DOW THEORY FORECASTS® Vol. 76, No. 18, May 4, 2020 Stock Market Trends & Securities Reports Since 1946 www.DowTheory.com No country for old bulls New Buys, a sell, and No country appears spared from the economic fallout of the coronavirus. FOREIGN MARKETS LAG a slight downgrade Stocks are down across all geographic Stocks are down across all markets this year. geographic markets in 2020. De- Keysight Technologies ($99; Despite their losses, U.S. stocks veloped markets have narrowly KEYS) is replacing J.P. Morgan have fared better than most, extend- outperformed emerging markets. Chase ($98; JPM) on the Focus List. ing their 10-year run of outperform- Just a handful of countries, such ■ Keysight provides software and ing foreign markets. U.S. stocks have as China, are outpacing the U.S. tools that help customers electroni- fallen 11% in 2020, according to in 2020. –– Price Returns –– cally design and test new products. MSCI. Just a handful of countries are – Annual. – A sturdy balance sheet and a steady holding up better: Denmark (down Year- 5 10 Geographic Region To-Date Years Years stream of recurring revenue should 1% in U.S. dollars), China (5%), New Europe (developed) -21% -4% 0% help stabilize operations during the Zealand (6%), and Switzerland (7%). Europe (emerging) -32 -6 -6 downturn. The shares have rallied Developed markets are down 17%. Pacifi c (developed) -17 -2 1 Asia (emerging) -28 -1 2 23% in the past month and dipped Emerging markets, which tend to rely just 4% for 2020. The consensus Africa -27 -11 -3 more on tourism and natural-resource Latin America -44 -10 -9 projects growth of 6% for earnings extraction, are down 19%. U.S. -11 6 9 and 3% for revenue. The global economy is expected China -5 -1 3 ■ Of all the big U.S. banks, we to contract 3% in 2020, estimates the Developed markets -17 2 5 Emerging markets -19 -3 -1 still like J.P. Morgan best. Having International Money Fund, which Source: MSCI. All returns in U.S. dollars. bank exposure makes sense given would mark the worst downturn the potential for a U.S. recovery. since the 1930s. The IMF anticipates a straight year. The fl u pandemics of But partly due to J.P. Morgan’s partial recovery in 2021, with growth 1918, 1957, and the late 1960s all ex- ® Quadrix scores — its Overall rank projected to reach 6% — but con- perienced second waves. The second is just 43 — the stock no longer cedes its forecast contains “extreme waves of the 1918 and 1960s pandem- ranks among our very favorite uncertainty.” The forecast assumes ics proved even deadlier than the fi rst. picks. J.P. Morgan remains a Buy and outbreaks peak in most countries in Although economic forecasts are a Long-Term Buy. Keysight is also a the June quarter and then fade in the becoming increasingly grim, stocks Long-Term Buy. second half of 2020. A more severe have bounced back. In the past ■ Adobe ($349; ADBE) joins pandemic could cause the global month, developed markets have ral- the Buy and Long-Term Buy lists. economy to shrink 6% this year, fol- lied 9% and emerging markets 6%. Adobe software and services help lowed by a weaker rebound in 2021. Again, the U.S. runs near the front of customers publish, promote, and For perspective, the global economy the pack, up 11%. measure the effectiveness of their contracted about 10% during the We are increasing our exposure to digital content. The stock trades at Great Depression of 1929 to 1932 and foreign stocks with the addition of a lofty 41 times trailing earnings, 0.1% in 2009. Kirkland Lake Gold ($44; KL) to our an 8% premium to the median If a second outbreak emerges in Long-Term Buy List, reviewed in more 2021, the IMF warns, the global Continued on page 6 economy could contract for a second Continued on page 2 Dow Theory Forecasts is an independent investment adviser and makes no commissions on the stock transactions of its subscribers. Alibaba is not rated. growth streaks seem destined to end No country ■ For the March quarter, Canadian in the current quarter. ICON warned National