Special Note: The system I built to produce my premium Portfolio reports ran into a source data issue today that resulted in a decision by Alexei and I to rebuild the portfolio management system from scratch. Afterwards, everything published at billcara.com for paid subscribers will be custom designed, built and operated. This is a tribute to the exceptional response we received from our subscribers to the special 50% discount offer. It’s only fitting that the greater the support we receive for what we do will result in our doing even more for you.
Today’s Portfolio Changes:
P1 Sold Adobe (ADBE) 6 @ $250.17 for proceeds of $1501.02
P1 Salesforce (CRM) 9 @ $181.19 for proceeds of $1630.71
P1 Sold Intuit (INTU) 5 @ $388.55 for proceeds of $1942.75
Reason: INSTAT is extremely weak and did not improve in the past several days, so a one-quarter position was trimmed in each.
Note: P3 Stopped Insulet (PODD) 52 @ $162.00 from purchase @ $175.04. Currently $151.28. This company will be monitored closely over the next week and may be re-purchased.
Insulet News: May 6 (Reuters) - Insulet raised its annual revenue growth forecast on Wednesday after reporting better-than-expected quarterly results, driven by strong demand for its tubeless insulin pumps that eliminate the need for daily injections. Shares of the medical device maker rose over 7% in premarket trading, but later collapsed, closing down -9.7%. However, Insulet today reported sales had surged after its Omnipod 5 insulin-delivery system, a wearable skin patch, and won U.S. approval for both type 1 and type 2 diabetes.
Portfolio 1 (Top Quality US Companies) News:
Apple Inc (AAPL) - Apple reported strong fiscal second quarter 2026 results on April 29, posting revenue of $111.18 billion (up 17% year-over-year) and net income of $29.58 billion, beating analyst expectations on both earnings and revenues. The company announced a 4% dividend increase to $0.27 per share and board approval for a new $100 billion share repurchase program. Apple provided robust forward guidance for 14-17% revenue growth in the next quarter, significantly above consensus estimates of around $102.6 billion, and has initiated preliminary discussions with Intel and Samsung to diversify chip production beyond its current reliance on TSMC while managing supply constraints related to AI-driven memory demand. The stock jumped more than 3% following the earnings announcement, with shares trading above $280.
Adobe Systems Incorporated (ADBE) - Adobe reported first quarter calendar year 2026 results in March, delivering revenue of $6.40 billion versus analyst estimates of $6.28 billion (representing 12% year-over-year growth and a 1.9% beat), with adjusted EPS of $6.06 beating consensus by 3.2%. The company provided guidance for Q2 2026 revenue of $6.46 billion at the midpoint (0.5% above estimates) and adjusted EPS guidance of $5.82, above analyst estimates of $5.68. Despite beating quarterly expectations, Adobe shares have declined approximately 9% over three months amid concerns about intense AI competition and macro uncertainties, though the company projects fiscal 2026 revenues between $25.9 billion and $26.1 billion with non-GAAP earnings between $23.30 and $23.50.
Berkshire Hathaway B (BRK.B) - New CEO Greg Abel hosted his first annual Berkshire Hathaway meeting on May 2, 2026, following his promotion from Warren Buffett (who remains executive chairman), reiterating commitment to Buffett’s principles and the company’s culture with a focus on maintaining the status quo. The company reported first quarter 2026 results showing an impressive 18% increase in operating earnings compared to the previous year, primarily fueled by a 28.5% rise in insurance underwriting (approximately $1.7 billion), with the conglomerate holding nearly $400 billion in cash reserves. Berkshire shares have declined 5.9% year-to-date and are currently trading at a 7% discount to Morningstar’s fair value estimates of $765,000 for Class A and $510 for Class B shares, presenting potential high-single-digit gains for investors.
Church & Dwight Company Inc (CHD) - Church & Dwight reported first quarter 2026 results on May 1 that exceeded expectations, with net sales increasing 0.2% to $1.47 billion versus analyst estimates of $1.46 billion (a 0.7% beat), while organic sales grew 5.0% compared to the company’s 3% outlook. The company delivered adjusted EPS of $0.95 (beating estimates of $0.93 by 2.3%) and adjusted EBITDA of $379.6 million (versus estimates of $356.6 million, a 6.4% beat) while achieving gross margin expansion and continued market share gains across its global portfolio. On April 28, the company declared its 501st consecutive regular quarterly dividend of $0.3075 per share, payable June 1, 2026 to shareholders of record as of May 15, and management reiterated 2026 guidance for organic growth of approximately 3-4%.
