In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market… It’s hard to know for sure whether traders are buying Tesla and Apple stock just to have their share counts multiplied, but both companies are rallying. Wall Street closed mixed on Tuesday despite the fact that the S&P 500 reached a fresh all-time high after six months. Lemonade stock is tied to a compelling and disruptive business. However, it’s the coronavirus doing the most disruption right now. All relevant comments and discussions regarding US Wheat Futures.
In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that’s been the case for longer term CB Financial Services, Inc. (NASDAQ:CBFV) shareholders, since the share price is down 36% in the last three years, falling well short of the market return of around 45%. And over the last year the share price fell 27%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 18% in the last three months. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
View our latest analysis for CB Financial Services
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
During the unfortunate three years of share price decline, CB Financial Services actually saw its earnings per share (EPS) improve by 8.7% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
It’s worth taking a look at other metrics, because the EPS growth doesn’t seem to match with the falling share price.
We note that the dividend seems healthy enough, so that probably doesn’t explain the share price drop. We like that CB Financial Services has actually grown its revenue over the last three years. But it’s not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on CB Financial Services
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for CB Financial Services the TSR over the last 3 years was -29%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
Investors in CB Financial Services had a tough year, with a total loss of 24% (including dividends), against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 1.3% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It’s always interesting to track share price performance over the longer term. But to understand CB Financial Services better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 4 warning signs with CB Financial Services (at least 1 which doesn’t sit too well with us) , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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Author: Simply Wall St
Tesla and Apple set stock splits to lower share prices — then they rallied
It’s hard to find better-performing stocks than Tesla and Apple. Tesla, now the world’s most valuable automaker, has seen its share price multiply eight times since this time last year, from $224 to beyond $1,800, while Apple’s more than doubled to $458.
And so, in a bid to make individual shares more affordable, both tech giants announced they’d be “splitting” their stocks later this month.
But, traders have recently pumped both companies’ shares; Tesla’s stock surged more than 30% in the six days following its split reveal, and Apple’s is up 24%.
As a result, Tesla added $85.8 billion to its market value while Apple’s grew by $318.6 billion.
The stock splits will work like this: Tesla stockholders will have their share count multiplied by five (5-to-1 split) on August 28, but the underlying value of their investment will not change.
This means Tesla’s stock price will effectively divide by five at the time of the stock split. If $TSLA is worth $1,800 before, its split-adjusted trade price will be $360 just after, the idea being that investors would find lower share prices more compelling.
On the other hand, Apple opted for a 4-for-1 split on August 31.
The thing is, it’s difficult to say just how many buyers either company has attracted simply through the promise of increased share counts.
[Read: Watch Tesla’s meteoric rise — set to techno-remixed Elon Musk tweets]
Revenue, profits, and other boring (but necessary) factors could just as likely have had positive effects on Apple and Tesla’s share prices.
Apple even disclosed its stock split inside its stronger-than-anticipated quarterly earnings call, making it even harder to tell.
For what it’s worth, the brainiacs over at Columbia University investigated the suspected link between stock splits and share price a few years ago, but found little connection.
Instead, they found that analysts tend to increase their earnings expectations around the time that stock splits are announced, which leads to more interest from investors.
While it is possible that managers split their stock to cater to investors that prefer low-priced stocks during certain periods, or attract more uninformed investors to their stock, our results indicate that the market’s reaction to split announcements is not likely to be driven by a response to these managerial motives.
Our new evidence supports the hypothesis that while managers often state various motivations for splitting their stock, the market’s reaction to stock split announcements is likely driven by information related to the firm’s earnings, which the market infers from the split announcement and views as favorable news. An earnings information hypothesis therefore warrants renewed attention as an explanation for the market’s reaction to stock split announcements.
In any case, Columbia’s research hasn’t stopped analyst speculation as to which major company will be next to split their stock.
Amazon is one likely candidate. The ecommerce giant hasn’t issued a stock split since 1999 — before the dot-com bubble burst — during which time its share price has risen from $60 to $3,182.
