3-Nov Morning Comments: Federal Reserve FOMC Meeting, Portfolio Actions (F, AMD), Stock Buy Back. 

Fed

Later this afternoon, the Federal Reserve will break from its latest monetary policy meeting, share it's decisions via a policy statement, and Fed Chair Powell will take the stage for the ensuing presser. As a reminder, the prevailing narrative calls for the Fed to kick off tapering in mid-November at a pace of $15 billion a month with a targeted finish around June 2022. While inflation has been running hotter than expected by the Fed, something it has copped to of late, given the recent Employment Reports and the weaker than expected GDP print for 3Q 2021, we could see the Fed start off with a smaller bite size. If that is the outcome, we could see stocks warmly embrace that news.

We continue to think Fed Chair Powell will re-emphasize that bond tapering and interest rate hikes are two different decisions, and rate hike contemplation likely isn't on the table until the bond tapering has been concluded.

Portfolio Actions (AMD, LLY, F)

The market is surprisingly positive coming into this risk event. This is good for us, as it presents an opportunity to trim some high-flyers in our portfolio, so that we have room to buy (either again, or something different) if the market takes a ... crap ... after the event. Again, when sentiment is too positive, there's always something that can go wrong.

Because of that, given we're sitting on a 38% gain in AMD, and shares are at an all-time high at this moment, we're going to trim 3/8 of our position in AMD with average price of 128.54$/share. This gives us the powder to go on the offense in any future dip. RSI for AMD shares is also indicating overbought territory, and a pull-back should be imminent.

We also have trimmed 1/4 of our position in Eli Lilly (LLY) at an average price of 262.36, given this stock has had a relentless 10% move straight up in the past week or so. Our position has a 10% gain, we feel it's time to trim some. We've recently added Pfizer (PFE) back to our portfolio as well (an analysis will be written soon), so this sale from LLY is utilized for PFE (currently 1.3%, see portfolio Excel sheet for details about price and positioning).

We'd also be looking to trim about 1/8 of our position in Ford (F), following our technical analysis yesterday (here). We'll look to sell anywhere between 18.5 and 19. 

Action with Ford stock has not taken place yet, and we will alert you when we actually do so. As of this moment, we've only sold shares of AMD and LLY.

Corporate Buy Backs

Some additional notes this morning is with regards to how companies are spending their capital (rather, returning them). When some portfolio companies have reported, we noted the influence of share buyback plans on reported EPS. We try to focus on whether company can beat bottom line estimates, top line forecasts, but also improvements how the share buyback is influencing the EPS. On that note, this morning, Goldman Sachs came out with a note that says buybacks are expected to hit $230 billion in repurchases during the current quarter, bringing the year over year swelling in that activity to ~50%. Massive and helping support the market for sure, and per Goldman it's expected to increase further in 2022 by about 8%. We'd note that comes despite the proposed 1% tax on buybacks as part of Democrats' stimulus plan.