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Reminder - the market closes at 1pm tomorrow ahead of the July 4th holiday.
Tesla sales surge in Q2, but I wonder if operating margins stabilized or continue to trend lower ?
https://www.nytimes.com/2023/07/02/business/tesla-q2-sales-deliveries.html
TSLA
Overstock.com to rebrand as Bed Bath and Beyond -
https://www.cbsnews.com/news/overstock-rebrand-bed-bath-and-beyond-bankruptcy-auction-coupons/
Seems like a savvy name change !
BBBY
Wade - how big a correction are you expecting for the S&P500 ? In what time frame ? What might be the catalyst to get the market moving lower ?
Wade: you're going miss out on loads of opportunities if you ignore undervalued stocks just because segments of the market are overvalued ! I've always invested in individual stocks, NOT the broader market indexes. For example, check out how well the homebuilders have done over the past year. They were super bargains a year ago. What a fabulous buying opportunity that was and they still look cheap now.
Wade - the FED has raised rates by 5% over the past 15 months. Even if they raise 2 more times by 0.5% in total, that's nothing compared to what they've done already. They've raised by 10x that much and the market is doing just fine. I doubt another 2 hikes will derail this bull market.
Yeah, the tech sector looks overvalued, but exclude those high PE stocks and forward PEs are quite reasonable. Plenty of stocks still trade at single digit forward PEs including 80 stocks in the S&P500.
I sure wouldn't want to be 100% short this market ! Even for an extreme bear like yourself, a 50/50 long/short strategy would be much more effective and balanced. Right now I'm about 80% long and 20% cash. Most of my holdings have single digit forward PEs and look undervalued.
FRD +2.45 to 12.40, sure would have made a nice day trade for anyone who bought at $11 this morning. I don't like the way management was deceptive regarding hedging losses, but they're not mentioning the gains either.
FRD +2.10 to 12.05, I should have picked up a few shares at the opening price of $11 .... nice quarter and guidance. Also they're finally making some big profits on their hedges rather than big losses as in the past. Book value rose by $4.85 to $15.65 per share y/y ! So on top of the $2.91 of annual EPS reported they had an additional $1.94 of hedging gains.
PCE lowest in over 2 years, but core inflation remains sticky -
https://www.marketwatch.com/story/u-s-inflation-slows-pce-shows-but-price-pressures-still-intense-27c683f4
BZH +2.62 to 27.26 after an upgrade by Wedbush -
fly -
Beazer Homes upgraded to Outperform from Neutral at Wedbush
Wedbush analyst Jay McCanless upgraded Beazer Homes to Outperform from Neutral with a price target of $32, up from $20. The analyst believes the rebound in new housing demand thus far in 2023 has been driven by a lack of existing home competition in most markets and by tools like mortgage rate and closing cost incentives that help buyers solve for the payment they need. Book values for the public homebuilders "are more secure now" versus the second half of 2022 when the market expected write-downs and GAAP losses to erode book values for all builders, the analyst tells investors in a research note. As a result, the firm anticipates Beazer's fiscal 2024 price-to-tangible book values should move closer to 0.9-times versus the current 0.7-times multiple. The stock's book value discount is unwarranted, contends Wedbush.
Crude oil is now $67/bbl versus $120 a year ago .... getting cheap, especially when adjusted for inflation. NG at $2.80/mcf is surprisingly strong given a relative inventory glut, but still way down from $10/mcf last August and below the 5 year average price. Low o&g prices have led producers to cut back on drilling with active rig counts trending down.
CL, NG
Homebuilders very strong today on surging sales in May - new all time highs for several stocks in the sector.
briefing -
New home sales surged 12.2% month-over-month in May to a seasonally adjusted annual rate of 763,000 units (Briefing.com consensus 665,000) from a downwardly revised 680,000 (from 683,000) in April. On a year-over-year basis, new home sales were up 20.0%.
The key takeaway from the report is that lower sales prices helped drive new home sales, which are counted when contracts are signed, to their highest level since February 2022.
The median sales price declined 7.6% yr/yr to $416,300 while the average sales price declined 6.6% to $487,300.
New home sales month-over-month/year-over-year by region: Northeast (+17.6%/+110.5%); Midwest (+4.1%/+40.0%); South (+11.3%/+22.0%); and West (+17.4%/-0.6%).
At the current sales pace, the supply of new homes for sale stood at 6.7months, versus 7.6 months in April and 8.3 months in May 2022.
