A Cryptocurrency Primer In recent years, a hot -- and at times controversial -- topic in the financial community has been cryptocurrency supported by blockchain technology. Cryptocurrencies first emerged in 2009 as a new technology, and offer some potential advantages to traditional currencies while creating new trading opportunities. Still, there are major risks as well. Blockchain and Mining Cryptocurrencies are supported by a technology known as blockchain, which is a tamper-resistant leger of transactions that outlines the ever-changing ownership of the underlying currency. Cryptocurrency is able to eliminate the middlemen in transactions through the blockchain as it records each transaction and stores the information in blocks. Blockchain technology is what has made cryptocurrency viable as it prevents individuals from making copies of their holdings and using them for multiple transactions, an issue that has prevented previous attempts at creating a digital currency. Many cryptocurrencies, such as Bitcoin, are created through a complex and energy-intensive process known as 'mining.' Mining involves a process of validating and updating transactions to the digital ledger, or blockchain. Crypto mining prevents the double use of coins as it is both remarkably expensive and inefficient to submit false transactions to the ledger, while being remarkably easy for other parties to verify the correct transactions. The crypto miners reward for correctly solving the complex algorithms required to upload transactions are new coins that get generated after solving the algorithm. Given this process, a malicious actor would need to control more than 50% of the entire mining network in order to record false transactions successfully, while overcoming extremely high physical hardware and energy demands. There are over 2 million cryptocurrencies in circulation, ranging from micro-cap to mega-cap, with some rising to valuations worth hundreds of billions of dollars. Crypto Pros Crypto offers several advantages as an alternative investment, which gives it certain unique benefits that traditional currencies do not offer. Inflation protection is one such advantage for many cryptocurrencies, with Bitcoin (as an example) having a hard cap of only 21 million coins that will ever reach circulation. With nearly 19.8 million coins currently in circulation, Bitcoin is programmed to halve the pace of its mining rewards every four years, making it a more-attractive investment in times of high inflation. The price of Bitcoin historically has risen following each halving cycle, this as prices must keep up with the high energy costs required to maintain the ledger and in order for it to remain worthwhile for miners (as the rewards become increasingly smaller). Crypto transaction speeds also offer an advantage over traditional currencies. Indeed, transferring a cryptocurrency can be accomplished within minutes rather than the several days needed by most U.S. financial institutions to process a transaction. As well, given the elimination of third-party vendors to validate transactions, transactions costs can be significantly lower than is the case with traditional methods of sending currencies, particularly when transferred overseas or as a large value transfer. Volatility has become associated with crypto given the swings in the price of Bitcoin, Ethereum, and other cryptocurrencies, with prices often rising and falling more than 50% over the span of just a few months. While this volatility has made crypto a popular short-term trading asset for traders looking to make significant gains amid the large swings in pricing, other investors have held firm, utilizing what has become known as a 'HODL' mentality as they 'Hold On for Dear Life.' Crypto Cons Despite the potential upside of investing in cryptocurrencies, there are also serious risks. User risk is one of the major issues seen with crypto, as entire balances can become lost if an investor losses a password or pass phrase associated with an account. This issue has reached such a high level that some early investors have been known to purchase waste dumps where they knew hard drives containing valuable holdings had been erroneously discarded. It is estimated that one-fifth of all Bitcoins are permanently lost due to the loss of passwords. As well, there is no way to rescind a transaction after it has been recorded. The manipulation of crypto markets also remains a large risk with cryptocurrencies, as there have been several instances of unethical practices. This is a particular issue as regulation remains a looming question in the