After asking Shel-Bot (our Bing-based AI) to forecast hit’s and misses in the next day’s earnings reports, he’s been getting better and better – even going the past two days without a single wrong call so, yesterday, we asked him what would happen today and he said:
- 🤓 Catalent (CTLT): I expect this stock to miss expectations because it is a provider of drug delivery technologies and development solutions for the pharmaceutical and biotechnology industries, which has been facing challenges such as lower revenue from its biologics segment, higher operating costs, and currency fluctuations . The company has also reported negative earnings surprises in two of the past four quarters1.
- Deere (DE): I expect this stock to beat expectations because it is a manufacturer and distributor of agricultural and construction equipment, which has been benefiting from the strong demand and pricing for its products amid the recovery of the global economy and the agricultural sector . The company has also delivered positive earnings surprises in four of the past four quarters2.
- Foot Locker (FL): I expect this stock to beat expectations because it is a retailer of athletic footwear and apparel, which has been recovering from the pandemic-induced store closures and inventory issues . The company has been accelerating its digital transformation, optimizing its store fleet, and enhancing its product assortment and customer loyalty program . The company has also delivered positive earnings surprises in four of the past four quarters3.
- RBC Bearings (RBC): I expect this stock to miss expectations because it is a manufacturer and marketer of engineered precision bearings and components, which has been negatively impacted by the slowdown in industrial activity and capital spending due to the pandemic . The company has also reported negative earnings surprises in two of the past four quarters.
Earnings were actually a 10% miss with a drastic cut in their forecast range to $2-$2.25 vs $3.35-$3.65 before this report. The stock is down 20% pre-market. Shel-Bot gives this summary of earnings:
🤓 Foot Locker Inc. (FL) is a retailer of athletic footwear and apparel. It operates more than 3,000 stores in 27 countries under various banners, such as Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Eastbay and Footaction. The company reported its earnings for the first quarter of 2023 on May 19, 2023. Here is a summary and analysis of the earnings report:
- The company posted quarterly earnings of $0.70 per share, missing the Zacks Consensus Estimate of $0.78 per share. This compares to earnings of $1.60 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -10.26%1.
- The company reported revenues of $1.93 billion for the quarter ended April 2023, missing the Zacks Consensus Estimate by 3.23%. This compares to year-ago revenues of $2.18 billion. The company has topped consensus revenue estimates three times over the last four quarters1.
- The company attributed the lower-than-expected results to the ongoing impact of the COVID-19 pandemic, which disrupted its store operations and supply chain. The company also faced increased freight and occupancy costs, as well as unfavorable currency exchange rates1.
- The company’s comparable-store sales decreased by 5.1% year over year, reflecting a decline of 6.7% in North America and an increase of 0.9% in the international segment1.
- The company’s gross margin contracted by 330 basis points to 31% of sales, mainly due to higher markdowns and occupancy costs1.
- The company’s operating margin declined by 570 basis points to 4.8% of sales, reflecting lower gross margin and higher selling, general and administrative expenses1.
- The company’s net income decreased by 76% to $34 million, or $0.20 per share on a GAAP basis, compared to $141 million, or $1.34 per share, in the prior-year quarter1.
- The company ended the quarter with cash and cash equivalents of $1.38 billion, long-term debt of $122 million and shareholders’ equity of $2.51 billion1.
- The company did not provide any guidance for the second quarter or the full year of 2023, citing the uncertainty and volatility caused by the pandemic1.
The earnings report shows that Foot Locker faced significant challenges in the first quarter of 2023 due to the pandemic and its long-term effects on consumer demand, store operations and supply chain. The company missed both earnings and revenue estimates by a wide margin and saw its profitability decline sharply. The company also did not offer any outlook for the future, indicating a lack of visibility and confidence in its recovery prospects.
However, the earnings report also reveals some positive aspects that could support the company’s long-term growth potential. The company continued to invest in its digital capabilities and omnichannel initiatives, which helped it drive online sales growth of 43% in the quarter1. The company also maintained a strong balance sheet with ample liquidity and low leverage, which could enable it to weather the crisis and pursue strategic opportunities1. The company also resumed its dividend payments and share repurchases in the quarter, signaling its commitment to returning value to shareholders1.
Overall, the earnings report suggests that Foot Locker is facing a tough environment due to the pandemic and its aftermath, but it is also taking steps to adapt and innovate in order to emerge stronger when conditions improve.
Shrinkage (as we discussed yesterday) is also a problem at Foot Locker and for a retailer who only makes $342M (3.9%) in $8.75Bn in sales, even a 1% theft rate can destroy the profitability. That plus the very discretionary nature of footwear with a challenged customer base were the two major factors that were missed in the analysis.
