The Triple Play Report — 8/2/23
An earnings triple play is a stock that reports earnings and manages to 1) beat analyst EPS estimates, 2) beat analyst sales estimates, and 3) raise forward guidance. You can read more about “triple plays” at Investopedia.com where they’ve given Bespoke credit for popularizing the term. We like triple plays as an indication that a company’s business is firing on all cylinders, with better-than-expected results and an improving outlook. A triple play is indicative of positive “fundamental momentum” instead of pure fundamentals, and there are always plenty of names with both high and low valuations on our quarterly list.
Bespoke’s Triple Play Report highlights companies that have recently reported earnings triple plays, and it features commentary from management on triple-play conference calls, company descriptions and analysis, and price charts. Bespoke’s Triple Play Report is available at the Bespoke Institutional level only. You can sign up for Bespoke Institutional now and receive a 14-day trial to read this week’s Triple Play Report, which features 24 new stocks. To sign up, choose either the monthly or annual checkout link below:
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Meta Platforms (META) is an example of a company that reported an earnings triple play recently back on the evening of July 26th. As shown below, META’s share price has been in a steady uptrend since late 2022, trading above both its 50 and 200-day moving averages since February of this year.
As shown in the snapshot from our Earnings Explorer below, Meta Platforms (META) has now reported back-to-back earnings triple plays. This is an important feat for the tech giant as it has never done this since going public back in 2014. With a high focus on AI and the Metaverse, Meta has really rebounded after seeing its market cap fall from over $1 trillion down to $235 billion last year. You can read more about META and the 23 other triple plays in our newest report by starting a Bespoke Institutional trial today.
Bespoke Investment Group, LLC believes all information contained in these reports to be accurate, but we do not guarantee its accuracy. None of the information in these reports or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. This is not personalized advice. Investors should do their own research and/or work with an investment professional when making portfolio decisions. As always, past performance of any investment is not a guarantee of future results. Bespoke representatives or clients may have positions in securities discussed or mentioned in its published content.
Downgrades Overlooked
The bottom has dropped out for the major US indices today with the Nasdaq down over 2% and S&P 500 down 1.25% as of this writing. The catalyst has been the downgrade of the United States’ credit rating by Fitch from AAA to AA+ . That is the first downgrade of U.S. sovereign debt in almost twelve years and just the second ever. In the charts below, we show the performance of the S&P 500, government debt, commodities, and the US dollar in the year before and the year after the 2011 downgrade.
The S&P 500 has been rallying in the months leading up to this downgrade, however, back in 2011 the S&P 500 had already begun rolling over by the time S&P downgraded US debt. In the wake of that downgrade, the S&P 500 went on to fully erase all of the prior year’s gains. Fortunately, all of those losses were quickly recouped within three months of the downgrade.
As for Treasuries and other US agency debt, performance over the past few months has been the complete opposite of 2011. Of course, the interest rate environment is also completely different now with Fed Funds 500 bps higher than it was at the time of the last downgrade. That being said, in 2011, Treasury yields were on the decline in the months headed into the downgrade, but contrary to what might have been expected, the downgrade itself did not change that trend. This time around has seen yields on US government debt moving in the opposite direction.
Bloomberg’s broad commodity index has been in a similar boat with the past few months seeing a decline compared to the steady uptrend back in 2011 that was uninterrupted by the downgrade.
Finally, we would note the downgrade only acted as a longer-term turning point for the dollar. As shown in the bottom right hand chart, both this year and in 2011, the trade weighted dollar was in a downtrend in the year before the downgrade. But right as S&P changed its rating, the dollar turned higher and continued to rise throughout the following year. In fact, one year out it had erased the entirety of the previous year’s decline.
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Bespoke’s Morning Lineup – 8/2/23 – Downgrade
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“True courage is being afraid, and going ahead and doing your job anyhow, that’s what courage is.” – Norman Schwarzkopf
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Just as Wall Street brokerage firms have been tripping over themselves to upgrade their views of the US economy and forecast a soft landing as opposed to a recession for the US economy, Fitch came out of the blue last night and downgraded their rating of US debt from AAA to AA+. The rationale behind the downgrade had nothing that couldn’t have been said at any point in the last couple of years, so the timing is curious. Then again, if you’re going to issue a downgrade, maybe it’s better to do it during a period of relative calm rather than in the middle of a period of heightened volatility like S&P did back in 2011.
