The Triple Play Report — 7/31/24
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 20 new stocks. To sign up, choose either the monthly or annual checkout link below:
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Impinj (PI), a manufacturer of radio-frequency identification devices (RFID), is an example of a company that recently reported an earnings triple play. Shares of PI are up more than 75% YTD with the help of two solid earnings reactions days so far this year, including a gain of 4.4% on 7/25 in reaction to its recent triple play, the company’s third in a row.
Looking at the snapshot below from our Earnings Explorer, PI has historically had some very strong earnings days as the result of triple play reports. The average move following the highlighted triple plays below is +19.47% (median +22.82%). To put together a streak of triple plays, PI has capitalized on automation processes across various industries with its products that allow businesses to connect their products to the internet through identification, location, and authentication solutions.
Two specific cases of this trend taking shape pointed out this quarter were book tagging in Japan, but more universal and importantly was the food industry using PI’s products to tag items that would ideally reduce food waste and maximize what they are able to sell. PI hopes for pilots in this category to scale into large deployments. PI’s endpoint ICs and reader ICs are also used across retail, logistics, healthcare, and manufacturing companies. You can read more about PI and the 19 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.
Bespoke’s Matrix of Economic Indicators – 7/31/24
Our Matrix of Economic Indicators provides a concise summary analysis of the US economy’s momentum. We combine trends across the dozens and dozens of economic indicators in various categories like manufacturing, employment, housing, the consumer, and inflation to provide a directional overview of the economy.
To access our newest Matrix of Economic Indicators, start a two-week free trial to either Bespoke Premium or Bespoke Institutional now!
Chart of the Day – July and AI Rotation
Bespoke’s Morning Lineup – 7/31/24 – Closing Out on a Positive Note
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“One of the great mistakes is to judge policies and programs by their intentions rather than their results.” – Milton Friedman
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
When Microsoft (MSFT) traded down over 5% in response to earnings last night, S&P 500 and Nasdaq futures immediately traded lower. A positive report from AMD and its halo effect on Nvidia (NVDA) has been more than enough to offset those losses. Positive results from Starbucks (SBUX) and Arista Networks (ANET) have also contributed to the positive tone…for now.
There’s a lot of data to get through between now and the close as the latest FOMC policy decision will be announced at 2 PM Eastern. Before that, we’ll get the ADP Employment report (weaker than expected), Employment Cost Index, Chicago PMI, and Pending Home Sales.
We’ve spoken a lot about the daily divergences between price and breadth for the last several weeks, and as we close out July, we just wanted to compare how this month compares to other months. Through 7/30, the S&P 500’s price moved in the opposite direction as its advance/decline (A/D) line on just over 38% of all trading days this month. Going back to 1990, there have only been three other months where the percentage of divergent days was as high or greater – July 2017 (40%), August 2020 (38.1%), and last month (52.6%). One notably absent period is 2000. While many comparisons have been made between now and the end of the late months of the dot-com bubble, the frequency of divergence days back then never reached the levels we have seen in the last two months.
Looking at breadth divergences on a 50-day moving average basis, through July 30th, 44% of all trading days in the last 50 saw breadth and price move in the opposite direction. No other period since 1990 comes even close. The prior record was 32%, reached in May 1995 and September 2017. Again, at the peak of the dot-com bubble, the percentage of divergent days peaked at 28%.
The similarities to the dot-com bubble arise when we looked at the percentage of days when the S&P 500 was down but breadth was positive. Back in 2000, the 50-day average peaked at just over 16%. Even based on this metric, the current period (18%) eclipses the peak from 24 years ago, but it’s much closer. One notable aspect of the last several years, though, is how the percentage of days has generally been trending higher since the mid-teens. Software may be eating the world, but megacaps are eating the market.
Chart of the Day – It’s Different This Time
Bespoke’s Morning Lineup – 7/30/24 – Trading Places
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“In this building, it’s either kill or be killed. You make no friends in the pits and you take no prisoners.” – Louis Winthorpe III
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
US stocks opened higher yesterday but gave up much of those gains throughout the trading session to close only with modest gains. This morning, futures have taken on a more modest but still positive tone. We’ve had a hefty dose of earnings reports to kick off the trading day, but the main event is Microsoft (MSFT) after the close with Starbucks (SBUX) and Mondelez (MDLZ) playing a supporting role. Before those reports, though, we’ll get JOLTS and Consumer Confidence at 10 AM.
