News Details – Smallcapnetwork
Healthcare Stocks Botch Q3 Expectations, Yet Nobody's Learned Their Lesson
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February 2, 2024

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PDT

Welcome back to the trading week, one and all - we hope everyone had a nice weekend. As we could have expected, last week's sizeable setback for stocks led to a bounce today. Let's not get too excited just yet though. This is nothing more than a dead-cat bounce so far. It's going to take a lot more than today's advance to shake stocks back into an uptrend. We'll take our usual look at things below, but first, we've got news items to work our way through with several of our Featured Stocks. Did You See The News? I don't know if they were intentionally ganging up on me to keep me super-busy today or if it was just a coincidence, but four of the companies we're keeping close tabs on at the site said something noteworthy today. This is just a brief synopsis. There's a link to where you can get more information. In no particular order... On Monday afternoon, New Global Energy (NGEY) posted this letter to shareholders about some of its recent milestones, and a glimpse of what to expect going forward. In case you missed it the one and only time we've had a chance to talk about it here in the newsletter, New Global Energy is the double-barreled growth company that's tapping into the moringa craze at the exact right time, and as an extension of how it got prepped to break into the moringa market, it's also an aquaculture (fish farming) play with a serious edge. If you're not familiar with why moringa - the world's next big superfood - I suggest you go back to our original look at NGEY, which explains it all. If you are familiar with New Global Energy and moringa though, then some of today's shareholder letter may be familiar to you. Either way, every time New Global Energy serves something up we get a better idea of what's in the cards. Empire Global (EMGL) did NOT post a press release with it this morning, so it would have been easy to overlook the fact that it just filed quarterly numbers. They were as impressive as you'd think they would be in light of the company's recent expansion-by-acquisition efforts. Bryan Murphy has all the details and how last quarter's numbers line up with the company's bigger-picture growth plan to consolidate Italy's fragmented online betting market (the fourth biggest in the world) into a more cohesive and profitable collection of companies. The only thing I'll add that Bryan didn't say is how sequential growth was a solid 13%. I don't know when or even if Empire Global will put out an official press release, though I suspect they will. But, you just got the data before anybody else waiting for an official announcement. Cardinal Resources (CDNL) passed a pretty big milestone today by letting the market know it was currently constructing its first RedBird System in Panama. CDNL has been a hotly-debated name, as the company's water-purification solution has undeniable value, but Cardinal Resources to date hasn't made a lot of sales progress. It appears they're coming now, though, even if at a slower pace than first anticipated. Leveraging the physical presence of this first one, Cardinal Resources and its Panamanian distributor are looking to sell several of these systems now in the foreseeable future. The market certainly seemed to think this is a big step in the right direction anyway, with CDNL shares jumping more than 90%. Last but not least, I think James Brumley was right - it's not even fair the way Barfresh Food Group (BRFH) is establishing business relationships and, now, securing some of the beverage industry's most-experienced and best-connected talent. Already partnered up with PepsiCo (PEP), today Barfresh announced it's hired the former PepsiCo executive that essentially made the company's beverage division the powerhouse that it is today. There was a bunch of other great stuff posted at the site today as well... too much to talk about here. You'll just have to go to the website to get it all. Right on Cue I hope nobody was surprised the market made a big gain today. Between last week's 3.6% slide and the gap we left behind between Thursday's low and Friday's high (yep, the S&P 500 gapped lower on Friday morning, and never filled it in), we were bound to get some sort of relief rally after testing a couple of fairly important support levels. More important, let's not jump the gun and assume stocks have begun their usual year-end rally. Stocks doled out a nice gain and the VIX closed lower, but if you look closely you'll see the VIX didn't close a whole lot lower, and was pushing off its lows when the closing bell rang. Likewise, the S&P 500 still hasn't hurdled any key moving average lines, mostly around 2069. You can also see today's volume wasn't exactly sky-high, given the size of the rally. It's going to be interesting to see which fork in the road stocks take here. Beware Unrealistic Expectations Last but not least, you may recall from late October how we gloated just a little bit when it looked like - just as we expected - the healthcare sector wasn't going to do nearly as well during the third quarter as originally expected. Well folks, in the meantime we got the data, and it confirms what we expected. That is, back on August 27th analysts were collectively expecting the healthcare sector to post Q3 earnings growth of 28.8%, but as it turns out - with 92% of the market's Q3 numbers in hand - the healthcare sector's earnings are on pace to grow a mere 8.3%. I hate to do this, but, I told you so. I'm still baffled how any analyst worth his or her salt would think we could get two great years of Obamacare-driven big-time growth. And just so there's no misunderstanding, no, this has nothing to do with Hillary Clinton's tweet about reeling in the price of specialty pharmaceuticals. That didn't happen until September 21st, and the fallout didn't materialize until late September when the quarter was basically over. This tepidness was in the cards way before that. Anyway, though I'm supposed to be making these sector-level income and valuation charts for the Elite Opportunity newsletter, I figured I'd sneak one in for you today, just so you could have some perspective on the trend for the healthcare sector. Here's the scary part: The S&P 500 Healthcare Sector is now valued at a trailing P/E of 21.24 and a forward-looking P/E of 16.12, but that forward-looking P/E is based on an earnings growth rate the sector hasn't been able to achieve in over five years. Doubts about that forward-looking P/E are justified. While you just saw the overarching healthcare sector chart, I'll go ahead and let you know right now the same charts for the other nine sectors are going to be exclusive to the EO, and a couple of them are just as eye-opening as the healthcare chart was for us a few weeks ago. Folks, having good information is half the battle.