Stop the Bleeding | The Daily Peel | 5/20/22

Silver Banana goes to...

Market Snapshot

Happy Friday, Apes. Futures pointed towards another brutal day yesterday, with markets down more than 1% before the opening bell. When the dust settled, the Dow shed 0.75%, the Nasdaq was down 0.26%, and the S&P lost 0.58%. WTI Crude is back above 111 bucks, and the 10-yr yield closed lower at 2.851%. After a rough week, hopefully, we can stop the bleeding on this week’s last trading day.

For today’s BBT, I will mail a sweet WSO t-shirt to the first respondent with the correct answer.

Let’s get into it.

Banana Bits

After share prices have tumbled, Tesla whale calls for rapid buybacks
Looking at the numbers, Wall Street sentiment is in a position of extreme fear
So, here we go again? More cases, more variants, more reopening trade?
Finally, a way to invest in residential real estate with increased liquidity and active management of your passive investment
After months of political strife, finally Adam Silver is speeding to the rescue #FreeBrittney

Banana Brain Teaser

The answer to yesterday’s Brain Teaser was "the right passage, as a tiger would be dead after not eating for months."

For today’s BBT, we will mail a sweet WSO t-shirt to the first respondent with the correct answer. Let’s give this one a try:

A cowboy rides into town on Thursday, he stays for 72 hours, and he rides out of town on Thursday. How is this possible?

Shoot us your guesses at [email protected] with the subject line "Banana Brain Teaser" or simply click here to reply!

Macro Monkey Says

Know Your Worth — Regardless of whatever business you’re in, every problem is a people problem. If you’re in high tech or high finance, only the right people can solve the right problems with the right methods or ideas.

Lately, finding the “right people” has been tough for employers. Keeping them has also been a challenge. Rumor has it that Microsoft just doubled their budget for salaries to do just that. This comes on the heels of an Amazon base pay max jump from 180k to 350k.

These massive hikes say something about the value of talent. They also say something about how challenging it is to retain great people and to spin up new employees, particularly knowledge workers.

While the federal minimum wage has stagnated for a better part of this century at $7.25, total comp for engineers, technologists, analytics professionals, data scientists, and even some IT people has outpaced the comp in Finance.

Remember this the next time you’re trying to convince yourself that 80 hours with a 75-minute commute from New Jersey is worth it.

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What's Ripe

Synopsys ($SNPS) — Shares of the design and automation company ripped 10.25% yesterday. Synopsys is only down about 16% for the year, which isn’t half bad, all things considered.

Their earnings call was yesterday, and the data looked good. Wall Street liked how they beat sales estimates and pumped up those revenues. They did not put out rookie numbers, and the stock climbed higher.

Live Nation Entertainment ($LYV) — Live Nation’s stock had a nice day yesterday, enjoying a nice little 5.98% pop.

The summer concert season is here, and it’s likely that Live Nation will be a strong reopening play moving forward. Analysts generally like Live Nation, and it is generally seen as a BUY by the Street.

What's Rotten

Under Armour ($UA) — Here’s another interesting one: UA’s CEO is stepping down, and the Street doesn’t like it.

Their current (previous?) CEO was supposed to right the ship but unfortunately came in a little, er, limp. Unlike Tom Brady, he’s decided to hang it up. $UA fell 15.76% on the news yesterday.

Is it time to buy our bro-ga pants on sale?

Ross Stores ($ROST) — Continuing the trend of retailers getting their a$$es kicked, $ROST is down over 25% pre-market today.

Clearly, Ross is having a tough time with freight and labor costs compared to TJX. Ross’s earnings weren’t fabulous, and just like Joey B’s administration, they’re blaming Putin for inflationary pressures and uncertainty in the marketplace.

Thought Banana

Valuation Compression — If you’re like me, your portfolio has been feeling the squeeze lately.

Lots of volatility can be great; lots of volatility during a downward trending market can eat your f*cking lunch.

There has been a massive drawback in equities valuations this year. Absolutely massive and sort of in biblical proportions for some of our favorite names.

Tech is now trading at the same levels as Consumer Staples. Read that again.

Your favorite names like $FB, $MSFT, $TSLA, $AAPL, etc. have absolutely tumbled. Thinking about this critically, it would appear that there isn’t much farther to go.

But if you’re trying to predict a bottom, where do you reach out your hand to try and catch a falling knife?

And who is to say that valuations haven’t adjusted too far to the downside and that fair value is slightly higher than these levels?

I’d argue that some valuation compression is good; this is a generational buying opportunity. Gen Z, congrats – this might be your chance to get in on stonks. I can’t say the same for housing.

Buying near all-time highs isn’t really fun. Massive moves are okay for those looking to access the market. Let’s just hope the rest of us aren’t underwater in the meantime.

Wise Investor Says

“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw, irrational emotion under control.” — Charlie Munger

Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? Sign up for the WSO Daily Peel here. ADVERTISE // WSO ALPHA // COURSES // LEGAL

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