Thanks so much for reading my Diary today.
Again, have a very Happy Thanksgiving.
Enjoy the holiday and be safe.

* Smucker's had a good beat for the second quarter in a row

J. M. Smucker (SJM) reported a $0.15/share beat (at $2.39) on better organic growth (+4%). Elevated at home consumption in the consumer and coffee segments were contributing factors. Smucker estimated that 1.5 million net new households consumed at least one of Smucker's coffee brands in the recently reported quarter. 

Dunkin' (DNKN) and Cafe Bustelo coffee brands grew by better than +20% in the quarter, while strength continued in Uncrustables and Meow Mix. 

The company again raised its Fiscal 2021 guidance to $8.55-$8.85, up from $8.20-$8.60 E. I have been at an above market $8.95 estimate for several months, see below. 

Reinvestment in peanut butter and the coffee business is keeping down even higher EPS realizations. 

Full year organic sales could be about +2.5%, compared to previous guidance of one to two percent gains. 

The company explained its strategy to revitalize the pet food business - which included more trade spending in e-commerce in the current quarter, as well as new products and generally more advertising. Smucker's Nutrish division has continued to lose share to General Mills' (GIS) Blue Buffalo. 

There is no change in my 12 month target price of $135/share.

As a reminder here is what I wrote after the last quarter's beat:

Aug 26, 2020 ' 10:00 AM EDT DOUG KASS

J.M. Smucker Update

* Big beat, good forward guidance

* Staying with position (that has been recently added to)

* SJM is on my Best Ideas List

Our channel checks indicated for the prospect of a robust quarter despite a concerning brokerage rating and price target downgrade last week.

We were not disappointed.

The J. M. Smucker Company (SJM) reported a large first quarter beat -- $2.37 compared to consensus of only $1.80. The company characterized about $0.15 of the improvement as "expected" with the balance reflecting Covid-19 related restocking, a shift in the SG&A line from lower administrative costs, and change in the dog food related marketing campaign.

Organic sales growth was fantastic at +11%, EBIT grew by +33% vs. consensus of only +9%.

The company raised its 2021 guidance by +$0.30 to a range of $8.20-$8.60. I live at $8.95/share, above the higher end of what I believe to be a conservative range.

The company's business momentum is strong - with coffee and peanut butter plants returning to full production leading Smucker's business lines.

E-commerce, which now represents about 1/8 of total sales, had astonishing growth of +70%.

The only weakness relative to expectations was the pet category - representing about 35% of total sales - where inventory issues arose, and should be sorted out over the next several quarters.

Forward sales guidance over the balance of the year seems conservative and could be easily be beaten.

My target price of $135/share represents a 12.4x enterprise value to EBITDA, a near 17% discount to packaged food peers, compared to an historic discount of 15%.

Tesla (TSLA) vs. Berkshire Hathaway (BRK.A) (BRK.B) :




Source: Zero Hedge

I have moved to medium-sized Tesla (TSLA) short - just shorted at $572.

I wanted to take this opportunity to wish our subscribers, our editors, my fellow contributors, TST management, and our editorial staff a Happy Thanksgiving. 

May you have a fun and peaceful day tomorrow with your family and friends.

The market action is good considering the magnitude of the recent rise. 

Market breadth stands at 13-17 and, as I expected, Nasdaq growth (like favorites Alphabet (GOOGL) and Amazon (AMZN) ) are playing "ketchup":

"The continued weakness in growth stocks defined and provided an exclamation point to the pivot from growth to value that has been taking place since early September. Given seasonality and the decline to more reasonable values, I suspect that the weakness in stocks like Amazon (AMZN) will moderate in the near term - allowing some growth stocks to "ketchup" after multiple weeks of underperformance."

Financials, in particular, are quite impressive today given the large percentage gains of late.

(Tuesday's comments and update appear at the end.)

The stock market rally kicked back into high gear and, the various averages all attained the high projections that we stated in yesterday's comments, although it is noteworthy that the S&P just kind of peeked over the top, while the others did it with a near vengeance. As you will recall, the rally began with the hopes about the vaccine three weeks ago and has built on it since. But yesterday was a further celebration of the apparent orderly transfer of power that seems to have moved to center stage. Additionally, Biden's picks, so far, are middle of road and, that is reassuring people who were worried about the potential for initiatives on taxes and a variety of other things. The fascination also remains hostages to what happens to the Senate and, we won't know that till the Georgia runoffs.