Author: David Canellis
Stock Market News for Aug 19, 2020
Wall Street closed mixed on Tuesday despite the fact that the S&P 500 reached a fresh all-time high after six months. Uncertainty about a new fiscal stimulus also dented investors’ confidence. Both the S&P 500 and the Nasdaq Composite ended in the green while the Dow finished in red.
The Dow Jones Industrial Average (DJI) dropped 0.2% to close at 27,778.07. Notably, 18 components of the 30-stock blue-chip index ended in the red while 12 finished in green. However, the tech-laden Nasdaq Composite ended in positive territory to close at 11,210.84, surging 0.7%. This was the 34rd closing high for the index so far this year. In the intraday trading, the tech-heavy index recorded all-time high at 11,230.62.
Meanwhile, the S&P 500 rose 0.2% to end at 3,389.78, marking its 14th closing high year to date. In the intraday trading, the broad-market index posted a fresh all-time high at 3,395.06. The Communication Services Select Sector SPDR (XLC) gained 0.9% while the Energy Select Sector SPDR (XLE) tumbled 1.3%. Notably, four out of eleven sectors of the benchmark index closed in positive territory while seven in negative territory.
The fear-gauge CBOE Volatility Index (VIX) was up 0.8% to 21.51. A total of 8.2 billion shares were traded on Tuesday, lower than the last 20-session average of 10 billion. Decliners outnumbered advancers on the NYSE by a 1.40-to-1 ratio. On Nasdaq, a 1.66-to-1 ratio favored declining issues.
It takes six months, from Feb 19 to Aug 18 for the S&P 500 index to erase all coronavirus-induced losses. The index started 2020 from where it ended 2019 with a fabulous gain of 28.9%. Since Jan 2 to Feb 19, the benchmark recorded thirteen all-time highs. On Feb 19, the index recorded an all-time high of 3,393.52 and closing high of 3,386.15.
Since Feb 20, the downturn of the index started as the pandemic spread globally and the index fell in bear market on Mar 12. The downfall continued till Mar 23 and by that day the index plunged 35.4%. The S&P 500 took a northward journey from Mar 24 buoyed by unprecedented fiscal and monetary stimulus.
Finally, on Aug 18, the S&P 500 recorded its 14th all-time high so far this year at 3,395.06 and closing high of 3,389.78. During Mar 23 to Aug 18, the benchmark rallied an astonishing 54.7%. Just three days ago, the index recorded its best-ever 100-day performance.
Technology behemoths such as Apple Inc. (AAPL – Free Report) , Microsoft Inc. (MSFT – Free Report) , Amazon.com Inc. (AMZN – Free Report) and Facebook Inc. (FB – Free Report) are major drivers of the S&P 500’s rally. Apple sports a Zack Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Negotiations between the Republicans and Democrats fell apart. Treasury Secretary Steven Mnuchin said that the Trump administration is ready to further negotiate with Democrats and may provide more money as fiscal stimulus if it was required for an amicable solution.
Mnuchin said that President Trump ” wants to provide money for kids and jobs, a second round of the PPP and to help small businesses cover payroll during the pandemic.” Notably, the unemployment benefit of $600 per week came to an end by the end of July. Meanwhile, new trench of stimulus are unlikely to come before September.
The Department of Commerce reported that U.S. Housing Starts jumped 22.6% in July to a seasonally adjusted 1.496 million units compared to the consensus estimate of 1.241 million units. June’s data was revised to 1.22 million units from 1.186 million units reported earlier. Year over year, the metric climbed 23.4%.
Building Permits came in at 1.495 million units in July compared to the consensus estimate of 1.333 million units. In this case as well, June’s data was revised to 1.258 million units from 1.241 million units reported earlier. The metric surged 18.8% monthly and gained 9.4% year over year.
