The world was a very different place in 2003, the year Tesla Motors was founded. The standard in American cars was huge SUVs. Large SUVs at the time were perfect in part because gas was so cheap, and they could fit an extended family. Yet, here came Tesla, a company urging buyers to be sustainable to use electricity instead of gas. Despite a lengthy series of infamous setbacks over the decade, Tesla has arrived. Standard and Poor’s (S&P500) disclosed Tesla is to be added on December 21st. The addition of Tesla ushers in a new era for the index funds.
Index funds are viewed in part as the safest assets American households seeking to participate in the market can acquire adjacent to Bonds and CDs. This “safe” factor is in part why this new addition to the S&P 500 is a milestone not only for Tesla but the electric vehicle sector as a whole. Fund managers that have been short/bearish on Tesla have constantly critiqued the company for being too overvalued and have accused Tesla of currently not having the proper financials to justify various market price valuations. This inclusion makes Tesla as American as apple pie. Once added, pension funds and retirement accounts alike will own a small portion of Tesla. Consecutive quarters of profitability, reducing production cost, and a successful expansion into Asia have now earned Tesla legitimate entry.
This inclusion comes when persons like Cathy Wood’s have heavily criticized classic index funds like Standard and Poors for not including companies that she would describe as innovative. Wood has critiqued Wall Street for undervaluing many of tech companies’ intangible assets like intellectual property (i.e., arthrograms, patents). Wood’s who manages $ARK Invest; the innovation ETF has consistently been a long $TSLA. And has publicly disclosed her PT for $TSLA was $7,000/share (pre-split) or a price of $1400/share post-split.
In the weeks to come, Tesla is likely to rally in anticipation of inclusion into the index. Yet, similar to its rally in anticipation of its stock split, it is unlikely the rally will continue after its inclusion. Historically, companies added to the S&P 500 are likely to experience a run-up after newsies are made public, followed by a pullback once the inclusion is complete.
On March 19 of 2019, the Boeing 737 max was grounded by the FAA post the Ethiopian Airlines crash. The incident happened on March 10, 2019; at this time, Boeing’s share price was trading right around the $400 mark. This was high for the past 12 months. In recent news this week, the FAA has released that the Boeing 737 max is now set to return to the skies. The 737 max’s return provides a lot of clarity for investors. The aircraft has and will continue to be a pivotal piece of technology in mass commercial aviation. With its new MCAS (system dedicated to providing additional sensors to the aircraft to help navigate through unusual weather) system, Validation program, Pilot training, modifications from airline input regulatory review as well as a grueling inspection process, it is safe to say that the 737 max is back and better than ever. However, it would be naïve to say that the 737 max’s return solely will directly correlate to a jump in its stock price. Expect heavy fluctuation In the stock shortly due to several factors.
One of the biggest factors that investors should be aware of is the mass cancellation of 737s on backorder. Due to COVID-19 airlines have taken a gruesome hit, it should be kept in mind that at this point, there are hundreds of 737 orders that are now pending cancellation. The airlines cannot afford to pay for these aircraft due to the lack of business due to COVID-19. As it stands now, 20% of Boeing‘s backorder is now pending cancellation around 780 Aircraft. There is still 3,120 737 max to be sold; this will be monumental for Boeing. With all this being said, it is with no doubt that the airline industry will return as we begin to enter a post-pandemic world. As people begin to travel, more airlines will rely heavily on the 737 Max’s capabilities. Expect the high demand for these aircraft to run parallel to a flux in $BA share price in the long run.
Tuesday, November 17th
WALMART – $WMT
Like other major brick-and-mortar stores, Walmart has seen a decline in overall foot traffic to both Sam’s Club and Walmart stores. What is important to understand is the increase in online shopping from Walmart. The pandemic has accelerated online grocery and general merchandise shopping for the entire retail sector. These key areas will drive Walmart into 2021.
Same-store sales rose 6.4%
E-commerce soared 79% and contributed approximately 570 basis points to comp sales.
