The two charts below are available to our subscribers on our Earnings Explorer page.  They show the rolling 3-month earnings and sales beat rates for US stocks reporting earnings.  Monitoring these charts is a good way to track how companies are doing relative to expectations over time.  As shown, the earnings beat rate has bounced a bit over the last month after trending lower over the prior 10 months dating back to the middle of 2018.  The sales beat rate hasn’t bounced as much, but it has stabilized around its long-term average of 56.45%.  Start a two-week free trial to Bespoke Institutional to access our interactive Earnings Explorer and receive ALL of our premium equity research.

Last week, 123 companies reported their Q2 earnings results, and 70% of them reported stronger than expected EPS.  But while the bottom-line beat rate was strong at 70%, the top-line sales beat rate was much weaker at 56%.

The average stock that reported last week traded well in reaction to the news, gaining an average of 0.56% on its earnings reaction day.  There were 20 stocks that gained more than 5%, and we have provided a snapshot of them from our website below.  Seattle Genetics (SGEN) was the biggest earnings winner last week with a gain of 19.11% last Wednesday.  CrowdStrike (CRWD) was the second biggest winner with a gain of 14.8% last Friday.  Skechers (SKX), Gentex (GNTX), and Marten Transport (MRTN) round out the top five with one-day moves of more than 9.2%.  Other notables on the list of last week’s biggest earnings winners include Cintas (CTAS), Philip Morris International (PM), State Street (STT), and Union Pacific (UNP).

Eagle Bancorp (EGBN) was last week’s biggest earnings loser with a one-day decline of 26.75% on Thursday.  ADTRAN (ADTN) was second worst with a decline of 23.32%, followed by Ericsson (ERIC) and Insteel Industries (IIIN).  Netflix (NFLX) was the 5th biggest loser on earnings last week with its one-day drop of 10.27%.  CSX and Limelight Networks (LLNW) were the other two stocks that fell more than 10%.  (Subscribers can use our Earnings Explorer to see the list of biggest earnings winners and losers over any time frame.)

As shown in the chart below of the number of companies reporting earnings by day over the next month, the next three weeks will be the busiest of the Q2 reporting period.   (This chart is updated daily at our Earnings Explorer page.  Our Earnings Explorer shows upcoming report dates and key earnings stats for all US companies set to report over the next 30 days.  To access the Earnings Explorer, start a two-week free trial to Bespoke Institutional.

Below we’ve compiled a list of the most volatile large-cap companies (>$28 billion market cap) set to report earnings this week.  Each of the stocks listed has historically experienced an average one-day price change of more than +/-3.25% on its past earnings reaction days.  For each stock, we include its expected report date, market cap, and year-to-date performance (%).  We also include its historical earnings and revenue beat rate (% of time it has beaten consensus analyst estimates) as well as the percentage of the time it has raised guidance.  Finally, we show its average one-day share price reaction to earnings reports throughout history and its average absolute one-day price change (earnings volatility).

There are no big reports scheduled for today, but tomorrow we’ll hear from Texas Instruments (TXN) and Visa (V) after the close.  Visa (V) has one of the strongest EPS beat rates at 95.6%.  Visa has historically averaged a one-day gain of 1.07% on its earnings reaction day (which would be Wednesday this week given that it reports Tuesday after the close).

Wednesday and Thursday will be extremely busy, led by Facebook (FB) and Tesla (TSLA) on Wednesday after the close and Amazon (AMZN), Alphabet (GOOG), and Intel (INTC) on Thursday after the close.  Twitter (TWTR) reports Friday morning ahead of the open.

Along with Visa, both Facebook (FB) and Twitter (TWTR) have historically beaten EPS estimates more than 95% of the time.  Atlassian (TEAM), PayPal (PYPL), and ServiceNow (NOW) are the three stocks on the list with the strongest revenue beat rates.  ServiceNow (NOW) has also raised guidance more often than any of the stocks listed.

In terms of share price reactions, Facebook (FB) and ServiceNow (NOW) stand out as they have historically averaged a one-day gain of more than 3% following earnings.  On the downside, Twitter (TWTR) has historically averaged a decline of 2.94% on its earnings reaction days.  TWTR is also the most volatile of the stocks listed with an average absolute one-day change of more than 12%.

The stocks above are the most volatile of the large caps reporting earnings this week.  Below is a list of the large caps that are the least volatile on their earnings reaction days.  This list is littered with Dow 30 stocks including Coca-Cola (KO), Travelers (TRV), United Tech (UTX), Boeing (BA), 3M (MMM), and McDonald’s (MCD).

