Today’s news:
• Universal Electronics (UEIC) reported good third quarter results.
• Stock market commentary.
Universal Electronics (UEIC) reported third quarter adjusted non-GAAP diluted EPS of $1.01 yesterday afternoon, when analysts had expected $0.87. The company reported $200.9 million of third quarter revenue vs. the consensus estimate of $193.5 million. Adjusted Non-GAAP gross margins were 26.8% compared to 24.6% in the year-ago quarter. (I hesitate to quote consensus estimates for Universal Electronics, because there were only two analysts contributing estimates. Two estimates on a micro-cap stock are practically a throw of darts, and not a realistic, predictive example of what investors should expect. Thus, investors will experience wild fluctuations in the share price when any type of news is reported, or simply from traders having a field day with the stock.)
Universal Electronics is a manufacturer and world leader of wireless and voice remote control products, software and audio-video accessories for the smart home. CFO Bryan Hackworth stated, “The world is moving toward advanced products, and we are filling the demand.”
For the fourth quarter of 2019, the company expects adjusted non-GAAP net sales to range between $173 million and $183 million vs. the consensus estimate of $183.6 million; and adjusted non-GAAP earnings per diluted share within a range of $0.79-$0.89, vs. the consensus estimate of $0.75.
The current quarter’s results and the fourth quarter outlook have been well-received by investors. The stock surpassed significant price resistance at 55 this morning, reaching as high as 60. Be prepared for pullbacks, at which time I might encourage investors to accumulate shares. Hold.
The S&P 500 Index is Reaching New All-Time Highs … Overdue! If this scares you, rather than excites you, then please read my recent article, It’s Time for Another Stock Market Run-Up. It’s normal for the stock market to rise. It’s abnormal for the stock market to fall or stagnate. For example, the huge downturn in U.S. stock markets during the fourth quarter of 2018 was abnormal. The primary reason that the market fell was fear, propagated by three types of media headlines: a pending U.S. recession (which did not eventually occur), a “Russian collusion” scandal/crime (which did not turn out to have the expected substance) and a “trade war” with China (yet negotiations with China continue to slowly progress).
I’ve made my contempt for the media rather clear in my weekly commentaries at Cabot Undervalued Stocks Advisor, and in my frequent radio appearances. The media is intent on scaring viewers and listeners, so as to make you feel compelled to keep tuning in to their latest breathtaking updates. And they are curiously united in the topics that they choose to emphasize, even when the topics themselves have no substance, which I hope clearly indicates that media outlets are creating and coordinating news stories rather than reporting actual news stories. Sigh.
So yes, the stock market is reaching new highs. Good. From my perspective, this moment is overdue. I will enjoy it, and we will all profit from it.
My only piece of advice is this: While the market is climbing and you’re buying and selling stocks, add to your cash holdings a little bit with each sale, while reinvesting some of the principal. That way, you are continuing to participate in the market’s upside, but you are also saving for the ability to buy low during the next stock market pullback.