Comparable sales at its discount unit Sam’s Club were up 11.1%
Reduced tobacco sales negatively affected comp sales by approximately 4.2%
Sam’s Club e-commerce sales grew 41%
Membership income increased 10.4% at Sam’s Club.
Total revenue was $134.7 billion, an increase of $6.7 billion, or 5.2%
Walmart International net sales were $29.6 billion, an increase of 1.3% after currency.
Consolidated operating income was $5.8 billion, an increase of 22.5%
Operating cash flow year to date has been strong and increased approximately $8.3 billion versus last year to almost $23 billion
Walmart has had strong all-around growth in Q3. Even after currency exchange expenses, its international sales have grown. Shoppers are spending more at Walmart per visit than pre-pandemic. Its online presence has allowed it to compete with Target and Whole Foods for store pickups, which have expanded to 3600 stores with same-day delivery at 2900. Walmart is one of the largest corporations in the US with good economies of a scale capable of continued growth during and posts this pandemic, and it’s apparent in their report.
HOME DEPOT – $HD
Due to the closing of malls and stores that were not deemed essential, most of the retail sector at the start of the pandemic experienced a major decline in revenue. $HD Home Depot, however, unlike many other retailers, has seen an increase in revenue in part because it is classified as an essential business and due to many more persons working from home. More persons working from home in a pandemic has led to more homeowners renovating their living space to make it more suitable to work from home.
Actual earnings per share $3.18
$3.06 expected earnings per share
33.54 billion revenue
32.04 billion expected
Net sales increased by 23%
33.5 billion in net sales (Q3 2020)
27.2 billion in net sales (Q3 2019)
Average customers sale rose by more than 10%
Similar to earnings last quarter Home Depot beat analysts’ expectations. Yet, this beat resulted in a 1%+ decline in the share price. Today Home Depot has beat expectations, but this beat has lead skeptics to question how well $HD will perform in a post-pandemic economy. Will customers still feel the need to renovate their homes in a post-vaccine economy, and if so, will net revenue see an increase or decrease when laborers can ditch their home offices and return to the workspace.
NIO – $NIO
Electric vehicles are gaining popularity globally. Sleek designs and multiple countries publicly announcing their push towards EV to come a hyper-competitive atmosphere in the EV market. NIO is based in China, which is an advantage in terms of potential market share.
31,430 vehicles delivered (10/31) 111% year-over-year growth
Adjusted loss per share 12 cents
Expected loss per share 18 cents
Revenue: 666 million v. 663 million expected
Actual gross margin: 12.9%
Expected gross margin: 11.25%
Value investors may have difficulty in understanding NIO’s current valuation relative to their current earnings. Nio’s current price is not based on what it is today but is based on what NIO could be in the not-so-distant future. This valuation indicates their current growth as of October 31st; 111% year-over-year growth gives NIO a promising future. NIOs current gross margin is higher than expected, which will likely aid NIO in scaling up to higher production numbers and ensuring profitability on vehicles as demands grow.
Wednesday, November 18th
Nvidia – $NVDA
Nvidia is the premier GPU producer. Their cards are years ahead of the competition, and that’s evident in their $300 Billion market cap compared to their competitor AMD’s $100 Billion market cap. They are also extremely integrated into the data center sector, which is their best performing division in terms of profits to expenses and growth.
Record revenue of $4.73 billion, up 57 percent Y/Y
Record Gaming revenue of $2.27 billion, up 37 percent Y/Y
Record Data Center revenue of $1.90 billion, up 162 percent Y/Y
GAAP earnings per diluted share for the quarter were $2.12, up 46 percent from $1.45 Y/Y and up 114 percent from $0.99 Q/Q
Third-quarter revenue was a record $1.90 billion, up 8 percent from the previous quarter and up 162 percent Y/Y
Shared news that Amazon Web Services and Oracle Cloud Infrastructure announced the general availability of cloud computing instances based on the NVIDIA A100™ GPU, following Google Cloud Platform and Microsoft Azure (not sure what we want to do about hyperlinks. They do lead to articles with the announcements.)