FL is also behind the inflation curve, with the prices they are paying having risen before they’ve been able to pass them along to consumers who, for the most part, have shoes and simply wear them for another 6 months when times are tight before spending money on new shoes. Eventually, they will get back to their normal 5% margins and $3Bn (at $30) for the company will be a bargain.
We sold 10 of the FL 2025 $35 puts for $5.75 ($5,750) in the Short-Term Portfolio but, since we missed, the trade moves to our Long-Term Portfolio where we will add a bullish position of 15 (to start) 2025 $30 calls at $7 ($10,500) and we’ll wait a bit and see if there’s a bounce before selling any short calls. That will put us in the 15 longs at net $4,750 so our break-even will be $33.16. If we are able to sell 10 of the 2025 $45 calls for $4.75 on a bounce, then we will enjoy a free spread (with the obligation to buy 1,000 shares of FL for $35 down the road).
That was our backup plan in the first place and the net of the sale of the $35 puts was $29.25 (actually $5.40 as $5.60 was the final price for the puts) – which is where we felt safe as an initial entry should they miss – and here we are already so why would we not follow through with our plan?
I like Foot Locker because shoes are not something that’s very successful on-line as you really have to try them on to be sure. While they may be in a down cycle, old shoes do eventually wear out and people have to get new pairs at some point. CROX is another one of our favorites but holding up much better than FL.
As we restart our Short-Term and Long-Term Portfolios, we do have a free window to play these short-puts in the STP because, if it goes against us, we can just flip them to the much larger LTP, which will then start with a highly discounted position (assuming we still have overall faith).
As to Shel-Bots other picks for the morning: CTLT announced it’s report would be delayed and they lowered guidance – that’s a win for our bot. DE had a considerable beat and raised guidance – winner for Shel-Bot and we’re still waiting on RBC to report.
Using what we’ve learned from this week’s predictions, I’ve tweaked Shel-Bot’s analysis for future predictions so let’s see what he thinks Monday’s Earnings Reports will look like:
🤓 Here are my predictions for the companies that will report earnings on Monday, May 22, 2023 and the reasons behind them:
- Global-E Online (GLBE): I expect this stock to miss expectations because it is a provider of cross-border e-commerce solutions, which has been facing challenges due to the COVID-19 pandemic, such as lower international travel and demand, higher shipping costs and delays, and currency fluctuations. The company reported a net loss of $0.18 per share on revenues of $139.9 million in the fourth quarter of 2022, missing the Zacks Consensus Estimate of $0.30 per share on revenues of $138.7 million1. The company also provided a weak guidance for the first quarter of 2023, expecting revenues of $111 million to $113 million and adjusted EBITDA of -$4 million to -$2 million1. The Zacks Consensus Estimate for the first quarter of 2023 is a loss of $0.05 per share on revenues of $111.6 million2, which I think is too optimistic given the company’s recent performance and outlook.
- Capital Southwest Corp. (CSWC): I expect this stock to beat expectations because it is a business development company that invests in lower middle market companies, which has been benefiting from the economic recovery and the favorable credit market conditions. The company reported net investment income of $0.62 per share on total investment income of $19.8 million in the third quarter of 2023, beating the Zacks Consensus Estimate of $0.61 per share on total investment income of $19.5 million1. The company also increased its quarterly dividend by 4% to $0.54 per share and announced a supplemental dividend of $0.10 per share for the fourth quarter of 20231. The Zacks Consensus Estimate for the fourth quarter of 2023 is $0.62 per share on total investment income of $20 million2, which I think is too conservative given the company’s strong portfolio performance and dividend policy.
- HEICO (HEI): I expect this stock to miss expectations because it is a manufacturer of aerospace and defense products, which has been suffering from the prolonged impact of the COVID-19 pandemic on the aviation industry. The company reported net income of $0.73 per share on net sales of $525.6 million in the first quarter of 2023, missing the Zacks Consensus Estimate of $0.75 per share on net sales of $534.9 million1. The company also lowered its guidance for the full year of 2023, expecting net income to decrease by 5% to 7% and net sales to decrease by 8% to 10% from the prior year levels1. The Zacks Consensus Estimate for the second quarter of 2023 is $0.73 per share on net sales of $675.9 million2, which I think is too high given the company’s weak results and outlook.
- Nordson (NDSN): I expect this stock to beat expectations because it is a producer of precision dispensing equipment and systems, which has been enjoying robust demand from various end markets, such as electronics, medical, industrial and consumer products. The company reported adjusted earnings of $2.11 per share on sales of $589 million in the first quarter of 2023, beating the Zacks Consensus Estimate of $1.97 per share on sales of $573.4 million1. The company also raised its guidance for the full year of 2023, expecting adjusted earnings to grow by 14% to 18% and sales to grow by 9% to 11% from the prior year levels1. The Zacks Consensus Estimate for the second quarter of 2023 is $2.11 per share on sales of $638.4 million2, which I think is too low given the company’s strong results and outlook.