Salesforce Inc (CRM) - Salesforce stock has declined approximately 30% year-to-date in 2026 amid fears that artificial intelligence will disrupt the traditional SaaS business model, though CEO Marc Benioff has been actively defending the company’s position by emphasizing that data security, brand safety, and compliance features built over decades cannot be easily replicated. The company processed 2.4 billion Agentic Work Units in its latest quarter, representing a 57% increase quarter-over-quarter, and has invested over $300 million in Anthropic since 2023, with the February announcement of Claude Cowork integration with Salesforce apps driving a 4% stock jump. On May 6, Salesforce announced that Merck Animal Health selected its Agentforce Life Sciences platform for customer engagement to transform animal care and enhance employee support experiences, while the company provided a fiscal 2027 disaggregated revenue reporting update on May 1.
Delta Air Lines Inc (DAL) - Delta Air Lines reported March quarter 2026 financial results on April 7, delivering earnings in line with initial guidance driven by broad demand strength and better-than-expected revenue performance, with earnings more than 40% higher than the prior year despite significant increases in fuel costs and operational disruptions across the industry. The company is guiding to low-teens revenue growth in the June quarter on flat capacity growth, reflecting strong demand momentum and meaningful capacity reductions to protect margins, while expecting June quarter pre-tax profit of around $1 billion on more than a $2 billion increase in fuel expense at the forward curve. Delta continues to strengthen its investment-grade balance sheet with adjusted net debt below 2019 levels, celebrated $1.3 billion in profit-sharing payouts in February (more than the rest of the industry combined), and Delta TechOps became the first and only North American airline MRO with full overhaul capability across both LEAP-1A and LEAP-1B engines.
GE Aerospace (GE) - GE Aerospace announced on May 5, 2026, an agreement with Turkish Aerospace for F404 engines to power HÜRJET aircraft, representing a significant defense milestone and reinforcing GE’s role as a trusted propulsion partner for advanced military aircraft programs. The company reported strong first quarter 2026 performance with total orders of $23.0 billion (up 87%), total engine deliveries increasing 43% year-over-year, and Commercial Engines & Services revenue up 39% driven by double-digit sequential increases in material input from priority suppliers. GE Aerospace announced in March a $1 billion investment across more than 30 U.S. manufacturing sites in 17 states to accelerate engine deliveries, create 5,000 jobs, and strengthen defense-related output, while maintaining its fiscal 2026 EPS guidance at $7.10-$7.40 and trending toward the high end of its profit outlook.
Intuit Inc (INTU) - On May 6, 2026, Intuit unveiled QuickBooks Workforce, a solution designed to radically transform human capital management for small and mid-market businesses, and completed FedNow Service Certification to accelerate instant payments for small and mid-market businesses. The company is scheduled to announce its third-quarter fiscal year 2026 results on May 20, 2026, with consensus estimates projecting EPS of $12.48 (representing a 7.12% increase compared to the same quarter last year) and revenue of $8.52 billion (indicating a 9.87% increase year-over-year). Intuit shares closed at $406.99 on May 6, gaining 1.99% from the preceding trading day while the broader market declined.
Microsoft Corporation (MSFT) - Microsoft experienced a phenomenal rally in April 2026, surging more than 11% from a low of $356 in March to open Monday’s session at $414, though analysts predict the stock could remain relatively stagnant in May with a projected close near $413. The company’s fiscal 2026 narrative is focused on demonstrating that AI is becoming a durable revenue layer rather than just strategic positioning, with first quarter fiscal 2026 revenue of $77.67 billion (up 18% year-over-year) but current Q1 2027 forecasts suggesting slower growth at 14% year-over-year to $88.64 billion. Microsoft’s subscription-driven business model has evolved into a high-visibility recurring revenue engine, with over 70% of total fiscal 2025 revenue derived from recurring sources and commercial cloud revenue exceeding $160 billion annually with consistent gross margins near 72%.
JPMorgan Chase & Co (JPM) - JPMorgan Chase released its first quarter 2026 financial results on April 13, with the firm reporting $4.9 trillion in total assets and $364 billion in stockholders’ equity, and filed its Form 10-Q for the quarter ended March 31, 2026 with the SEC on May 1. On May 5, Chase announced it is accelerating products and support for young adults ages 18-24 and customers new to banking, with initiatives including the Secure Banking account (no overdraft fees), expanded monthly fee waivers through age 24, a co-created mobile app, the Freedom Rise credit card, and expanded in-person workshops. On May 4, the bank released survey findings showing that most small business owners are not prepared for succession planning.
Today’s Market News:
US and global equities extended their record-setting run today, powered by another strong wave of earnings and ongoing enthusiasm for AI and semiconductors, even as oil, credit, and geopolitics remain clear headwinds. Deutsche Bank and others continue to describe this as an “exceptionally strong” earnings environment, with growth and beat rates that are among the best in decades.
Today’s market backdrop
The S&P 500 and Nasdaq remain near fresh all‑time highs, with chip and AI‑linked names leading gains; recent sessions saw the S&P close above 7,250 and the Nasdaq around 25,300.