Extended its lead on MLPerf performance benchmarks for inference, winning every test across all six application areas for data center and edge computing systems
NVIDIA’s GPU segment is taking off rapidly and better than ever before. As new games come out that utilize ray tracing, the RTX GPU becomes more relevant. Unseen loads of everyday life are being automated, put online, or requiring exact and technical technological inputs from GPUs and CPUs in our society. Of these two, they lead in GPU technology, and the acquisition of ARM will allow NVIDIA to fully compete with AMD in the CPU division with their state-of-the-art processors. CPUs were the only division NVIDIA was not leading in. NVIDIA has excellent growth drivers that continue to accelerate business growth and push the company forward well into the future.
Thursday, November 19th
Workday – $WDAY
Workday has been able to expand throughout the last year due to its ease of use platform.
Total revenues were $1.11 billion, an increase of 17.9% from the third quarter of fiscal 2020
Subscription revenue was $968.5 million, an increase of 21.3% Y/Y
Operating loss was $14.1 million, or negative 1.3% of revenues, compared to an operating loss of $110.3 million, or negative 11.8% of revenues Y/Y
. Non-GAAP operating income for the third quarter was $268.1 million, or 24.2% of revenues, compared to a non-GAAP operating income of $142.6 million, or 15.2% of revenues Y/Y
Operating cash flows were $293.8 million compared to $258.0 million in the prior year.
Subscription service growth has led the way for Workday’s growth the past year. Even in the midst of the pandemic, Workday has grown revenue and shrink its operating loss Y/Y from (11.8%) to (1.3%). Workday’s partnership with Accenture will help make an even more ergonomic friendly experience for Workday users through “greater visibility and simplified experiences
Best Buy $BBY (Before Market Open)
Best Buy is a massive tech retail company that has posted strong earnings from the last 2 Quarters, and they are expected to continue that trend for the Q3 report. They have an expected EPS of $1.93, and Revenue is expected to be $10.9B. With quarantine orders coming back into effect and schools shutting down, the need for technology at home will come back, and we expect Best Buy to post strong earnings for a long time.
$DLTR (Before Market Open)
The largest single price point store in the U.S., as money in the current economic climate is very precious, Dollar Tree will continue to grow. $DLTR expected EPS is $1.24, and Revenue is expected to be $6.11B. For the next several quarter’s Dollar Tree will see growth and revenues steadily increase.
$DELL (Aftermarket close)
Correlating in the same vein with Best Buy is Dell technologies. More and more people are buying technology to work from home or go to school online. Much like the previous two companies mentioned, the Q2 numbers provided positive insight into how the company performs. Dell is expected to have $1.50 EPS, and revenue is expected to be $21.92B. Continued stay-at-home orders and in-person learning put on pause; we will be on the lookout for their Q3 report.
This past week we had a total of 24 trades. 20 of which were positive trades and yield an average of 112.7% return on investment. We had 4 losses with an average loss of 60%.
The trade of the week goes to Tesla!
On Tuesday, we alerted our members about the $TSLA 490calls for November 27 at an average price of $460.
On the 18th, the 490 calls were trading at $2,300, and the 500 calls were trading at 1,950.
A 400% and 500% return on investment overnight!!
Perspective is an invaluable strength—the ability to look at a situation and discern more than just the negative from it. Perspective has allowed me to view loss differently and find the silver lining. While trading, even when your trade doesn’t have the desired outcome, spend more time trying to understand why you want wrong and adding that information to your tool kit rather than energy being disappointed at the outcome.
Thursday, December 31st Closing Price
TABLE OF CONTENTS
THE SECOND ROUND OF STIMULUS – WHAT DOES THIS MEAN?
President Trump has officially signed a second round of stimulus checks to citizens as part of the coronavirus relief package. This second round of direct payments does come with a few fundamental changes, though. In the first round of funding, eligible households received $1,200 per adult and $500 per child. This time around, we see a decrease to $600 per adult and an increase to $600 per child. These changes apply to individuals with gross income under $75,000 and married couples under $150,000 based on their 2019 income. All of these changes are expected to happen relatively quickly, as the IRS has started sending out payments via direct deposit as of December 29th. Treasury secretary, Steven Mnuchin, states that all taxpayers who have current banking info with the IRS will receive direct deposits by January 4th. With nearly a third of Americans reporting that they are struggling to pay their bills due to the pandemic, this is undoubtedly welcome news, despite failure to push through legislation to increase direct payments to $2,000 from $600.