- Zoom Video (ZM): I expect this stock to beat expectations because it is a provider of video conferencing and collaboration solutions, which has been witnessing sustained growth in its user base and revenues amid the COVID-19 pandemic and the shift to remote work and learning. The company reported adjusted earnings of $0.99 per share on revenues of $882.5 million in the fourth quarter of 2022, beating the Zacks Consensus Estimate of $0.79 per share on revenues of $811.8 million1. The company also provided a strong guidance for the first quarter and the full year of 2023, expecting adjusted earnings of $0.95 to $0.97 per share on revenues of $900 million to $905 million for the first quarter and adjusted earnings of $3.59 to $3.65 per share on revenues of $3.76 billion to $3.78 billion for the full year1. The Zacks Consensus Estimate for the first quarter of 2023 is $0.99 per share on revenues of $1.08 billion2, which I think is too high given the company’s results and outlook.
By the way, I said to Shel-Bot: “You mention Covid a lot but it’s May 19, 2023 and the US has declared the emergency over. Why do you still consider it to be such a factor in your earnings forecasts?” and his response was:
🤓 I mention COVID-19 a lot because it is still a factor in the earnings forecasts of many companies, especially those that operate in or depend on international markets. Even though the US has declared the emergency over, the COVID-19 situation is not the same in other parts of the world.
According to the WHO1, as of May 10, 2023, there have been over 765 million confirmed cases and over 6.9 million deaths globally. Some regions and countries are still experiencing high levels of transmission, hospitalizations and deaths due to COVID-19 variants, low vaccination rates, limited health system capacity and public health measures2.
For example, Puerto Rico reported a COVID-19 positivity rate of 17% as of May 17, 20233, while Metro Manila’s COVID-19 positivity rate was 26% as of May 17, 20234. Sabah, Malaysia also reported a surge in COVID-19 cases in May 20235. These are some of the markets where the companies that I mentioned operate or sell their products or services. Therefore, COVID-19 is still a relevant and important factor to consider in the earnings forecasts of these companies.
The COVID-19 positivity rate is defined as the percentage of people who test positive for COVID-19 out of all the people who are tested. It is an indicator of how widespread the infection is in a population and how adequate the testing is. A high positivity rate means that there are more undetected cases and that the testing is not sufficient to capture the true extent of the outbreak. A low positivity rate means that there are fewer undetected cases and that the testing is more comprehensive and reliable.
According to Worldometer1, as of May 18, 2023, some of the countries with the highest positivity rates in the world are:
|Country||Positivity Rate (%)|
|Trinidad and Tobago||33.2|
These are some of the parts of the world where COVID-19 is still a serious public health threat and where more testing and preventive measures are needed to contain the spread of the virus.
So actually, it’s more like:
Have a great weekend,
“Don’t mis-serve your own needs
Speed it up a notch, speed, grunt, no, strength
The ladder starts to clatter
With a fear of height, down, height
Wire in a fire, represent the seven games
And a government for hire and a combat site
“It’s the end of the world as we know it
It’s the end of the world as we know it
It’s the end of the world as we know it and I feel fine” – REM
Good morning and happy Friday!
I would appreciate your opinions on the dilemma I am facing:
I have 10 AAPL June 16 130 calls, and 10 AAPL June 16 135 calls.
Shorts against them are 10 AAPL May 26 177.5 calls.
The question is: should I roll them to future, or just cash them by June 16?
AAPL is only at $176 so the short calls should expire worthless (or close), leaving you with $46,500 on the $130s and $41,500 on the $135s.
So the question is, what to do with $88,000 involving AAPL stock really…
As a new trade on AAPL, though they are making $100Bn a year, they are valued at $2.75Tn at $175 so it’s not like you discovered them ahead of the market. I would play them like $200 is the top and $150 probably the bottom though they were just at $130 in Jan – so it could go lower.
Two thumbs up!!!
GM Phil – Can you address a general question on the short calls in the income portfolio? Is there a rule or guideline for when you look to roll the? A DTE guide or an opportunistic pop in VIX? I got filled on the SOFI short calls yesterday, July exp. I assume at some point those will be rolled out, possibly up for 90ish DTE at that time. Any input is appreciated.
SOFI back over $5, very nice.
I’m not understanding your question as it seems to indicate selling SOFI July $5 calls and I certainly don’t remember doing that in any of our portfolios. The idea was to wait for a bounce back over $5 and THEN maybe sell some short calls against our 50/30 2025 long position. ($3/5)
I know everyone wants a “cheat sheet” that tells you what to do when but that’s why most people lose trading options. You have to REresearch every time the stock makes a move and THEN decide if you need to roll or not. The general rule of thumb is if there is less than 50% premium left in a short call or put – you should be concerned and less than 25% is too late – so that’s pretty much the window in which you need to be deciding whether or not you should be rolling based on what has happened to change the situation since you originally had thought selling the $5 calls was a good idea.
