Bespoke’s Brunch Reads: 6/4/23
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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Science and Technology
Could we stop Yellowstone from erupting with a giant geothermal power plant? (Construction Physis)
Yellowstone National Park sits on a massive super volcano that, if it erupted, would be catastrophic for the entire world causing a cloud of ash that would likely lead to the extinction of most species. Some scientists have theorized that a geothermal energy plant could mitigate the risks of an eruption and create a major source of power for the United States. [link]
Measuring the Productivity Impact of Generative AI (NBER)
A study found that customer support agents using AI reported a nearly 14% increase in productivity, with 35% improvements for the lowest skilled and least experienced agents. [link]
Apple’s Headset Has Metaverse Believers Hoping It Can Save Their Industry (WSJ)
Apple is set to unveil its virtual reality headset next week at its World Wide Developer Conference (WWDC), and developers across the industry are counting on its success to help revive the entire space which, to this point, just hasn’t caught on with consumers or enterprises. [link]
Deep-brain stimulation during sleep shown to strengthen memory (Medical Press)
New research from UCLA Health and Tel Aviv University shows how deep-brain stimulation during sleep could help patients with memory disorders. It’s theorized that memory is consolidated by the brain during sleep and this research provides ground-breaking evidence. [link]
Tennessee man eats only McDonald’s food for 100 days straight: Here’s what happened (Fox News)
In an attempt to lose weight, yes, lose weight, a fifty-seven-year-old man in Nashville ate only McDonald’s for 100 consecutive days. After those 100 days, he’s lost 58.5 pounds from his start at 238 pounds. [link]
The big question of how small chips can get (Financial Times)
Experts warn that semiconductor chips won’t be able to get much smaller, even as computing progress has depended on it in the past. [link]
Macy’s and Costco sound a warning about the economy (CNN)
Big chain stores suggest their consumers are spending less at their stores and shifting their priorities to more essential purchases. In the past, these types of shifts have been common in recessions. [link]
As retailers leave some cities, one grocery chain is trying to stay (Washington Post)
A significant increase in theft and violent crime over the last five years together with decreased urban foot traffic and inflation-related issues are trends that are forcing companies to think hard about closing stores in urban areas. Giant Food is standing firm on its position to not close stores and is attempting to combat these issues with actions. [link]
A Visual Breakdown of America’s Stagnating Number of Births (WSJ)
A multitude of factors are impacting the recent decline in the nation’s birth rate. Included are some economic factors such as housing affordability. In the next ten years, this decline in conjunction with lower levels of immigration and more baby boomer retirements will contribute to effects on the labor force supply. [link]
Here Are The 15 Richest Women Celebrities In America (Forbes)
Forbes presents the fifteen richest women celebrities in America, how they did it, and what they’re up to. Second on the list of musicians is Taylor Swift, as every additional concert ticket you buy, pushes her net worth higher. [link]
Apple Customers Say It’s Hard to Get Money Out of Goldman Sachs Savings Accounts (WSJ)
The Apple savings account has attracted many customers given its attractive interest rate of 4.15% compared to the average of 0.25%. Some customers, however, have experienced delays and other inconveniences regarding transfers out of their accounts despite Goldman’s contradictory claims on the matter. [link]
TSA records busiest day of pandemic amid smooth holiday for air travel (Washington Post)
Memorial Day Weekend, like many holiday weekends, means increased air travel across the United States. This year saw a major rebound as TSA screened 300,000 more flyers this Memorial Day weekend than they did pre-pandemic in 2019 during the same holiday weekend. [link]
Why You’re Losing More to Casinos on the Las Vegas Strip (WSJ)
With odds already stacked against gamblers, Vegas is subtly making changes to further game odds in their favor. This means lower payouts, riskier bets, and higher minimums to play. Players are already losing billions of dollars annually to the casinos, so find out why they haven’t been so easily deterred from their growing disadvantages. [link]
Airlines Are Weighing Passengers to See if They Got Heavier (Time)
Air New Zealand is the latest airline to jump on the trend of asking its passengers to step on the scales, and it has to do with safety. The airline claims that this survey, running through June, will help it calculate the “weight and balance of the loaded aircraft.” Some airlines are conducting surveys of this kind in part to analyze how “recent factors such as the shift to remote working, war in Ukraine and potential long-term effects of Covid-19 have impacted people’s weight.” [link]
App Store developers generated $1.1 trillion in total billings and sales in the App Store ecosystem in 2022 (Apple)
The App Store store has grown over 27% for three straight years and 90% of billing and sales accrued solely to developers, with no commission to Apple, the tech giant announced. The marketplace supports close to 5 million jobs in the United States and Europe. Read about some of the key drivers of its growth. [link]
Everywhere You Look in China Are Signs of More Market Misery (Yahoo Finance)
Chinese stocks entered a bear market after a drop of over 20% from their peak. Weak data, geopolitical risks, and other signals point to a continued downturn in China. [link]
Friends With (Metal) Benefits (Phenomenal World)
The United States is looking to Australia for critical minerals to aid the energy transition. Approval of an earlier signed compact allows American taxpayers to support Australian mineral projects, and the US can benefit against China (Australia’s largest export customer) in obtaining scarce minerals like lithium, nickel, and cobalt. [link]
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Have a great weekend!