COVID-19 RELIEF BILL
House Representatives passed the updated Covid-19 relief bill with increased payments from $600 to $2,000, and the bill now includes college-dependent students. This all seems to be not due to the Senate’s expected vote to decline the increased Stimulus. This re-vote was all based on President Trump initially declining the first round of stimulus funding in favor of the larger package.
In other news, Boeing had its first flight with its controversial 737 Max from Miami to LaGuardia after 21 months of being forced aground after two fatal crashes. This comes after nearly two years of the plane being grounded and facing harsh regulations from every aviation agency across the globe. With Boeing able to fly this plane, we can begin to see Commercial Airlines begin to purchase and renew contracts for the 737Max.
Ant group is facing harsher regulations from the Chinese government as they want to hold Ant Group’s finances in a holding company. China is using this as a possible way of increasing domestic consumption by having raised consumer loans. They want to use Ant group finances to provide funding to citizens, which in turn will then increase at-home spending.
And finally, the United Kingdom approved the third vaccine from AstroZenica to combat the notorious Covid-19. AstraZeneca has partnered with Oxford University to create this vaccine, and it has reached the minimum efficacy needed to push forward for implementation. This approval is only within the United Kingdom and needs to go through trials within the United and be approved by the Food and Drug Administration. The United States is skeptical of the AstroZenica vaccine as they have had several missteps along the way and need to re-prove their credibility to the United States marketplace.
The head of Ontario’s COVID-19 vaccination program has requested that Health Canada, the department responsible for the country’s federal health policy, delve into the feasibility of administering Moderna’s two-shot vaccine in a single dose. General Hillier (Ret.) cites a desire to increase efficiency in helping citizens. Notable health officials have expressed that there is a lack of evidence to suggest merit to this idea. If this idea gains traction and is proven to be effective, the implications are significant as it will lower the time necessary to inoculate and protect the population, effectively lowering the rate at which coronavirus will spread.
NATIONAL DEFENSE AUTHORIZATION ACT
The House and Senate overwhelmingly voted to pass the National Defense Authorization Act and override President Trump’s veto. The 740 billion dollar law automatically comes into effect. The bill contains multiple cybersecurity provisions relevant to the Solar Winds hack. It also gives the Cybersecurity and Infrastructure Security Agency at DHS the authority to issue administrative subpoenas that will enhance the agency’s ability to investigate private-sector networks’ hacks. The bill is necessary for strategic programs, cyber, intelligence matters, drug interdiction, and counter-drug activities in appropriations adjustments.
In other news, there may be major international shipping disruptions in 2021 due to a law signed in 2018 that comes into effect. Over 180 countries and territories are not in compliance with the 2018 Synthetics Trafficking and Overdose Prevention (STOP) Act. The bill’s purpose was to combat the opioid crisis and stop fentanyl shipments through the USPS by providing advanced electronic data, or AED. AED provides USPS and Customs and Border Protection with information about international packages’ contents before reaching the United States. Country waivers are available, but only to countries without the technological and financial capital to properly comply with it, only 10-15% of the total volume.
Thursday (Before Market Open)
Bed Bath & Beyond
In a year when home improvement and retail therapy have run rampant across the United States, Bed Bath & Beyond has a stronghold in that market. Beginning in Q3-2020, $BBBY began to pivot its business model from retail to a digital-first company. They will be closing over 200 stores within the next two years with this strategy to save money. They have an expected EPS of $.31 and revenue of $2.77B and have expected quarterly earnings of -155%.