Beyond the US, Asia was mostly lower, although the Nikkei bucked the trend with a modest 0.2% gain after Unemployment came in lower than expected. The tone in Europe is decidedly more positive with the STOXX 600 up 0.4% as GDP for the region came in stronger than expected even though growth in Germany showed an unexpected decline.
With just two trading days left this month, July has been a month of trading places as stocks and areas previously favored by investors have been taken out to the woodshed while some of the more neglected ones finally get their fifteen minutes – or maybe even more. The two tables below show the performance of the ten largest and ten smallest S&P 500 stocks by market cap on both a month and year-to-date basis.
Starting with the top ten, they are some of the bottom performers for the month. Seven of the ten stocks have declined this month, and the median decline of all ten has been over 5%. Even after these declines, though, nine of the ten stocks are up for the month (only Tesla is lower), and their median YTD is over 20%!
Now moving on to the ten smallest stocks, through Monday’s close, their median MTD performance was a gain of 2.27% with six out of ten stocks rallying. Contrast that to their YTD performance where all ten stocks are in the red on a YTD basis with a median decline of close to 20%.
The chart below compares the MTD and YTD performance of the 10 largest and smallest stocks in the S&P 500. On a MTD basis, the performance spread is over 8 percentage points in favor of the ten smallest stocks by market cap. Conversely, on a YTD basis, the performance spread between the two groups of stocks is nearly 42 percentage points. Which areas of the market lead or lag can have a big impact on investor portfolios based on their positioning, but to adapt a phrase from Randolph Duke in Trading Places, no matter which stocks lead or lag the market, Duke & Duke get the commissions.
AI vs. the Web
In our premium research over the last few months, we’ve done a lot of analysis comparing the launch of ChatGPT and the AI Boom that has ensued with other major technological advances over the last few decades.
One of the most correlated periods to now in terms of the Nasdaq 100’s performance was the launch of the modern web browser (Netscape) back in late 1994. Just as ChatGPT brought AI to the masses, the Netscape browser made the internet easily accessible.
As shown in the chart below that was included in our latest Bespoke Report newsletter, if we tie the release of ChatGPT in November 2022 to the release of the Netscape web browser in December 1994, the Nasdaq 100 is up about the same amount, and we would currently be around August 1996 on a time scale.
What’s interesting about August 1996 is that we’d be about four months away from Fed Chair Alan Greenspan’s famous “Irrational Exuberance” comments that were meant to highlight some of the frothiness that he was seeing in markets at the time.
Those comments by Alan Greenspan turned out to be correct (eventually), but if we expand the chart above out ten years, they were about three years early! As shown below, the Nasdaq would go on to experience a massive bubble for years after Greenspan’s first mention of “irrational exuberance” in late 1996.
There are plenty of investors saying the same thing and worse about Tech/AI stocks right now, but keep in mind that we’ve yet to see a pick-up on the M&A and IPO fronts that usually accompany bubbles. Some of that can be tied back to the fact that companies that may have gone public 25 years ago are often getting acquired before they go public, but overall, the AI Boom, while certainly hot, still seems far more subdued than what we saw during peak Internet boom back in the late 1990s.
Of course, every boom/bust cycle is different, and the chart below is not to suggest that the Nasdaq will continue following the path it took back in the 1990s. We just thought it was helpful to see the two periods side by side when comparing the launch of ChatGPT to the launch of the Netscape web browser.
As always, past performance is no guarantee of future results!
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Historic Readings From the Dallas Fed
It’s a quiet start to the week for economic data with the only US release being the Dallas Fed’s Manufacturing Survey for the month of July. Other regional surveys already released this month have been mixed with the reports out of New York and Philadelphia coming out better than expected whereas Richmond was much weaker than expected. The Dallas Fed was more in line with that Richmond report. The headline number was expected to improve rising from last month’s contractionary reading of -15.1 up to -14.2. Instead, it fell deeper into contraction at -17.5.
Although that reading doesn’t make for any sort of new low, it did mark a 27th consecutive month with a contractionary reading. As shown below, there has only been one other streak lasting as long: an identically long streak ending in November 2009.
