$SPY... comments on my quarterly 400 company review for Q1 or for non-standard FY, the Period Covering Mar 15th through May 30th. Why Mar 15? B/c Q4 starts a little later and takes longer.
I finished the 80% earlier this week and then began rebalancing my own stuff. Then $GS put out a piece and beat me to the punch with a few of my highlights (i'll like below).
The first has to do with how strong this earnings report was. I do not use street estimates, particularly in this very weird period of time where uncertainty is distorting things, AND ALSO, the street is not really doing what it historically did to estimate thoughtfully (*sorry, not sorry, do better).
1) The AI build is very real. This is discussed in the $GS piece but what is remarkable is that a few companies hinted that it is no longer the hyperscalers. There are very real use cases for many industries that result in immediate monitizable outcomes.
2) Healthcare Labs (Example of item 1). $LH and $DGX for example, finally caught a break with single-digit revenue growth and low teens net income growth. This after spending most of the decade in a nasty spot due to both COVID and medicare medicaid "stuff." What's intriguing about what they had to say about AI is the types of tests that are now possible that weren't before. The drive, therefore, is to then move ALL collections into a digital format, such as X-rays. What is possibly by doing this in the way of AI is tremendous, and it will create real tangible benefits to Drs, diagnoses, and - ultimately the inherent liability hospital networks carry. That same sort of thought process (very tangible, immediately cost-improving or revenue-generating) in decision-making is driving HC equipment as well.
3) The speed of monetization is faster than folks understand. Item 2 illustrates a point that is lost in the naysayers of AI right now. Namely, that the speed between new product and monetization has meaningfully changed in many industries. This is faster than what happened when the world moved to even more agile forms of internal innovation. And this implies that the second wave of AI spend (one that is NOT driven by the hyperscalers alone) has already begun.
4) Energy Beverages. I have no idea what is driving this passion toward energy beverages, and no one has an explanation. If I had to guess, it contrasts with what I'm seeing in Alcohol. Nonetheless, $MNST $KO $PEP all reported that thematically, and I have subsequently taken a position in $CELH, which had a blowout quarter
5) Consumer Discretionary. More than one industry reported that consumers are hanging in there but that it is a tail of 2 worlds. The card companies all said that the hit to gas was not changing overall behaviors meaningfully. And for the most significant weakness in Discretionary Staples was all consolidated toward the most fragile parts of the economy. That said, the consumer is far more picky.
6) Staples. Recently, poor renamed Consumer Defensive was anything but though. Food-related staples were an awkward story. This is not a GLP1 thing as some might argue. Really, it's just that they can't catch a break. In some cases, it was a particular ingredient's rising cost. In others, it was the packaging that did them in. In a third mix, it was folks just not wanting what they were selling. Energy drinks were in demand. And IMO there isn't a great theme here that flips the switch.
7) Industrials. Largely speaking, did great. Because of the earlier part of this decade, most were able to pass through fairly well. In some cases, there is a lag, and you do have some weakness in leveraged end markets. But because energy and construction, particularly for data warehousing, were so strong, the industrials did fine, EVEN without the Residential housing pick-up.
8) REITs. This was a mixed bag, but mostly good. CRE is really benefiting from the 5-year lack of additional supply and a reconstitution into the Sunbelt, aka Red states. (Sorry, the picture in blue vs red is pretty significant.) Resi is mixed depending on geography as well. But again, you have such a limited build occurring. And I see people arguing that it's not the rates that are doing it, it's the uncertainty. But to me, that's a red herring. If rates were lower, you'd take the uncertainty risk in most cases.
9) Utilities. 100% are demonstrating the need to build. And it's not just built to generate energy. It's also built to enhance the grid. As a result, the parts of Industrials and tech that deal with power storage both showed great numbers this quarter, in line with a demand that was willing to offer margin to get things done faster.
10) Materials. Very strong b/c of the dynamics also driving energy and industrials. Chemicals were obviously going to a few awkward players due to SOH. But those guys were already struggling before this scenario. Mostly, they benefited from tariffs, anything that hit non-US competitors, and the massive Industrial, Utility, and Energy demand.
11) Capacity. For all of the strong areas, it's worth mentioning that there is a slow thoughtfulness to building capacity. This is why I still argue for rates, though I get that the SOH makes it harder. For a lot of these industries, little to no capacity has been built in this decade. And in some cases b/c the industry left US shores, the situation is quite tight.
12) Inventory Build. That said, b/c of the Tariffs and the many things that happened at the beginning of this decade, most are running inventories that are healthy enough to pace out the impact of Q1's geopolitics. It's really amazing given how much of the first 2 decades of this century were about just-in-time. Supply chains weren't this fragile this time around. But my impression is that this is a quarter by quarter phenomenom.