The Bespoke Report — Remember When? — 6/2/23
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Daily Sector Snapshot — 6/2/23
Q1 2023 Earnings Conference Call Recaps
Bespoke’s Conference Call Recaps provide helpful summaries of corporate conference calls throughout earnings season. We go through the conference calls of some of the most important companies in the market and summarize key topics covered by management. These recaps include information regarding each company’s financial results, growth by segment, as well as some aspects of the business that management expects to impact future results. We also identify trends emerging for the broader economy in these recaps.
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Below is a list of the Conference Call Recaps published during the Q4 2022 and Q1 2023 earnings reporting periods.
Q1 2023 Recaps:
Nordstrom: Q1 2023
Salesforce: Q1 2024
NVIDIA: Q1 2023
Procter & Gamble (PG): Q1 2023
Big Banks (JPM, C, BAC, GS): Q1 2023
Q4 2022 Recaps:
Walmart: Q4 2022
Shopify: Q4 2022
Palantir: Q4 2022
MGM Resorts: Q4 2022
Tyson: Q1 2023
Amazon.com: Q4 2022
Meta Platforms: Q4 2022
Apple: Q1 2023
Alphabet: Q4 2022
Boats and ATVs: Brunswick (BC), MarineMax (HZO), and Polaris (PII)
Hershey Q4 2022
Old Dominion Q4 2022
PulteGroup Q4 2022
Whirlpool Q4 2022
Mastercard Q4 2022
Tesla Q4 2022
Microsoft Q2 2023
Johnson & Johnson Q4 2022
Netflix Q4 2022
Bank of America Q4 2022
Taiwan Semiconductor Q4 2022
Constellation Brands Q3 2023
Cintas Q2 2023
FedEx Q2 2023
Adobe Q4 2022
Lennar Q4 2022
Oracle Q2 2023
Costco Q1 2023
Lululemon Q3 2022
Recaps published during Q4 2022 are available with a Bespoke Institutional subscription
Bespoke’s Morning Lineup – 6/2/23 – They Did it Again!
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“The four most dangerous words in investing are: this time it’s different.” – Sir John Templeton
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
Positive earnings news from the likes of lululemon (LULU) and MongoDB (MDB) plus a positive tone in overseas markets, where many benchmark indices are trading up over 1%, is pushing US equity futures higher ahead of the May jobs report. Reports that China is considering a new round of stimulus measures to support the property market has commodity stocks ripping higher following gains in Thursday’s session as well. The Senate also passed the debt ceiling bill, which will now move to the President’s desk. Its quick movement through Congress is a positive, but at this point, you can only rally on the same news so many times.
Heading into this morning’s jobs report, economists were expecting an increase of 195K non-farm payrolls (down from 253K last month), the Unemployment Rate to increase to 3.5% (from 3.4%), average hourly earnings to increase 0.3% (down from 0.5%), and average weekly hours of 34.4 (unchanged). The actual headline number was much stronger than expected (339K), but the Unemployment Rate was also much higher than expected at 3.7% and the highest since last October. Also, average hourly earnings were in line with forecasts and average weekly hours were weaker at 34.4. While the headline number is a bit of a shocker, given the higher Unemployment Rate, it’s unlikely to have much impact on FOMC policy forecasts.