The tone of the market's rally yesterday was clearly part of the back to normal game. Not only back to normal economically and health-wise, but back to "normal" politically as most of the Biden nominees so far have served in government and most were attached to the Obama Administration.

The market euphoria is at a very high level. With the three-week rally in a nearly euphoric mode, it is tempting to say - step back and take profits. And, while the market may face some consolidation, not sure it is quite time to blow the whistle and head for the hills.

As the smart folks over at DataTrek point out, selling successive rallies is not always practical, witness Tesla. We will nonetheless assume that we are going to go into consolidation for at least a day or two.

There are also signs of second thinking beginning to show up, even in the political euphoria. Some are speculating that the recent rise in oil prices may be the assumption that the new President will be tested in the Middle East rather quickly and, that could begin to put stains on the international oil lines.

We haven't quite gone parabolic yet and, as you will note from yesterday's comments, the history of Thanksgiving week has become somewhat muddled and muted. So, we will not look for a big projection here. We are kind of muddling our way into Turkey Day. Let's see what happens.

Stay safe.

Arthur

Housekeeping Note

THERE WILL BE NO NOTE ON THURSDAY/FRIDAY.

HAPPY THANKSGIVING!

Stay Safe.

Arthur
__________ 

Monday's stock market action was intriguing on several levels. Once again, we began with a boost from some vaccine news but compared to the prior reactions, it was somewhat underwhelming.

Here is what I wrote in the midday update:

Update - 1:45 p.m.

As you can see, market response to "new vaccine" is a little bit ho hum. We already had two at 90%+ efficacy, so it is tough to show something remarkable. Witness what is happening with the AstraZeneca stock itself.

Only Nasdaq came within hailing distance of the former highs and it is now performing the worst of the indices. So far weeks on Biden cabinet sound middle of the road and that too is not causing any shake-up in the market.

The one thing the bulls have to hold onto, however, is the plus tick in the Dow. So far, they are good shape but keep your eye on the newsticker.

Shortly after this update, the Nasdaq went negative and S&P dipped into negative territory, but the bulls quickly regrouped, and they managed to get back in line and managed to rally. Things changed in the final hour. The final hours sharp rally came when the Wall Street Journal seemed to confirm that Biden would pick Janet Yellen as Treasury Secretary. The market seemed to be reassured that a familiar face was taking place and relieved it was not Elizabeth Warren.

One further note on Janet Yellen. In my recollection, when she was President of the San Francisco Fed, I think she had some rather strong positions on the environment and recycling. It may have just been the location and, maybe my memory is not correct, but we will see how the environmental stocks begin to assess her probable nomination.

The S&P rallied back to the mornings post opening highs and, seemed to stop dead as a door nail and, stocks then gave back at least 1/3rd of the that final hour rally.

We will not expect major bounces from any further news on vaccines since remarkable surprises do not appear to be in the offing.

Overnight, futures have rallied sharply as President Trump has began to prepare his Administration to move toward an orderly transfer of power. We have maintained throughout that would be the ultimate end despite some people thinking that Trump would tough it out and try to take over the game. So, for this morning, we are getting a sigh of relief bounce on an orderly transfer of power.

With Thanksgiving approaching, I asked my two friends Jeff Hirsch and, his fabulous 97-year-old father, Yale (the founders and authors of Stock Traders Almanac) what the week of Thanksgiving looked like.

In the tradition of Lucien Hooper's great caution that whenever you find the key to the market, they change the locks, here is what the fabulous Hirsch's wrote in their indispensable Stock Traders Almanac.

For 35 years, the "holiday spirit" gave the Wednesday before Thanksgiving and the Friday after a great track record, except for two occasions. Publishing it in the 1987 Almanac was the kiss of death. Since 1988, Wednesday-Friday gained 18 of 32 times, with a total Dow point gain of 531.05 versus Monday's total Dow point loss of 814.56, down 15 of 22 since 1998. The best strategy appears to be coming into the week long and exiting into strength Friday.

So, given the overnight pop in the futures, based on the transition hopes, we will assume traders will look at testing the former highs once again. In case you have forgotten, the numbers we cited yesterday were - Dow 30000, the S&P above the 3640/3660 level but in the Nasdaq we would probably move the target to about 12000.

Politics is now moving toward center stage. That will make things all the more interesting.

Stay safe.

Arthur
__________

Update - 1:40 p.m.

The bulls take successful charge. The indices achieved their upside targets but, more importantly, at 1:30, they seemed to be holding. And, that is impressive. Some feared that they would touch and repel.

