Stocks Nosedives After Red-Hot Inflation Data

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JOIN OUR FREE LIVE TRADING SESSION!]( Hello investor, Stocks Nosedives After Red-Hot Inflation Data Yesterday’s hotter-than-expected inflation data was a big slap in the face for bullish investors who bet on early rate cuts. The consumer price index gained 0.3% in January from December and 3.1% on an annual basis. Economists expected 0.2% and 2.9%, respectively. Core prices (excluding volatile food and energy prices) were hotter with a 0.4% monthly gain and 3.9% from a year ago. (Source: Bloomberg) This marks the big shift in the mindset for traders because Wall Street was focused on when the first rate cut should happen, while not spending much time thinking whether inflation could be sticky. - “Today’s CPI report caught a lot of people off guard,” said Chris Zaccarelli at Independent Advisor Alliance. - “Many investors were expecting the Fed to begin cutting rates and were spending a lot of time arguing that the Fed was taking too long to get started – not appreciating that inflation could be sticky and not continue down in a straight line.” Chris Zaccarelli at Independent Advisor Alliance (Photo: Bloomberg) So, it raises the question whether the “last mile” will be harder than anticipated. - “It is too early to declare victory over inflation,” said Torsten Slok at Apollo Global Management. “Maybe the ‘last mile’ was indeed more difficult.” But it remains too early to make a judgment. The Federal Reserve expects ups and downs, and officials won’t make any decision without several inflation readings to see if the recent uptick is just an outlier or a persistent one. If inflation remains sticky over the next two months, it could change the direction of the stock market. The next inflation data will be the personal consumption expenditures price index due on February 29. It is the Fed’s preferred gauge, and economists expect it to rise 0.29% from the prior month. That reading will be important to see if yesterday’s data is anything to fret about. The #1 Cash-Flow Tech Stock To Own Right Now Today’s Pick: Copart, Inc. ([CPRT]( Copart.com is a true American success story. Founder Willis J. Johnson started with just a single salvage yard in California and quickly saw the future of the internet by launching Copart.com in 1996. It became the first online-only auto auction in 2003.  Willis Johnson now owns a business empire that spans four continents and nine countries. Now, here are two words to describe Copart: Spectacularly profitable. Listen, their profit margin posted 33.14% for the last 12 months, which is nearly 50% higher than their auction and valuation industry peers! (Source: MacroTrends) As a result, the company is swimming in cash. Take a look at the quick accumulation of cash on their balance sheet in the three years: - June 2019: $186 million - June 2020: $477 million - March 2021: $1.05 billion - Current (10/5): $2.36 billion The cash diet has left their balance sheet exceptionally healthy, with a current ratio of 5.74 and a debt/equity ratio of just 2.06. What is its business? When insurance decides to auction off a totaled car, Copart is the popular platform that offers a marketplace for it. Cars get moved to massive lots that are located outside of urban cities and get auctioned off. So, who would want to buy a totaled car? People often buy cars, dismantle parts, sell all the auto parts, and just scrap the remaining car. And there are some repair shops who could fix these cars and sell them for a profit. And Copart takes about 10% commission from these sales. Yes, it is far from a sexy business. I mean, they sell damaged cars! But you can’t argue how profitable Copart has been. (Source: copart.com) Copart has invested a large share of its cash flows into overseas expansion. According to CEO John Liaw: “The first priority is capacity investment, as you mentioned, as we've talked about, and it has been the trend over the past number of years, all the way back to '16.” What’s more, Copart was listed on 2020 Fortune Future 50 -- which is a list of companies with “best long-term growth potential.” Here was what Fortune wrote about Copart: - “While auto salvage might seem like one of the most low-tech businesses imaginable, Copart, which began as a single salvage yard, has grown into a digital force by connecting would-be buyers with companies looking to sell damaged vehicles online. The company, which sells more than 2 million vehicles a year, has experienced rapid growth as cars have become more technically complex, and therefore less economically viable to repair.” It is currently a Fortune 1000 company, but there’s a plenty of growth ahead to reach Fortune 50. Bottom line: With its financial fortress, the company is well-positioned for long-term growth. Plus, its business is “ugly” and unattractive to many smart entrepreneurs. With its network effect of buyers and sellers, the company is positioned to grow for a decade (and longer). Buy and hold this stock.  [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](