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The Weekly Summary


The world continues to recover from the biggest economic shock in decades, with the COVID outbreak generating infection and fatality rates that would have been shocking a mere months ago. Unemployment has spiked to 15% as a full 20 million jobs vanished in April. While there are bright spots, they are more relative than absolute: overall worker productivity only declined 2% last quarter, for example.


Stocks, meanwhile, keep trading around the Federal Reserve’s latest rescue programs, Congressional stimulus and the naked limits of fear. Investors indulged their most apocalyptic scenarios in March. They have yet to come true, which means a market that was briefly priced for catastrophe has fuel to recover a lot of lost ground.


The BMR universe is now down only 6% YTD, which means this is already more correction than disaster for our stocks. If the rebound recovers at this rate, our recommendations should be collectively back where they were before the outbreak within a matter of weeks. After that, as impossible as it would have sounded back in March, they get back to work rewarding shareholders who hung on for the long term.


Of course winners and losers aren’t equally distributed, even in our world. Real Estate and the High Yield portfolio have taken a huge step back as the Fed resets the yield curve and the economic chill raises questions about whether landlords will face substantial lease defaults. Dividends haven’t shown any sign of stopping forever. When cash starts flowing for these companies again, their management teams will get a new chance to shine.


We simply need to wait for the “slow” end of our universe to heal. Ironically enough, more Aggressive BMR recommendations are already rallying and not just bouncing. Our Aggressive and High Tech portfolios are now up 22% YTD. As far as Wall Street is concerned, these stocks are the future. Since that was always our thought, it’s nice to see sentiment catch up.


Admittedly, our strong defense has hurt our overall performance, but the speed with which those stocks plunged points to an equally volatile recovery when we can evaluate just how much the outbreak has hurt them. That’s all we really want. And we’re going to get it.


Strategically, it's been a whirlwind season. As you know, after the S&P 500 hit an all-time high of 3,393 on February 19, stocks plunged 35% (one of the biggest short-term drops in history) before the index bottomed out at 2,192 on March 23.


Since then, the S&P 500 has rebounded to its present level of 2,930, recovering a full 20 percentage points of lost ground. Those that stayed invested this entire time would have noticed a relatively small drop in the value of their holdings, but those who panicked and sold would not be happy about their current situation. We are not here to say that this is what you should do at any time in the future, because there just may come a day when the market doesn’t come back right away. The market in 1929 took 25 years to reach the same level again. Read that sentence again, please.


Now, all of that is in the past. And despite what many believe, the past does not dictate the future. But we can make observations about the future. As we progress through the new virus world that we live in, we are concerned about the financial status of the country and the world. We can’t help but see that the virus story is still unfolding.


Financial ramifications of the virus continue to present themselves. Many of them are shocking as we read about them, especially the massive number of healthcare workers being laid off now and the homeless rolls increasing by triple digit numbers. Then we see the number of small businesses that may never reopen; and then start to hear horror stories of many states not being able to pay their bills.


What happens if a state were to go bankrupt? How about the United States deficit – did you see the numbers for April?  Tax receipts of $240 billion. Outflow of $980 billion. This is insane. The Congressional Budget Office has projected that the deficit for the year will be $3.7 trillion, increasing the national debt by that amount and about that much next year. The current number is almost $25 trillion. Repeat: $25 trillion. At this rate we could be at $30 trillion in just two years.


These are just scary times and that means we have to protect our financial assets as the country and world works through this. What we initially thought might be a month or two blip is turning into a 6-12 month recession. Some are suggesting that this could lead to depression and take us three years to get out of it. Maybe it could be worse.


We love to be optimists, and if you have been with us for long you know this. But reality is here to stay. And the current reality could be a tough one. We hope we are dead wrong on this one and we all come out of this over the summer. But what if we don’t?


In this issue we have made a few mentions of some of the stocks that have weathered the last two months well. Big Tech, Johnson & Johnson, Eli Lilly, Blackstone and others. Meanwhile our smaller Tech stocks are soaring. We will single out a few in the coming weeks.


There's always a long-term bull market here at The Bull Market Report! Gary Jefferson remains off duty for the duration but as compensation The Big Picture has an extended look at the earnings season we sat out. While it's impossible to extrapolate from these numbers, they point to a world that's unlikely to come crashing down any time soon. The High Yield Investor returns with fresh looks at some of our most resilient recommendations in the dividend zone . . . and then there's a fresh set of corporate snapshots to mull as we move into a new market season.