Market reaction to the downgrade has been muted. Equities did sell-off overnight but have rebounded off their overnight lows and are now pointing to a decline of 0.6% at the open. The only economic report of the day was ADP Employment which blew past expectations once again. Earnings results have also been positive, but stock price reactions to those results remains underwhelming as investors start taking profits following the massive gains from the first half of summer.
While the US debt downgrade should theoretically cause higher interest rates, as we saw back in 2011, that was not the reality. This morning, yields are pretty subdued with little in the way of changes across the curve, and any moves have been to the downside. From a longer-term perspective, though, if the charts of the 10-year and 30-year US Treasury yields were stocks, technicians would likely be bullish.
After tests of the 4% level this year back in early March and early July, the 10—year yield is once again bucking up against 4%. The more often the yield tests this resistance level, the weaker it tends to get, so when and if yields do convincingly break through 4%, they’re likely to immediately test the highs from late last year.
If recent moves in the 30-year are any indication, more upside in the 10-year yield is likely. Yields at this part of the yield curve have already broken through this year’s resistance levels and at just under 4.1% are at the highest level since November.
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$10 Trillion Added in Market Cap; 2023’s Best and Worst Through July
The US stock market (using the Russell 3,000 as a proxy) has now seen an increase in market cap of roughly $10 trillion from its bear market low last October through the end of July 2023. As shown below, the peak market cap for the US stock market was $51.5 trillion seen on the first day of 2022. From high to low, total US market cap fell $13.7 trillion during last year’s bear, but since then it has risen back up to $47.7 trillion. To get back to new all-time highs, total market cap would need to rise by roughly $3.8 trillion.
The average Russell 3,000 stock rose 5.74% in July. There were 813 stocks in the index that rose 10%+ in July, including 29 names that rose 50%+ which are listed in the table below. This list is made up of many of the high-fliers during the post-COVID bull that then got slaughtered during last year’s bear. Four names rose 100%: PolyMet Mining (PLM), Quantum-Si (QSI), UroGen Pharma (URGN), and Bridgebio Pharma (BBIO). Other notable names on the list of big July winners include Nikola (NKLA), Upstart (UPST), Carvana (CVNA), QuantumScape (QS), Rivian (RIVN), and Riot Platforms (RIOT). In case you haven’t been keeping track, Riot Platforms used to be Riot Blockchain, and before that, in early 2018 its name was Bioptix and it described itself as a company involved in developing new ways to test animals for disease.
Through July, the average Russell 3,000 stock was up 18.1% year-to-date. Below is a list of the 35 names that are already up 200%+ on the year. Topping the list is Carvana (CVNA) with a YTD gain of 869% after gaining 77.3% in July. Back in December 2022, CVNA had fallen into the $3s, but it’s now back up to the mid-$40s. Next up is Bit Digital (BTBT) with a YTD gain of 638%, followed by Cipher Mining (CIFR), IonQ (IONQ), Riot (RIOT), and Applied Digital (APLD). Similar to the list of July’s biggest winners, the biggest winners YTD are many of the names that got hit the hardest last year, with many falling more than 70% during their bear market drawdowns. Carvana, for example, was actually down 98% from its all-time high when it bottomed in 2022, so even after gaining more than 800% this year, it needs to gain another 700% from here to get back to new highs.
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Bespoke Market Calendar — August 2023
Please click the image below to view our August 2023 market calendar. This calendar includes the S&P 500’s historical average percentage change and average intraday chart pattern for each trading day during the upcoming month. It also includes market holidays and options expiration dates plus the dates of key economic indicator releases. Click here to view Bespoke’s premium membership options.
Key ETF Performance Through July 2023
The S&P 500-tracking ETF (SPY) finished July up 3.27%, leaving it up 20.62% YTD on a total return basis. The mega-cap Tech-heavy Nasdaq 100 (QQQ) gained only slightly more than SPY in July, but it’s up more than twice as much as SPY on a YTD basis at +44.5%. The small-cap Russell 2,000 (IWM) did better than large-caps and mid-caps in July with a gain of 6.11%, but IWM is up less than large-caps on a YTD basis at +14.7%. Value and dividend stocks held up well in July and actually outperformed growth for the month, but value is lagging YTD and the DJ Dividend ETF (DVY) is actually down 0.5% on the year.
