B.I.G. Tips – Earnings Season Recap and Triple Plays
Today we published our newest Earnings Triple Plays report. This season there were a total of 133 earnings triple plays out of just under 2,000 individual quarterly earnings reports from US-listed stocks.
What is a triple play? When a stock reports quarterly earnings, it registers a “triple play” when it beats analyst EPS estimates, beats analyst revenue estimates, and raises forward guidance. We coined the term back in the mid-2000s, and you can read more about it at Investopedia.com. We consider triple plays to be the cream of the crop of earnings season, and we’re constantly finding new long-term opportunities from this basket of names each quarter. You can track the newest earnings triple plays on a daily basis at our Triple Plays page if you’re a Bespoke Premium or Bespoke Institutional member. To read our newest report and see some of the triple plays with intriguing charts at the moment, start a two-week trial to Bespoke Premium!
Homebuilder Hopes Demolished
The national average on a 30-year fixed rate mortgage has come back below 7%, but it remains elevated versus recent history as housing data still can’t catch a break. This morning, the NAHB released their latest reading on homebuilder sentiment and for the eleventh month in a row, the headline index fell month over month. As shown below, the current streak of nearly a year straight of declines is far and away a record, surpassing two eight-month long streaks leading up to the Financial Crisis.
This month, homebuilder sentiment dropped another 5 points down to 33. That is not the largest drop of the current streak of declines, with bigger drops of 8 points last month or 12 points in July, but it still ranks in the bottom 4% of all months on record. In other words, not only is homebuilder sentiment falling consistently, but it’s falling fairly fast. The other components have also seen bottom decile declines with the only sub-index avoiding declines being in the West.
After the November decline, the headline homebuilder sentiment reading sits 3 points above the spring 2020 low. Similarly, Present Sales and Traffic are down to the lowest level since April 2020 while Future Sales have actually surpassed those levels to now sit at the weakest reading in over a decade.
Last month, we highlighted how the geographic breakdown of sentiment was showing homebuilders in the Northeast being much more optimistic than their counter parts in the rest of the country. In November, that region joined the rest of the pack with a massive 17 point decline. That ranks as the third largest monthly decline on record behind a 19 point drop in June 2010 and the 45 point decline at the onset of the pandemic in April 2020. While that has not been enough to result in a new low, similar to sentiment in the Midwest, sentiment in the South is down to the lowest level in a decade. The same could be said for the West although it rose marginally month over month.
As for the reaction of homebuilder stocks, the iShares US Home Construction ETF (ITB) is trading 1.1% lower as of this writing. As shown below, after last week’s equity market surge on CPI in which the group moved not only above its 50-DMA but also its 200-DMA, ITB has continued to hold above its moving averages for now. Without much follow through on the post-CPI surge, any move above last week’s highs would be a welcome bullish sign, whereas the 200-DMA is looking to be the critical level of support for the time being. Click here to learn more about Bespoke’s premium stock market research service.
B.I.G. Tips – Strong Retail Sales
Bespoke’s Morning Lineup – 11/16/22 – Retail Divide
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“You always hear the phenomenon that people are trading down, that’s not happening in our space.” – Marvin Ellison, CEO Lowe’s (LOW)
“Based on softening sales and profit trends that emerged late in the third quarter and persisted into November” Target (TGT) Earnings Release (11/16/22)
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After some geo-political tensions yesterday afternoon following reports of a Russian missile strike on Poland, markets are breathing a sigh of relief this morning after NATO said that the missile likely did not come from Russia and wasn’t an act of aggression. Despite the eased tensions, futures are modestly lower this morning following a mixed batch of earnings reports. Treasury yields are lower on continued optimism that inflation pressures in the US are easing (we’ll see what Fed officials think throughout the day as a number of speakers are on the calendar), but over in the UK, CPI rose by a 40+ year high of 11.1% y/y.
It looks like it’s a morning of the haves and have-nots in retail. Target (TGT) noted in its earnings release that sales trends are softening after reporting weaker-than-expected EPS and sales. Lowe’s (LOW) seems to be operating on a whole different landscape, though, as the company reported better-than-expected EPS and sales while raising guidance. In an interview on CNBC, CEO Marvin Ellison noted that he has seen no signs of a consumer slowdown and no sign of trading down. Two large American retailers with two entirely different viewpoints on the consumer. It will be interesting to see which comments today’s Fed speakers decide to place more weight on. Getting back to the Lowe’s report, while Ellison noted that consumer trends remain strong, he also added that input prices are starting to trend down, so even from the strong report, there were some positive signs on the inflation front… but it’s just ‘one data point‘.