A note on our publishing schedule. We had mentioned in March that we were cutting back a bit and now, as we acclimate to the new virus world, we believe we can publish every other week or so. Again, please write Todd Shaver directly at Info@BullMarket.com with any questions you have about our stocks. His goal is to respond within 24 hours.


Key Market Indicators




BMR Companies and Commentary


The Big Picture: An Earnings Season To Miss


We aren’t fans of the “sell in May” theory, especially when current economic conditions argue more for holding onto existing positions while the outbreak reshapes the corporate landscape. Outside a few obvious pain points like Big Oil and the Airlines, there simply isn’t a lot of reason to liquidate stocks that all moved down together and are now mostly recovering.


However, it’s clear that there was little reason to pay much attention to the April earnings cycle. Digesting the 1Q20 numbers after the fact, we did the right thing by refusing to lavish much attention on whether any given company hit its numbers in the most disruptive quarter we’ve seen in years.


Nearly all stocks missed their initial targets and while forecasts dropped precipitously once the outbreak’s impact became obvious, earnings for the market as a whole are still close to 16% below where we thought they would be three months ago. All in all, the bottom line has dropped nearly 14% from last year.


Sector by sector, the pain was deepest the farthest you got from the defensive “essential services” heart of the economy. Healthcare is holding up best, with 7% earnings growth actually coming in 2 percentage points better than we expected back in February. Utilities are also getting a lift from plunging fuel costs and Consumer Staples companies got a surprise 5% lift from millions of households hoarding whatever they could find at the supermarket.


Those sectors collectively account for a healthy 26% of the S&P 500. We’re pleased that we maintained an entire Healthcare portfolio and a few key positions like Dollar Tree (DLTR) for just this kind of environment. Beyond those stocks, however, the season has demonstrated the power of the viral shutdown.


Growth for Technology and Communications companies dropped to a dismal 4%, which would normally raise questions about whether valuations are sustainable if this felt like the start of a larger economic chill. We see no evidence of that. Once the virus has been successfully controlled and people get back to work, these businesses should rebound fast. We clearly aren’t alone in thinking that, given the fact that the Technology-heavy Nasdaq is now back in positive territory YTD.


Other areas of the market will require time and close attention before investors can make any informed decisions about whether to hold, fold or buy the dip. So far people seem to be buying the dip across the board. A full 95% of the members of the S&P 500 have recovered 20% or more from their recent bottom. It turns out that this earnings season hasn’t been particularly bad. People see more hope in the future than dread.


And that hunger for a ray of light applies no matter where the quarterly fundamentals are coming in. All a company needed to do to earn applause was beat the dismal targets Wall Street conjured out of thin air. Those targets were set deliberately low. Most companies so far have been able to brag a little because reality was not quite as bad as anyone expected. When you’re braced for apocalypse, a more mundanely bad quarter feels like an enormous relief.


But everyone recognizes that the numbers are arbitrary right now. The quarter will be the real test of corporate strength, since it’s starting to look like many companies will remain effectively shut down until June. We won’t see those numbers until July and then hopefully October will reflect something like the “new normal” economic environment. That’s a long time to stare at arbitrary numbers.


We will keep our eyes on the shocks, the disappointments and the relief, even though we acknowledge that sentiment and the Fed are the only factors that are really driving stocks one direction or the other right now. If you are eager to extrapolate any kind of trend from the remainder of the season, we will keep you posted. Only a few earnings reports remain on our calendar:


CyberArk on May 13
Agilent on May 21
AutoDesk on May 28
Salesforce.com on June 3
Docusign and Dollar Tree on June 4




Alphabet (GOOG: $1,388, up 5% this week)



The stock has risen from $1,014, a 52-week low, where it plummeted to in late-March. While the Street was concerned about advertising slowing down due to the pandemic, the company reported a strong quarterly revenue gain in the first quarter of 2020. Revenue was $41 billion, 13% year-over-year growth. Investors liked these results and so did we. Google shot up 8% the day after the company released 1Q20 results to $1,340. Profit only rose 3% to $6.8 billion, held back by other non-recurring expenses. We aren’t particularly concerned since these aren’t core items. Admittedly, ad revenue softened in March and we expect some weakness going forward in a sluggish economy. It’s just that with great assets like Search and Maps, and non-advertising products like Cloud, Google Play, and YouTube subscriptions, the company’s business will hold up just fine and explode when the economy picks up again. We have a $1,600 Target Price and we think so highly of the company that we do not ever see selling the stock; hence, no Sell Price.






