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This week, Zacks Equity Strategist Mayur Thaker, CFA discusses:

• 3M Company (MMM), an iconic American company and member of the Zacks Earnings Certain Portfolio (ECP). Last summer, Mayur discussed why this company was a good value for investors, despite a pair of lawsuit settlements totaling more than $18 billion (previous video linked below). This week, he looks at some of the positive company metrics that he believes make 3M an outstanding value opportunity.

• While P/E multiples for S&P 500 and NASDAQ companies are often more than 20x, Mayur points out that, with a P/E hovering around 10, 3M’s multiple is usually only found in a dying company. However, that is not the case with 3M, and in this video he highlights why this is a vibrant and growing enterprise.

• Mayur walks through key metrics that underline the true value of the company, including Free Cash Flow per Share, Return on Invested Capital, and others. Also, while the two lawsuits are certainly an issue, he also points out that the planned spin-off of the Healthcare division of the company will unlock more than $10 billion, and offset the lawsuit settlement costs. Don’t miss this fascinating examination of the true value of a classic American brand.

This week, Zacks Chief Equity Strategist and Economist John Blank, PhD discusses:

• More on the Zacks approach to asset allocation, plus an overview of top stocks in the Consumer Staples sector. John writes the Zacks Monthly Investing Update and Asset Allocation report, and the first half of this week’s webinar is the conclusion of his series on asset allocation, specifically looking at Zacks ETF model portfolio cumulative and annualized returns at various weights as well as portfolios formed from other mutual funds and ETFs.

• John then shifts gears to look at top picks in the Consumer Staples sector, which includes food, beverages, publishing, soaps/cosmetics, tobacco, and miscellaneous. John defines “top” stocks using three screening metrics: market capitalization, number of analysts following the stock, and largest percent change in F1 EPS estimate (the most important element used in assigning a Zacks Rank to stocks).

• Using this framework, John then examines key metrics for these leading names, using our charts to compare the most relevant trends for these companies, including Revenue F12M, EPS F12M, Return on Equity, Earnings Pureness, Capital Expenditure, and many more. His discussion includes both household names like Procter & Gamble (PG) and Hershey (HSY), and less familiar stocks such as United Natural Foods, Inc. (UNFI) and Mondelez International Inc. (MDLZ). Don’t miss this informative double feature from Zacks’ Chief Equity Strategist!

This week, Zacks Equity Strategist Mayur Thaker, CFA discusses:

• The latest entry in his series of macro updates. Mayur still believes that we are headed toward a recession in 2024, and he cites a plethora of metrics that support his thesis: Manufacturing gauges have been in recession for 15 months; the 10y – 2y UST yield curve has been inverted for 20 months; and many other signals flashing red. He also focuses on indicators that imply that the job market is much weaker than it appears—including cyclical employment in its 7th consecutive month of YoY contraction, full-time YoY job growth at its slowest outside of recessionary periods, and average weekly hours in rapid decline consistent with recession, among other alarming trends.

• What do these macroeconomic indicators mean for stocks? Mayur points out that the S&P 500 forward P/E is significantly higher than previous 5% environments, and that the direction of leading fundamental indicators (including the rising cost of capital), at the margin, implies negative pressure to S&P earnings. This means analysts will mark down FY 2024 EPS forecasts. Finally, Mayur offers his ideal defensive capital allocation for the low-growth environment he sees ahead.

• However, Mayur notes that there is initial evidence that S&P 500 earnings growth put in a trough around Q3 2023 and is beginning to re-accelerate. Combined with continued disinflation and easing long-term bond yields, the market has exhibited extraordinary momentum leading to a major breakout from the 2021 top. His conclusion: While recession is still the likely outcome, it may not be as imminent as he originally thought. Mayur offers two signals to look out for to potentially time the beginning of a major downturn more accurately.

This week, Zacks Chief Equity Strategist and Economist John Blank, PhD discusses:

• More on the Zacks approach to asset allocation in 2024. John writes the Zacks Monthly Investing Update and Asset Allocation report, and this is the second part of his series on this critical topic. In this week’s webinar, he focuses on the concepts of risk and return in building asset allocations. The slides he presents in both webinars are essential to understanding these concepts, and John tells viewers how to get these slides and charts for free from Zacks.

• John begins by defining the various types of risk and return and, importantly, key measures of portfolio returns and risks including Information Coefficient, Information Ratio, Sortino and Sharpe Ratios, Skewness and Kurtosis, and others. John also outlines types of broad risk (natural events, economy, politics, etc.) as well as important investing concepts including the Efficient Frontier, Capital Market Line (CML) and Capital Allocation Line (CAL).

• John then reviews the returns for the family of Zacks ETF Model Portfolios. He presents the annual returns by class, correlation coefficient matrix, and variance-covariance matrix, as well as charts detailing monthly returns since 2010 for various weights in hypothetical portfolios. Don’t miss this expert review of risk and return factors in the asset allocation process from one of the industry’s leading strategists!

This week, Zacks Equity Strategist Mayur Thaker, CFA discusses:

• His latest assessment of what leading indicators say about the economy and market ahead. To make his case that these metrics point to a recession in 2024, he points to U.S. manufacturing in recession for over a year, personal savings depletion, cyclical GDP and employment entering contraction, and other troubling signals.

• Mayur also analyzes a number of negative trends in credit and banking. He notes that 14% of loans—and 44% of office loans—are underwater, putting up to 300 regional banks at risk of solvency runs. In addition, credit card delinquencies are rising. Mayur notes that shares of Discover Financial Services (DFS) declined -10% following Q4 earnings. DFS is seen as a bellwether of the U.S. middle class.

