The stock market continues to demonstrate remarkable resilience, maintaining a strong
uptrend that has been in place for over a year. Looking at the weekly chart, this positive
momentum actually began in mid-March, with only a brief negative signal appearing
approximately a year ago. That temporary dip occurred when economic data suggested a
slowdown, but the Federal Reserve’s swift pivot toward aggressive rate-lowering policies
quickly restored market confidence.
This eighteen-month uptrend in the S&P 500 has proven particularly robust when viewed on a
weekly basis. While the index has occasionally tested short-term support levels, it has
consistently closed above them on a weekly basis. The trend remains unchallenged, with prices
well above the 200-day moving average and continuing to climb along the 20-day moving
average.
The market’s strength is particularly noteworthy given the current landscape of concerns. The
twenty-year Treasury bond ETF (TLT) has been steadily declining since its mid-September peak,
reflecting persistent inflation worries. These concerns are further amplified by recent
geopolitical developments, including the escalating situation between Israel and Iran, which
poses potential risks to oil supplies and prices. Additionally, while grain markets have been
trending lower, an eventual reversal could introduce new inflationary pressures into the
system.
Several commodities are showing inflationary signals. Gold has been on a strong upward
trajectory since October of last year. Live cattle prices continue their choppy but upward
movement, while coffee prices maintain steady gains. These commodity trends, combined with
sticky inflation above the Fed’s 2% target and ongoing wage pressures, suggest that inflationary
concerns remain valid.
The treasury bond market’s behavior is particularly telling, reflecting a broader vote of no
confidence in the U.S. government. This isn’t limited to foreign buyers; domestic investors are
also demanding higher yields on twenty-year bonds. This skepticism stems from recurring
government shutdown threats, debt limit challenges, and campaign promises from both parties
that could exacerbate debt and deficit issues. Historically, stock prices tend to follow interest
rates over extended periods, though this correlation hasn’t held recently. With the election
approaching and potential post-election turbulence, markets could become increasingly
volatile.
Momentum Edge Pick:
This weeks Momentum Edge pick is a company working to change banking and Financial
Services in Latin America.
Nu Holdings has demonstrated impressive sales and earnings growth, positioning itself as a
rapidly expanding digital banking and financial technology leader in Latin America. With a
mission to democratize access to financial services across Brazil, Mexico, and Colombia, the
company has been steadily scaling its customer base, surpassing 80 million users. This growth is
propelled by a strong focus on user-centric, technology-driven products that offer streamlined
and affordable banking solutions compared to traditional financial institutions.
Nu Holdings’ revenue growth has been remarkable, with sales consistently outpacing industry
averages year-over-year. The company’s freemium model, which allows customers to access
basic banking services at no cost while offering premium, fee-based services for a minimal
charge, has been a key driver of this expansion. It has proven effective in drawing in users and
gradually converting them to revenue-generating accounts. This model is expected to maintain
traction as digital banking penetration in the region deepens.
In terms of earnings, Nu Holdings has made strategic investments in technology infrastructure
and market expansion that have positively impacted its profitability. The company reported
substantial margin improvements attributed to economies of scale and cost management. Its
move into higher-margin products like credit cards, loans, and personal investments has been
highly successful, further diversifying its revenue streams and bolstering earnings.
Looking ahead, Nu Holdings has robust growth prospects. Its expanding portfolio and
deepening customer relationships position the company to capture a larger share of the Latin
American financial services market. With continued product innovation and a solid financial
foundation, Nu Holdings is poised to maintain its growth trajectory, providing significant upside
for investors focused on the burgeoning fintech space in Latin America.
The stock has excellent fundamental momentum, attracting intense buying pressure.
It is worth noting that Berkshire Hathaway and Tiger Global are two very different but wildly
successful investment firms and are large shareholders of the stock.