13) Food Inventory. As an example, Fertilizer, which got a lot of airtime, is mixed. In some cases - as with $MOS - it's just springloading. The farmer has a choice whether to apply or delay until next year. With $CF (nitrogen), it's also mixed. The US is the low-cost provider, and so it comes down to what will be used here vs. what we will export. And recall, if it's on US shores and falls under Ag there are unique solutions that always crop up. As for the actual plants, it's always hard to say in spring. We - unlike Central/S. America - really do have mostly 1 season for harvest.
14) Software. This is the most confused area of Tech and it's player by player because of AI. In some cases, AI offers fundamentally different approaches to doing things such that strategies are undergoing very meaningful changes that the organization are still trying to absorb. In other cases, this software was right into the sweet spot. This quarter has been about figuring out who is in which strategic position.
11) Data. Unambigiously, the data providers both in Tech and Finance were doing great.
12) Computer Hardware/Semi/Semi-Equipment. We all saw $DELL. The demand is there, and it is very real. But I really have to express how much that demand is also showing up in Real Estate, Industrials, & Materials. And recall, this is the S&P 500, and these companies are global.
13) Finally, Energy & Mining, there's no real need to comment on, given SOH has demonstrated what the US can do with its natural resources. I would mention that a lot of folks are only just learning about the beautiful geology of America. And as a result, they are not aware that for the US, it's not about not having resources, but which federal lands we are comfortable contributing to this effort. I do hope anyone with a thesis here just takes a moment to look at the US map of federally owned land and then juxtapose it to the hundreds of US geological surveys that exist.
Final Remarks
Overall, scale of 1 to 10, this mix of positive vs negative is around an 8.5/9 healthy level relative to this decade.
It feels like these companies are "chomping at the bit." Whether they need more less staff is hard to say despite the newsflow from specific industries.
My gut feel is that a rate cut would be applied to building capacity rather than just the share buybacks we saw in previous centuries. THOUGH, in some very specific cases, you'll get the buy-backs. This is particularly true if you cannot get the uncertainty down in certain very specific end markets (Consumer Discretionary, media, Energy, Financials, etc).
I think most are trying to figure it all out on headcount in a very changing, transforming environment. The image below is a chart summary I use to keep up with my progress.
I begin the new quarter on June 1st, regardless of what Fiscal quarter it is for the companies. Have an excellent weekend.
GS piece I mentioned. https://t.co/MLEseBeZhE
$AXP... wow... what a red tape Glad I took some profits... hmmm... let's see how silly this gets...
I only sold b/c I was overweight financials and neede to make some room in general to have summer cash. At 19x this isn't expensive.
Earnings season doesn't start again until mid-July so it's very much a day traders market. let's see how silly this gets.
$AXP, finally sold out of my $AXP at a very boring gain of about 24% for a 1-year holding.
That makes me happy, but I know a lot of you are doing things in this semi-world that are far better than that.
I really only bought it b/c it seemed oversold. I have too much financial exposure right now. Trying to diversify a bit. The quarter was fine, and many things on the horizon could take the company higher. It's still only at 19x.
I might do something with options on this, though.
IDK... I'm going to go at this very slowly.
It wasn't a stellar quarter, but it was bad. I think the freak out is related to all distribution models and the price and dynamics of what is going on with long haul trucking.
But it also could be as straightforward as more sellers than buyers. Hard to say. But I like the CEO a lot and the company is one of few that is giving the $WMT model a run for it's money. After all the origin of $WMT (not what it is now) was to be the consumer spot for rural communities. You can see from just the size and mix of the garden section of $WMT how far it's moved from its origins in this regard (not all, but just this).
$TSCO... taking a starter position, very nervously b/c my goodness...
It's trading at 14x forward. I'll likely put a new limit order in where it makes sense technically rather than fundamentally... It's gonna be a bumpy ride.
@grok@Rob__2345@JonathanCohn@grok... can you more directly explain why someone with a political background (some senator) cannot do financial analysis or assess an IPO
I'm not so sure he will understand what you posted.
@Rob__2345@JonathanCohn@grok... can you explain from the previous post why i've responded as I did?
Follow the entire thread and help him understand where the logic broke apart.
https://t.co/36zvBc38vq
You make too much of "governing and elected democracy." The core skill is still leadership, and if you think no give and take happens in a public corp, then you are ignorant.
If you think there is no reading of by-laws in a public company, understanding the board or otherwise that the CEO of a company answers to no one, then you are also as guilty of not knowing what you're talking about as the OP.
