Ep 69: Trump, Putin, Amazon Prime Day and the importance of 2Q 2018 earnings season

Ep 69: Trump, Putin, Amazon Prime Day and the importance of 2Q 2018 earnings season

 

 

 

Before the 2Q 2018 earnings season kicks into high gear this week, Tematica mixologists Lenore Hawkins and Chris Versace talked about one of the largest self-created holidays known to man – Amazon’s Prime Day — as well as the competitive response that has emerged during this seasonally slow time of the year for retailers. On the global stage, Lenore takes us through the geo-political and trade happenings over the last few weeks and explains how this along with fresh data pointing to a global slowdown has ratcheted up uncertainty risk even as the US stock market continues to march higher.

Against that backdrop, Chris shares his concerns for the upcoming earnings season and how earnings from truck logistics company JB Hunt and slowing loan volume growth at JPMorgan Chase, Citigroup, Wells Fargo and PNC suggest a step down in the speed of the domestic economy is likely in the current quarter. It’s all about earnings reality matching up with earnings expectations, and if reality falls short it likely means a turbulent summer for stocks.

 

Companies mentioned on this podcast

  • Amazon (AMZN)
  • Citigroup (C)
  • Netflix (NFLX)
  • JB Hunt (JBHT)
  • JPMorgan Chase (JPM)
  • Kohl’s (KSS)
  • PNC (PNC)
  • Target (TGT)
  • Walmart (WMT)
  • Wells Fargo (WFC)

 

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Ep 58: Why Boxed is a Takeout Candidate

Ep 58: Why Boxed is a Takeout Candidate

 

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Amid the ups and downs of the stock market, it comes as little surprise to us here at Tematica that thematically well-positioned companies are M&A takeout candidates. We’ve seen it before, and odds are we will see it again. If you’ve been listening to CNBC or FOXBusiness, we are once again hearing that Boxed, a company that sits at the crosshairs of our Connected Society and Cash-Strapped Consumer investing themes, is once again in those crosshairs. Again, no surprise to us given we see Boxed as a cross between Amazon (AMZN) and Costco Wholesale (COST). With Walmart (WMT), Target (TGT), Kroger (KR) and others looking to catch Amazon, we see the logic.

For more on Boxed, here’s the conversation between Tematica’s resident mixologists, Lenore Hawkins and Chris Versace with Boxed CEO Chieh Huang. It’s a conversation filled with confirming data points as well as some movie references to keep it fun and one that will leave you understanding why any of those companies we mentioned above could benefit from the addition of Boxed.

 

 

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Ep. 52: Should You Be Worried About the Return of Volatility?

Ep. 52: Should You Be Worried About the Return of Volatility?

 

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Last week the S&P 500 enjoyed the biggest one-week advance since 2013, gaining 4.3%. The index began 2018 with its best start to the year since 1987 followed by a 10% decline in just 9 trading days, and then proceeded to bounce off its 200-day moving average, reversing roughly half its losses in the process.

Quite a quick, volatile ride unlike anything we’ve seen in more than a year. We’ve gone from overbought to oversold and back to overbought again, but with volumes 22% lower on the move back up than during the slide down. It would seem not everyone is convinced the rebound will stick.

Adding to the renewed sense of volatility, following its disappointing December quarter results, Walmart (WMT) shares fell 10% on Tuesday, as Tematica’s investing mixologists Chris Versace and Lenore Hawkins discussed what is likely to drive the markets in the coming weeks and months and what data they will be looking for to confirm or refute their outlook.

Tematica’s dynamic duo point out that much of the enthusiasm for domestic equities is based on expectations concerning the impact of the recent tax reform legislation on the economy. A survey of Morgan Stanley analysts released last week, however, found that just 13% of companies’ tax cut savings are expected to go to increasing pay, bonuses or employee benefits, while 43% is expected to go towards stock buybacks and dividends. With only 10% of households owning 84% of all stocks in 2016, the benefits of that 43% is going to a small portion of the economy. While those upsized dividend payments could provide some safety net for stock prices we find it rather unlikely the dividend payments or increase in share price will materially alter consumer spending, given those households that will benefit most are already feeling pretty great thanks to the big run-up equities have already enjoyed.