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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Author: Zacks Investment Research
Why Lemonade Stock Is a Victim of Unfortunate Timing
Despite the many trials and tribulations associated with the novel coronavirus, upstart insurance provider Lemonade (NYSE:LMND) remains a compelling idea. For one thing, there’s evidence to suggest – and I’ll dive into the details later – that the insurance industry is resilient. That’s great news for Lemonade stock, as it faces serious questions about viability in the face of an economic crisis.
While the worrying backdrop is an element we can’t ignore, it’s also fair to point out the obvious: in an increasingly complex world, it pays to have insurance. For a relatively modest cost, providers offer peace of mind. In my opinion, that’s worth paying for, even with this unprecedented crisis.
Further supporting the case for Lemonade stock is the underlying disruptive business. Rather than employ an army of corporate bureaucrats and risk assessors, Lemonade relies heavily on artificial intelligence. Through an intuitive app, prospective clients can get insured within 90 seconds. On the other end, claims are paid out in three minutes, according to the company’s website.
By cutting out the middlemen within the insurance architecture, LMND is able to offer renters, homeowners and pet health insurance for rock bottom rates. And that’s why people have jumped ship from insurance giants like Allstate (NYSE:ALL) and Travelers Companies (NYSE:TRV) to Lemonade.
Better yet, the company delivered a solid performance for its second-quarter earnings report, paring an expected per-share loss and generating revenue of $29.9 million, up nearly 117% from the year-ago quarter, while also besting consensus by $590,000.
But following the disclosure, Lemonade stock dropped sharply. Although shares have since returned to a bullish trajectory, should investors be concerned about a potential warning sign?
Though the headline earnings print was optimistic, Lemonade’s management team didn’t quite live up to expectations for third-quarter estimates. LMND guided Q3 revenue to between $14 million to $15 million, a hair shy of the $15.2 million consensus target. For the full year, the insurance provider expects top-line sales between $86 million to $88 million, again falling just short of the $88.9 million consensus target.
In the big scheme of things, the Q2 report and Q3 forecast miss probably won’t impact Lemonade stock that much. Presently, what most investors are concerned with is the longer-term viability of LMND. With the nation still reeling from the coronavirus devastation, can Lemonade survive in this troubled environment?
According to S&P Global Market Intelligence, stakeholders of Lemonade stock can at least assure themselves that they’re in a robust industry. Generally, insurance companies fared well during the Great Recession. And while we may face economic turmoil in the months ahead, experts believe that this sector can hold up. In part, that’s because there are “not as many systemic imbalances as there were during the financial crisis in 2008.”
Further, that LMND is poaching clients from Allstate and Travelers is a huge positive for Lemonade stock. Between 1994 and today Allstate and Travelers averaged year-over-year returns of 12.3% and 10.5%, respectively. In contrast, the average return of the S&P 500 index over the same period is 8.3%.
It’s very possible that Lemonade stock could exceed these average returns over the next several years. Primarily, the underlying company is relevant to millennials, which represent the largest working demographic in the U.S. Additionally, the Lemonade platform is accessible and simple, with its flat fee.
Finally, whatever money is left over is given to causes clients care about.
Undoubtedly, Lemonade is a brilliant concept. In a parallel universe, this would be the time to go public with such a business. With the convergence of technology and millennial culture, LMND would ordinarily be a no-brainer.
Sadly, there’s a little thing called the coronavirus that worries me. More to the point, it’s the economic pain resultant from the pandemic that gives me pause.
As you know, millions of Americans face eviction risks through no fault of their own. With federal and state authorities urging them to shut down and stay indoors, of course their livelihoods have been turned upside down. But then, adding insult to injury, Congress skips town for vacation while families suffer.
Words can’t describe how utterly pathetic our elected officials are. That they can look themselves in the mirror without feeling any shame is the true mystery here.
While I love the business and the disruptive potential, I must take a cautious approach. With so many unknowns and a deadbeat Uncle Sam, I believe waiting is the best tactic.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
Josh Enomoto, InvestorPlace Contributor
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