The broader market averages ended the week at fresh record highs, as we passed the final major investing mile-marker of 2019. Not even an impeachment vote in the U.S. House of Representatives on Wednesday could rain on the Bull’s parade this week.
When the closing bell rang on Friday, the S&P 500 gained 1.65% for the week, led by Utility and Real Estate names. Conagra Brands (CAG) was a big earnings-related winner this week, while FedEx (FDX) disappointed investors with its profit outlook.
Expect Muted Action Until 2020
We experienced quarterly quadruple-witching options expiration on Friday, which likely marked the last day of meaningful market action for the year.
As a reminder, U.S. stock markets will close at 1 p.m. ET on Dec. 24 and remain closed on Dec. 25. We expect that trading volume will begin to decline between now and the end of the year, as many institutional investors have already locked in gains of 20%, 30% and higher for 2019.
Low trading volume can lead to increased trading volatility, which could still create attractive trading opportunities in the final days of 2019, for anyone paying close attention to the market this holiday season.
Positive Economic Data
One catalyst behind the gains this week was a raft of upbeat economic reports. November readings for U.S. housing starts, building permits, industrial production and personal income/spending all exceeded expectations. Homebuilder confidence was also reported at its highest level in 20 years.
The only notable earnings report for next week, is the November durable goods orders, scheduled for Tuesday morning. Strong data here could confirm that the U.S. economy is on solid ground (political wrangling aside), heading into the new year.
Where to Buy Now?
As we’re about to change the calendar to 2020, it’s becoming more difficult to find value in a market that’s trading at all-time highs.
Deciding what and when to buy can be challenging for any investor. However, the fact remains that attractive investments are out there, if you’re willing to dig a little deeper.
One such Consumer name that announced a notable acquisition this week, is worth a closer look and is our Stock of the Week.
Stock of the Week: Fortress Transportation (FTAI)
Fortress Transportation specializes in the transportation of both goods and people around the world, owning and acquiring infrastructure and equipment needed to do so. The company has assets for the aviation, energy, intermodal transport and rail sectors that add up to $3.1 billion as of the end of September.
Shares are up 32% year-to-date and we believe this positive momentum can continue into the new year. Here’s why:
While the stock has climbed in 2019, one analyst argues that the share price doesn’t fully take into account the company’s vast potential. Benjamin Nolan of Stifel Nicolaus sees several key factors as especially encouraging. These include positive EBITDA for infrastructure, the aviation advanced repair program, Jefferson pipeline, storage build out and monetization of the aviation asset upside. All of this prompted Nolan to start FTAI as a Buy and put the price target at $22.
On top of this, FTAI could get a boost as a result of near and medium-term catalysts according to BTIG’s Giuliano Bologna. “Near-term opportunities to scale aviation leasing and the launch of the company’s Advanced Engine Repair JV in mid-2020 provides additional differentiation and return upside. At the same time, infrastructure EBITDA and Funds Available for Distribution (FAD) should turn positive in FY20 as Jefferson Terminal and Repauno Phase I come on line. Together, we expect these catalysts will result in a dividend increase in FY20 and rerate FTAI’s valuation higher,” he commented.
No wonder the analyst initiated coverage with a Buy rating and set a $25 price target. This target conveys his confidence in FTAI’s ability to rise 32% higher in the coming twelve months.
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