Apple (AAPL: $310, up 7%)


We don’t throw the word “great” around too often. But what other adjectives can we use to describe Apple? It’s no wonder the stock has recovered 90% of its pre-corona value, going from $224 on March 23 to $310 (39%). The company reported fiscal 2Q20 results (ended March 28, 2020) on April 30. If this is what a “disappointing” quarter looks like, we’ll take it in a heartbeat. As a reminder, back in February management warned 2Q revenue was under pressure from iPhone supply constraints and weaker demand caused by the coronavirus that was affecting China at the time. Apple’s 2Q20 revenue rose from $58 billion to $58.3 billion, 1% year-over-year growth. iPhone sales were softer, falling from $31 billion to $30 billion. Wearables, Home and Accessories and Services were strong performers that helped boost the company’s top line. Income was temporarily under pressure, falling from $11.6 billion to $11.2 billion, which we expect to grow again when sales pick up. We are optimistic that this will come soon since there is the new iPhone 12 on the horizon.  Surpassing our $300 Target Price, we are raising it to $350 and we don’t have a Sell Price.





Berkshire Hathaway (BRK.B: $177, down 3%)


Here is yet another company that hit a 52-week low on March 23, when it fell to $160. It closed Friday at $177, which we still view as a strong buying opportunity. Warren Buffett and his business partner Charlie Munger recently held their annual meeting (a/k/a Woodstock for Capitalists). While Berkshire couldn’t hold the extravaganza in person, these meetings are still a treat, filled with their nuggets on the economy, business, and all sorts of musings. The big news was Berkshire giving up on airlines, selling out its positions. We are fine with that – it is a tough business chronicled by high labor costs, unpredictable fuel expenses, capacity constraints, and tough competition, not to mention close to zero revenue currently. The remaining businesses Berkshire is involved in (insurance, banks, consumer products, commercial/industrial, railroads, utilities, to name some) are great. The biggest risk is Buffett and Munger’s ages (89 and 96 years old). Buffett promises he has planned for the event and the company is well prepared. We have no doubt that this is true. Long time executives Greg Abel and Ajit Jain were named vice chairman a couple of years ago and Todd Combs (now head of GEICO) and Ted Weschler have been handed greater responsibility overseeing the investment portfolio. We have a $255 Target Price. This is a pre-corona Target, but we don’t see any reason that the stock can’t get there in the future. It’s just a matter of time. Our Sell Price? There’s no way we can see selling this stock.





Blackstone Group (BX: $53, up 5%)


On March 18, the stock slid to $33, a 52-week low. Since then, it has risen sharply to $53. This is still well off the 52-week high of $65, so there is plenty of room for the stock to run. This asset manager now has an incredible $570 billion under management. The company invests in Real Estate, Private Equity, Hedge Funds, and Credit. Like it always does, Blackstone will take advantage of lower prices to invest and earn attractive returns. After all, that’s what the portfolio managers did during the last recession, notably scooping up distressed real estate. For the year, revenue rose from $6.8 billion to $7.3 billion with the core Management and Advisory Fees increasing from $3.0 billion to $3.5 billion. Profit grew 18% year-over-year to $3.9 billion. We have a $69 Target Price. The stock is trading very close to our $52 Sell Price. Obviously, we still like the company, but when a stock breaches our Sell Price, you are the one who needs to decide what to do based on your own personal risk tolerance. We will say that if any company can survive and thrive in the current environment, it is Blackstone.






Microsoft (MSFT: $185, up 6% )



The stock moved smartly higher this week. No one told Microsoft that it was supposed to have transitioned into a stodgy, slow-growth company. Management said that Covid-19 had a minimal impact on fiscal 3Q20 (ended March 31, 2020). Revenue rose 35% versus 3Q19, to $35 billion and profit increased 22% to $11 billion. (Note what an amazing statement that is. 31% profit AFTER TAX. Extraordinary. Beyond good.) The company will feel a larger impact at its LinkedIn business with advertising slowing down. This will be more than offset by its other businesses such as More Personal Computing that is seeing increased demand from remote workers. Productivity and Business Process and Intelligent Cloud are also doing better from higher cloud usage. With a multitude of products spanning Gaming, Windows, Cloud, there are multiple strong growth platforms to propel this company higher. A strong balance sheet never goes out of style, but it is particularly important during economic downturns. Microsoft is one of the few AAA-rated companies in the US. It’s no wonder that the stock is nearing its $191 all-time high reached in February.  We have a $200 Target and no Sell Price. We can’t wait to raise the Target!