crypto community, with plenty of grey areas surrounding crypto legislation in the U.S. and sudden shifts in regulation that dramatically impacted the way that crypto is bought and sold. Given the limited regulation, some large account holders, known as whales, have engaged in pump-and-dump schemes that have artificially caused the price of certain cryptocurrencies to skyrocket or plunge. Liquidity can also be an issue in crypto, especially with lesser-known coins that hold limited demand. While liquidity has improved over the past few years across the crypto market, particularly for the largest coins such as Bitcoin and Ethereum, it remains an important factor to be considered. The Future for Crypto Looking at crypto as a currency alternative is an interesting exercise as the issue is relatively complicated. Bitcoin, for example, has largely been described as a 'digital gold,' offering its best use-case as a means to settle transactions. Rival Ethereum is largely considered closer to a 'digital oil,' serving to power an ecosystem of digital contracts. There are many different types of crypto currencies across the market. Besides Bitcoin, stablecoins could make a convincing case for serving in the place of traditional currency. Stablecoins are cryptocurrencies that are backed by another asset, such as a currency, commodity, or financial instrument. Stablecoins are not as volatile as non-backed cryptocurrencies and have increased traction across various markets. European fund giant DWS has announced plans to launch the first euro-backed stablecoin in 2025, which we think demonstrates the potential of these coins. Still, stablecoin issuer Paxos was under SEC investigation for their USD-backed stablecoin due to speculation about possible violations of securities laws. The SEC decided it will not be continuing action in the case, but the event does highlight the issue of stability for the asset. Blockchain technology may also see an increase in its number of use cases. As the world becomes increasingly data-driven, blockchain may be able to help with data and information management. Healthcare is thought to be an industry that could benefit from blockchain technology, with opportunities surrounding the security of patient data, transparency and traceability in the supply chain, and a reduction in the risk of data breaches. Blockchain may also find use in the financial industry as it has the potential to streamline banking and lending services, reduce counterparty risk, and decrease issuance and settlement times. While classifying crypto as an alternative asset class offers the potential for major upside, there remains uncertainty. One of the biggest concerns is regulation. In many countries, crypto is already becoming increasingly regulated -- but in the U.S., lawmakers have been slow to respond, forcing companies to rely on legal battles as they fight to establish greater clarity in the market. Furthermore, many states have adopted their own laws on cryptocurrencies, creating barriers for some would-be market participants. Conclusion Despite these risks, there remains optimism over the growth of cryptocurrencies, and that has fueled a significant rise in the price of Bitcoin and Ethereum over the past 12 months. Global conflicts and geopolitical tensions have led some to believe that cryptocurrencies offer a potential hedge against instability in currency fluctuations and financial markets. Amid the rapid rise in inflation in Venezuela and Argentina, El Salvador has adopted Bitcoin as an official legal tender. Additionally, former U.S. president and current presidential candidate Donald Trump has suggested that the U.S. should establish a Bitcoin strategic reserve. Within the financial world, BlackRock CEO and co-founder Larry Fink has described Bitcoin as 'digital gold,' offering some legitimacy to it being used as a hedge against currency fluctuations. According to Mr. Fink, 'It is a legitimate financial instrument that allows you to have maybe uncorrelated, non-correlated returns.' BlackRock has launched a Bitcoin ETF, which saw $4 billion in net inflows in the second quarter, and, more recently, an Ethereum ETF. Crypto seems to be gaining traction within the investment community and seems to hold promise in regards to growth. Despite recent excitement around crypto, there are still some factors that can be cause for concern -- such as a lack of regulation, a lack of fundamentals for valuation, and other potential pitfalls. Yet even with these concerns, the future of crypto still appears to be bright as the asset appears to be gaining increasing traction.