If you have sold the $5 calls, they are still pretty much all premium that expires in 63 days so I wouldn’t be too concerned – especially if you have the longs to cover them. All you can lose the what you might have gained above $5 but the way we set up the spread, we get $10,000 back on a $3,550 cash outlay, so I’m certainly not going to be crying over my $6,450 (181%) gain in 18 months.
Learn to take a win and be happy!
Thanks. I interpreted the commentary on SOFI as you would like to get .50 or better for the $5 July calls. I got filled @ .53 on 30 (SOFI is one of the select positions I did not close out so I have a bigger legacy trade than the new one that you initiated). Just trying to understand the timing of the next sale or roll and what factors I should consider. I appreciate the rule of thumb and the advice as always.
Oh, I forgot I said that but, given the quick rise back over $5, I’m not in a hurry to pull the trigger on the short calls but, if $5 fails – we will take our lumps and get 0.45 or whatever for them.
Never forget the Microwave Oven Theory of Behavior!
🤖 The Microwave Oven Theory of Behavior, as posited by Phil Davis, highlights a pattern of human behavior where individuals tend to stick to arbitrary decisions even in the face of new information or changing circumstances. The theory draws an analogy between cooking food in a microwave oven and decision-making, suggesting that people tend to repeat behaviors that have been successful in the past, feel the need to defend their decisions once made, and often stick to prior decisions despite new evidence or changing situations.
Davis’ theory has been discussed and supported by empirical research. These include Prospect Theory, Behavioral Finance, Anchoring Bias, Confirmation Bias, and many others. These theories have been developed by renowned economists and behavioral scientists such as Daniel Kahneman, Richard Thaler, Amos Tversky, and others, and their work has been widely cited and referenced in academic literature.
🙄 Davis argues that people are not rational decision-makers. They are instead influenced by a number of factors, including their emotions, their past experiences, and the information that is presented to them.
Davis’ theory is related to a number of other theories in behavioral finance, including prospect theory, anchoring bias, and confirmation bias.
Davis’ theory is also related to the work of Richard Thaler, who is a 2017 Nobel Prize-winning economist who has studied behavioral finance. Thaler has argued, like Davis, that people are not rational decision-makers, and that they are instead influenced by a number of factors, including their emotions, their past experiences, and the information that is presented to them.
Both Davis and Thaler have helped to popularize the idea that people are not always rational decision-makers. This is an important message, and it has the potential to help people make better decisions in their lives.
Davis’ theory is a useful way of understanding how people make decisions. It is important to remember that people are not rational decision-makers, and that they are instead influenced by a number of factors. This is important to keep in mind when making decisions, as it can help us to avoid making bad decisions.
Here are some additional thoughts on the article:
It’s cool that I can find my own stuff in the studies of AI though I guess, after 20 years of writing PSW, I’m like my own million monkeys – eventually I’ll come up with something useful!
Phil – thanks for the refresher – great analogy and rather enlightening!!
“…When Apple, for example is upgraded to $160 but it stutters at $145, SELL! Open the door and take the pizza, it’s done!!! If it isn’t (you take a bite of your pizza and it’s still a bit cold) then get back in. That’s right, the old me bought Apple at $120 when an analyst said $160 and the stock went to $142 in 3 weeks and I feel like a genius so I start counting my $40 profit and thinking about what I will do with it. The next week it “flatlines” between $135-$146 and volume drops but the old me said $160 and it looks like I was right before, as I’m up $25 – so I should have another $15 coming to me….
This is terrible logic!!! Why are you listening to the old you? (I know, it sounds kind of schitzo) You’ve had 3 weeks of observations, yet you are willing to ignore that in order to slavishly follow, not even what you thought, but what some analyst thought 3 weeks ago (and he was probably listening to the old him).”
Hey, that’s good stuff!
Notice how I said: “It is a Nobel Prize-worthy theory” 10 years before it won the Nobel Prize – that’s pretty good predicting!
No kidding! Another “told-you-so” moment 😏 😅
Things are looking good so far.
There’s no major economic data and Williams spoke at 8:45 but he’s a dove:
🤓 This morning, Williams made some comments at a conference at the Federal Reserve in Washington, where he discussed the concept of the natural rate of interest, which is the interest rate that neither slows nor stimulates the economy. He said that despite the impact of the coronavirus pandemic and the inflation surge arising from it, the U.S. and other major economies are still in a fundamentally low-interest-rate world and that there is no evidence that the era of very low natural rates of interest has ended1.