Twitter (TWTR: $30, up 8%)


Twitter dropped to $20 in March, a 52-week low, before gaining 50% to its current level. The company relies on advertising for nearly 85% of its revenue, and this was naturally impacted by Covid-19. The company got off to a good start in 1Q20, but revenue only ended 3% higher to $810 million. We expect the sluggishness to remain for a while since companies are pulling back advertising and which will continue in the recession. With higher expenses, there was a $10 million loss compared to a $190 million profit last year. Monetizable Daily Active Users continue to grow, averaging 166 million versus 134 million a year ago.


We hope that reinvigorated revenue and profit growth will appear once the economy recovers. However, we are feeling a bit cautious on this company. Yes, they have new substantial activist owners and now board members in Elliott Management and Silver Lake and Jack Dorsey, the founder and CEO has a new lifeline to remain as CEO, but something about this whole arrangement makes us a bit nervous. Activism at this level is good, but it doesn’t always work, especially with such a tough nut to crack as Twitter. FAAAM have all flourished, with Twitter trading at where it was in 2015. Not good.


We are adjusting our $47 Target Price and $30 Sell Price to $34 and $28. Yes, a tight Sell Price. But take heed – watch the risk level on your investment here.




Agilent Technologies (A: $1,80388, up 7%)


It is hard to believe that six weeks ago, the stock fell to $61, a 52-week low. Not surprisingly, Covid-19 has created near-term uncertainty, and management withdrew their fiscal 2Q20 (ending April 30) and 2020 guidance. They also announced revenue for the first two months grew 2% year-over-year. Management previously expected 2Q20 revenue growth of 8%, to $1.3 billion. Moving past the short-term issues, which the company is reacting to by cutting expenses, the long-term story remains intact. After all, this is a leading life sciences and diagnostics company that provides instruments and software, among other things, that its Pharmaceuticals, Chemical, Academia customers need to do wonderful things. We have a $100 Target Price and a $74 Sell Price.





AstraZeneca (AZN: $53, up 3%)


The stock reached a new all-time high of $55 on Wednesday. This is quite remarkable considering the company hit $36, a 52-week low, in mid-March. The company continues chugging along, reporting 16% year-over-year growth in 1Q20 revenue, to $6.4 billion. This drove profits 33% higher, to $750 million. The company has a host of strong drugs leading the way. These include oncology treatments Tagrisso (56% year-over-year growth to $1 billion for the lung cancer drug), Imfinzi, used to treat bladder cancer (57% growth to $460 million), and ovarian, breast, and pancreatic drug Lynparza (67% growth to $400 million) along with asthma and COPD drug Symbicort (35% growth to $800 million) and asthma treatment Fasenra (54% growth to $200 million). Recently, the FDA approved Farxiga to treat heart failure. This was already a strong drug with 1Q20 revenue growth of 16% to $400 million. Is it any wonder why we are so bullish on the stock? We have a $58 Target Price and our Sell Price is $44. We can’t wait to raise the Target.





Eli Lilly (LLY: $153, flat)


Who can blame investors for taking a little breather after the Street sent the stock to an all-time high of $165 after the company reported 1Q20 results a couple of weeks ago? While understandable, we view the pullback as a buying opportunity. Turning to the performance, 1Q20 revenue was $6.0 billion, 15% higher than 1Q19’s $5.1 billion. Excluding impairment charges, profit increased 50% to $1.5 billion. The company launched several drugs over the last few years (e.g. diabetes treatments Trulicity, Basaglar, and Jardiance and Taltz for plaque psoriasis), and these continue to do well, replacing revenue from older drugs. There are also up-and-coming Verzenio (breast cancer treatment) and Olumiant (rheumatoid arthritis) that grew 70% and 72%, respectively. We have a $170 Target Price, and given its proven track record developing drugs, we do not have a Sell Price. Are you looking for a solid performer if the market turns south in the future? Lilly was at $146 in February, $120 at the low which wasn’t pretty but certainly wasn’t as bad as some that were down over 50% (would have been $73), and is now higher. Very strong company.





