Haircuts for All My Friends | The Daily Peel | 5/19/22

Market Snapshot

The futures pointed lower yesterday morning before the bell, and things got worse from there. The Dow tumbled 3.57%, the S&P lost 4.04%, and the Nasdaq, the day’s big loser, gave away 4.73%. WTI is just shy of $110/barrel, and the 10-year is below 2.9%. BTC is below 30k, and ETH is below 2k. What a day, Apes.

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For today’s BBT, we will discount our VC Course by 100 bananas for the first 15 respondents with the correct answer.

Let’s get into it.

Banana Bits

Banana Brain Teaser

Macro Monkey Says

Train with the Pros

What's Ripe

TJX Companies ($TJX) — The parent company for TJ Maxx, HomeGoods, and Marshalls posted strong revenues and solid earnings yesterday, sending their stock higher. At the closing bell, the company was one of the few winners in a broad sell-off, ending 7.12% higher.

This performance is in line with Wally’s guidance from two days ago: consumers are still spending, but they are spending their next penny on less expensive brands. TJX Companies fits that mold.

CureVac BV ($CVAC) — Its shares shined brighter in green than most other stocks during yesterday’s shellacking. They ended the day up 4.10%.

Covering this little-known stock in our Ripe section seemed like a no-brainer today. When the leader in the Dow was ended down a half percent, I had to pick literally any other stock to fit our format.

Hopefully, you had something good in your portfolios yesterday, Apes.

What's Rotten

Target ($TGT) — There’s no easy way to put this: Target’s quarter wasn’t great. Revenues are up, but costs were hefty. Supply chain, transportation, logistics… all higher this year, and the company’s bottom line suffered.

This is a tale of the bifurcation of retail. Some of the wealthiest people in America are still spending money, but the middle class, aka most of everyone, is likely slowing their spending.

On earnings news, its shares was down 24.93%.

Old Dominion Freight Line ($ODFL) — $ODFL had a rough day yesterday, losing 12.97%.

Freight is in rough shape, and a price target cut for these cats doesn’t help. They reported earnings about a month ago, posting a decent quarter. However, $ODFL is likely feeling the squeeze of supply chain slowdowns and labor shortages.

Thought Banana

Under Pressure — CEO confidence is low. Like, really low. Lower than even the first quarter of 2020 when we pushed the O-F-F button on the economy.

From yesterday’s CEO sentiment report from The Conference Board, the number was 42. This signals that CEOs think the economy is slowing and that economic conditions aren’t great for business.

This most recent reading reflects negative sentiment from more than half of the respondents.

Numbers below 40 typically show up during a recession or significant contraction. We might see a lower number next time, so hold on to your butts.

Businesses are still not completely passing their pricing problems on to the consumer. This is going to change; eventually, businesses will raise prices on finished products so that consumers start to foot the bill for increased production costs.

After hearing from Wally, Target, Home Depot, Lowes, and a few other major retailers, I get the feeling that even with strong sales, rising prices are eating into the margins for these big boys.

Margin pressure is bad. Wall Street doesn’t like it when a company’s margins are being squeezed. Smaller margins impact profitability. Stupid pre-revenue growth-at-all-cost tech names aside, profitability is obviously crucial in a company’s valuation.

I’ll close with this: my mind is effing blown that CEOs feel less confident about the economy now than two years ago. Business & economic cycles are much better understood than a once-in-a-century pandemic.

Hopefully, things will turn around. Low confidence isn’t good for anyone’s mental health.

Wise Investor Says