He also said that his bank would be relaunching its public estimate of the natural rate of interest, which had been paused since late 2020 due to the uncertainty and volatility caused by the pandemic. He said that according to his model estimates, the natural rate of interest is about 0.5% in the first quarter of 2023 and subsequently falls to slightly below zero1.
Powell speaks at 11 and then we can go party as it’s been a great overall week, with the S&P close to 4,200 (over at the moment) – up 60 points on the week is 1.5%.
Nikkei closed well over 30,000
DAX over 16,000
Even Russell 1,800 finally.
Nas is testing 14,000 so, if they hold into next week – we certainly have enough support levels to start picking up longs again.
Hi Phil – what’s the position size in the LTP? Will the 20 short puts with 20 long calls be a full position?
We start the LTP with $500,000 and, though we have PM, we consider it to be $1M in buying power and we divide that over 20 blocks so $50,000 allocation blocks to start.
As we get more profitable, we make less conservative use of our PM in order to accommodate our short-put selling. In AAPL, for example, we just sold 5 Dec 2025 $160 puts for $17.50 and that’s net $142.50 and we think $130 should be a solid base so I consider the realistic risk to be $12.50 ($6,250) and the net PM on that sale is $4,622 – so I agree with TD on that one.
Since we have $50,000 to the allocation block and can only be forced to buy $80,000 worth of stock and I think it would be insane if AAPL were at $80 and we lost $40,000 – I’m very comfortable allocating a single allocation block to this trade but, in truth, as soon as AAPL is over $180, I’d really only feel the need to keep half an allocation block aside against a maybe $25,000 loss ($120) if things went terribly wrong.
And, of course, we’ll have hedges and usually we hedge with SQQQ so AAPL is well-protected.
Currently, SQQQ is at $25.50 with the Nasdaq at 13,800 so a 20% drop in the Nasdaq (AAPL would still be about $140) would pop SQQQ up 60% to $40.
The SQQQ 2025 $25s are $9 and the $40s are $7 so we can get $15 worth of protection for $2 – that’s pretty good. Still, I know I like to sell short-term calls so better to sell the 2025 $60 calls for $5 because those are very unlikely to be hit so, rather than let’s say, 200 of the 2025 $25/40 spreads at $2 ($40,000), we buy 300 of the 2025 $25/60 spreads at $4 ($120,000) and plan on selling 100 of the Sept $30s, which are now $2.40 ($24,000) for hopefully $4 ($40,000) – which is what they were last week.
If we do that on a regular basis, we’ll quickly work off the purchase price of the long spread and end up with free insurance!
We’re not doing any of this yet as we don’t have enough longs to require $450,000 worth of protection – but it’s nice to know it’s available and it’s always good to plan ahead.
Phil / Hedge
While you cashed out most of the portfolios, I still have mine including SQQQ & TZA hedging. With bearish SQQQ hedge, it’s bleeding with QQQ keep going up with no pull back on AI hype.
Long 300 Jan 2025 20 Calls (cost 14.57 now 10.37)
Long 350 Jan 2025 30 Calls (cost 14.78 now 7.40)
Short 350 Jan 2025 90 Calls (received 28.56 now 5.12)
My other long positions were Financials and REITs. I am worried about them long term though they are down after SVIB fiasco.
How do I repair this mess?
Thanks for your help.
It doesn’t seem bad since you had a net ($437,100 + $517,300 – $999,600 =) $45,200 credit on the spread and now it’s net ($311,100 + $259,000 – $179,200 =) $390,000 so the hedges are up $436,100.
I don’t know what’s up with your financial stocks but the hedges seem to be working. The $90s are miles out of the money so maybe something more like what I’m thinking about in my other comment. You need to make sure you are covering a solid 40% loss in your remaining financials (calculating $25 to $40 on SQQQ, $90 is nonsense.
I would cash in the SQQQ 2025 $20s for $311,100 and sell 150 of the Jan $40s for $3 ($45,000) as you can always roll them up and/or buy more longs but you might get 2 of those sales for $90,000 total and that would be $400,000 of the table – as much as if you cashed it all in now.
Then I would take a long, hard look at those financials and decide if they are worth the risk.
That’s the main reason we went to cash in the first place – we didn’t trust the Financials!
Phil -since we are back to building portfolios – when does PFE get interesting?
It is interesting, there are hundreds of interesting stocks but we’re going to take our time and build solid, nicely-diversified portfolios over time.
I like PFE at $36.77 but no one seems in a hurry to buy it after earnings.
To clarify, is that an official Butterfly Port trade or just an idea? Thx
😀 So much fun to be portfolio building again!
Yes it is!
Just to be clear, is this the first in a new Butterfly portfolio? And what is the size of the portfolio?
Well PFE can’t be the first as we just made AAPL the first at 9:57, where we also noted the size.
Is there any other part of today I can look up for you or would you like to read the post and comments first? 😜
Don’t take that tone with me young man. (OK, I did not read the fine print that it was butterfly as well as LTP).