It’s only fitting that right in the thick of retail earnings season, we’re also getting the monthly update on Retail Sales for October this morning. The report came in stronger than expected with headline Retail Sales rising 8.3% on a y/y basis. While that’s strong at the surface, keep in mind that Retail Sales are a nominal reading. After adjusting for inflation, the y/y reading was up 0.5%.
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Daily Sector Snapshot — 11/15/22
B.I.G. Tips – Tech Takes a Back Seat to Old Economy Sectors
Bespoke Stock Scores — 11/15/22
Chart of the Day – 1,000 Days Later
Bespoke’s Morning Lineup – 11/15/22 – The Day Trader Turns 155
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“Hunches and the mysterious ticker-sense haven’t so very much to do with success.” – Edwin Lefèvre, Reminiscences of a Stock Operator
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.
We’re now in the thick of retailer earnings season, and this morning’s two big reports were from Home Depot (HD) and Walmart (WMT). The former is trading modestly lower after reporting better-than-expected EPS and sales while reaffirming guidance. WMT, meanwhile, is surging over 6% after a better-than-expected report and announcing a $20 billion stock buyback. More importantly, inventory levels at the company appear to be coming under control as management guided last quarter. It’s been a roller-coaster ride for WMT this year. After plunging this summer on a profit warning, the stock has recovered all of its losses, and based on where it is trading in the pre-market is now up on the year.
WMT’s positive report has contributed to a positive tone in the futures market. Equities are firmly higher, led by the Nasdaq which is up well over 1%, crude oil is marginally lower, and the ten-year yield is lower. This could all change at 8:30 with the release of the October PPI, but for now, rising stock prices accompanied by lower rates and lower oil prices are more than any bull could ask for.
The spread of the internet during the mid to late 1990s is traditionally regarded as a key catalyst behind the birth of day trading in the stock market. The internet spawned online investing which enabled anyone with available funds to set up a brokerage account and point and click their savings away. Day trading became popular during the dot-com bubble (and again during the COVID lockdowns when consumers flush with cash and nothing to do started trading on their mobile phones on apps like Robinhood), but day traders have been around much longer than that. The founding of the Nasdaq in 1971 and its electronic platform facilitated the practice of more rapid trading, but day trading traces its roots all the way back to the late 1800s following the invention of the ticker tape which was first unveiled on this day 155 years ago.
Prior to Edward Calahan’s invention of the ticker tape, the only way stock prices were disseminated was by word of mouth, through the mail, or by messenger, and you can’t really day trade when you’re getting stock quotes through the mail (even FedEx didn’t start until 1971). Calahan’s invention unlocked the opportunity for anyone with a telegraph line and enough money to pay for a feed to set up a ticker tape and get ‘real-time’ stock quotes (actually delayed by a minimum of 15 minutes but still real-time in 1800s terms). The ticker tape sped up the flow of information and enabled investors to make more well-informed decisions, but it also spawned the creation of bucket shops and other types of venues in cities across the country where traders could go and bet on the direction of stock prices intraday.
Throughout society and culture, we use all sorts of common phrases without even thinking about them (bite the bullet, hands down, etc). In the investment sphere, ‘don’t fight the tape’ is one of them. Without the invention of the ticker tape, there would have been no tape to fight for the last 155 years! Instead, investors would be ‘fighting the mail’ or the messenger (although from a messenger’s perspective being fought with certainly sounds a lot better than being ‘shot’).
When it comes to sentiment lately, consumers don’t seem to be fighting the tape. The latest example we can cite came in yesterday’s monthly update to the NY Fed’s Survey of Consumer Expectations. You may have seen some headlines highlighting the fact that both short-term and long-term inflation expectations ticked higher, but sentiment toward the stock market remains right near the lowest levels in the history of the survey (2013). As shown in the chart below, barely more than a third of investors expect the stock market to be higher one year from now. The only month with a lower reading was in June when it ticked down to 33.8%.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
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