The percentage of new homes sold for $399,999 or less accounted for 44% of new homes sold versus 49% in April and 39% one year ago.
MHO, CCS, BZH
Wade: Those 4 ETFs are down an average of 97% since the start of 2018, so your overall trading profits are amazing and due entirely to market timing. A buy and hold strategy over the past 5 1/2 years would have been a total disaster.
PRICE CHANGE FROM CLOSING PRICE ON 20171231
TKR % Change Cur Price Start Price
TZA -94% 29.18 490.8
SPXS -95% 15.16 299.6
SQQQ -99% 20.81 2151
SOXS -100% 11.27 19800
AVERAGE RETURN = -97%
CVS -2.02 to 67.83, I hope you're right about CVS .... they're reporting Q2 earnings on 8/2, so we have 5 weeks to wait ....
But those who went for a short RIDE found it to be very profitable.
WBA and CVS getting hit in pre-market after mildly disappointing earnings and guidance from WBA ..... these stocks are beginning to look like value traps .... they're cheap but keep getting even cheaper.
briefing -
Walgreens Boots Alliance misses by $0.07, beats on revs; guides FY23 EPS below consensus; immediate actions to improve profitability including $600 million of incremental cost savings (31.59 ) :
Reports Q3 (May) earnings of $1.00 per share, $0.07 worse than the FactSet Consensus of $1.07; revenues rose 8.6% year/year to $35.41 bln vs the $34.23 bln FactSet Consensus.
Co issues downside guidance for FY23, sees EPS of $4.00-4.05 vs. $4.45 FactSet Consensus. For the full fiscal year 2023, Walgreens Boots Alliance now expects adjusted EPS of $4.00 to $4.05 from $4.45 to $4.65 previously, reflecting challenging consumer and macroeconomic conditions, and lower COVID-19 vaccine and testing volumes.
The fourth quarter is expected to be negatively impacted by a higher effective tax rate, shifting U.S. consumer spending with heightened macro pressures, and the impact of a weaker respiratory season for both U.S. Retail Pharmacy and U.S. Healthcare. Despite these challenges, the Company expects adjusted operating income growth to accelerate in the fourth quarter from 0.6 percent in the third quarter.
For the fiscal year 2024, Walgreens Boots Alliance is providing preliminary expectations for low- to mid-single digit adjusted operating income growth, with the U.S. Healthcare and U.S. Retail Pharmacy performance more than offsetting headwinds from lower sale and leaseback program benefits, lower COVID-19 contribution, and the sale of holdings in AmerisourceBergen.
Adjusted operating income growth is expected to outpace adjusted EPS due to a higher tax rate and a negative impact from non-controlling interest.
The Company is taking immediate actions to drive sustainable growth including:
Raising the Transformational Cost Management Program target from $3.5 billion to $4.1 billion in cumulative savings by fiscal 2024; expecting cost savings of $800 million in fiscal 2024
Implemented capital and project spend reductions; working capital optimization program launched, benefiting fiscal 2024
Advancing portfolio simplification to pay down debt and fund strategic initiatives
Announcing swift actions to improve the U.S. Healthcare path to profitability, including realigned CityMD costs, accelerated VillageMD patient panel build, aggressive integration of prior Summit Health acquisitions, upgraded VillageMD management, and an increased and accelerated synergy target for VillageMD/Summit Health
Accelerating synergies between U.S. Healthcare and Walgreens operations
RIDE -1.60 to 1.16, files for bankruptcy .... another EV startup bites the dust - this was a $470 stock early in 2021. What a fall from grace !
https://www.wsj.com/articles/ev-startup-lordstown-files-for-bankruptcy-5c7a0f46?st=vps7f9pcf4l1hxy&reflink=desktopwebshare_permalink
Weak oil and gas prices are hurting profit margins of producers -
https://www.ft.com/content/26bd3376-c4b4-4257-98e1-93b29706d2d8?desktop=true&segmentId=7c8f09b9-9b61-4fbb-9430-9208a9e233c8#myft:notification:daily-email:content
TSLA - it will be interesting to see whether the margin pressure eases in Q2 which ends this Friday ..... earnings season is just around the corner.
VTLE +.65 to 42.55, has been a dog, but is super cheap at just 2.1x analyst 2023 EPS estimates and the chart show solid support in the low $40's ..... I've been adding shares, but aggressively writing covered calls which I'll be rolling over monthly. Same for CPE.