This clearly is aided and abated by the idea of a an orderly transfer of power and, the assumption that the Democrats, and particularly, the progressive side of the Democrats will not have complete control. So partial gridlock and, the market is enjoying it greatly.

Stay tuned.

Arthur

No trades today.

Going back to an early holiday lunch with friends.

Peter on sentiment and other stuff: 

Yesterday's retest of the intraday high of November 9th, the day of the Pfizer vaccine news, brought with it a lot of market ebullience as measured by the CNN Fear/Greed index which closed at 88, 'Extreme Greed'. I can't remember the last time I saw a 13 pt one day increase. This metric is not measuring how people feel but how they are actually behaving as it includes The McClellan Volume Summation Index which weighs market breadth, the extent over which the S&P 500 is above its 125 moving average, the spread in performance between stocks and bonds, the CBOE put/call ratio, the high/low list, credit spreads between IG and HY and finally the VIX vs its 50 day moving average. This contrasts with II and AAII which is just asking people how they feel. We'll see the fresh II data today which I haven't seen yet but it won't include the action over the past few days.

The front month crude oil contract is finally peaking above its $35-45 trading range seen since late May and now sits at the highest level since early March. I remain bullish on it along with the entire commodity space with crude the last major component to now join the rally. I want to say this about gold which has gotten thrown out this week. It is NOT a safety trade. It should not be bought on geopolitical worries; it should not be sold if the world seems more sanguine. It is a currency, that's it, that should only trade off the direction of fiat currencies, particularly the US dollar and real rates.

Jan 2021 Crude Oil contract

With another leg lower in mortgage rates to 2.92% on average, the MBA said purchase applications to buy a home rose 3.5% w/o/w and are up 19% y/o/y. This is the 2nd straight week with a similar gain after a stretch where they moderated for 6 weeks in 7. As home prices continue to climb and the mix skews towards the higher end, the average loan size rose to a fresh record high of $374,100. Affordability for the lower end continues to be an issue as what product of ANY kind can sustain annual price increases of 5%+ and still maintain the same level of demand? None no matter how easy the financing situation is. Refi's were higher by 4.5% w/o/w and by 79% y/o/y.

PURCHASE APPS

Along with the economic rebound in China and the vaccine news, South Korea's manufacturing sector confidence number from the Bank of Korea rose 5 pts m/o/m to 81, matching the highest since March 2018. The services index was up by 3 pts to the best since February. South Korea in particular has benefited from Samsung and its electronic exports along with the auto sector. The Kospi though did close down by .6% as notwithstanding the US market spike, Asian markets were much more mixed.

Have a great Thanksgiving holiday.

 * Dr. Jeremy Siegel on the markets. 

* What stays and what goes in a post Covid world? 

* We begin our lives as growth stocks and end as value stocks.

"What do you want me to do
To do for you to see you through?
For this is all a dream we dreamed
One afternoon long ago

Walk out of any doorway
Feel your way, feel your way like the day before
Maybe you'll find direction
Around some corner where it's been waiting to meet you
What do you want me to do
To watch for you while you were sleeping?
Then please don't be surprised
When you find me dreaming too"

- Grateful Dead, Box of Rain

In five weeks I will enter the 24th year of writing for TheStreet/RealMoney Pro. 

The past 23 years have been a labor of love. 

Candidly, I don't write my Diary for the purpose of making money - as my "day job" of managing money provides me with what I need. 

I actually enjoy writing - expressing my views and outlook in a Daily Diary. (Here is my "My 2018 Unabridged User's Guide to Investing and the Diary".)

But there are many other benefits to my writings. 

Importantly I have made some very dear friends that I hope I will have for another two decades. 

I started this gig as a lark - it was literally an after thought to my primary charge of managing money. 

Writing and analysis comes easy for me and thanks to the work elan instilled by my old boss Lee Cooperman so does rising early in the morning and getting to work!

My days typically start at around 4:30 am - I find I can most coherently write and express myself early in the morning. I am fortunate that words come off the keyboard easily for me - it seems natural. 

Sometimes those words come out too easily - to the chagrin of our wonderful editors who are inundated with multiple columns very early in the morning! (As always thanks to our editors for their immeasurable assistance - and patience - through the years!) 

I am a contrarian - a lot of what I write is non consensus and unpopular. This results in a lot of pushback, especially on social media. Some of that feedback is harsh as Twitter and other social media platforms have too often become unproductive mediums for hate as opposed to forums of respectful debate and value added exchange of ideas. 

After the close I made some personal comments about this:

Nov 24, 2020 ' 04:09 PM EST DOUG KASS

I Refuse to Lend My Time to the Haters

My skin is hardened after all these decades.