Looking at US sectors, Energy (XLE) and Financials (XLF) — which lagged in the first half of 2023 — did the best in July, while Health Care (XLV) and Real Estate (XLRE) were up the least. Technology (XLK) and Communication Services (XLC) are currently neck and neck on a YTD basis with XLK up 43.94% through July and XLC up just three basis points more at 43.97%.
Outside of the US, we saw China (ASHR) and Israel (EIS) gain the most in July, while France (EWQ) and Spain (EWP) gained the least. YTD, it’s Mexico (EWW) that’s currently atop the list of country ETFs with a gain of 42.85%.
Oil (USO) gained 15%+ in July, while natural gas (UNG) fell 4.2%. Gold (GLD) saw a small monthly gain of 2.3% versus a gain of 8.6% for silver (SLV). Finally, with yields rising again during the month, Treasury ETFs were in the red. Aside from natural gas, the 20+ Year Treasury ETF (TLT) is down more than any other asset class in our matrix on a YoY basis with a total return of -12.3%.
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Bespoke’s Morning Lineup – 8/1/23 – Touch of Red
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“Live life expecting the worst, hoping for the best, and living for the future” – Jerry Garcia
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As if on cue, the calendar flipped to August and futures are pointing to a lower open this morning. Things started off well enough overnight in Asia where Japan, South Korea, and Australia all traded higher, but Europe picked up the baton and has headed south since the open. The catalyst for weakness there has been some lackluster manufacturing PMI data, but at this point the declines are relatively modest. While the headline PMI reading for the Eurozone was right in line with expectations, it remained deep in contractionary territory at 42.7.
In the US today, the focus remains on earnings, but fifteen minutes after the opening bell, we’ll get the S&P US Manufacturing PMI followed by Construction Spending, ISM Manufacturing, and JOLTS at 10 AM.
With a rally of over 28% from its bear market lows in late 2022, equities have really come a long way in a short period of time, but if you widen out your view from the extreme lows of last year and look on a calendar basis, the gains don’t look quite as impressive. In the case of the S&P 500, over the last 12 months, it’s still up over 11%, but on a two-year basis, performance looks much less attractive at just 4.4%. That hardly looks like a market that has become unanchored from reality.
The Nasdaq is a similar picture. It has rallied more than 40% from its bear market lows and is up nearly 16% over the last year. Over the last two years, though? Down 2.2%.
Lastly, the Russell 2000. It’s been a laggard off the lows and over the last year as well with gains of 21.4% and 6.3%, respectively. The two-year performance looks downright depressing with a decline of 10%. When you have big gains in a short period of time, yet longer-term returns are still flat to down, all you can say is “What a long strange trip it’s been.”
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Dogs of the Dow for the Dog Days of Summer
With the Dow coming off of a historic winning streak last week, below we check in on performance of the index versus the Dogs of the Dow. The Dogs of a Dow is a stock-picking strategy that invests in the index members with the highest dividend yields at the end of a year holds them through the end of the next year. On a total return basis, the Dow’s recent winning streak has been a benefit to both the overall index and the Dogs alike. That said, the gains to the former have brought the index up near 2022 highs on a total return basis while the Dogs of the Dow has much further to go given the overall weakness of dividend-oriented equities recently.
In the table below, we show the returns of this year’s Dogs of the Dow and all other individual Dow members. The Dogs of the Dow are host to some of the stocks with the worst performance this year like Verizon (VZ) and Chevron (CVX), however, there are also a couple of big winners like Intel (INTC) which has returned nearly 42% YTD or JPMorgan Chase (JPM) which has nearly posted a 20% return. However, the biggest gains in the index have come from non-Dogs. In fact, the largest gains this year have been from those with the lowest or no dividend yields at the end of last year like Boeing (BA), Salesforce (CRM), or Apple (AAPL).
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Bespoke’s Morning Lineup – 7/31/23
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“It is dangerous to make everybody go forward by the same road.” -Ignatius of Loyola
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We’re now well past the halfway point of a year that most investors would prefer never to end. That’s a big shift in the way sentiment was to start out the year, but while things are far from perfect, the backdrop looks a lot less ominous now than it did at the start of the year. That’s both a good thing and a bad thing. It’s good because no one wants runaway inflation or a recession. The bad news is that it’s becoming a much more widely accepted view, and when everyone starts to travel the same road, traffic jams are ultimately the least of your problems.