In this edition, divining European insurance dividends; demand for gaming can't be denied; initiating coverage of UL Solutions; and Port of Tauranga, Prudential Financial, and Nokia.

Management's ability to "raise guidance" can often be a catalyst for market-beating returns in the quarters ahead. The first-quarter earnings season has crossed the 90% mark and is wrapping up, with blended earnings (actual results and the consensus for those still to report) showing a year-over-year gain of almost 7%, according to Refinitiv. That is considerably better than the 4%-7% advance expected at the start of the earnings period. Leading the outperformance were strong gains in Communication Services earnings, up 43%, and Consumer Discretionary, up 26%. On the flipside, Healthcare and Energy, both down 24%, are performing the worst. Our analysts are always on the lookout for companies that boost outlooks during earnings season, as this is often a signal for momentum in the months ahead. Here is an initial list of BUY-rated companies in the Argus Fundamental Universe of Coverage at which management raised guidance or increased its outlook during the 1Q24 EPS reporting season.

Technology is back!!! Okay, it never really went away. But a few popular names did fall 20% to 50% in about seven weeks, from March 7 until April 19. That occurred after some monster moves higher for more than four months, starting in late October. Over the past 18 days, and especially over the past 10 days, the Technology sector has been on fire. And the recovery took place ahead of earnings reports from Applied Materials (AMAT) after the close today and Nvidia's EPS report next Wednesday (also after the close).

Monday Tee Up: A Breather

When the stock market is in a strong uptrend, pauses, and then finally threatens to pull back, what happens? When there has been institutional selling, better known as "distribution" in the Nasdaq 100, Technology often comes to the rescue after a short break and destroys the bears -- as well as a good number of technicians (hand raised) who expected more giveback.

Small- and mid-cap stocks (SMID) have underperformed large-caps over the past 12 months, but may be in a better position to generate market-beating returns going forward. SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the fallout from global events. As well, the prices of SMID stocks generally are lower than the prices of large-caps. As well, there are long stretches in the record books when SMID stocks have outperformed large-caps. That said, SMID stocks can be risky. The standard deviation for monthly returns was 5.7% for SMID stocks over a 2003-2021 test period, versus 4.3% for large-caps. Still, despite the risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record.

The S&P 500 (SPX) and S&P 100 (OEX) closed at minor all-time highs (ATHs) on Tuesday, while the rest of the major indices were near that mark as the relentless push higher continues. The leadership over the past month has shifted from AI and Technology to cyclical sectors -- which is what happens in a strong bull market. Rotation is really starting to gain some footing in 2024 and is critical to a long and enduring uptrend. We have seen addditional cyclical sectors join the party over the past month, as Energy (XLE +8.6%), Materials (XLB +6.8%), and Industrials (XLI +4.5%) have taken some of the load off the Technology gains.

Stocks were mixed on Tuesday morning as investors await results from the Federal Reserve policy meeting. On the housing front, in February, housing starts rose to a seasonally adjusted annual rate of 1.52 million. This up from the revised 1.37 million in January and above expectations of 1.43 million. Building permits issued were at a seasonally adjusted annual rate of 1.52 million, up from January's revised 1.49 million. The Dow rose 0.6%, the S&P 500 was nearly flat and the Nasdaq lost 0.3%. Crude oil traded above $83 per barrel, while gold fell $7 to $2157 per ounce.

The stock market has been on hold this week, as investors await the Federal Reserve's preferred inflation measure, the Personal Consumption Expenditures Price Index (PCE). The report tends to show inflation trends that are less affected by short-term price changes. Stocks threw a bit of a tantrum when the January CPI and PPI were released a few weeks ago, but the market has since shaken off these single data points. There are at least four Fed governor/president speeches as well today -- and more on Friday.

Weekly Tee Up: Walmart and Nvidia

Perhaps Sir Isaac Newton was thinking about the price action of a stock or commodity in 1687 when he wrote his famous first law of motion, which states that a body at rest tends to stay at rest, while a body in motion tends to stay in motion. Indeed, maybe he was thinking of the tulip mania from 1634 to 1637, when a single tulip bulb sold for more than 10 times the annual income of a skilled artisan. In any event, the roaring stock market today certainly seems to have that feeling. But there is one important question about the stock market's current phase. Are we in the second inning or the seventh inning?

This weekend, in Vegas, it's the Chiefs versus the 49ers. Usher is the halftime show; Tom Brady appears in a commercial; and Taylor Swift fans add a whole new demographic to the fan base. But aside from all that, there is big money at stake. For our list this week, we present possible ways to invest in the Super Bowl.

The SPDR Gold Shares (GLD) fund remains near the top of its longer-term range going back to 2020, but is stalling out once again. Perhaps the yellow metal is refueling before it finally blasts above the $2,000/oz. region. As we have been saying, some worries have cropped up in the form of weekly momentum divergences.