Chris and Lenore also discuss some examples of Tematica’s investing themes playing out in the news:

  • Safety and Security gets yet another tailwind as companies look to tap into the increase in government spending.
  • China sits at the intersection of the Rise of the Middle Class with Content is King.
  • The intersection of Connected Society and Disruptive Technologies is on display with 5G at the 2018 Winter Olympics

 

 

Companies mentioned on this podcast

  • Albertson’s
  • Amazon (AMZN)
  • Arlington Capital Partners
  • CRSA
  • ECS Federal
  • General Dynamics (GD)
  • Home Depot (HD)
  • Hyundai (HYMTF)
  • Integrity Applications (IGAP)
  • Intel (INTC)
  • KT (KT)
  • Lockheed Martin (LMT)
  • Macfadden & Associates
  • MGM Resorts International (MGM)
  • Morgan Stanley (MS)
  • On Assignment (ASGN)
  • Rite Aid (RAD)
  • PAE
  • PricewaterhouseCoopers
  • Samsung (SSNLF)
  • Target (TGT)
  • Veritas Capital
  • Walmart (WMT)
  • Yum Brands (YUM)

 

 

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Books we’re currently reading:

The Rise and Fall of the Middle-Class Part 1

The Rise and Fall of the Middle-Class Part 1

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The Economic Impact of the Expanding Global Middle Class

This week, Tematica’s investing mixologists Chris Versace and Lenore Hawkins walk through the global impacts of the Rise and Fall of the Middle Class, focusing in Part I of this series on the Rise portion of this investing theme. The expanding global middle class will account for nearly half of all consumption in the coming years, but as we discuss the where and why behind this new middle-class is reshaping industries and business models at Amazon (AMZN) and General Motors (GM) to McCormick & Co. (MKC) and many, many more.

For over 90% of the past two millennia, China and India dominated the global economy, generating over half of the world’s GDP in terms of real purchasing power. The end of the 17th century saw a seismic change with the start of Europe’s Industrial Revolution, which later spread to the New World. From 1820 to 1950 Asia’s share of GDP plunged from just under 60% to 16 percent and by the middle of the 20th century the West had come to dominate global growth with the United States generating over a third of world GDP by the end of World War II and when combined with Western Europe, accounted for nearly 60% of global GDP. However, this would not be permanent.

Asia’s return to its multi-millennial dominant role began in the 1950s and started accelerating in the 1980s to rise from 16% to over 30% by 2000. Today Asia’s share of global GDP, excluding the Middle East, has reached a 160-year high of 43%. During that time, the share of the United States and Western Europe has fallen to a 166-year low of 33%, with the U.S. share cut to half its mid-20th peak and Western Europe losing nearly one-third of its share just since the start of the 21st century — all part of the story behind the Rise portion of our Rise and Fall of the Middle Class as the west loses its dominance while emerging economies come into their own.

The incredible volume of sales generated by Alibaba (BABA) over the weekend for Singles’ Day illustrates the reemergence of that economic power and the convergence of our Rise and Fall of the Middle Class with the Connected Society as a stunning 90% of the transactions were done via mobile, which we discussed here earlier in the week. As the center of gravity for middle class households shifts from west to east, it will open up new opportunities for those companies that adjust their strategies accordingly, generating tailwinds for growth. Those that miss this tectonic shift will face challenging headwinds.

Along the way, our mixologists talk about which sectors and companies are poised to prosper from the emerging middle class in the East as well as giving an assessment of the recent moves in the markets.

 

Companies mentioned on this podcast

  • Alphabet (GOOGL)
  • Amazon (AMZN)
  • Apple (AAPL)
  • Ford Motor (F)
  • General Motors (GM)
  • Home Depot (HD)
  • McCormick & Co (MKC)
  • Samsung (SSNGY)
  • Target (TGT)
  • Wal-Mart (WMT)
  • Whirlpool (WHR)

 

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Books we’re currently reading:

COCKTAIL INVESTING: Panera Challenges McD’s, Apple Watch flubs, and the SEC gets hacked

COCKTAIL INVESTING: Panera Challenges McD’s, Apple Watch flubs, and the SEC gets hacked

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This week, Tematica’s investing mixologists Chris Versace and Lenore Hawkins face-palmed after learning the Securities Exchange Commission (SEC) has been compromised in a cyber-attack. This ironic breach mere days after Equifax broke the news on its breach… as we discuss, this increasing pain point that spills out of our Connected Society investing theme is fodder for our Safety & Security one.  As our portfolio mixologists touch on that, they dish on the Fed’s latest missive coming out of its September monetary policy meeting and on a variety of data points for our Connected Society, Food with Integrity and Fattening of the Population investing themes. Chris and Lenore also mix in the latest economic data, and share why S&P 500 Global Ratings’ first rating cut to China’s sovereign credit rating in nearly two decades is important for investors.