Volatility is subdued, with the VIX in the high‑teens, reflecting strong dip‑buying and confidence in the earnings cycle despite overbought technicals.
Markets continue to shrug off elevated crude (roughly near 100 USD), sticky inflation expectations, and higher yields, even after a recent backup in Treasuries tied to energy‑driven inflation concerns.
Overnight and today, strong results from key technology and AI‑hardware players (e.g., AMD, Super Micro, memory and logic names) again pushed global chip indices to records, with Korea’s Kospi and large US chipmakers rallying sharply.
On the macro data front, the day was light; markets remain focused on Fed rhetoric, oil and Middle East risk, and the earnings tape rather than a single data print.
Earnings: “best in decades” – what’s actually driving it?
The earnings season in context
Deutsche Bank recently flagged Q1 earnings as poised for about 19% year‑over‑year growth in the US, above an already bullish Street consensus of roughly 16%, calling it one of the strongest earnings backdrops in years.
Earlier, the bank highlighted that recent quarters ranked near the top of the last 10–15 years in terms of sequential and year‑over‑year profit growth, with Q3 growth around 13–14% and one of the highest seasonally‑adjusted quarter‑on‑quarter gains in the past decade and a half.
Current-season commentary from sell‑side strategists and outlets like Investing.com emphasizes “exceptionally strong” US earnings as the primary driver of the rally, with broad beats on both EPS and revenue relative to expectations.
In short, this is not just a narrow mega‑cap story; breadth of beats and magnitude of revisions are both unusually robust by post‑GFC standards.
Key earnings drivers at the index level
1. AI and semiconductor capex super‑cycle
· Chipmakers and AI infrastructure suppliers (CPUs, GPUs, memory, networking, power, and cooling) are printing outsized growth, with high‑profile beats (e.g., AMD, Super Micro, Micron) catalyzing repeated upgrades and re‑rating for the group.
· Downstream beneficiaries include hyperscale cloud providers and select software/platform names monetizing AI workloads, supporting both revenue growth and margin expansion across the tech complex.
2. Operational leverage and margin resilience
· Many large‑caps have used the 2022–2023 tightening cycle to cut costs, rationalize headcount, and refocus on higher‑margin lines; when nominal revenue growth reaccelerates into that leaner cost base, incremental margins expand faster than top line.
· This is especially visible in financials, industrials, and parts of consumer discretionary where fixed costs are high and volume recovery drops heavily to the bottom line.
3. Energy and resource windfall
· High oil and gas prices, while a tax on consumers, are boosting profits for integrated majors, refiners, and related service and infrastructure companies, adding meaningful EPS to the index even as they weigh on certain cyclicals.
· Commodity‑linked earnings have also benefited from supply tightness and geopolitical risk premia (shipping dislocations, conflicts), supporting cash flows and buybacks in energy and some materials.
4. Financials: higher‑for‑longer tailwind, with some dispersion
· Banks and asset managers are seeing improved net interest income and fee income as yields remain elevated and risk appetite in capital markets is strong.
· Deutsche Bank’s own recent results show EPS and revenue tops of 30%+ and 17% vs forecasts, respectively, highlighting how cost discipline and rate tailwinds are enabling banks to beat consensus even in a choppy macro environment.
5. Still‑resilient nominal growth and pricing power
· Despite concern about growth slowdown, nominal GDP is still running at levels that allow corporations with pricing power to pass through cost pressures and maintain or expand margins.
· Consumer‑facing companies with strong brands and differentiated products continue to report steady demand and only moderate elasticity, particularly in services and experiences.
These drivers together explain how the market can sustain record highs in the face of oil near 100 USD, inflation‑sensitive yields above prior-cycle medians, and ongoing geopolitical shocks.
Why macro headwinds haven’t derailed the bull yet
Elevated oil and shipping disruptions
Central bank research indicates that while rates have become more sensitive to oil supply shocks in recent years, long‑term inflation expectations remain well anchored, limiting the extent of policy over‑reaction to energy spikes.
Investors appear to believe that current oil strength is mostly a manageable supply‑driven phenomenon, offset by productivity gains and AI‑enabled efficiency, rather than a 1970s‑style unanchoring of inflation expectations.
Shipping slowdowns and Red Sea rerouting are raising costs and tightening some supply chains, but companies are managing via inventory buffering, price adjustments, and re‑routing, turning what could be margin pressure into another test of pricing power that many large‑caps are passing.
High Treasury yields and the discount‑rate question
Recent weeks have seen a rise in Treasury yields as oil‑led inflation expectations push out the timing of Fed cuts, with 2‑year yields moving above 3% and longer maturities staying elevated.
Yet equity risk premia, strong earnings growth, and the perception of a “soft landing” (moderating inflation without a deep recession) have allowed equities to absorb higher discount rates so far; markets see higher yields as an expression of decent growth, not a precursor to policy‑induced recession.