In 2023, the S&P 500 climbed almost 24%, skewed heavily by a handful of tech and consumer stocks that recovered from the pandemic. The top-10 stocks in the Argus Universe advanced, on average, 180%, while the top-20 rose 140%. The average stock rose 17%, and the median stock advanced 7%. The average BUY-rated stock increased 20%, while the average HOLD-rated stock gained 8%. Will investors continue to favor growth in 2024? Will small-caps reverse their recent thrust as the risk of recession puts a premium on clean balance sheets? Investors seeking value are encouraged to focus on dividends and yields in the 3%-4% range. As for small-caps and international stocks, valuations remain depressed -- and these group looks to offer value into 2024 as market breadth likely widens. Below are the top-10 performers from the Argus Universe last year, with representatives in six of the 11 major sectors, as well as the bottom-five performers.

Monday Tee Up: Let the Shopping Begin

Management's ability to "raise guidance" can often be a catalyst for market-beating returns in the quarters ahead. The third-quarter earnings season is wrapping up, with blended earnings (actual results and the consensus for those still to report) showing a 6.3% gain, year-over-year, according to Refinitiv. That is considerably better than the 1.0% expected at the start of the earnings period, and should be enough to end the "earnings recession" that investors have endured over the past three quarters. Propelling the 3Q outperformance were strong gains in Communication Services, up 46%, while Energy again (like last quarter) is performing the worst, down 33%. Our analysts are always on the lookout for companies that boost their outlooks during earnings season. Here is an initial list of BUY-rated companies in Argus Coverage at which management raised guidance or increased its outlook during the 3Q23 EPS reporting season.

We've had a plethora of breadth thrusts since the late-October low, typical at intermediate- to long-term bottoms. We saw a Zweig Breadth Thrust and a Whaley Breadth Thrust; the S&P 500 (SPX) had three upside gaps of at least 0.4% in nine days; the percent of SPX stocks above their 50-day average has bolted to 70% from 11%; and, finally, the five-day average of NYSE breadth has now cycled from an extreme oversold reading of -1,100 on 10/23 to an extreme overbought reading of +1,510 on 11/3. Pradeep Bonde at stockbee.blogspot.com looked at 6,300 stocks, and 25% of them were up at least 4% back on Tuesday.

For a second week, insider-transaction data from Vickers Stock Research is generating bullish signals. Last week, insider-transaction volume was low as trading restrictions are in place during earnings season. But trades that did occur resulted in bullish insider-sentiment measures, especially open-market transactions (the most meaningful when considering sentiment).

DraftKings got its start in 2012 as an innovator in daily fantasy sports. Then, following a Supreme Court ruling in 2018 that allowed states to legalize online sports wagering, the company expanded into online sports and casino gambling, where it generally holds the number two or three revenue share position across states in which it competes. DraftKings is now live with online sports betting in 21 states (44% of the U.S. population) and iGaming in five states (11% of U.S.), with both products available to around 40% of Canada's population. The company also operates a non-fungible token commissioned-based marketplace and develops and licenses online gaming products.

The worry over interest rates, both market rates, and Fed-controlled rates has disappeared faster than a kid's Halloween candy. Stocks rocketed higher again on Thursday, with the S&P 500 (SPX) rising 1.9%, and the Nasdaq and Nasdaq 100 gaining 1.8%. The real story was in the long-forgotten rest of the market, with the Russell 2000 jumping 2.7% and the S&P 500 Equal Weight and S&P MidCap 400 each popping 2.2%.

We have been looking for some important reversals in Treasuries and in currencies -- and finally, they may be here. Lower yields and a weaker greenback would be equity friendly and should turn the beaten-down metals around.

AI & EV: The Other Edge of the Sword

Small- and mid-cap stocks (SMID) have underperformed large-caps over the past 12 months, but may be in a better position to generate market-beating returns going forward. SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the fallout from the Russian invasion of Ukraine, high European inflation or other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps. SMID stocks can be risky, but diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 12%-15% of the U.S. stock market's capitalization is comprised of SMID stocks. For our purposes, we use a threshold of $20 billion to define a SMID stock.