This time is different, may be a dangerous phrase, but when it comes to economists’ forecasts surrounding the monthly non-farm payrolls report, this period really is like no other we have ever seen. As shown in the chart below, this morning’s release extended the streak of better-than-expected reports to 14 months. For over a year now, economists have been underestimating the rate of job growth in the US economy, and they still haven’t made the necessary adjustments to their modeling. In football, a coach only gets one halftime to make the necessary adjustments, but economists have had more than ten halftimes, and they still can’t get things quite right. If the definition of insanity is doing the same thing over and over and expecting a different result, Wall Street needs an army of psychiatrists.
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The Closer – Small Caps Left in the Dust, PMI Update, Construction Boom – 6/1/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a look at surge in the ratio of large cap to small cap stocks (page 1) followed by a dive into the latest macro data including nonfarm productivity & costs (page 2), construction spending (page 3), PMIs (page 4), and oil inventories (page 5).
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Chart of the Day: May Deciles
Bespoke’s Weekly Sector Snapshot — 6/1/23
Target’s (TGT) Troubles
It’s been a miserable couple of weeks for shares of Target (TGT) as the stock is on pace for its tenth straight day of losses today. Whether or not the stock closes up or down today, the nine-day losing streak heading into Thursday was the longest in more than 23 years, and there have only been three other streaks that were as long or longer than the current one.
While shares of Target (TGT) have been down sharply over the last two weeks (-20.2%), its main competitor Walmart (WMT) hasn’t had nearly as rough of a time as its shares are down just 1.5%. At the current level of -18.7 percentage points, the two-week performance spread between TGT and WMT is at an extreme, and there are only a handful of other periods since 1980 where the spread was wider in WMT’s favor. What’s ironic, however, is that exactly a year ago today, TGT’s two-week underperformance versus WMT was even wider at -22.8 percentage points. Back then it was a disastrous earnings report that caused the stock to crater.
The recent weakness in TGT has been mostly attributed to a negative backlash from the merchandise associated with the company’s Pride campaign, and while that may have accelerated the decline, it’s important to note that the stock has been steadily underperforming WMT for well over a year now. The chart below shows the relative strength of TGT versus WMT over the last five years. While TGT was a big beneficiary relative to WMT during the year after COVID when consumers were flush with cash, once the checks stopped, so too did the outperformance. As of today, the stock’s relative strength versus WMT is at the lowest level since the first half of 2020.
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The Bespoke 50 Growth Stocks — 6/1/23
The “Bespoke 50” is a basket of noteworthy growth stocks in the Russell 3,000. To make the list, a stock must have strong earnings growth prospects along with an attractive price chart based on Bespoke’s analysis. The Bespoke 50 is updated weekly on Thursday unless otherwise noted. There were seven changes to the list this week.
The Bespoke 50 is available with a Bespoke Premium subscription or a Bespoke Institutional subscription. You can learn more about our subscription offerings at our Membership Options page, or simply start a two-week trial at our sign-up page.
To see all 50 stocks that currently make up the Bespoke 50, simply start a two-week trial to Bespoke Premium or Bespoke Institutional.
The Bespoke 50 performance chart shown does not represent actual investment results. The Bespoke 50 is updated weekly on Thursday. Performance is based on equally weighting each of the 50 stocks (2% each) and is calculated using each stock’s opening price as of Friday morning each week. Entry prices and exit prices used for stocks that are added or removed from the Bespoke 50 are based on Friday’s opening price. Any potential commissions, brokerage fees, or dividends are not included in the Bespoke 50 performance calculation, but the performance shown is net of a hypothetical annual advisory fee of 0.85%. Performance tracking for the Bespoke 50 and the Russell 3,000 total return index begins on March 5th, 2012 when the Bespoke 50 was first published. Past performance is not a guarantee of future results. The Bespoke 50 is meant to be an idea generator for investors and not a recommendation to buy or sell any specific securities. It is not personalized advice because it in no way takes into account an investor’s individual needs. As always, investors should conduct their own research when buying or selling individual securities. Click here to read our full disclosure on hypothetical performance tracking. Bespoke representatives or wealth management clients may have positions in securities discussed or mentioned in its published content.