Tomorrow morning we’ll hear from Biogen (BIIB), Coca-Cola (KO), Lockheed Martin (LMT), Travelers (TRV), and United Tech (UTX).  On Wednesday we’ll get reports from Boeing (BA), Northrop Grumman (NOC), AT&T (T), and UPS all ahead of the open.  Hershey (HSY), 3M (MMM), and Raytheon (RTN) are a few of the big names reporting on Thursday, and then McDonald’s (MCD) will be the biggest of the least volatile blue-chips reporting on Friday morning.  Start a two-week free trial to Bespoke Institutional to access our interactive Earnings Explorer and receive ALL of our premium equity research.

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.

While you’re here, join Bespoke Premium for 3 months for just $95 with our 2019 Annual Outlook special offer.

Oversight Needed

The Border Patrol Hits a Breaking Point by Garrett M. Graff (Politico)

Many of the problems faced by CBP are not caused by current political assignments but are the inevitable consequence of years without consistent management, expansion too rapid to handle masses of new recruits, and the theory that money will solve all problems. [Link]

Pentagon fails its first-ever audit, official says by Idrees Ali and Mike Stone (Reuters)

The Department of Defense was given a comprehensive audit by an army of accountants since December. This was the first-ever audit for the Pentagon, despite a 1990 law requiring an audit of all federal agencies. [Link]

Kids These Days

American kids would much rather be YouTubers than astronauts by Eric Berger (Ars Technica)

The latest moral panic over the state of American youths is apparently related to career choice, with a five-choice survey across three countries showing American kids would rather be a “vlogger/YouTuber” than astronaut, the least favored choice. [Link]

Some thoughts on youth sports by Myles Udland (Tumblr)

Myles considers his own struggles and positive experiences with youth sports and the larger incentives that drive children to specialize and hyper-focus on sports at a young age. [Link]

Economics

Measuring Labor-Force Participation and the Incidence and Duration of Unemployment by Hie Joo Ahn and James D. Hamilton (NBER Working Papers)

Statistical biases – that are artefacts of consistent survey methodology, not some sort of political pressure – are responsible for presenting a skewed picture of the US labor market. [Link; 51 page PDF]

Infrastructure Costs by Leah Brooks and Zachary Liscow (Brookings)

A new paper seeks to identify the increased construction costs for basic infrastructure like roads. Contrary to popular perception, materials and even labor inflation aren’t the key drivers, but instead that rising “citizens voice” decision-making processes, higher incomes, and higher home prices explain the results. [Link; 88 page PDF]

Not What You Paid For

Safe Deposit Boxes Aren’t Safe by Stacy Cowley (NYT)

Storing valuables is hard even when you outsource it to a location that should be secure: a bank. Cautionary stories on why your safe deposit box isn’t as safe as you think it ought to be. [Link; soft paywall]

Searches for ‘Canceling Amazon Prime’ Spike on Prime Day by Spencer Soper (Bloomberg)

Advertising doesn’t always work the way it’s intended to, and in the case of Amazon Prime paying customers sometimes forget that they’re paying until Prime Day reminds them. [Link; soft paywall, auto-playing video]

The women who win hundreds of sweepstakes per year by Zachary Crockett (The Hustle)

A unique online culture features a hunt for the ubiquitous sweepstakes, which can yield tens of thousands of dollars per year in winnings for the most dedicated prize hunters. [Link]

Europe

Swedes are getting implants in their hands to replace cash, credit cards by Lee Brown (New York Post)

Small RFID chips are being implanted in Swedes who use them to pay at the store, unlock doors, and monitor health metrics. [Link]

Older Employees Breathe New Life Into Europe’s Labor Market by Tom Fairless (WSJ)

Almost 90% of employment growth in the Eurozone between 2012 and 2018 came from workers aged 55 to 74, a function of both an aging society and rigid labor markets. [Link; paywall]

Tinseltown

‘The Town Hall of Hollywood.’ Welcome to the Netflix Lobby. by Brooks Barnes (NYT)

Where can you see Dolly Parton, Leo DiCaprio, John Kerry, Cindy Crawford, David Letterman, Beyoncé, President Obama, Alfonso Cuarón, Jay Leno, or studio heads? Waiting to pitch or be pitched by the biggest content budget in LA. [Link; soft paywall]