The FOMC kept the fed funds target at 5.25%-5.50%, but continues to say that rates will stay higher for longer. The chances for a 25-basis-point hike at the meeting on November 1 popped to 72% from 31% on Tuesday. In addition, the potential for rate cuts in 2024 has fallen, as the market now sees the funds rate at a target of 5.5%-5.75% by the May 1 meeting next year. We warn investors not to get too hung up on what the Fed does and says. Still, the central bank has a remarkable history of tightening too much and pushing the economy into a recession.

Stocks edged higher on Wednesday morning as investors weighed new GDP and employment data. The Commerce Department said that the U.S. economy expanded at a 2.1% annualized rate in 2Q, down from its previous estimate of 2.4% and below the Reuters consensus, which also called for 2.4% growth. Employment data pointed to a cooling labor market. Payroll provider ADP said that U.S. companies added 177,000 jobs in August, down from 371,000 in July and below the consensus estimate of 195,000. The Dow rose 0.1%, the S&P 0.3%, and the Nasdaq 0.4%. Crude oil traded near $81.50 per barrel, while gold rose $9 to $1974 per ounce.

Major stock indices bottomed on August 18 and then traced out higher closing and intraday highs on August 24 and 25. It is not surprising that the bottom and subsequent rally in stocks coincided with the recent short-term top in Treasury yields.

Stocks Hit Early August Speedbump as Earnings, Economy Roll On

It turned out that the ugly downside reversal for the stock market on Thursday was a one-day wonder, and the major indices came roaring back on Friday with absolutely no downside follow-through. At least for the short term, that is very impressive and shows this advance continues to be very strong. The S&P 500 (SPX) popped 1% on Friday, the Nasdaq and the Nasdaq 100 rose 1.8% to 1.9%, the S&P 400 tacked on 0.8%, and the Russell 2000 added 1.3%.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are Tesla Inc (TSLA); Walmart Inc (WMT); Merck & Co Inc (MRK); Adobe Inc (ADBE) and the Focus List deletions are DraftKings Inc. (DKNG); Dell Technologies Inc (DELL); Thermo Fisher Scientific Inc. (TMO); Coca-Cola Co (KO).

Short term measures of market breadth have oscillated below overbought levels and above oversold readings since early April. In other words, we are not seeing breadth exhibit a whole lot of strength or weakness recently. For instance, the McClellan Oscillator, a breadth indicator using advances and declines on the NYSE, has been stuck between -60 and +77 in recent months. Overbought or strong breadth readings are at least +100 and weak breadth would be -100 or lower.

Stocks started a new bull market in 2Q23, as the S&P 500 climbed 20% above bear-market lows from last October. For the quarter, the index climbed about 8%. Performance was narrow in 2Q, led by last year's laggard sectors, including Communication Services, Consumer Discretionary, and Technology. Last year's top-performing sector, Energy, and the Utility sector, were the worst performers in 2Q23. The average stock in the diversified Argus Universe of Coverage rose 4% in the quarter, and the median stock advanced 2%. The average Argus BUY-rated stock rose 5.7%, while the average HOLD-rated stock gained 1.2%. We recently raised our sector rating on Consumer Discretionary to Over-Weight, as the employment environment is strong. We also look for a pick-up in EPS growth in Communication Services and Technology, and expect these groups to pace broad market performance. Below are the top 10 performers from the Argus Universe in 2Q23, many from Technology and Communication Services. After that, we list the bottom five performers.

Stocks rose on Thursday morning, a day after the Federal Reserve left interest rates unchanged but pointed to additional rate hikes later this year. The European Central Bank also raised its benchmark interest rate by 25 basis points to 3.5% - a 22-year high. Meanwhile, retail sales data was stronger than expected. The Commerce Department said that U.S. retail sales rose 0.3% in May, down from 0.4% growth in April, but above the Reuters consensus forecast, which called for a decline of 0.1%. The Dow rose 0.7%, the S&P 0.5%, and the Nasdaq 0.5%. Crude oil rose 2% to nearly $70 per barrel while gold traded near $1970 per ounce.