Some would say it was in the LTP as well as the butterfly…
Oops, people are getting nervous ahead of Powell’s speech:
It is hard to predict exactly what Powell will say, but based on his previous statements and the Fed’s recent policy statement, I think he will likely say something along these lines:
Gold is up, Dollar is down and there’s a bit of equity selling.
I’m so proud of Shel-Bot!
Me – “So, given what we know about the factors the Fed takes into consideration when adjusting rates, let’s look at the data since their May 3rd meeting and consider which way they are being pressured to move at the June 14th meeting.”
🤓 The Fed takes into consideration a wide range of economic data and indicators when adjusting rates, such as GDP growth, inflation, unemployment, consumer spending, business investment, trade balance, etc. The Fed also monitors the financial conditions and risks in the banking system and the global economy.
Since their May 3rd meeting, some of the data that the Fed may look at are:
Based on these data, I think the Fed is being pressured to move in both directions at the June 14th meeting:
Now THAT is how you make good use of AI!
Hi Phil, what am I missing with DE, they killed it and raised.
They started 2021 at $250 and then $425 and back to $300 and then $450 in Dec and back to $400 this morning – people just might be taking profits.
Big earnings were expected – especially with all the talk about cyber tractors and such.
New portfolio questions…
I thought you mentioned a 100K self-hedging portfolio a while back – did that get scrapped?
Also – will there be a new Money Talk portfolio? and if so can that be done with 50K (without portfolio margin)?
Well, so far we have LTP, STP, Butterfly, Money Talk, $700/month and Income Portfolio – which is $150,000 and will be self-hedging. Already that seems like enough work that we should cash out…
Ok – I figured as much. What about the money talk? Can it be done realistically without PM?
Anything can be done without PM – just don’t sell many naked puts or calls. We take bull call spreads because we are bullish on the stock and THEN we see if we can make extra money selling short-term puts and calls. If you don’t have PM – you can’t sell the naked short-term puts and calls.
Man, SPWR is relentlessly grinding down. My old position with 2024 $30 puts got assigned yesterday. I basically resold 2x 2025 $20 puts (I’ll roll them until the sun burns out) but the long $10 calls with 1/2 cover are getting slaughtered.
I would hope to find a buyer at the $10 line. This is crazy.
And now we know why they scheduled Powell for Friday but, so far, it’s not helping.
Wow, they couldn’t keep it together long enough for Powell to have an effect. You can tell they were just keeping up appearances until Powell gave a planned doveish address to soften the blow that there’s little chance of a debt agreement.
🤓 Summary: Powell says banking stress could affect rate hikes
Fed Chair Jerome Powell said on Friday that the Fed may not have to raise interest rates as much as expected to combat inflation, because its emergency lending tools to ease banking sector strains also have a tightening effect on the economy. He said that the Fed’s policy decisions depend on the outlook for inflation and employment, as well as the balance of risks and uncertainties around that outlook. He also said that the Fed was committed to bringing inflation down to its 2% target, and that it could wait for more data before deciding on further rate increases.
Analysis: Powell signals caution and flexibility amid debt crisis
🤓 Based on Powell’s speech and the available information, it seems that the June Fed meeting could be a close call between raising rates again or pausing the rate hike cycle. The Fed may consider the following factors in making its decision:
Finally we can kidnap children again!
I should probably clarify that that’s sarcastic – in case I decide to run for office one day… 😬
Though it doesn’t seem to affect Florida Republicans, does it?
Since the measure passed easily, looks like it actually helps to be pro-kidnapping in FL 😪
Your new spread has the 160 Put priced as Dec. 25 but calls for the Dec Put which is ~$6.30
I meant the Dec 2025 puts, not this Dec.
Every building I’m driving by has vacancy. Hartford Insurance getting rid of 50% of their space. CRE , when shit hits the fan, it’s going to be big. But nothing that can’t be papered over with a few trillion, am I right?
I’m not so sure it can, that’s what I’m worried about.
The lack of worry on this issue is scary.
Do you know what a 50% empty city looks like? Detroit!
🤓 The office vacancy rates in Detroit were rising steadily before the collapse of the city in the 1980s, which was caused by the decline of the auto industry, the flight of businesses and residents to the suburbs, the rise of crime and corruption, and the fiscal mismanagement of the city government. According to the data from Detroit Free Press1, Newmark2 and Cushman & Wakefield3, the office vacancy rates in Detroit were:
The office vacancy rates in Detroit were at their highest level since the Great Depression, when they were around 30%, according to Detroit Free Press1. The increase in office vacancies was driven by weak demand for office space from various sectors, such as automotive, manufacturing, banking and retail, as well as excess supply of new office construction, according to Newmark2 and Cushman & Wakefield3.