• Mayur’s conclusion is that the market is substantially overvalued and that analysts will mark down FY 2024 earnings forecasts. He notes that markets are priced for earnings growth at a forward P/E of 18-20x, and if that doesn’t happen, there will be a substantial drawdown. Finally, Mayur offers his ideal capital allocation for the low-growth environment he sees ahead.

This week, Zacks Chief Equity Strategist and Economist John Blank, PhD discusses:

• The Zacks approach to asset allocation in 2024. John writes the Zacks Monthly Investing Update and Asset Allocation report, and this is the first of two webinars he will present offering his expert insights on this critical topic. John begins this session by defining the broad asset classes (equities, bonds, commodities, etc.), outlining the 7 characteristics of an asset class, and enumerating the three asset allocation strategies.

• John then digs into charts showing annualized returns for some key asset class indices, ranging from the S&P 500 to Dow Jones Industrials to the Russell Micro-Cap Index in equities, to municipal and U.S. Treasury bonds, to real estate, commodities and more asset classes. He also surveys ETF-based asset class options.

• To finish up the first of his two asset allocation webinars, John incorporates risk metrics into the asset allocation discussion. He looks at beta as well as Sharpe Ratio for various asset classes, sector weights and investment styles for the largest equity mutual funds, and Moody’s/Fitch/S&P ratings as a percentage of the portfolio for the largest bond mutual funds. Don’t miss this expert review of the asset allocation process from one of the industry’s leading strategists!

This week, Zacks Equity Strategist Mayur Thaker, CFA discusses:

• The performance of our Earnings Certain (ECP) family of portfolios in comparison to the S&P 500. The underperformance of the ECP portfolios is not surprising given their defensive-oriented approach, but the magnitude of the difference is in large part due to the fact that 2023 was a “reversal year” for the S&P 500 after its -18% drop in 2022 when recession became the consensus (and when the ECP significantly outperformed the index).

• Mayur looks at some of the key reasons for the divergence in performance of the ECP portfolios compared to the S&P 500. He notes that while ECP delivered better earnings growth, the S&P 500 enjoyed significantly higher P/E multiple expansion throughout 2023. Other factors contributing to the S&P’s performance included excitement around Al, rising expectations of a soft economic landing, and the extreme concentration in the S&P 500—with 7 companies making up 30% of the index.

• Looking ahead, Mayur believes the ‘Goldilocks’ conditions that enhanced S&P 500 performance will end. In addition, because ECP companies are recession-resistant, high quality, durable businesses, they will outperform on both a risk-adjusted and absolute basis over the complete market cycle—as they have historically. To sum up, Mayur offers his ideal capital allocation for the year ahead which includes (surprise) the Zacks Earnings Certain Portfolio. Don’t miss this important and illuminating discussion.

This week, Zacks Chief Equity Strategist and Economist John Blank, PhD discusses:

• The top ETFs in the Consumer Discretionary sector—funds consisting of companies of companies that provide the “fun stuff” in life, from gaming to media, appliances to hotels, retail to automotive and more. This presentation, like our previous Consumer Discretionary stock analysis, highlights the rotation from buying “stuff” during the pandemic to buying services and experiences after it.

• After an overview of this ETF sector, including a look at the benchmark indexes, expense ratios, inception dates and changes in weekly AuM for key funds, John dives in to the ETF returns. He reviews charts for Dividend-Adjusted Price Returns and Returns Analysis, with special emphasis on the pre-Covid and post-Covid periods.

• John wraps up this week’s presentation with a look at valuations for these funds, including essential metrics like P/E, P/BV, and Beta. As always, he clearly defines what each metric means and its importance for investors. Don’t miss this expert analysis of the ETFs that cover the products and services we love to buy.

This week, Zacks Equity Strategist Mayur Thaker, CFA discusses:

• Arthur J. Gallagher & Co. (AJG), one the largest insurance brokerage and risk management consulting firms in the world. While they are a huge company, employing more than 50,000 people, they are not a household name like Allstate or Progressive, because they are not underwriters (and not really a consumer-facing company).

• Mayur chose to analyze Gallagher this week because he believes this company offers an excellent example of earnings quality. In fact, Gallagher was recently added to the Zacks Earnings Certain Portfolio (ECP). Mayur illustrates his point by walking through the 4 big metrics of quality: Linearity, Growth, Return on Invested Capital, and Free Cash Flow Conversion.

• See how Gallagher measures up on these metrics as Mayur explores the relevant numbers and charts. It’s your chance to learn more about a remarkably high-quality company that is not well-known among the general public. Don’t miss this week’s webinar for a deep dive into this global insurance behemoth.

This week, Zacks Chief Equity Strategist and Economist John Blank, PhD discusses:

• Key stocks that are the winners in Consumer Discretionary industries. These industries are vital to the U.S. economy—in fact John posits that these sectors, including Home Furnishings/Appliances, Leisure Services, Media, and more, are holding the American economy together. Also, this analysis illustrates the rotation from buying “stuff” during the pandemic to buying services and experiences after it.

• John introduces some of the noteworthy companies in these industries, from well-known names like Netflix (NFLX) and Marriott (MAR) to lesser-known but interesting stocks including SharkNinja (SN) and On Holding AG (ONON). John also spends some time on the “Big Six” multi-product consumer stocks: Target (TGT), Wal-Mart (WMT), Home Depot (HD), Lowes (LOW), Best Buy (BBY), and Amazon (AMZN).

• John’s analysis includes cash flow fundamentals such as Revenue F12M, EPS F12M and more, as well as balance sheet data like Capital Expenditures, Total Debt, Reinvestment Rate, and other metrics. As always, he clearly defines what each metric means for investors. Don’t miss this review of the essential stocks in the industries that produce the products and services we love to buy!