Additionally, while the current conditions index continues to sit in contraction, expectations have surged. General Business Activity Future Expectations rose to 21.6 which is the highest level since November 2021. Taking the spread of current conditions versus expectations, the July reading registered the second lowest reading in the survey’s history behind a slightly lower -42.8 in March 2009.
In the table below, we show the readings in July and June and how those rank relative to the whole survey history for each category of the report. The headline reading is only in the 17th percentile of all months since the start of the survey in 2004. Weakness is seen throughout most other indices with significant month-over-month declines as well. The only current conditions index that is currently above its historical median is wages and benefits. Similarly, even though the General Business Activity expectations are elevated relative to current conditions, only a handful of expectation indices are in the 50th percentile or better. Granted, breadth this month was strong with all but two expectation categories rising month over month.
The single weakest category for current conditions was unfilled orders. That index is contracting rapidly, falling 21.9 points month over month (the third largest MoM decline to date) to -26.6 and in the bottom 2% of readings. It even surpasses the COVID lows for the worst reading since the first quarter of 2009. Shipments are not as depressed, but after a 19.1 point MoM decline, it has turned from expansion to one of the largest contractions of the past couple years.
Pivoting over to the employment indices, there were some mixed findings. For starters, the employment index measuring whether businesses are on net hiring or firing rose to the most expansionary reading since September. However, hours worked has cratered. At -13.8, that index is now down to the lowest levels since the spring of 2020 and before that, it was only lower during the depths of the 2008-2009 recession (although the troughs of both those periods was much deeper).
In tonight’s Closer, we will plug this data into our Five Fed Manufacturing Composite as well as dive into the findings of the special questions segment of the survey.
Chart of the Day: Sector Switch
Bespoke’s Morning Lineup – 7/29/24 – A Bonze Medal Performance
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“Scientists have proven that it’s impossible to long-jump 30 feet, but I don’t listen to that kind of talk.” – Carl Lewis
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After a nice close to the week, futures are looking to build on those gains as we head into the final days of July and into the dog days of August. As is usually the case with Mondays, the economic and earnings calendars are light to start the week, but it will be busy, nonetheless.
In terms of economic data, we’ll get Consumer Confidence and JOLTS on Tuesday, ADP, ECI, Pending Home Sales, and a Fed decision on Wednesday, and then Thursday will kick off the month with jobless claims and manufacturing PMIs. Finally, Friday will close out the week with the July employment report.
Among the most high-profile companies reporting earnings, we’ll hear from Microsoft (MSFT), Meta Platforms (META), Amazon.com (AMZN), and Apple (AAPL), plus hundreds of others. It’s been an interesting start to the week for Treasuries where the 10-year yield is down well below 4.20% and even flirting with 4.15%
The S&P 500 finished last week just like it ended it by rallying just over 1%. It’s nice to finish the week off on a positive note, but since the S&P 500’s recent peak in mid-July, the trend has been a series of lower highs. Since breaking through support to the downside right around 5,500 last week, the S&P 500 made two attempts late in the week to get back above that psychological level but failed both times. This recent bounce won’t be worthy of gold until the S&P 500 can break back above and hold those levels, On a more positive note, the S&P 500 also briefly traded below 5400 twice, but each time, buyers were quick to step in.
For the Nasdaq, the intraday downtrend established in mid-July has been steeper in slope. While Friday’s intraday high was well below Thursday’s, a trend of intraday higher lows has been established since early last Thursday.
The Russell 2000 has been the standout performer since the middle of the month, but even it remains below its July high. Closing just above 2,260 on Friday, though, the Russell 2000 is less than 1% from its recent 52-week high of 2,278 on July 17th.
Outside of equities, Bitcoin has been strong surrounding this weekend’s Bitcoin conference in Nashville. Headlines were made when former President Trump said in a speech that he would see to it that the US government never sells any of its Bitcoin and would ease regulations to make the US the Bitcoin superpower of the world. This morning, the world’s largest cryptocurrency has rallied to just under $70K from a low of less than $54K just after July 4th. 30% in less than a month is an impressive rally, but it still hasn’t been enough to break out of the downtrend channel it has been in since reaching a record high of just under $74K in the spring.