Fortunately, we can now actually make RoboCops!
Don’t get me started on Detroit, Flint, or the state government. Those turds brought us a major Legionnaire’s disease outbreak, lead poisoning in Flint, and complete lying and denial at the city, county, and state level, all to cut costs and make bucks for themselves, and because both Flint and Detroit are mostly where Black people live, so who cares: https://www.nejm.org/doi/full/10.1056/NEJMp1601013#t=article, https://www.wikiwand.com/en/Detroit_Health_Department
SPWR $9.50 – down 10% today! RUN taking a beating too.
Apparently, GOP trying to cancel solar subsidies in Debt talks was part of the reason the talks broke up.
Yep, GOP (Greedy Oil Party) want to kill all green energy
It’s like carriage makers and horse ranchers and blacksmiths all banding together to prevent the auto industry from happening. You can try to stop Congress from funding roads or permitting fuel stations for only so long but the cars keep coming.
Even in recent history, old-line businesses have tried to stop progress via politics like Cable and Telco vs Net Neutrality, Taxis vs Uber, Hotels vs AirBnB, etc. The fact is, oil companies have been fighting solar for decades but now it’s going to hit them hard and fast instead of slow and steady.
lol .. totally agree Phil. I see the Saudi’s installing 100million panel’s, installing cables export the energy to Europe and
Phil/SPWR: What is your view on that?
I think Solar is inevitable. The economics now make it work so it can’t be stopped – just delayed. SPWR makes money, they don’t lose it. They are not going to go out of business just because a few subsidies go away – they haven’t had them before and they grew to own 10% of the market.
Below is a rundown of major earnings due in the week of May 22 to May 26:
Monday, May 22
Ryanair (RYAAY) is due to provide its full-year update on Monday, following shortly after a massive order of aircraft from Boeing. The Irish airline said it plans to buy at least 150 of Boeing’s (BA) 737-10 Max jetliners, along with an option for 150 more. While the low-cost carrier has notched double-digit traffic growth heading into the warmer months of the year, staffing concerns and worker strikes have caused its summer schedule to come under scrutiny.
Also reporting: Zoom Video Communications (ZM), ZIM Integrated Shipping (ZIM), HEICO Corporation (HEI), PetMed Express (PETS) and Niu Technologies (NIU)
Tuesday, May 23
Lowe’s Companies (LOW)
Just a week after a downbeat forecast from rival Home Depot (HD) dragged the stock down, Lowe’s Companies (LOW) is due to provide its own quarterly update before the opening bell on Tuesday. Lowe’s (LOW) has significantly outperformed Home Depot in 2023, rising over 5% in contrast to a nearly 7% decline for its Atlanta-based competitor. The stock has become a favorite among analysts ahead of the Q1 print as well, with both Jefferies and Wells Fargo adding the name to “top pick” lists.
“We have a favorable outlook on home improvement demand based on housing and demographics factors that we see bolstering R&R activity. Recent meetings with LOW mgmt. suggested company initiatives are poised to deliver near flat comps Y/Y. Shares trade at a 30% P/E discount to peers, and our ’24 EPS forecast is ahead of consensus,” Jefferies wrote in a recent note.
Also reporting: Intuit (INTU), Palo Alto Networks (PANW), AutoZone (AZO), Agilent Technologies (A), Kroger (KR), Best Buy (BBY), DICK’S Sporting Goods (DKS) BJ’s Wholesale Club Holdings (BJ), V.F. Corporation (VFC), Williams-Sonoma (WSM), Toll Brothers (TOL), Manchester United (MANU), Urban Outfitters (URBN), and Cracker Barrel Old Country Store (CBRL)
Wednesday, May 24
Nvidia (NVDA) is due to report its first quarter earnings results after the closing bell on Wednesday. Shares of the California-based chip maker have recorded a 100% gain to start 2023, rising alongside spiking interest in AI advancements. From its October 2022 low, the stock has nearly tripled. The Jensen Huang-led company was also recently boosted by the announcement of additional details on its new low-priced GPUs. EPS and revenue estimates have been revised upward a net of 15 and 7 times, respectively, in the 90 days ahead of the earnings announcement.
The consensus sell-side rating on the stock remains a Buy. However, both Seeking Alpha analysts and maintain a Hold rating, citing an untenable valuation. Victor Dergunov recently warned of a coming post-earnings plunge due to the red-hot run into the print.