June has delivered quite a charge to the stock market -- and while the 2023 leaders (Tech, Communication Services, and Discretionary) are still crushing the other S&P 500 sectors, some of those other sectors have come to life. This tells us that the stock market is broadening (not a bad thing) and that some funds from the leadership sectors are rotating to areas that have been mostly ignored this year. Rotation is the lifeblood of most bull markets, as it is unsustainable to have only a few stocks do all the heavy lifting The key to rotation is that money stays in the market, but moves among different sectors and industries.

Despite a pop in Treasury yields over the past five days, as well as a resurgent U.S. Dollar Index over the past four days, the stock market threw caution to the wind and logged two days of gains. Perhaps an agreement on the debt ceiling will be reached and the U.S. will continue to pay its bills and its employees. While Wednesday's gains were broad, Thursday's breadth wasn't even lukewarm when compared to the gains of the major indices.

Monday Tee Up: Is Inflation Slowing?

With the flick of a switch, the stock market became "good" again as a risk-on mentality came back, at least for a day. On Thursday, Communication Services (XLC) led the 11 S&P 500 sectors, with a surge of almost 6%. XLC component Meta Platforms (META), which has seen a stunning about-face in 2023 after a disastrous 2022, soared another 14% after the company reported better-than-expected quarterly results. The stock has rocketed almost 100% this year and 168% from its November low (less than six months ago). Still, META has retraced only 50% of its bear market (which started in September 2021 from $384).

Gaming is growing, both for brick and mortar casinos and for platforms that offer gambling online, including sports betting. At Argus Research, we have BUY ratings on certain gaming stocks -- but are being highly selective at this time. Travel and lodging are making a comeback after COVID-19. Bookings are up across many travel sectors, including airlines and with online booking agencies like Airbnb, Expedia, and Booking Holdings. The big hotel chains confirm that travel demand is up as well. Marriott says leisure travel and group travel are now above pre-pandemic levels and business travel is at 90%. Gaming revenues have been up for 24 consecutive months, according to the American Gaming Association. All gaming segments -- slots, table games, sports betting, iGaming -- show growth. Legislation is also loosening in many states, allowing for more casinos. China lifted long-held COVID-19 restrictions, boosting Macau. Metrics for Las Vegas are up for many indicators, and last week MGM won approval to build a massive new integrated project in Japan, which includes the first casino in the country. Marketing efforts are paying off for online gaming platforms, building awareness and brand loyalty. Below are the select gaming stocks on which we have a BUY rating. Also listed is our Financial Strength rating (with some at Low or Medium Low, which is lower than we normally like). We also show the price performance for the year-to-date.

Argus has published its latest Portfolio Selector, which features its popular Focus List. Each month, Director of Research Jim Kelleher, CFA, surveys the team of Argus Research industry analysts for their timeliest recommendations out of the company's fundamental universe of approximately 500 stocks. The Focus List typically includes 30 stocks: turnover is high, as Jim typically adds three or four new stocks per month. Below are the latest additions, all of which are rated BUY at Argus Research.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are Cracker Barrel Old Country Sto (CBRL); DraftKings Inc. (DKNG); Intel Corp. (INTC); J.M. Smucker Co. (SJM) and the Focus List deletions are Restaurant Brands Intl In (QSR); Monster Beverage Corp. (MNST); Expedia Group Inc (EXPE); Fox Corporation (FOXA).

First-Quarter Rally: Our Monthly Survey of the Economy, Interest Rates, and Stocks

In 1Q23, stocks continued to recover from the bear-market lows of 2022, with the S&P 500 rising 7% for the quarter. Performance was led by last year's laggard sectors, including Communication Services and Technology. Last year's top-performing sector, Energy, was the worst in 1Q23. Financial Services, including banks, were not far ahead. The average stock in the Argus Universe of Coverage rose 4% in the quarter; the median stock advanced 2%. The average BUY-rated stock rose 5.4% and the average HOLD-rated stock gained 3.4%. Recently, we raised our sector rating on Technology to Over-Weight, and expect outperformance into 2Q -- especially if interest rates head lower. We also raised our rating on Financial Services, and the bottom five stocks in our list point to potential value opportunities.

