This week had some of the most important trading days so far this year … but it’s probably not what the average investor thinks.
After the close on Tuesday, Apple, Inc. (Nasdaq: AAPL), Alphabet Inc. (Nasdaq: GOOGL) and Microsoft Corp. (Nasdaq: MSFT) reported quarterly financial results and the numbers were great.
The overall rally will continue, and investors needed a perfect baton pass this week from tech leadership to cyclical issues.
Case in point: Investors should learn not to bet against managers at Apple, Alphabet and Microsoft. They know exactly how to handle quarterly earnings reveals … and they are good at it.
And we know from Accenture plc (NYSE: ACN) and other tech consulting firms that demand from enterprises for new hardware, software and services is all the way back to pre-pandemic levels.
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We saw Apple, Microsoft and Alphabet sold off slightly this week. Microsoft is the most expensive company out of the trio, and its business is the most complex.
Going back to cyclical issues … they’ve been wildly out of favor.
I have written about the weird assumptions being made by investment research firms about slower economic growth and weaker consumer demand. They are discounting the impact of the reopened economy when most signs point to the contrary.
One cyclical winner that has all the hallmarks of success is The Walt Disney Co. (NYSE: DIS).
Disney is a big, well-managed consumer discretionary business. Its theme parks are iconic. And its streaming media business — Disney+ — is growing fast with multiple new revenue opportunities.
Recently, “Black Widow,” its Marvel summer blockbuster, took in $80 million at the box office on opening weekend and another $60 million on Disney+. The latter category didn’t even exist a year ago.
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That is a prime example of how powerful the digital transformation is becoming.
This dual release hybrid strategy may not be the future of media, yet Disney is the only company globally that can pull it off. It’s a huge advantage over competitors.
Tech stocks have had a great run as investors came to realize those businesses are growing fast. Worries about interest rates never made much sense … yet tech needs to rest. Share gains need to be digested. The Apple, Alphabet and Microsoft earnings reports this week have provided that opportunity.
Cyclicals are ready to run the anchor leg in this bull move, and Disney is in a great position to lead.
Savvy investors should use any near-term weakness as a potential buying opportunity.
Best wishes,
Jon D. Markman
