While the Middle East turmoil is dominating the news cycle, there were still gains in stocks that we like. With geopolitical events roiling the market, two of our companies broke through the nervous chatter.
But first, start with the missiles Iran fired on U.S. bases in Iraq overnight. Four of them reportedly failed after launch and the rest gave personnel plenty of time to shelter. The market reacted sharply in the futures markets and initially fell 440 points on the Dow on top of the 120 it fell in yesterday's day session. But then the sentiment came roaring back, leaving futures up by morning.
Reading between the lines, there's now a significant chance that Iran has taken its retaliatory swing and will calm down for the time being. They weren't seriously spoiling for a war on these terms. As long as calm heads prevail, this will be remembered as just another bit of thunder in a sky that looks bluer all the time. We've seen endless wars and rumors of wars in our decades watching the market. None of them has shifted stocks off their long-term upward track yet.
And whatever happens overseas, the business of global industry will continue. That means the important thing is keeping an eye on our stocks. Alphabet (GOOG: $1,393, flat), for example, continues to scale new heights, reaching an all-time high on Monday at $1403, before dipping ever so slightly yesterday. These levels do not scare us and we remain confident.
The company is simply a cash machine. For the first nine months of 2019, Alphabet generated $23 billion in free cash flow, using $12 billion of it to repurchase shares. Despite the company’s large size, revenue grew 20% for the period, from $98 billion to $116 billion and net income rose from $22 billion to $24 billion.
Alphabet is not merely a search engine, with its hand extending into many tech spaces. This massive company remains a technology stalwart.
Admittedly, Square (SQ: $65, up 3%) hit a rough patch, losing 20% since mid-summer. It remains a company we like, however, and a Wall Street analyst joined us. The stock had a strong day yesterday after Bank of America upgraded it to a Buy. And Cramer on his TV show said it’s a strong buy too.
Square, a payment processor started 11 years ago, has continued to make inroads. The company’s revenue grew 45% in the first nine months of 2019, from $2.4 billion to $3.4 billion, and producing a $30 million profit in the 3rd quarter with management investing in new products and improvements at the same time.
It is never easy to practice patience, but with Square’s products continuing to gain traction, the pullback represents an attractive buying opportunity. We remain confident in the company’s prospects. Our Target is an aggressive $105, and our Sell Price is $56.