TSLA -15 to 241 after downgrade by Goldman -
briefing -
Tesla: Goldman steps to the sidelines citing difficult pricing envm't for new vehicles (253.19 -3.41) :
Analyst Mark Delaney added, "We're downgrading Tesla shares to Neutral from Buy, as we believe the stock now better reflects our positive long-term view of the company's growth potential and competitive positioning. While the primary reason for the change is that we think the market is now giving the stock more credit for its longer-term opportunities post the recent rally, we're also cognizant of the difficult pricing environment for new vehicles that we think will continue to weigh on Tesla's automotive non-GAAP gross margin this year. We attribute the recent move higher in shares (which exceeded our expectation) to a combination of factors including relatively solid sales in April and May, less price declines/discounting in 2Q than investors (and we) had expected, incremental IRA credits, several companies now planning to use Tesla's charging network, and investor focus on companies that benefit from AI. While we raise our estimates reflecting a more moderate rate of price declines going forward (with our new estimates about in line with consensus for 2Q23 and 2024/2025 but below in 2H23), other contributors to the recent move in the stock such as opening parts of the charging network and the impact of AI on Tesla's full-self-driving product are likely to have a more limited near-term contribution to EPS."
NYFANG up 241% versus a mere 21% for the Russell since start of 2018 ..... microcap indexes have fared even worse -
PRICE CHANGE FROM CLOSING PRICE ON 20171231
TKR % Change Cur Price Start Price
$NYFANG 241% 7598.68 2226.06
$NDX 132% 14867.45 6396.42
$RLG 100% 2711.1 1352.37
$COMP 96% 13502.2 6903.39
$SPX 63% 4365.69 2673.61
$SPXEW 46% 5960.22 4092.21
$IXBT 43% 4802.82 3351.27
$DJT 39% 14739.08 10612.29
$DJI 37% 33951.52 24719.22
$MID 35% 2558.21 1900.57
$SML 28% 1197.96 936.26
$DJU 28% 923.91 723.37
$RLV 25% 1528.69 1222.64
$RUT 21% 1863.01 1535.51
$RUMIC 16% 693.48 597.98
$W5KMICRO-5% 13404.11 14123.5
Strength in new home construction surprises some economists -
https://www.nytimes.com/2023/06/26/business/economy/housing-market-construction-cost.html
CCS, MHO, BZH
LPI symbol changed to VTLE in January due to a corporate name change .... they are the same company.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=170895543&txt2find=lpi
By shorting both you are fully hedged only for a single day .... on day 2 you'd have imbalanced positions since one would be larger than the other - hence you are no longer fully hedged.
Example - if NG moves down 10% for 2 days in a row -
$1000 short in BOIL would be a $640 short. ($1000 x .8 x .8)
$1000 short in KOLD would be a $1440 short. ($1000 x 1.2 x 1.2)
So your net LOSS in 2 days is $80 if you cover both short positions.
The problem with shorting BOIL and KOLD are multifold .... firstly KOLD can be hard to borrow .... currently 13% annualized at IB. Secondly there's always some risk of a forced buy in if the shares are no longer available for shorting. Thirdly, while these ETFs inevitably decline over the long term, they can also rally several 100% in the short to midterm, which can be very painful if one is short. Clearly shorting should be done only with very small positions.
BOIL = 62, KOLD = 62, it's a race to the bottom after BOIL's 1 for 20 reverse split. Historically the decay rate for BOIL is greater due to the typical contango in the futures market .... eventually they'll both have another reverse split ! In the long term, it's better to be short than long these leveraged NG ETFs.
5 Years of substantial underperformance for the Russell 2000 - I wonder if there's some overdue outperformance in the years ahead ? Or have small caps become chronic underperformers ?
The Russell 2000 has lagged behind larger stocks by more than 7 percentage points annually over the past five years.
https://www.wsj.com/articles/hopes-rise-for-rally-in-small-stocks-after-historic-underperformance-b15a1d20?st=bubx7vf7bncc303&reflink=desktopwebshare_permalink
RIVN (14.36) was priced at $78 for the Nov 2021 IPO which raised nearly $12 Billion. The underwriting syndicate of 22 investment banks led by Goldman Sachs, Morgan Stanley and JP Morgan earned $169 Million, so of course they had very optimistic price targets ! They were very well paid to be optimistic. Investors got caught up in the hype, ignoring the huge challenges facing the startup. On the other hand, the shorts have made lots of money. I wish I had shorted RIVN at $180.