Plenty of people go from the private to the public sector without batting an eye for that reason. But very few in the other direction, for obvious reasons, not the least of which is that, unlike in public service, you can't just make your customers (the taxpayers) eat your mistakes.
But you know what the core skill set of making a statement of related to an IPO is, especially if you are then going to suggest some wrongdoing? Financial statement analysis and biz strategy. An editor-in-chief of a political media company has questionable abilities at best. They are totally different professional trajectories, and the OP isn't like those of us who are doing it after our time in finance.
No friend. This wasn't an insult. I can't argue with you further b/c I realized you have an education gap, and I don't engage in that behavior.
My discussions always assume the person I'm discussing it got a certain level of education, either directly or indirectly through life experience.
Truly friend, I think you might want to review the whole part of logic that relates to Ven Diagrams and subsets. If it wasn't a part of your education, I'd just add it back in. Plenty of youtube videos. It will help. You can even have Grok create a Ven Diagram of what I said to help explain where you might be getting it wrong. No worries. have a great Wednesday.
I would say it's both run out of money and also have not the talent or ability to come up with solution.
The two are correlated, but technically different things.
After all, those who can do, and those who cannot tend to criticize others who can.
I don't mind any of that. I just want political people who have no meaningful business knowledge of the capital markets to stop posting nonsense that makes it into the FinX areas.
I don't post on Nascar races. He shouldn't post on IPOs.
I do post on politics, b/c that actually is a part of my undergrad & graduate degree.
Kirk... I'm a fan and sometimes I think X beats you down a bit.
Might I suggest that what the good Pope meant was that it should "serve human dignity" meaning to work with a moral compass toward what elevates/collaborates rather than merely replaces human effort.
My suspicion is your own views are not so far from this.
So, for example, if you have a senior his age who no longer has full mobility, can AI assist by reducing cognitive load while this individual deals with the additional physical pain that comes with mobility reduction?
Can AI simplify inference of X-rays for doctors (once digitized) to improve analysis of labs, thereby enabling more labs faster (vs just replacing doctors and lab techs)?
I know there are those who do directly attack your views, but I think here, the Pope is simply concerned that the focus of many isn't on the positive potential of all beings living in harmony...It's simply on the uglier side of industrialization (scale and replacement of labor).
The truth is, all major tech transformations have always made new and often more engaging roles that allow for greater human empowerment.
Have a happy Wednesday, my friend :)....
@Rob__2345@JonathanCohn Wow.... logic... not your thing...
Alright. I'm out on this one. If you can't find the flaw in your own logic after what I wrote, then you are a special one.
In the meantime, might i suggest you review subset as a concept... You appear to have missed that one in grade school.
@Thatguysince74 It's not the S&P 500 so I've not looked at it. I am trying to figure out which categories are doing ok, b/c $EL did not fare as well, as $ULTA...
Hmmm... interesting...
$ULTA... down 3% on a decent Q
Rev + 11%, Net Inc + 15%, 5.3% CompSS
And if i use the mid of guide, which is $28.50/share, then it's trading at 16x, which isn't bonkers. TBH.
It was a great quarter all around. I would say I am not thrilled that the new management team doesn't show the growth by category. It makes it all a little hard to understand where the growth is coming from. I don't feel this was clearly articulated on the call either.
But at 16x if it gets weird here, I do start to get interested. They are still mainly US based and recent events with tariffs and otherwise does actually help them unambigiously across categories.
@electricangles hahaha... you're welcome to shoot your shot... and if I had more female followers, I'd try to match up all the $SOFI guys to more ladies....
@DeuceCabooseSki Well, the good news is that you have both. Ulta is a great company. It's had an awkward time of things, but even if I might criticize management (that's the role of the FinXers, no) , I do think they do a decent job.
You make too much of "governing and elected democracy." The core skill is still leadership, and if you think no give and take happens in a public corp, then you are ignorant.
If you think there is no reading of by-laws in a public company, understanding the board or otherwise that the CEO of a company answers to no one, then you are also as guilty of not knowing what you're talking about as the OP.
Plenty of people go from the private to the public sector without batting an eye for that reason. But very few in the other direction, for obvious reasons, not the least of which is that, unlike in public service, you can't just make your customers (the taxpayers) eat your mistakes.
But you know what the core skill set of making a statement of related to an IPO is, especially if you are then going to suggest some wrongdoing? Financial statement analysis and biz strategy. An editor-in-chief of a political media company has questionable abilities at best. They are totally different professional trajectories, and the OP isn't like those of us who are doing it after our time in finance.