IPO Flops

Why Budweiser and Bankers Failed to Sell the King of IPOs by Thomas Buckley, Vinicy Chan, Crystal Tse and Bruce Einhorn (Yahoo!/Bloomberg)

Global brewing behemoth AB-InBev was all set to list its APAC businesses in a massive Hong Kong IPO, but the $10bn listing had to be pulled due to lack of investor interest. [Link]

Laugh More, Live Longer

You’re Not Laughing Enough, and That’s No Joke by Pamela Gerloff (Psychology Today)

Toddlers burst out laughing hundreds of times a day, but adults – especially those later in life – are much less frequent to giggle. But laughter reduces stress hormones and releases endorphins which can improve quality of life. [Link]

Long Reads

Apollo 11 Had a Hidden Hero: Software by Robert Lee Hotz (WSJ)

The story of the code behind the moon landing, and how it helped jump-start the role of computers across industries and applications more broadly. [Link; paywall]

A Carolina Dog by Cy Brown (Bitter Southerner)

The fascinating story of a dog breed which has been wandering around North America with and without human companions for the past 14,000+ years, and has rooted itself in the swamps of the rural south. [Link]

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Have a great weekend!

Earlier this week the Investment Company Institute (ICI) released weekly mutual fund flows for the week ending July 10th. Every single category of equity fund flows had outflows this week, which is relatively rare; of the 654 weeks with data since 2007, only 70 have seen that kind of consistency across all equity categories…and four of those have been in the past four weeks! Total equity fund outflows were $46bn this week, versus $6.8bn for the week and $85.4bn over the past three months. On a cumulative basis, $1.2trn has left equity mutual funds since January of 2007. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

With equity fund flows in the bottom quintile of all periods in recent weeks, bond funds have been the complete opposite story. As shown in the table below, bond fund inflows were in the 97th percentile overall this week and in the 94th percentile or higher in four different categories. The only areas that were at all weak were taxable global bonds and high yield bonds. On a cumulative basis, bond fund inflows total $1.7trn since the start of 2007, an interesting mirror image of the $1.7trn in domestic equity fund outflows since 2007.

The bottom line is that equity fund flows have been very large over the past year. As shown in the chart below, more than $320bn has flowed out of equity funds over the past year, more than any other 52-week period in the history of the day. Even at the height of the crisis, investors were pulling substantially less from funds.

The Dow (DIA) has distanced itself from the other major index ETFs in the past week.  While other large-cap ETFs like the S&P 100 (OEF) have dropped 0.23% and the Nasdaq (QQQ) is flat, DIA has managed to rise 0.5%.  DIA is also the most overbought of all the major index ETFs, although like other large caps, it is less overbought than it was one week ago.  On the other hand, mid-caps like the S&P MidCap 400 (MDY) and the Russell Mid-Cap (IJR) have actually moved higher within their trading ranges on small gains.  At their current levels, the S&P MidCap 400 (MDY) and the Core S&P Mid-Cap (IJH)  both have good timing scores in our Trend Analyzer.

Equity indices have not managed to see any sort of large move in the past week as each of the fourteen has gained or lost less than 1%. Meanwhile, the commodities space has been much more volatile.  In particular, oil (USO) and energy in turn as seen through the DB Energy Fund (DBE) have gotten smashed over the past week. USO is down 7.89%, falling below the 50-DMA and moving towards oversold levels.  Similarly, Nat. Gas (UNG) continues this year’s pain falling 4.79% further.

Contrary to the moves in energy markets, precious metals like silver (SLV) have been soaring.  After lagging behind gold recently, the Silver Trust (SLV) has finally caught up with the yellow metal.  SLV has risen 7.9% over the past week, the best gain of any commodity. Ironically, earlier in the week it was actually negative YTD but these gains over the past five days have brought it to a 5.3% YTD gain.  But also with this surge, SLV is now extremely overbought sitting over 2 standard deviations above the 50-DMA. Gold ETFs on the other hand, while not seeing as large of a move, has also done well rising around 2.75%. Precious metals in general as seen through DB Precious Metals (DBP) have become extremely overbought.

Looking at the charts, yesterday’s strong session for precious metals led to a further breakout to 52-week highs across the board.  While the DB Precious Metal Fund (DBP) and gold’s break out is above more recent resistance, silver’s 52-week high took out resistance from much earlier in the year. In reaching this new high, SLV’s chart makes it pretty evident as to just how rapid the move has been and the degree to which it is extended to the upside.