Futures are modestly higher to kick off what will be another busy week for earnings and economic data. In terms of earnings, the two biggest reports will be Amazon.com (AMZN) and Apple (AAPL), which will both be reporting after the close on Thursday. On the economic side of things, the key reports to watch will be ISM Manufacturing (Tues) and Non-Manufacturing (Thu), as well as Non-Farm Payrolls on Friday. Besides those reports, JOLTS and Jobless Claims will obviously be key indicators to watch.
Along with the positive tone in US futures this morning, Asian stocks were broadly higher with gains of more than 0.5% while European stocks are also higher led by France and Italy.
The S&P 500 rallied over 1% last week, but four sectors posted losses led lower by interest rate-sensitive sectors like Utilities and Real Estate which were both down close to 2%. At the other end of the spectrum, more cyclically sensitive sectors like Communication Services, Energy, Materials, and Consumer Discretionary led the way higher. While Real Estate and Consumer Discretionary are no longer trading at overbought levels, they are still well above their 50-day moving averages, and the broader market remains overbought as has been the case since the Friday before Memorial Day.
Regarding seasonality and the last trading day of July and the first trading day of August, there have been some interesting (and not so bullish) trends regarding performance during years when the S&P 500 was up 10%+ YTD versus all other years. Regarding the last trading day of July, there hasn’t been much in the way of differences in performance. In the 24 prior years since 1953 when the S&P 500 was up 10%+ YTD, its median performance on the last trading day of July was a gain of 0.06% with positive returns just over half of the time. As shown, both in terms of median performance (top chart) and consistency of positive returns (lower chart), these numbers are just slightly less than the figures for all other years.
Where things get interesting (and less positive for bulls) is on the first trading day of August. In years where the S&P 500 was not up over 10% YTD, the S&P 500’s median performance was a gain of 0.07% with positive returns 54% of the time. It’s in the years where the S&P 500 was up over 10% YTD, though, that the first day of August has been prone to profit-taking. In those years, the S&P 500’s median first day of August performance was a decline of 0.31% with gains less than 30% of the time.
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Bespoke Brunch Reads – 7/30/23
Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
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On This Day in History:
Oil On the Move. On this day in 1869, the world’s first ‘oil tanker’ the Charles, departed from the U.S. carrying 7,000 barrels of oil. Today oil tankers are much larger carrying millions of barrels of oil. That oil they carry is also a lot more valuable today. The cost of a barrel of oil in 1869 was $3.64. As of July 27, the cost of a barrel of oil was $78.73 meaning a nominal increase of 2,063%. [link]
Girl Power
The Federal Reserve Says Taylor Swift’s Eras Tour Boosted the Economy. One Market Research Firm Estimates She Could Add $5 billion (CBS News)
For many cities across the U.S., Taylor Swift’s Eras Tour is positively contributing to economic activity, allowing some cities to recover from the lingering effects of the COVID-19 pandemic. Experts are comparing the hotel demand like that of the Super Bowl, with other businesses like restaurants and retail shops also reaping the benefits of fans flocking to see Swift perform. Forbes estimates the tour will contribute $1.6 billion to the U.S economy. [link]
Parents Hire $4,000 Sorority Consultants to Help Daughters Dress and Impress During Rush (WSJ)
Mothers and daughters now can receive professional help when it comes to sorority rushing. Trisha Addicks owns a Georgia-based consulting firm that offers a $600 seminar covering basics of rushing and a $3,500 all access plan that gives customers unlimited access to rush mentors. Customers can find out what to wear, what to say, how to act, and social media consultation to be the best candidate for sorority rush events. [link]
Who’s Hungry?
