Profile of a High Performing Stock

MGM Resorts (MGM), the largest operator on the Las Vegas strip with more than 35,000 room, had the second best performing stock among the S&P 500 this week surging +19.9% crossing its pre-pandemic high. As the accompany graph shows, the stock collapsed during the COVID crash last year hitting a low of $7.14 and now trades at $34.25…an incredible recovery!

Stocks such as MGM, and there are many more, have been fascinating to watch given their phenomenal stock performance even as they continue to face operational challenges and a lengthy full recovery. For example, the below graph shows MGM’s quarterly revenue for the most recent 4 quarters. They are very much experiencing a rebound but analysts a forecasting it will be sometime AFTER 2022 that the company’s revenue and earnings reach pre-pandemic levels.

Source: www.YCharts.com

This Week’s Performance Highlights

Source: www.YCharts.com

Markets around the world rallied posting impressive gains for the week after having fallen sharply the week before. It was a total flip-flop by investors who had previously fled from more risky assets, such as small stocks and emerging markets, but then rushed back pushing these assets up more than their safer counterparts.

Economic Indicators

The January employment report showed a resumption in growth adding 49,000 compared to the prior month’s 227,000 job losses. Although this was a relatively positive headline number compared to the month before, digging a bit deeper shows that 43,000 of the job gains were in government and mostlyseasonal adjustment for K-12 and public colleges teachers.

The private sector created just 6,000 jobs with the biggest gains by a wide margin in professional jobs adding 97,000. Leisure and hospitality lost 61,000 and retail was down 37,800. Even the hot transportation and warehousing industry, growing with the surge in e-commerce, was down 27,800 jobs for the month.

The unemployment rate dropped to 6.3% from 6.7% but only because more than 400,000 people gave up looking for jobs. As the accompanying graph shows the size of the U.S. labor force, those people working or actively looking for work, has steadily increased for decades with the biggest slowdown occurring during the financial crisis more than a decade ago…until COVID.

Source: https://fred.stlouisfed.org/series/CLF16OV

In just 3 months, early last year, the labor force shrunk by nearly 8 million then rebound to recover roughly half the losses. Growth generally stalled in the later months of 2020 and has turned negative to start the new year. The big question today is when will the economy fully recover the 10 million jobs that have yet to return.

Both the manufacturing and services sectors are growing at a rapid pace according to separate reports form the Institute for Supply Management (ISM). The index for manufacturing came in at very strong 58.7 (any number of 50 indicates growth) although this was a slight deceleration from the prior month’s 60.7. The strength is broad with 16 of the 18 sectors measured showing growth. These strong monthly readings are near 16-year highs for the index.

The services sector showed acceleration coming in at 58.7 compared to 57.2 the month before. The strength was not quite as broad with only 14 of the 18 sectors reporting growth. Financial services firms and construction companies were among strongest while restaurants, retail, hotel, and entertainment continue to suffer.

Productivity, a measure output, or production, to hours worked, fell at the fastest pace since 1981 at -4.8%. It is generally believed that some economic numbers, including productivity, are being exaggerated by the pandemic’s impact on the economy. To put this most recently quarter’s change in perspective, there were increases in productivity of 10.6% and 5.1% in the two preceding quarters, as shown in the accompany graph, resulting in an increase for the full year 2020.

Source: https://fred.stlouisfed.org/series/CLF16OV

Upcoming Economic Reports