Rate Hike Inbound | The Daily Peel | 6/15/22

Market Snapshot

Futures pointed towards positive territory yesterday morning, but nothing compared to the persistent, abusive beatdown that we’ve watched since late last week. Towards mid-day, markets had basically given back any morning gains. ETH traded below 1300 bucks, and BTC was flat at around $22.5k.

At the end of the day, the Dow was down 0.50%, and the S&P had lost 0.38%. Not that you can call it the big winner, but the Nasdaq was up 0.18%.

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Let’s get into it.

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What's Ripe

FedEx ($FDX) — This is about as good as you can hope for our struggling FedEx, paying like $7 a gallon for diesel in their trucks and who knows how much for JP-8 in their jets. Shares of $FDX skyrocketed on news that the shipper was boosting its dividend and entering a deal with activist DE Shaw & Co.

$FDX also plans to cut expenditures and re-work executive comp. It sounds like they’re attempting to batten down the hatches for the upcoming hurricane Jamie (Dimon). On the news, $FDX ripped higher by 14.38%.

Chinese Internet Names ($KWEB) — Shares of $PDD, $JD, and $BIDU all moved significantly higher yesterday, sending the $KWEB Chinese Internet ETF higher by 6.66%.

Looking at the data, $KWEB has seen significant capital inflows this week, and it might be poised to pop. Or it might not be. I’m not a fortune teller.

What's Rotten

Pool Corp ($POOL) — After receiving a price target slashing, the most appropriately named company in the S&P shed 5.27% yesterday.

I don’t know about you, but people don’t buy as many luxury goods in a recession, especially not ones that require financing during a tightening cycle. $POOL weighed down the S&P yesterday as the market remained in bear market territory.

Exelon Corp ($EXC) — With crude trading at about $121 bucks yesterday, it was hard to believe that an energy/utility company was one of the big losers on the day amongst the Nasdaq’s darlings.

Apparently, it’s hot outside, and some of Exelon’s infrastructure likely won’t be able to handle the heat, so to speak. This might lead to summer brownouts or power loss, all together. Yesterday, shares of $EXC lost 3.14%.

Thought Banana

Back Up the Truck — Well, here we are again.

A lot of you have seen gains that you accumulated in the last two years evaporate.

Broadly speaking, many investors have tons of cash on the sidelines. Even with raging inflation, we thought it better to keep our money-losing like 7% a year because of crappy monetary policy was better than losing 10% a month because of valuation compression.

The Nasdaq is down by a third this year. That means a lot of market cap has gone the way of the dinosaurs. But does it mean there’s a buying opportunity on the horizon?

I think that we still have ways to fall. The Fed is downright adversarial. Even if we have compressed significantly, have we moved just to fair value, or are companies on sale?

Some of the talking heads that are more bullish think that we are only at fair value. I tend to agree, but I don’t think we’re at bargains yet. That being said, look at the forward P/Es of mega-cap tech or the price-to-book value of the big banks.

If you’ve followed stonks for the last decade, you could argue that you haven’t had a buying opportunity like this in at least two years.

The markets could go lower, and I personally expect to see that happen. I do have a number in mind where I am thinking about backing up the truck. But hey, you be your own judge.

Depending on your time horizon, a pullback can be a good thing. If you think we are approaching a bottom, don’t let a bargain pass you by.

Wise Investor Says