Railway’s ($85; CNI) ad- that June-quarter earnings per share for old bulls justed earnings per share rose 4% on would slump 23% to 47%, on a sales Continued from page 1 flat revenue. Volumes slipped 1%, decline of 10% to 17%. That guidance detail on page 6. For investors seeking driven by weakness in automotive, in- fell well short of analyst expectations. additional diversifi cation, we review termodal, and forest products. Pricing With nearly two-thirds of ICON’s three international stocks below. climbed 2%. Management scrapped global sites affected by the coronavi- ■ Alibaba Group ($207; BABA), both its 2020 guid- rus pandemic, man- China’s internet-commerce giant, is ance and its three- agement withdrew pushing further into the cloud, with year outlook due to its full-year outlook. plans to pump $28 billion into its uncertainty caused More encouraging, cloud infrastructure over the next by the coronavirus ICON says the num- three years. Cloud computing repre- pandemic. But the INT’L INVESTING ber of affected sites sented just 7% of Alibaba’s sales for the railroad stands by its previous plan to could fall to 20% in the December 12 months ended December but grew raise the quarterly dividend 7% this quarter, even if a second wave of 66%. Companywide sales rose 42% year. Yielding 2.7%, Canadian National coronavirus hits this fall, because during that stretch, while per-share is rated B (average). ICON will be able to prepare for profi ts rose 47% and operating cash ■ For the March quarter, ICON any potential shutdowns. ICON’s fl ow 34%. Alibaba launched a book- ($162; ICLR) reported 4% higher earn- long-term prospects remain intact, ing service for coronavirus tests at a ings per share on 6% sales growth. given its backlog expanded 10% last time when China is accelerating test- ICON has now grown per-share profi ts quarter to $8.7 billion, more than ing in the hope of limiting outbreaks. in 31 straight quarters and sales in three times annual revenue. ICON is Earning a Quadrix Overall score of 93, each of the past 40 quarters. But both a Focus List Buy and a Long-Term Buy. FOREIGN STOCKS Below we list international stocks included in the eign stocks with high Quadrix scores. Our recommended Monitored List, along with a handful of other large for- foreign stocks are listed in bold. To-Date –– Quadrix Scores –– Market Total Momen- Value Company (Price; Ticker) Return tum Value Overall (Billions) Sector Country Advice Accenture ($188; ACN) -10% 39 29 45 $121.8 Technology Ireland B (average) Alibaba Group ($207; BABA) -3 83 39 93 546.1 Cons. discretionary China Not ranked AstraZeneca ($51; AZN) 4 24 18 18 66.6 Health care U.K. C (below avg.) BP ($25; BP) -31 17 67 27 515.9 Energy U.K. C (below avg.) Barrick Gold ($27; GOLD) 43 97 23 91 46.7 Materials Canada A (above avg.) Canadian National Railway ($85; CNI) -6 24 38 44 61.0 Industrials Canada B (average) ICON ($162; ICLR) -6 57 27 58 8.8 Health care Ireland A (above avg.) Kirkland Lake Gold ($44; KL) 0 96 45 98 9.3 Materials Canada A (above avg.) Nintendo ($54; NTDOY) 9 58 26 72 6.5 Communication svcs. Japan Not ranked Novartis ($86; NVS) -7 53 42 60 197.8 Health care Switzerland B (average) Unilever ($49; UN) -14 78 41 86 129.3 Consumer staples Netherlands Not ranked Note: Quadrix scores are percentile ranks, with 100 the highest. The Dow Theory is a method of interpreting and classify- capitalized securities are made available to subscribers. A for $10 each by writing to the address above, or free to ing general market trends and does not directly encompass small-capitalized security is defi ned as meeting one of the our subscribers on our website at www.DowTheory.com. the selection or rating of individual stocks or the duration following criteria: 1) a market capitalization of less than Periodicals postage paid at Hammond, Indiana, and at of market movements. Dow Theory Forecasts endeavors $300 million or 2) a three-month average daily trading additional mailing offi ces. 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