They Took Blockbuster Drugs for Weight Loss and Diabetes. Now Their Stomachs are Paralyzed (CNN)
Two popular drugs for weight loss and diabetes are highlighting extreme side effects in some patients even though their doctors recommended the drugs. Users of Ozempic and Wegovy are reporting extreme nausea and some doctors believe they are suffering from stomach paralysis. The FDA has not been able to conclude the medications caused these symptoms. [link]
Why Cheech & Chong Ads Are Flooding Twitter (WSJ)
With Twitter ad buying traffic on the decline, companies such as Cheech & Chong Global can cheaply buy ad space on the social media platform. The company, named after the two cannabis promoting comedians, sells cannabis products in states where it is legal. Their ads have gained popularity recently on Twitter with some users claiming half the ads they see are Cheech & Chong Global ads. [link]
Regulation
IRS Ends Unannounced Revenue Officer Visits to Taxpayers; Major Change to End Confusion, Enhance Safety as Part of Larger Agency Transformation Efforts (IRS)
Following the new legislature, the IRS announced it is ending unplanned visits for agency revenue officers. The change in practice is a response to an increase in the number of scams related to the IRS and to increase the safety of revenue officers. Now, the IRS will mail letters to schedule meetings with an individual or corporation to resolve cases. [link]
Harvard Faces Federal Civil Rights Probe Over Legacy Admissions (US News)
The U.S. Department of Education is investigating the legality of legacy admissions at colleges such as Harvard University. This investigation follows complaints filed alleging that legacy admissions disproportionately favor white applicants and would violate federal civil rights law. Some colleges across the U.S. have voluntarily ended legacy admissions following the Supreme Court ruling on affirmative action earlier this summer. [link]
AI
Our Oppenheimer Moment: The Creation of A.I. Weapons (New York Times)
Some AI and machine learning developers believe this technology is similar in its impact on society as the nuclear bomb. While AI is not being developed for military purposes (that we know of), some believe it is imperative that the United States pursue development of AI implementation in defense systems. They argue that the United States would not need to use these systems in an act of war, but rather highlight its uses and strengths to prevent future wars. [link]
Oppenheimer Offers Us a Fresh Warning of AI’s Danger (Scientific American)
Taking the opposite view as the article above, some believe governments should come together and determine the best way to regulate this innovative technology. Previous experiments have shown that ChatGPT can give detailed instructions on how to build a regular bomb, create a synthetic pathogen, and construct bioweapons. Thus, some believe governments should ensure big tech companies are developing AI for the best public interest through regulations. [link]
Aided by A.I. Language Models, Google’s Robots Are Getting Smart (New York Times)
Google recently unveiled its latest secret project: robots with large language models as ‘brains.’ Before the success and popularity of large language models like ChatGPT, robots had to be manually programmed to complete the most basic tasks. In the past, a robot could flip a hamburger with the right programming, but it could not flip a pancake unless it received new programming. Now robots can learn and build on their experiences without constant upgrades to their software. [link]
Social
Mark Zuckerberg: Threads Users Down by More Than a Half (BBC)
After seeing 100 million users join the platform in 5 days, Meta’s Threads app has seen more than half of the users leave the platform. The main complaints for users leaving the platform were the lack of content and limited functionality of the app. This should come as no surprise as Threads is in its initial stages of development. [link]
Enjoy Alcohol, Without the Hangover (WSJ)
GABA Labs in London is developing a synthetic alcohol that will give consumers all the pleasures of consuming alcohol without the negatives such as a hangover. If a substance can target only the GABA receptors, the brain can naturally turn on dopamine and serotonin. The company is in early stages and looking to find volunteers to test the product (we’re available!). This is one of many products in development aimed at revolutionizing alcohol consumption and enjoyment. [link]
Bud Light Parent Announces Layoffs in Wake of Brand’s Woes (Washington Post)
Anheuser-Bush InBev recently announced it was laying off 200 employees from its corporate division. These layoffs come roughly 3 months after Bud Light released a controversial promotion leading to brand boycotts. Bud Light was previously the most popular beer in the United States but was dethroned this summer by Modelo. [link]
Science & Technology
It’s Alive! Worms Revived After 46,000 Years in Siberian Permafrost (WSJ)
Scientists have revived worms that had been buried in Siberian permafrost for 46,000 years. The worms entered a state of cryptobiosis, where the metabolism comes to a halt and the organism stops reproducing, developing and repairing itself. Organisms do this in extreme conditions as a survival tactic. This discovery can give valuable insight into a possible third stage between life and death. [link]
Time-traveling pathogens from melting permafrost pose great risk to the Earth (Earth.com)
Melting permafrost has the potential to unleash dangerous pathogens into an environment that hasn’t experienced them in thousands of years. Said one of the scientists involved in a study on the subject, “Our findings suggest that threats so far confined to science fiction could in reality pose serious risk as powerful drivers of ecological damage” [link]
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