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Financial Fitness & Life Planning

June Update

My market outlook is approximately the same as prior months, so for June I will instead highlight three stocks that had a difficult month but whose prospects I believe remain positive:

  1. Intel – Its smaller rival AMD made market share gains.  A similar scenario has played out every so often, but Intel’s dominance is difficult to challenge. Intel’s stock also suffers from the decline of the personal computer, but the PC market is stabilizing and Intel’s earnings in that area are growing.  Meanwhile, 60-70% of its profit comes from growth areas that are outside of the PC.
  1. Apple – I believe this is simply the case of a market leader consolidating some of its extraordinary gains.  It could even be considered healthy market action that sets up better performance ahead. 
  1. Walmart – hurt by the splashiest corporate news of the month, Amazon’s announced takeover of Whole Foods.  The market perception was that this deal immediately and materially harms Walmart.  Amazon is an amazing company, but food retailing is a difficult, low-margin business, and Amazon has plenty of failures in its history to go with its breathtaking successes. 

Walmart earned more money in 2016 alone than Amazon has earned in its entire 20-year history combined, and yet the stock market considers Amazon twice as valuable as Walmart.  Even the greatest asset in the world can be overvalued, and I feel that Amazon is potentially a bubble stock while Walmart is a value stock.  The gap between their valuations should close and perhaps even reverse over time.  

~~~~Michael Berlin can be contacted at mberlin@mhbpartners.com and at (631) 629-4928 .

The information included in this article is not intended to be used as a basis for making investment decisions nor should it be constructed as a recommendation to buy or sell any specific security. Consult your investment professional for additional information and guidance.
 

 

 

 

 

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