RIVN (14.62) was a red hot EV IPO just 19 months ago and traded as high as $180, but is struggling to sell vehicles and will need another big cash infusion next year to avoid going under .....
https://www.wsj.com/articles/rivian-tries-selling-trucks-out-of-its-factory-parking-lot-1c44a17f?st=9f6vne59bs484v0&reflink=desktopwebshare_permalink
Homebuilders are partly benefiting from high mortgage rates because existing homes for sale are suppressed because owners don't want to give up their low rate mortgages .... when one sells a home to buy another, the original mortgage must be paid off and a new mortgage issued at current interest rates. Ouch.
Bloomberg -
The number of homes for sale in the US fell to record low levels in May, according to real estate brokerage Redfin Corp., as high mortgage rates continue to deter people from moving.
Active listings fell 7.1% on a seasonally adjusted basis in May, and were down 38.6% from pre-pandemic levels, according to Redfin’s Housing Market Tracker. The brokerage said just 1.4 million homes were up for sale in May — lower than any month on its records, which date back to 2012.
Many homeowners are opting to stay put as moving means giving up a cheaper mortgage. Rising interest rates pushed the average 30-year-fixed rate to 6.43% in May, Redfin said, up from 5.23% a year earlier, and more than double the 2.65% rate in May 2021.
The low number of homes for sale has driven price increases in some markets. Nearly half of Redfin’s offers were met with bidding wars in May, while more than two-thirds of homes sold went for above list price.
But new builds could help alleviate those high prices, and the listings scarcity. US housing starts unexpectedly reached their highest level since 2016 in May, according to government data.
CCS, MHO
KBH down 1% after hours .... annual revenue guidance was raised, but as you indicated, represents a sequential decline from the 1st half of their November FY. However typically they beat guidance as they did this quarter. Clearly good news is already priced in with the stock up 63% YTD. Maybe the sector is due for a correction ?
briefing -
KB Home beats by $0.61, beats on revs, home deliveries increased 6%, raises full year housing revenue guidance (52.03 +0.98) :
Reports Q2 (May) earnings of $1.94 per share, excluding non-recurring items, $0.61 better than the FactSet Consensus of $1.33; revenues rose 2.6% year/year to $1.76 bln vs the $1.43 bln FactSet Consensus.
Homes delivered increased 6% to 3,666.
Average selling price decreased 3% to $479,500.
Excluding inventory-related charges, the housing gross profit margin decreased 390 basis points to 21.4%, mainly due to price decreases and other homebuyer concessions, together with higher construction costs and a shift in the mix of homes delivered.
Net orders for the second quarter increased 1% to 3,936, a significant improvement to the 49% year-over-year decrease in the 2023 first quarter.
Guidance: Co raises guidance, sees FY24 housing revenue of $5.80-$6.20 bln vs. prior guidance of $5.20-$5.90 bln. Average selling price of approximately $485,000 vs. prior guidance of $480-$490K. Housing gross profit margin of approximately 21.2%, assuming no inventory-related charges.
WKEY balance sheet shows no holding of LAES shares.
https://www.sec.gov/ix?doc=/Archives/edgar/data/1738699/000119380523000625/e618522_20f-wisekey.htm
It's a remarkably imbalanced market this year with the S&P Equal Weight Index up just 4% YTD whereas FANG stocks along with NVDA and TSLA have been huge gainers -
YTD -
TKR % Change Cur Price Start Price
$NYFANG 75% 7785.94 4448.07
$NDX 38% 15070.15 10939.76
$COMP 31% 13667.29 10466.48
$RLG 27% 2734.78 2158.19
$SPX 14% 4388.71 3839.5
$DJT 10% 14735.47 13391.91
$W5KMICRO6% 13450.79 12683.47
$RUT 6% 1866.7 1761.25
$MID 5% 2561.26 2430.38
$SPXEW 4% 5967.72 5739.53
$SML 4% 1199.6 1157.53
$BTK 3% 5443.05 5281.1
$DJI 3% 34053.87 33147.25
$RUMIC 2% 694.5 678.57
$RLV 2% 1531.18 1497.12
$NBITR 0% 4488.8 4474.26
$IXBT 0% 0 0
$NBI 0% 4208.5 4213.13
$DJU -5% 916.26 967.4
I think new home construction is in a long term uptrend. Since the housing bubble of 2008, annual construction has been way below what it was in the years preceding it .... the population has grown in the meanwhile and there's a lot of catching up to do, which will take years. If we get a recession there'll be a temporary lull in demand, but the positive long term outlook will remain intact, imho.