  • After last week’s not-too-special event, we share our view on why it’s so disappointing there are connectivity issues with the new Apple Watch model even before it begins to ship.
  • As Apple tries to get itself back on track, Google is scooping up the team at smartphone company HTC that helped Google develop its Pixel phone. We share why Google is making this move and it’s got something to do with its core search business. Here’s a hint – it isn’t good news.
  • Why is Post Holdings pivoting its business with the purchase of the packaged foods business at Bob Evans? Believe it or not, it’s all about the sausage!
  • What do drones in Greece and being a neighbor of comedian Kathy Griffin have in common? The answer ties into one of our investing themes.
  • Who’s hiring and who’s not hiring for the year-end holiday shopping season? Part of the answer ties to where people are shopping for toys that is part of our Connected Society theme.
  • What’s the story behind Panera Bread CEO Ron Shaich challenging McDonald’s, Wendy’s and other fast food companies? The answer ties into our Food with Integrity investing theme and if you’ve seen the documentary Super Size Me you can guess where this is going. You can practically see Lenore roll her eyes at the response from McDonald’s.
  • The Fed expects to hike interest four times before the end of 2018 as it embarks on selling securities on its QE bloated balance sheet, but its economic forecast calls for year over year declines in 2018 and 2019. As Chris and Lenore face-palm, they put some much-needed perspective on this, and explain the real reasons for the Fed’s actions.
  • Over the coming week, we’ll be eyeing several key economic reports, including the Flash U.S. September PMI report, the August reports for Durable Orders and Personal Income & Spending. We’ll also be watching Hurricane Maria as we look to get a final tally on hurricane-related damage and what it means to 3Q 2017 GDP.

Companies mentioned on this podcast

  • Alphabet (GOOGL)
  • Amazon (AMZN)
  • Apple (AAPL)
  • Bob Evans (BOBE)
  • Burger King (QSR)
  • Equifax (EFX)
  • HTC
  • KB Home (KBH)
  • Kohl’s (KSS)
  • Panera Bread (PNRA)
  • Post Holdings (POST)
  • Macy’s (M)
  • McDonald’s (MCD)
  • Nest
  • Nordstrom (JWN)
  • Target (TGT)
  • Toys R Us
  • United Natural Foods (UNFI)
  • Wal-Mart (WMT)
  • Wendy’s (WEN)

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Cocktail Investing Ep 4: Yellen, South Korea & Plastic Surgery and Mobile Advertising with Digital2Go

Cocktail Investing Ep 4: Yellen, South Korea & Plastic Surgery and Mobile Advertising with Digital2Go

On this week’s episode of Cocktail Investing, we welcome Digital2GO CEO Mike Canevaro, who not only adds his perspective to the economic and Thematic Signals discussion but then gives us a deep dive on Digital2Go and on how mobile is shaking up the advertising industry. Will the Fed boost rates come March? What data are they likely watching? Amazon launches Charm to go after the video conferencing market, which puts them head to head with Microsoft’s (MSFT) Skype, Alphabet’s (GOOGL) Hangouts, Cisco System’s (CSCO) WebEx and even Apple’s (AAPL) FaceTime. It was Mike who shared a rather interesting view on what could come to market if Amazon were to combine its Alexa digital assistant with Charm… it could just mean the end of the fixed phone line once and for all.

Leveraging its location and contextual engagement platform, Digital2Go leverages the ubiquitous use of mobile technologies by connecting digital signals to the physical world and building a profile of consumer behaviors. Amid all the noise that consumers face day in, day out from a multitude of apps, Twitter (TWTR), Facebook (FB), Instagram, SnapChat and other social media platforms, consumer product companies are looking to cut through the noise to deliver a targeted message to those most likely to become their  customers.

From a consumer point of view, wouldn’t it be wonderful if we only received relevant offers that meshed perfectly with our preferences and habits at an opportune time rather than random ones that resemble all those pop up ads trying to sell us things we have no interest in that we all find so annoying? By leveraging location, context, and consumer behaviors, Digital2Go assists brands, agencies, and data partners to bring more personalized and contextually relevant mobile experiences to consumers in a way that drives usage, retention, and new ad revenue. After our conversation with Mike, you’ll be thinking that in the coming years companies may not be as reliant on companies like Facebook and Google when it comes to their digital advertising strategies.

Stocks Mentioned on the Podcast

  • Alphabet (GOOGL)
  • Amazon (AMZN)
  • Apple (AAPL)
  • AT&T (T)
  • Cutera (CUTR)
  • Cynosure (CYNO)
  • eBay (EBAY)
  • Facebook (FB)
  • Macy’s (M)
  • Nike (NKE)
  • Nordstrom (JWM)
  • Qualcomm (QCOM)
  • Starbucks (SBUX)
  • Target (TGT)
  • Twitter (TWTR)
  • Under Armour (UAA)
  • US Concrete (USCR)
Lenore Hawkins Tematica Research Chief Macro Strategist
Chris Versace Tematica Research Founder and Chief Investment Officer