At this point, little impacts me from the standpoint of ad hominem attacks or non rigorous criticism or both.

The haters on social media platforms like Twitter are pathetic, and, while I actually feel badly for their plight, I aggressively and routinely block and report them, leaving them and their words in the purgatory of their isolation.

It's easy to reside in the cheap seats of anonymity -- especially by the many that have never been on the playing field.

But, frankly, it is amazing how much grief I have taken on the banks in 2020. Not surprisingly, not one of the self-confident bears who literally (incessantly) ridiculed me for buying the banks/financials (I have copies of their tweets) have said a word on Twitter or elsewhere in recognition that they were wrong in spirit and in fact.

Crickets.

This tells me more about the critics than their criticism.

If I ever behave like they did, please call me out in our Comments Section -- for I would deserve it.

Thanks for reading my Diary today and enjoy the evening.

But, after I wrote this final post of the day I received a number of supportive comments in our Comments Section, and in social media, which makes the potshots taken at me worthwhile. 

Among the feedback was this marvelous email from a subscriber which I want to share with you: 

The market has a way of making us feel really stupid for a long time. However at times like this with the financials rallying the satisfaction is worth it. I was fortunate enough to sell a big position of my GS on Feb 27 at 209.51 and bought it back on 3/23 at 141.73 and 5/15 at 174.06. Similar bought JPM at 93 after selling half of my BAC for nice gains from the single digits. Your steadfast encouragement on the banks gave me the confidence to stay the course recently as the rest of the market was ripping and I was trying not to feel stupid. Having said that I did participate in other sector rallies but financials are a significant part of my portfolio as I am typically contrarian.

Similarly, you gave me the confidence to go long at the Devil's Low of 666 back in the spring of 09. To this day I remember sitting in the Regan Convention Center in Washington DC that day in early March. I was at a conference for Public Private Partnerships as a consultant for a large infrastructure construction company after shutting down my small (35MM) hedge fund in late 08. Given that I was all in cash after having liquidated everything in late 08 when i shut down it was a prescient time to go long. I took my computer to the back of the auditorium and logged into the wifi and literally started buying when you were pounding the table about the generational low. That decision was significant, and I am fortunate that at this point in my life I no longer need to work to pay the bills. My full time profession is essentially investing my own capital.

Disregard the haters and know that you do in fact help people. Thanks!

Thanks to all the subscribers that have responded to Tuesday's post and that have provided me with this forum - you have filled me up with genuine emotion, continued optimism, and you have generated even more enthusiasm than I had previously in writing my Daily Diary.

"Such a long long time to be gone and a short time to be there."

* Tesla's shares have risen more than twice the market value of General Motors in less than two weeks

* The recent market rise may not be the end of the beginning of the Bull Market

* It might be the beginning of the end of the Bull Market

I start the day with a medium-sized net long exposure. 

That said, I want to start today with a warning that the recent strength in the market may not be the end of the beginning of the Bull Market. Rather, it could be a blowoff representing the beginning of the end of the Bull Market. 

No better example are the shares of Tesla (TSLA) (a new short) which has risen more than twice the market value of General Motors (GM) in less than two weeks - primarily based on its inclusion into the S&P Index. 

Tesla exemplifies the current degree of speculation (manifested in an extreme greed reading in the CNN Fear and Greed Index). In the case of Tesla, it has likely been fueled by option strategies (see Softbank (SFTBF) !) that have been seen before where there is massive buying of short term out of the money options forcing dealers to buy stock to hedge their options they sold. 

What has been the news during this period? As mentioned yesterday, more product recalls and Consumer Reports no longer recommending their cars because they came out second to worst in product reliability. Plus a host of new and bonafide competitors. 

Despite the stronger economic rebound there isn't a peep out of the central bank saying it's policy of endlessly keeping rates low may be data dependent. It is fostering a casino with a host of unprofitable IPOs and SPACs with an EV cherry on top of the sundae. 

Most of the country is suffering terribly and the financial markets are partying. When this finally ends Main Street may come after Wall Street with pitchforks and investors' current smiles could be erased and replaced with tears. 

I recently made the point that the price-to-sales ratio of the S&P 500 is at an all-time high of 2.71x, while other measures such as the Shiller's Cyclically Adjusted PE Ratio, Tobin's Q Ratio, and the Market Capitalization-to-GDP Ratio are also at or near all-time highs. 

High valuations can obviously persist for long periods of time but that doesn't render them attractive entry or hold points.