https://ipropertymanagement.com/research/housing-starts
CCS, MHO, BZH
BZH +.48 to 22.79 in a strong homebuilder group this morning on news of much higher than expected housing starts for May. BZH has a somewhat higher than average debt/equity ratio for the sector, but also is the cheapest homebuilder both on the forward PE of around 5.7 and price/book of roughly .70 - it will be interesting to see the KBH earnings report later this week.
briefing -
Total housing starts surged 21.7% month-over-month to a seasonally adjusted annual rate of 1.631 million (Briefing.com consensus 1.400 million) following a downwardly revised 1.340 million (from 1.401 million) in April. That is the strongest pace of starts since April 2022. Total building permits increased 5.2% month-over-month to a seasonally adjusted annual rate of 1.491 million (Briefing.com consensus 1.425 million) following a revision to 1.417 million (from 1.416 million) for April.
The key takeaway from the report is rooted in the monthly growth for single-unit permits (+4.8%) -- a leading indicator -- and single-unit starts (+18.5%), which is a good sign for a supply-challenged housing market overall and a seemingly good portent for homebuilders' sales and earnings prospects.
GERN peaked at 3.74 on 6/9 and then declined steadily. Those drug trial halts began on 6/17, so probably unrelated to the GERN correction. It's noteworthy that GERN is a somewhat momentum driven stock with persistent trends, both up and down, so 3.74 simply marked a trend reversal with traders taking profits.
GERN +.18 to 3.18, is up nicely today on news of the NDA submission to the FDA. Maybe this marks the start of a new uptrend ? At least there does seem to be technical support at around $3.
PR -
Geron Corporation (Nasdaq: GERN), a late-stage clinical biopharmaceutical company, today announced the submission to the United States Food and Drug Administration (FDA) of a New Drug Application (NDA) for imetelstat for the treatment of transfusion-dependent anemia in adult patients with low- to intermediate-1 risk myelodysplastic syndromes (MDS) who have failed to respond or have lost response to or are ineligible for erythropoiesis-stimulating agents (ESAs).
“This pioneering achievement to submit the first New Drug Application to the FDA for a telomerase inhibitor reflects the dedication, commitment and teamwork of so many people who believed targeting telomerase could make a significant difference for patients,” said John A. Scarlett, M.D., Chairman and Chief Executive Officer. “We are deeply committed to addressing the unmet needs for lower risk MDS patients, who often suffer from transfusion-dependent anemia.”
The NDA submission is based on results from IMerge Phase 3, in which the primary endpoint of 8-week transfusion independence (TI) was significantly higher with imetelstat vs. placebo (P<0.001), with median TI duration approaching one year for imetelstat 8-week TI responders. Mean hemoglobin levels in imetelstat-treated patients increased significantly (P<0.001) over time compared to placebo patients. Further, statistically significant and clinically meaningful efficacy results were achieved across key MDS subgroups: ring sideroblast (RS) status, baseline transfusion burden and IPSS risk category. Safety results were consistent with prior imetelstat clinical experience.
As allowed under imetelstat’s Fast Track designation in lower risk MDS, Geron has requested that the FDA grant Priority Review of the NDA. Under standard practice, Geron expects FDA communication in 60 days whether the NDA was accepted for review and the timeline of such review (i.e., priority or standard). Additionally, based on IMerge Phase 3, Geron expects to submit a Marketing Authorization Application (MAA) in the EU in the second half of 2023.
Reminder - Market is closed Monday for the new Juneteenth Holiday.
I just sold my remaining SPXS and invested the proceeds by adding to my positions in BZH (forward PE 5), NEX (forward PE 4) and CVS (forward PE 8).
I no longer own any short ETFs - good riddance !
S&P500 +42 to 4415, it's becoming a broad market rally with the Russell outperforming since 6/1 ..... I had small hedge positions in short ETFs TZA, SARK and SPXS and covered about 80% when the S&P broke over 4200 .... I may cover the rest soon. Why fight this market ? I'm having plenty of success with low PE, undervalued small caps. There are plenty of single digit PE stocks still out there. It's been MUCH better to invest in those rather than the short ETFs.
I also had a position in FNGD which I lost about 25% on before covering in early May at around $16.50 ..... glad I covered because it's now down to $8.74. YIKES. The shorts are getting crushed !
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=171932729&txt2find=fngd