2) as hopeful sentiment builds on new product performance, earnings estimates will go higher and then sights will turn to a dividend hike from Apple sometime in 2013, therefore triggering another wave of buying in the stock. By Apple enacting a dividend, it essentially set investor expectations up for a perpetually rising payout ratio.
True Story #2: Low Gas Prices are Not So Low
Sell-side note after sell-side note I have read voice “lower gas prices” as a supporting thesis to buy cyclical stocks. The viewpoint is increasing becoming outdated in light of the price of gas steadily rising from the early July low (as economic data surprises have been less disappointing). I think strategists are incorrectly postponing clients in cyclicals on the gas price thesis (and on the notion the defensive dividend payer trade is dying in a world of yet to see extraordinary easing), and this is dangerous as food costs are prepared to increase and consumer confidence is dented from building fiscal cliff fears. By the way, price increases were the best component of the surprisingly favorable consumer staple sector 2Q12 earnings, offsetting sluggish volumes.
True Story #3: August Employment Report Comes After Jackson Hole
Expectations in the marketplace based on my contacts is that as in years past, Bernanke will pour a more concrete structure on the Fed's intentions at Jackson Hole. However, there is a lurking disappointment factor as the July employment report upside may cause Bernanke to wait for the August report, which is released on September 7 (and if the report beats again, the Fed's September 12/13 meeting becomes even tougher to handicap). Jackson Hole could very well be a sinkhole event to buy stocks into.