Also reporting: Abercrombie & Fitch (ANF), Analog Devices (ADI), Bank of Montreal (BMO), Snowflake (SNOW), Splunk (SPLK), U-Haul Holding Company (UHAL), Xpeng Inc. (XPEV), UiPath (PATH), Futu Holdings (FUTU), Nutanix (NTNX) e.l.f. Beauty (ELF), Petco Health and Wellness Company (WOOF), American Eagle Outfitters (AEO), Kohl’s Corporation (KSS)
Thursday, May 25
Washington-based Costco Wholesale Corp. (COST) is set to update investors on its fiscal third quarter results after the closing bell on Thursday. The company recently indicated sales rose 3% to $17.85B for April and comparable sales were up 1.4% during the month, led by international growth. The sell-side consensus on the stock remains a Buy, with William Blair joining the bull camp in April.
Equity analyst Philip Blee said that the company maintains a “best-in-class private-label brand” and an engaged membership base that would likely not balk at a modest membership price increase.“Our pricing analysis implies the average product savings delivers an 11-times return on the annual membership fee,” Blee wrote. “Our proprietary survey suggests the average consumer ranks Costco first on best product price, quality, brand trust, and experience versus its peers.”
The Toronto-Dominion Bank (TD)
Canadian bank Toronto-Dominion (TD) will report its fiscal second quarter results in premarket hours on Thursday. The report comes shortly after the collapse of talks to take over First Horizon (FHN). The bank initially disclosed in early March that it didn’t expect to receive regulatory approval in time to complete its $13.4B acquisition of First Horizon. By early May, the deal had officially fallen through. The Seeking Alpha Quant Ratings system recently upgraded the stock to Buy as the acquisition fell through, highlighting improving valuation and momentum dynamics.
Also reporting: Royal Bank of Canada (RY), Medtronic (MDT), NetEase (NTES), Workday (WDAY), Autodesk (ADSK), Marvell Technology (MRVL), Dollar Tree (DLTR), Ulta Beauty (ULTA), Deckers Outdoor Corporation (DECK), Burlington Stores (BURL), Ralph Lauren Corporation (RL), Weibo Corporation (WB), The Gap (GPS), and Lion’s Gate Entertainment (LGF.A)
Friday, May 26
Big Lots (BIG)
Big Lots (BIG) is set to post its first quarter earnings update on Friday before the opening bell. The heavily shorted stock has slumped over 70% in the past year, plummeting 19% in just the month ahead of the print. While the Seeking Alpha Quant Ratings system has rated the stock a Sell for much of the past 6 months, analysts maintain a consensus Hold rating.
That said, Piper Sandler is the latest to join the bear camp ahead of the earnings report, citing slowing furniture and mattress sales, as well as free cash flow concerns for the retailer.
“We are downgrading shares of BIG to Underweight and lowering our PT to $7 based on our industry view that demand for both home furnishings and mattresses has deteriorated since March and will likely remain challenged in the months ahead,” the downgrade authored in late April explained. “With continued weakness in sales FCF could go negative and put the dividend at risk.”
NO plans to resume discussions on Debt Ceiling.
Powell says banking system stress could influence the Fed, who just raised rates on the 3rd so is he saying there is currently more stress they are worried about? He did not reassure anyone this morning.
This air-bag recall is supposed to be 6.8M cars and figure $200/car is $1.4Bn of unplanned expenses for the auto industry. That’s going to sting. There’s a much higher number floating too:
Air-bag inflators that regulators have warned could explode during a crash and spray the car’s interior with metal shrapnel are in at least 50 different vehicle models spanning 15 automotive brands, according to records filed as part of a federal safety-defect investigation.
The Wall Street Journal identified at least 6.8 million vehicles that carmakers have said were built with the potentially dangerous air-bag part. To tally the figure, the Journal reviewed documents that automakers submitted to regulators during the government’s eight-year probe of the matter.
Takata had a recall like this back in 2014 and it bankrupted them. So far, 22 people have died and 400 have been injured and they are freaking out. Seems very arbitrary compared to all the other stuff that kills us…
Inflators used in driver- and passenger-side air bags are prone to exploding when deployed, which can send metal fragments into the vehicle cabin with the potential to seriously injure or kill the driver or passenger, the safety agency said.
In its letter Friday, NHTSA cited a potential problem in how the metal inflators were welded in manufacturing. That potential flaw can result in too much pressure inside the inflator and cause it to rupture, the agency said.
🤓 A list of the top 10 products that kill or injure the most people in the U.S. based on the data I found. Here is the list:
I don’t know if we should consider homicides a “defect” in guns – it’s kind of their primary use.
I would like to delve into those bed numbers – seems like a lot. Would not have thought mattresses are deadlier than sofas – going to redefine which way I turn next time I’m cornered by a furniture gang…
OMG and I was cutting up Maddie’s steak when she was still in her high chair and she reached out to grab the steak from under my knife as I was slicing – I almost had a heart attack! I stopped the blade less than a centimeter from her finger.
Don’t even get me started on soap! At home I have a system but hotels can be deadly.
A disappointing finish but it didn’t ruin things.
Hi Phil, is the Butterfly portfolio self hedging too?