Thursday (Before Market Open)
Walgreens Boot Alliance Walgreens is a retail drugstore chain that sells prescription, non-prescription drugs, and various household items. With a consistent decrease in in-store visits and pivot to online sales, Walgreens will continue to tumble on its earnings reports. Estimated EPS of $1.02 and Revenue of $34.89B, with expected Quarterly earnings of -25.5%.
Thursday (After Market Close)
Micron Technology is one of the world’s largest and leading semiconductors and data storage providers. They have shown consistent downtrends in their last three years of annual reports, including lower revenue and net income. They have an estimated EPS of $.80 and Revenue of $5.73B, and their expected quarterly earnings are expected to increase by 42.9%.
Thursday: Balance of Trade (NOV) at 8:30 a.m. EST
Jobless claims 4-Week Average at 8:30 a.m. EST
We finished the year strong.
We had a total of 22 trades in the 4 day trading week, with 18 of those trades being profitable.
We will continue to focus on companies in the Electric Vehicles Industry in 2021.
We have also improved our discord experience by adding more bots to the server at no additional cost to our members.
Quant Data Bot –
Provides the team with options sweep. The team’s sweeps are used to note what stocks are getting a lot of attention and have the potential to make a big move towards the upside or downside.
Join the team to see how we will use this information to improve our trading.
Straddling is a conservative trading strategy that consists of buying both calls and put option contracts for security with the same strike price and expiration date. Straddling is an attractive option because you don’t need to accurately predict price direction as you are poised to benefit from a sharp move in either direction and can sell your incorrect position at a loss once the direction is confirmed. This strategy provides a built-in hedge, but you do stand to lose on both positions if a move fails to happen. So the next time you find yourself wanting to test your thesis on a big move, consider straddling to protect your investment.
Thursday, December 24th Closing Price
Just a couple of days after Congress agreed to pass an $892 billion coronavirus relief bill, President Trump surprised many by strongly criticizing the bill and threatening not to sign it until Sunday night. President Trump lambasted the lengthy bill for its billions in foreign aid without focusing internally on the American people. His signature did two things for the US economy: it prevented a government shutdown on Tuesday, and it extends aid to the American people in coronavirus aid. The two key pandemic unemployment programs received their last payment this weekend. Still, due to the bill being signed on Sunday instead of Saturday, the payments could be delayed several weeks.
The President cites too small of a direct payment in the form of a stimulus to citizens, referring to the proposed $600 stimulus as “ridiculous low. He instead proposed an increased stimulus of $2000 for individuals and $4000 for couples.
Yesterday, President Trump ended up signing the bill as his club in Mar-a-Lago, with the stipulation that Congress consider implementing legislation to increase direct payments in the future. However, less than timely, the signing of this bill allows approximately 12 million benefit recipients to continue receiving benefits for another 11 weeks and signals an end in the Trump presidency’s latest point of contention.
Peloton, the American exercise equipment, and media company, have struck a deal to acquire Precor. Precor is an industry leader in exercise equipment manufacturing. This deal presents a unique opportunity for Peloton to continue to capitalize on the significant success they’ve had this year boosted by the pandemic. This deal is expected to close early in 2021 and cost $420 million but stands to return far more. Peloton has the great problem of struggling to meet their ever-growing demand for their orders. This, in conjunction with shipping delays due to the pandemic, has led to an increase in canceled orders by frustrated customers. Peloton’s stock had a meteoric ascent this year, up more than 500% on the year. A successful solution to their distribution issues will surely please their investors and pique the interest of many more.
It appears that Jack Ma would have far preferred a lump of coal this Christmas; instead, he received news that Chinese regulators were conducting an anti-monopoly probe into the Chinese monolith. This news led to a massive selloff for the E-Commerce company, with a 13% drop in share value on Christmas eve. This appears to be just the start of the implications from their recent woes, including halting the $37 Billion IPO of their subsidiary Ant Group. As of yesterday, the Zhejiang Provincial Administration for Market Regulation has concluded the probe into Alibaba, reporting that they cooperated with the investigation team promptly. Subsequently, Alibaba has announced a 67% increase in their share buyback program from $6 to USD 10 Billion over the next two years. This may be great timing considering the discount in share price, although the timing has led to speculation amongst investors. In demonstrating their confidence in their outlook, they may have provided a bit of good news. Whether this is reflected in the halting of their tumultuous stock price has yet to be seen. With Alibaba down 26% since its peak in late October, there are certainly several investors tuned in for an answer.