You can buy the stock up to $16 and I would suggest cautious investors use a stop loss at
$11.75
Portfolio Review
KKR & Co. Inc. ($KKR) (Recent Addition):
The private equity firm delivered exceptional quarterly
performance that exceeded market expectations across multiple metrics. Fee-related earnings
and total operating earnings both saw remarkable 50% year-over-year growth, setting new
company records. KKR’s capital raising capabilities remained robust, with $24 billion in new
capital secured during the quarter, contributing to an impressive $118 billion raised over the
trailing twelve months. The firm’s investment deployment has been equally aggressive,
investing $24 billion in the quarter and $77 billion over the past year. This deployment strategy
has been balanced by prudent capital management, resulting in significant dry powder that
positions KKR advantageously for future market opportunities.
The firm’s fundamental momentum is reflected in their year-to-date earnings growth of 30%,
with the most recent quarter’s 50% surge highlighting accelerating growth. Looking forward,
analysts project 20% annual gains over the next five years. The company’s revenue growth has
been particularly impressive, with a 121% increase over the last five years and a 105% year-
over-year gain. KKR’s strategic positioning in the private credit market is especially noteworthy
as this sector continues to expand, driven by increasing demand for reliable income sources in
an uncertain market environment. Their comprehensive approach to alternative investments,
combined with their proven ability to raise and deploy capital effectively, underpins their strong
market position.
Idaho Strategic Resources ($IDR):
The stock continues to benefit from gold’s upward momentum,
with earnings up sevenfold and projected to increase nearly 100% next year. Beyond their gold
operations, their strategic mineral deposits represent significant future potential, particularly as
the U.S. seeks to reduce dependence on rare earth metals in China. The stock has gained 10% in
the last month and almost 60% in the last quarter.
Oscar Health ($OSCR):
While the stock has experienced recent pressure, down approximately
20% on earnings concerns, the underlying business fundamentals show remarkable
improvement. The company has successfully transitioned from a loss-making position to
generating substantial profits, with earnings more than doubling in the current year.
Longleaf Partners, a premier value investing firm, provided a detailed analysis highlighting
Oscar’s strategic positioning and growth potential. Their latest report emphasized several key
points about Oscar’s business model and prospects. The firm noted that Oscar possesses
significant “hidden non-earning assets” across various regions, each at different stages of
development. Some regions are still in investment mode, while others are transitioning to
higher-margin operations, creating a diversified growth pipeline.
Longleaf Partners views this developmental variance as a long-term positive, indicating
embedded growth potential that is not fully reflected in current earnings. While acknowledging
potential near-term volatility through December, they have strategically used market
fluctuations over the past year to build their position. Their analysis suggests that Oscar’s role in
the U.S. healthcare system is becoming increasingly essential, delivering tangible value to consumers and strengthening its industry position. Longleaf Partners believes this trajectory
will continue regardless of political outcomes, highlighting Oscar’s fundamental strength
independent of policy changes.
Flex Steel Industries ($FLXS):
The furniture company emerged as a surprise performer, up 31% this week following strong quarterly results. Net sales grew 9.9%, with new orders up 10% and significant margin expansion. Despite challenging macroeconomic conditions, the company has achieved four consecutive quarters of growth.
Baker Hughes ($BKR):
The oil services firm posted solid results with orders of $6.7 billion and
revenue of $6.9 billion, up 4%. Cash flow improved 23% year-over-year, with half returned to
shareholders through buybacks and dividends. The company’s outlook remains positive,
particularly if future policies encourage increased drilling activity.
Zeta Holdings ($ZETA):
Currently down 10% monthly, the stock faces near-term pressure ahead of November 11th earnings. The company’s recent LiveNet acquisition is expected to be immediately accretive to earnings. Despite mixed analyst opinions, with price targets ranging from $28 to $40, strong institutional interest and insider ownership of nearly 20% suggest continued potential.
The portfolio maintains a positive outlook for the next three months, though careful attention
will be paid to election outcomes and geopolitical developments. Barring significant political or
global disruptions, the current market uptrend appears sustainable across portfolio positions.