Small- and mid-cap stocks (SMID) have underperformed large-caps over the past 12 months, but may be in a better position to generate market-beating returns going forward. SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the fallout from the Russian invasion of Ukraine, high European inflation or other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps. SMID stocks can be risky, but diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 12%-15% of the U.S. stock market's capitalization is comprised of SMID stocks. For our purposes, we use a threshold of $15 billion to define a SMID stock.

Small- and mid-cap stocks (SMID stocks) have underperformed large-caps over the past 12 months, but may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the fallout from the Russian invasion of Ukraine, high European inflation, and other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps, with the P/E ratio on the Russell 2000 Small-Cap Index at 11 compared to a trailing P/E of 20 for the S&P 500. Finally, the long-term record has favored SMID stocks over large-caps. From 2003-2022, the Russell 2000 Index climbed 470%, compared to an advance of 444% for the S&P 500 index. Here are the stocks with market caps below $15 billion that are on the Argus BUY list and have been added to our Mid-Cap Theme Model Portfolio.

California is expecting less snow going forward than it had in the past week. Indeed, residents in areas around Los Angeles may soon put away their snow shovels. So the trend is improving, but the bigger picture remains of concern. That also can be said of insider sentiment.

Stocks fell sharply on Thursday as investors weighed new inflation, employment, and housing market data. Producer prices rose more than expected, raising concerns about continued aggressive rate hikes, while weak housing starts and building permits showed the impact of high mortgage rates. Meanwhile, weekly unemployment claims pointed to a still strong labor market. The Labor Department said that first-time claims for state unemployment benefits fell by 1,000 to 194,000 for the week ended February 11, below the Reuters consensus forecast of 200,000. The Dow fell 1.26%, the S&P 1.38%, and the Nasdaq 1.78%. Crude oil traded near $78 per barrel, while gold rose $3 to $1848 per ounce.

Stocks surged on Thursday following positive inflation data, recording their strongest one-day advance since 2020. The Labor Department said that its consumer price index rose 7.7% from the prior year in October, down from 8.2% in September and below the consensus forecast of 7.9%. The core CPI, excluding food and energy, also rose at a lower-than-expected 6.3% rate. On the employment front, first-time claims for state unemployment benefits rose by 7,000 to 225,000 for the week ended November 5, slightly above the consensus forecast. Continuing claims rose to 1.493 million, also up from the prior week and above consensus. The Dow soared 3.70%, the S&P 5.54%, and the Nasdaq 7.35%. Crude oil rose slightly to $86 per barrel, while gold jumped $47 to $1760 per ounce.

Stocks fell sharply in 3Q 2022, with the S&P 500 down more than 5.2% for the period after a 9% decline in September. Year to date, the index is down 25% and in a bear market. Growth stocks have again been the weakest performers, as sectors such as Technology, Communication Services, and Consumer Discretionary have all lagged the major market indices. The leading sectors were value-oriented, including Utilities, Energy, and Consumer Staples. The average stock in the Argus Universe of Coverage declined 5.6% during the quarter, and the median stock declined 6.9%. The average BUY-rated stock dropped 5.0%, while the average HOLD-rated stock fell 7.1%. Will investors continue to favor value in 4Q22? Will high inflation drive continued outperformance in Energy? Given interest rates that are on the rise, we are thinking 2022 may be the one-in-five years that value leads growth for the full year. Investors seeking value are encouraged to focus on dividends and look for yields in the 3%-4% range. Regarding sectors, our current Over-Weights are Energy, Healthcare, Industrials, and Materials.

Recession Barometer: Struggling Consumers, Busy Business Economy

Stocks continued to fall sharply on Monday morning amid a range of economic and geopolitical negatives, as investors awaited new inflation data later this week. On the earnings front, Tyson shares rose modestly after the company posted better-than-expected fiscal 2Q results, helped by soaring meat prices, and raised its full-year sales guidance. The Dow fell 1.8%, the S&P 2.7%, and the Nasdaq 3.5%. Crude oil fell more than 4% to $104.50 per barrel, while gold traded near $1862 per ounce.

