Joey B Loves Metallica | The Daily Peel | 3/31/22

Market Snapshot

RIP to that incredibly short winning streak equity markets saw last week. Traders completely killed the vibe yesterday, with hopes for Russian de-escalation in Ukraine fading more than the value of my portfolio. Naturally, oil gained on this news, and tradeoff had a moderately good day. 

All in all, the Nasdaq lost 1.21%, while the S&P shed 0.63%, and the Dow fell 0.19%.

Let’s get into it.

Banana Bits

• Start lining up, boomers. Your second booster shot is waiting.
• The US Labor Market remains less balanced than your diet.
• Former President Donnie T may have lied bigly about his firm’s asset valuations.
• Axies got mugged for $600mn in the second-largest* crypto hack of all time.
• CNN+ officially launched because ‘round-the-clock coverage still isn’t enough. 
• Positive drug tests for US workers hit a 20-year high in 2021. Nice, lol.
• Robinhood’s long-time crypto lead says peace out.

Macro Monkey Says

No Homes for You — If you don’t already have or didn’t buy a home in the last few years, well, good luck being homeless for the rest of your life. Don’t worry, though. I’ll be right there with you, and I’m guessing so will a lot of people.

I didn’t realize this was actually possible, but home prices continued to accelerate to kick off 2022. January home prices grew at an annualized rate of 19.2%, according to the S&P Case-Shiller Index, increasing from December’s reading of 18.9%.

We already knew the housing market was a hodgepodge of garbage right now, but now we know that it’s still possible for things to get worse. Case-Shiller operates on a couple of months lag, hence the January report just dropping on Tuesday, so we’ll have to wait a while to see just how strong that trend is.

But all signs point to a pretty damn strong trend. Homebuilding in the US remains woefully behind demand, largely leading to the broad price jumps we’ve seen lately. Estimates show that between 2012 and 2021, 12.3mn households were formed within the United States, while only around 7mn homes were built. Doing some quick math, we can see that leaves a shortage of some 5.3mn homes. Not a great start.

In 2021, just 1.6mn homes were built, according to the US Census Bureau. As demand has only increased over that course of time, safe to say that shortage isn’t getting any better. Meanwhile, in 2021, many homebuyers were anything but families finally getting into the home of their dreams.

Firms like BlackRock, Blackstone, and a slew of other domestic and overseas investors have been buying up houses at the same rate that Will Smith is losing fans. Of course, the end goal with a lot of those purchases is to sell them, but trading literal houses is a bit different than trading stocks. Residential investors tend to keep them in their clutches for as long as they can. 

The one shining light that gives us some reason to think we’re not back in 2008 is rates. Mortgage rates hit over 4% for the first time in years recently, and as we saw a few Daily Peel’s ago, price elasticity is showing. New home sales slowed dramatically and against expectations, so while we’re watching prices skyrocket, we’re not seeing the same subprime-loan-fueled buying bonanza that led to the GFC. 

Or maybe we are. Who really knows because I sure as hell don’t. Like Samuel Goldwyn, we don’t like to make predictions, especially about the future.

What's Ripe

Lululemon ($LULU) — What’s the saying? When the market gives you lemons, make them Lulu? Something like that…

Regardless, that saying was hella true yesterday. Lulu popped off 9.6% after a classic beat and raised earnings release late Tuesday. Net income exploded by 131% to $434.5mn, translating to an EPS of $3.36, while the Street was looking for $3.27. Sales were up 47% QoQ, but not enough to beat analyst guesses.

I hate to burst the bubble of any Lulu-wearing apes out there, but much like the Fed, rates on the company’s products are getting hiked next quarter. 

Might be time to check out one of the millions of Lulu knockoffs that plagues your Instagram feed.

Formula One Group ($FWONK) — We love weird ass companies here at the Peel, so let’s take a look at Formula One Group… or is it called Liberty Media…? Tough to tell. But when a business doesn’t even know its own name, I’m into it. 

The wonkily named FWONK shares popped 3.5% yesterday, and while there was exactly 0 news to support this, we’ll take that all day. Essentially, Liberty Media group is a “media” investment firm. Its biggest holdings consist of, get this, 1) Formula One, 2) SiriusXM, and 3) the Atlanta Braves. Seems legit.

Yeah, it sounds pretty f*ckin’ weird, but it’s working out for them. F1 viewership is ramping up and might have something to do with the stock’s 61% 1-year gain. 

Don’t sleep on the weird ones, apes.

What's Rotten

Restoration Hardware ($ RH) — The world’s most pretentious retailer has gotten a good taste of the downside lately, falling well over 40% since mid-December and adding another 13.3% loss yesterday.

Restoration Hardware — the store that’s too good to call their stores “stores” and instead uses the term “galleries” — completely sh*t the bed last quarter. 

Revenue came in over $30mn short of expectations, clocking in $902.7mn for the quarter while raking in $4.91/sh GAAP on those sales. Wall Street wanted $5.52/sh.

Honestly, I don’t even feel bad about this one. Maybe a nice price correction will knock the pompous BS out of them.

Concentrix ($CNXC) — Congrats to the Concentrix team for having the second-worst performance in the entire Russell 1000 yesterday (only behind $ RH). Even solid earnings couldn’t pull them out of the water. Shares plummeted 11.5% by close, but in classic Mr. Market fashion, there wasn’t a whole lotta reason for it. 

Revenue grew a bit slower than expected. But still, you can’t be mad about a 13.5% quarterly bump. EPS grew nearly 24% from a year ago, hitting $2.09/sh, well above the $1.83 expected. So, Mr. Market, what are you mad about?

Oh yeah, they also announced that no share repurchases had occurred during the quarter. After authorizing and promising share repurchases for the whole year, Mr. Market may feel a bit betrayed. You don’t wanna break a promise with him. 

Thought Banana

Joey B Loves Metal — Turns out Joe Biden is a pretty big Metallica and Black Sabbath fan. The President is reportedly considering invoking the Defense Production Act to ramp up domestic production of metal.

Oh, wait a minute, I just read the report, and it’s not metal as in music, but metal as in actual metal. That makes a lot more sense.

That makes more sense, as you may have noticed lately that metal prices are skyrocketing as supplies continue to flounder while supply chains seem to still think we’re in the middle of the pandemic. To combat this and ensure all those EV firms have access to their metal, Joey B might dole out some lithium.

But it’s not just lithium. Biden has his eyes on supplies of graphite, nickel, cobalt, manganese, and a few other words that remind me of 10th grade chemistry class. Under the Defense Production Act (DPA), companies gain access to government funding to facilitate productivity, general operations, and, of course, safety.

Experts view the move as potentially taking us one step closer to energy and material independence, something that we’ve all now realized might just be slightly important. 

Nothing is set in stone yet, but certain material and industrial stocks were hyped. Lithium Americas gained almost 12%, while MP Materials gained 9% early to finish up 3.3%.

Apologies in advance, apes, but I have to say it. Got metal?

Wise Investor Says

“Stock prices can go to zero. Commodities cannot. Unlike shares in a company, commodities are real things that are always likely to be worth something to somebody.” — Jim Rogers