Despite the FDA announcing emergency approval for immediate distribution of Pfizer and Moderna’s coronavirus vaccines, panic is still prevalent. A few new coronavirus strains have been detected in the UK, South Africa, Nigeria, and others in the past few weeks, raising questions about whether the vaccines carry the same macroeconomic implications as before. The effects of each strain are far-reaching. The strain in the UK, for example, does not appear to be more fatal, but it is reportedly 70% more transmittable, leading to dozens of countries banning travel from the United Kingdom. The Public Health Agency of Canada confirmed the first two North American cases in Ontario Saturday night. Japanese officials have announced that their borders will be closed from midnight tonight to January 31st after receiving seven positive results for the new coronavirus strain. BioNTech’s CEO has announced a “relatively high” chance the vaccine they created in conjunction with Pfizer will prove resistant to the new coronavirus vaccine. The importance of this statement’s accuracy cannot be overstated, and we can expect a significant public reaction to the conclusion one way or another.
LAST WEEK’S EARNINGS
Heico is a company that has seen large declines this year, which is to be expected from any company that is integrated into the airline industry. A pickup in global fleet travel is necessary for the company to continue to grow. It is important to see just how negatively affected the company has been since the pandemic began and how much it’s improved as lockdown restrictions are eased.
Adversely affected by CoVid. Consolidated net sales for their aerospace segment decreased approximately 32% during FY 2020. Cash flow was only down from $437.4 million FY 2019 to $409.1 million FY 2020. The Pandemic is likely to continue to impact HEICO negatively. HEICO will not issue guidance for FY 2021 for this reason. A lagged return to normalcy can be expected.
As the largest used car dealer in the United States, Carmax can give a good insight into consumer spending habits. The ebb and flow of spending will tell consumers’ activity levels and if they are affected by any external factors. Lockdown restrictions are a key factor in this.
Vehicle sales are down to 1% from 11% in total used vehicle unit sales with comparable store unit sales down to (0.8)% from 7.5% YoY. The surge in CoVid cases had a substantial impact on their sales when lockdown restrictions were tightened. Total used vehicle revenue increased mainly due to the average retail selling prices rising almost $700 per unit YoY. Other sales and revenues took a hit in the quarter, decreasing by $6.9 million in other revenues. Much of the business expansion hinges on vaccine distribution and return to normalcy to return to normal growth expectations.
Paychex is a mostly positive bag when it comes to the pandemic. The pandemic has accelerated the growth of their business due to their online and automated business model. Cloud-based technologies were exceedingly profitable and necessary pre-pandemic, and the need for them skyrocketed as business structures changed overnight. However, a decrease in jobs in the economy is bound to affect the business.
Client base increases, and their suite solutions primarily drove increased revenue YoY in that segment. PEO and Insurance Solutions revenue decreased 3% YoY to $236.1 million due to the mass shift in worksite employment and premium collection. YTD FY 2021 has seen operating income decreased 8% to $638.3 million, which is a significant amount to business operations. Changes in their operating assets and liabilities produced a 24% drop in cash flows from operations YoY. The company expects an overall flat movement in the next six months, but this is subject to change when the economy turns to normal.
Averaging down is an exciting high-risk, high reward investment strategy. Averaging down is the practice of buying more of your original investment (shares or contracts) after the price has fallen for a lower average cost per security. For example, if 100 shares were purchased at $20 per share, and then a further 100 shares were purchased at $18 per share, the average cost per share is lowered to $19. This means that if the share price rises to $19, then the investor breaks even. If the price returns to $20, then a profit is made. This isn’t for the faint of heart and is a quick way to blow up your account. Be sure to strongly evaluate your trade thesis to determine if the risk is worth the reward to you and the timeframe on the reversal that you are predicting.
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