Johnson & Johnson (JNJ: $149, flat)


Two weeks ago, the stock hit an all-time high, $157. This is quite remarkable and proves the company’s strength after the sharp Covid selloff caused the company to fall to $109, a 52-week low at the end of March. We’ll take the 3% revenue growth for 1Q20 as the coronavirus pandemic hurt the top line. The top line was $21.0 billion. Profit skyrocketed to $5.8 billion from $4.0 billion. Pharmaceutical, the biggest segment, was the main driver, rising 9% to $11 billion. There are a number of treatments that are doing well, including Stelara (inflammatory diseases) and Darzalex (multiple myeloma). Adding to the strong results, this is another AAA-rated credit. Management and the board of directors feel so good about the company’s prospects that they hiked the quarterly dividend 6%. This is impressive in an environment where so many other companies are suspending their payouts. Our Target Price is $168, and we don’t have a Sell Price. Given the company’s many positive attributes, you shouldn’t be surprised that we wouldn't recommend you ever sell the stock.


Are you looking for a solid performer if the market turns south in the future? JNJ was above $150 in February, $110 at the low which wasn’t pretty but certainly wasn’t as bad as some that were down over 50% (would have been $75), and is now higher. Very strong company.





The High Yield Investor
By Larry Rothman
VP High Yield Investments
The Bull Market Report 


The waters are certainly calmer after a couple of months of rough seas. Still, with states starting to reopen, certain politicians and healthcare officials fear a second wave of the pandemic. So, we are certainly not out of the woods yet. On top of that, millions have been filing unemployment claims and the official unemployment rate skyrocketed to nearly 15%. With that as a backdrop, we chose the following four investments as they offer a substantial yield advantage over long-term Treasury yields and in addition are four of our more conservative income investments.


AllianzGI Equity & Convertible Income Fund (NIE: $21, up 5%, yield = 7.2%)


The fund returned 18% for the fiscal year that ended on January 31. At the end of January, 63% of the portfolio was invested in equities. It writes call options against some of its stock positions to generate income. The remaining 37% was mostly invested in convertible securities, which typically offer higher income and more downside protection than stocks. Some of you may find this particularly compelling in this uncertain environment. The Target Price is $26 with upside potential from the equity exposure, and the 7.3% current yield is attractive in this low-rate environment.



BlackRock Income Trust (BKT: $6.09, up 1%, yield = 6.8%)


This is another income investment for those of you that prefer a more conservative approach. Its objective is to preserve capital and generate monthly income. The fund invests at least 65% of its assets in mortgage-backed securities and a minimum of 80% in securities issued or guaranteed by the U.S. government, one of its agencies, or rated AAA. At the end of April, the portfolio managers had 96% of the assets in agency mortgages and 99% of the securities were rated AAA. The stock has a Target Price of $6.50 and offers a very attractive 6.8% yield compared to the sub-1% yield on Treasuries with up to a 10-year maturity.



Invesco Municipal Trust (VKQ: $11.48, up 3%, yield = 5.1%)


The coronavirus continues to do a number on municipalities’ finances. This is one of the more conservative municipal funds, with 60% of assets invested in A-rated or higher securities as of March. The bonds of Illinois (12%), Texas (9%), New York (9%), California (8%), and New Jersey are the top states that the fund invests in. Revenue bonds, backed by specific revenue from projects, are 84% of the fund. These have been hard hit in certain places around the country, and the federal government provided aid to states in the previous legislation. Despite jawboning by politicians, further help may be on the way. After all, a prolonged and deep recession is not in anyone’s best interest. The 5.1% yield is effectively 2-300 bp higher since you don’t pay federal income taxes on the amount earned. The higher your tax bracket, the greater your advantage. Target Price: $15.



Nuveen AMT-Free Municipal Credit Income Fund (NVG: $14.43, up 3%, yield = 5.4%)


This is another fund that invests in tax-free munis. 54% of assets were placed in A-rated or better securities as of March 31. Illinois is the largest investment, accounting for 16% of the portfolio. California and Texas follow, with 10% and 8%, respectively. Then, Colorado and Ohio round out the top five, at 6% each. It has 95% of assets in conservative sectors. These are Healthcare, Transportation, General Tax Obligation, Education, U.S. government guaranteed, Utilities, Consumer Staples, Water and Sewer, and Long-Term Care. Nuveen AMT-Free Municipal Credit Income Fund (Target Price: $19) offers a 5.4% yield with a higher tax-equivalent yield, naturally.



Good Investing,
Todd Shaver, Founder and CEO
The Bull Market Report
Since 1998