Geopolitics and volatility
The easing of some US–Iran tensions and talk of potential deals recently helped push oil briefly lower and volatility down, reminding investors how quickly geopolitical risk premia can compress when headlines improve.
With VIX in the teens and repeated successful “buy the dip” episodes, the market’s default mode is still to lean into risk rather than de‑risk on macro scares, as long as earnings keep surprising positively.
How to stay prudently invested in this environment
For a professional portfolio manager, the challenge is to participate in the earnings‑driven upside while acknowledging that valuations and positioning embed a lot of good news. A few practical lines of defence:
1. Anchor on earnings quality, not just growth rate
· Focus on companies where the earnings beat is driven by sustainable drivers (unit growth, durable pricing power, structural cost improvements) rather than transitory items or aggressive accounting.
· Use free‑cash‑flow yield, reinvestment discipline, and balance‑sheet strength as filters; in a high‑rate regime, weak balance sheets can quickly erase equity value when conditions turn.
2. Diversify across the earnings engine, not just index weight
· Maintain exposure to AI and semis, but balance it with beneficiaries of higher-for-longer rates (select financials), energy cash‑flow compounds, and quality industrials that benefit from capex cycles and reshoring.
· Consider regional diversification: markets like Korea that are heavily levered to chips have been explosive to the upside, but also raise the portfolio’s factor concentration risk.
3. Use factor and time‑horizon diversification
· Blend momentum and quality exposures with a core of reasonably‑valued cash‑compounders; this can be implemented via a mix of sector ETFs and hand‑picked names.
· Explicitly separate “structural compounders” (held through cycles) from “tactical cyclicals” (energy, deep cyclicals) where you pre‑define exit criteria based on earnings revisions, spreads, or macro indicators.
4. Risk management: options and duration barbell
· Where mandate allows, consider selective index put protection or put spreads timed around key event clusters (Fed meetings, major geopolitical dates) to cushion tail risks without fully de‑risking.
· Use a duration barbell in fixed income (some short‑duration to offset rate risk and some longer‑duration Treasuries as a hedge against growth shocks) to stabilize portfolio volatility if the equity risk premium compresses abruptly.
5. Process: forward revisions, not backward beats
· Systematically track 3‑ to 6‑month forward EPS revisions and guidance language at the sector and factor level; in late‑cycle rallies, price will eventually follow the direction of revisions.
· Prioritize names and sectors where positive revisions are still under‑discounted relative to price moves, and trim where price has run far ahead of fundamentals.
An illustration: a “prudent participation” portfolio today might be overweight high‑quality AI infrastructure, energy cash‑returners, and capital‑disciplined financials, balanced with core healthcare and staples, plus modest index hedges around known macro catalysts.
Black swans and regime‑change risks
The more earnings and positioning stretch, the more vulnerable the market becomes to a non‑linear shock. Key candidates that could halt or reverse this bull market:
1. A genuine inflation shock, not just oil‑driven noise
· If inflation expectations de‑anchor (e.g., 5‑year CPI swaps make a decisive break higher and stay there), the market will have to re‑price a meaningfully higher terminal rate and “higher‑for‑much‑longer” Fed stance.
· That would hit long‑duration tech, compress multiples broadly, and likely invert or flatten earnings revisions as financing costs bite.
2. Hard‑landing or profits shock
· A sharp and synchronized deterioration in leading indicators (claims, PMIs, credit spreads) that translates into margin compression and outright EPS declines would expose how much of the current rally rests on the “soft‑landing” narrative.
· Given current valuations, even a modest recession with mid‑single‑digit EPS contraction could produce a far larger price drawdown if multiples de‑rate simultaneously.
3. Systemic credit or funding event
· A large default or solvency scare (e.g., a major non‑bank financial institution, shadow bank, or sovereign credit event) could freeze risk appetite, widen credit spreads, and drive a rapid de‑risking regardless of earnings momentum.
· The combination of high public debt, large fiscal deficits, and elevated rates means a policy or market accident in rates or FX markets cannot be dismissed.
4. Escalatory geopolitics and global trade fracture
· A sharp escalation in the Middle East that sends oil well beyond current levels, or a severe disruption in key shipping lanes that materially curtails global trade, could crush margins and force a growth‑negative policy response.
· Similarly, a renewed and aggressive US–China confrontation over technology or Taiwan that leads to sanctions or export bans could choke the very AI/semiconductor supply chains powering this earnings boom.
5. Policy mistake or loss of central‑bank credibility
· If the Fed and other major central banks are seen as either capitulating to inflation or over‑tightening into a slowdown, the market’s comfortable belief in a controlled soft landing would unravel.
· A spike in real yields and volatility together would hit both risk assets and traditional 60/40 portfolios, challenging the “everything rally” structure investors have grown accustomed to.