Why Today’s Inflation Report May Be Important

Earn While You Learn! ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!]( Hello investor, Why Today’s Inflation Report May Be Important The consumer price index is due to be out today. This report will be more important than the last couple readings because of last Friday’s red-hot jobs report. Investors are worried that a heating-up economy may accelerate inflation again. Wall Street would feel more confident in the Federal Reserve’s ability to preserve the labor market if inflation keeps cooling down. The reason is simple — they can cut interest rates to manage it. However, their job would be more complicated if inflation accelerates again which can restrict how often the Fed can cut rates, even if the labor market deteriorates again. It is showing up in mortgage rates. Even though the Fed brought interest rates down by 50 basis points in September, the average 30-year fixed mortgage rate actually jumped about 47 basis points since that rate cut to 6.62%. Why? Mortgage rates correlate closely with the 10-year Treasury yield. Investors believe the economy will perform so well that the Fed won’t cut rates that much over the long term, keeping the long-term yield higher. - "Mortgage rates have increased since the September Fed meeting because longer-term rates have also increased, mostly as a function of markets pricing in lower recession odds, thanks to strong payroll data especially," said Sonu Varghese, a global macro strategist at Carson Group. Sonu Varghese, a global macro strategist at Carson Group Economists expect good news from today’s inflation report. The CPI is expected to rise 0.1% in September, its smallest gain in three months. Versus a year earlier, the estimate is for a 2.3% increase. The core CPI (excluding food and energy prices) is projected at 0.2% from the prior month and 3.2% from September 2023. - “The Fed’s decision to shift its focus from inflation to the labor market means that inflation data, including tomorrow’s CPI, is likely to become less market-moving than it had been,” said Matthew Weller at Forex.com and City Index. - “Despite that logical observation, this month’s CPI report may still drive market volatility coming on the back of Friday’s stellar jobs report, a reading that hints at the potential for renewed upside risks to inflation.” A cooling inflation is key to sustain the current bull run, along with a robust economy and strong corporate earnings growth. The Federal Reserve released its meeting minutes from the recent FOMC meeting. It wasn’t a market-moving event. The biggest point from the minutes was that some Fed officials preferred a 25 basis-point cut over the final decision of a jumbo-sized cut. - “Today’s Fed minutes were pretty ‘ho-hum,’ which could actually be a good thing for stock investors,” said David Russell at TradeStation. - “Policymakers agree inflation is fading and they see potential weakness in job growth. That keeps rate cuts on the table if needed. The bottom line is that Powell might have the market’s back headed into the year end.” Could This Stock Become The Next Dividend Superstar? Today’s Stock Pick: OneSpaWorld Holdings (OSW) OneSpaWorld has surprisingly good business fundamentals. Two of them are (1) captive audience and (2) dominant market share. The company offers spa services on cruise ships. Most cruises have spa facilities, and many cruise operators outsource the whole thing to companies like OneSpaWorld to run. (Source: OneSpaWorld) OneSpaWorld is responsible to manage services, such as recruiting, training, and managing staff around the world. They must come up with product and services to delight customers. On the other hand, cruise lines will fund multi-million-dollar buildouts, market OneSpaWorld’s services and bring customers on cruises. OneSpaWorld will share revenue with cruise lines, as part of their business agreements. As a result, the company enjoys an asset-light balance sheet that yields a huge amount of free cash flow. (More on this later.) (Source: OneSpaWorld) Now, guess what? OneSpaWorld holds a whopping 90%+ outsourced spa market on cruise ships! The company is nearly 20x larger than nearest maritime competitor. Can you name a company with a dominant market share like OneSpaWorld? Maybe only Google’s search engine. It also estimates to have ~23 million annual captive audience on cruise ships. (Source: OneSpaWorld) OneSpaWorld has a long-term relationship with major cruise lines. I am sure that you’ve heard of RoyalCaribbean, Carnival and Norwegian. OneSpaWorld is on all of their ships. They have been in business together for more than 24 years. Its historical contract renewal rate is ~97%. Impressive, right? (Source: OneSpaWorld) How is the cruise industry doing? It is doing well. 2024 is projected to eclipse 2019. The second quarter of 2024 saw a 50.6% increase in passenger bookings from the same quarter in 2019. On-board spend jumped 18.9% in the same period. (Source: OneSpaWorld) The industry saw more than 20 consecutive years of global passenger growth with a 6.7% CAGR between 1995 and 2019. (Source: OneSpaWorld) Not only that, the global cruise capacity growth is expected to grow at a 4.0% CAGR between 2020 and 2027. Meaning? More cruises for OneSpaWorld to operate in. (Source: OneSpaWorld) Now, let’s talk about financials. OneSpaWorld has a solid track record of growing its revenue. It grew 5.5% CAGR from 2015 through 2019. Adjusted EBITDA grew faster at 7.0% CAGR. It is solid, but what makes OneSpaWorld attractive is how much cash it generates. The company generated about 90% after-tax free cash flow to adjusted EBITDA conversion. As a result, OneSpaWorld recently announced an annual cash dividend program with an initial quarterly dividend payment of $0.04 per common share. Because of its strong financial fundamentals, we believe OneSpaWorld is about to turn into one of the best dividend stocks. (Source: OneSpaWorld) Bottom line: OneSpaWorld has every trait of a phenomenal dividend stock — strong free cash flow conversion, dominant market share, and steady revenue growth. We won’t be surprised if the company raises dividends annually, and you could get in the stock early. [EARN WHILE YOU LEARN! 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