With the exception of Ford Motor (F) and Diamondback Energy (FANG), the rest of the portfolio sold off today alongside the overall stock market. Several issues, including the move higher in Treasuries and potentially new saber-rattling between the U.S. and China, have joined growing concerns over weaker-than-expected economic data over the last few months, supply chain disruptions, rising input and transportation costs as well as efforts to pass those rising costs on to customers, and the inability to find labor. Those issues were noted last week in comments from Nike (NKE) , FedEx (FDX) , and Bed Bath & Beyond (BBBY) when they reported earnings last week, and in the IHS Markit September Manufacturing PMI report for the U.S. 

Because of the combined factors mentioned above, Nike, FedEx, and Bed Bath & Beyond all served up either weaker-than-expected quarterly results, guidance, or both. In our view, that guidance and the underlying comments behind it set the stage for what we're likely to hear in the coming weeks as the September quarter earnings season heats up. At risk are earnings expectations for the September quarter and also for the December one as well. Currently, EPS for the S&P 500 in the second half of 2021 is expected to reach $99.92 per share, up more than 22% year over year, but down about 2% compared to the first half of 2021. 

Based on what those three companies and others shared in just the last weeks, odds are we will see that $99.92 EPS estimate get revised lower in the coming weeks as the third-quarter earnings season takes hold. If we're right and that comes to pass, it likely means we will have a bumpy next few weeks as expectations get reset. Here's the thing, those periods following times such as we're likely to see in the coming weeks tend to offer opportunity, either to add new positions or improve our cost basis in existing ones.

As longer-term investors, our time horizon isn't measured in days, weeks, or months, but quarters and in some cases years. Our preference is to capture the positive tailwind from structural changes that drive revenue, operating profit, EPS growth, and cash flow. We'll also be looking to participate in cyclical upturns and, of course, we'll be opportunistic when we see a wide disconnect between a stock's current share price and its intrinsic value.

Stepping back, we'll want to be involved with companies that are growing their profits faster than the S&P 500. Why? Because we want to benefit from the powerful one-two punch of growing EPS and the multiple expansion that often results when a company is growing its EPS faster than the S&P 500. Given where we are in 2021, and adjusting for the pandemic, it means looking at things over the 2019-2022 period. Over the time frame, the S&P 500 is currently expected to grow its EPS some 34%. The good news is the vast majority of our holdings are expected to drive the kind of EPS growth we're looking for. 

Finally, a quick word on the portfolio's technology names that are under pressure today. Much of this has to do with the uptick in Treasury yields that appears to be leading a rotation out of tech. The general thought is that higher Treasuries will spur higher borrowing costs that could be a headwind to growth-oriented companies. That's more the case for small-cap growth stocks, though, and not quite the worry for ones in the portfolio that are EPS and cash flow positive like Salesforce, NVIDIA, Apple or Microsoft..