Major stock indices fell on Monday, with the S&P 500, Nasdaq, and Nasdaq 100 (NDX) all off 1.6%. The Russell 2000 (IWM) and the S&P 400 MidCap (MDY) fared better, dropping 1.2%. There are several potential technical scenarios as we move into the second half of October. The passage of another stimulus bill would, of course, add yet another -- although it could very well be a "sell the news" event as possible stimulus is likely already discounted by the market.

The IPO market built on 2Q momentum and completed its best quarter in at least five years in 3Q20. Key drivers included the usual suspects -- Cloud-based companies, Unicorns -- as well as an emerging factor, SPACs. Quarter-to-quarter, IPO activity jumped 87% in 3Q. By the numbers, 86 companies raised funds through IPOs in 3Q20, up from 46 in 2Q and from 38 a year ago. Secondary offerings were also 34% higher year-over-year in 3Q20. High-quality companies came public in 3Q, and investors, still recovering from the pandemic-induced sell-off earlier in the year, snapped them up. Investors favored industries that appear to be well positioned to thrive on the other side of the pandemic, such as Biotech, in Healthcare, and Cloud-Based Connecting Platforms from the intersection of the Tech and Communication sectors. The ratio of positive issue-opens to negative issue-opens was 2.5:1 in 3Q, down from a ratio of 5:1 in 2Q but up from 2:1 in previous quarters. Looking into 4Q20, we think the market for IPOs will remain strong, though seasonal factors typically emerge late in the quarter as the holidays arrive.

The Argus Research Universe of Analyst Coverage includes approximately 500 leading U.S. and international companies. We cover the waterfront -- from Technology to Utilities, from Energy to Healthcare. We generally follow the Top 200 most widely held stocks, which we source from our sister company Vickers Stock Research, which collects institutional ownership data from the U.S. Securities & Exchange Commission. From there, we look to identify the next 200-300 leading U.S. and international companies to add to our list. Our Universe of Coverage is dynamic and growing. We are continually adding stocks to coverage and often get great ideas from our clients. Here are five of our most-recent additions, all of which are rated BUY.

Major stock indices fell on Monday, with the S&P 500, Nasdaq, and Nasdaq 100 (NDX) all off 1.6%. The Russell 2000 (IWM) and the S&P 400 MidCap (MDY) fared better, dropping 1.2%. There are several potential technical scenarios as we move into the second half of October. The passage of another stimulus bill would, of course, add yet another -- although it could very well be a "sell the news" event as possible stimulus is likely already discounted by the market.

The IPO market built on 2Q momentum and completed its best quarter in at least five years in 3Q20. Key drivers included the usual suspects -- Cloud-based companies, Unicorns -- as well as an emerging factor, SPACs. Quarter-to-quarter, IPO activity jumped 87% in 3Q. By the numbers, 86 companies raised funds through IPOs in 3Q20, up from 46 in 2Q and from 38 a year ago. Secondary offerings were also 34% higher year-over-year in 3Q20. High-quality companies came public in 3Q, and investors, still recovering from the pandemic-induced sell-off earlier in the year, snapped them up. Investors favored industries that appear to be well positioned to thrive on the other side of the pandemic, such as Biotech, in Healthcare, and Cloud-Based Connecting Platforms from the intersection of the Tech and Communication sectors. The ratio of positive issue-opens to negative issue-opens was 2.5:1 in 3Q, down from a ratio of 5:1 in 2Q but up from 2:1 in previous quarters. Looking into 4Q20, we think the market for IPOs will remain strong, though seasonal factors typically emerge late in the quarter as the holidays arrive.

The Argus Research Universe of Analyst Coverage includes approximately 500 leading U.S. and international companies. We cover the waterfront -- from Technology to Utilities, from Energy to Healthcare. We generally follow the Top 200 most widely held stocks, which we source from our sister company Vickers Stock Research, which collects institutional ownership data from the U.S. Securities & Exchange Commission. From there, we look to identify the next 200-300 leading U.S. and international companies to add to our list. Our Universe of Coverage is dynamic and growing. We are continually adding stocks to coverage and often get great ideas from our clients. Here are five of our most-recent additions, all of which are rated BUY.