Terrible, Horrible, No Good, Very Bad Earnings Season

Investment Analysis Clubs Macro Economic Trends and Risks
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Companies and the Terrible, Horrible, No Good, Very Bad Earnings Season

Sales are flagging, and profits are flagging even more

By Justin Lahart, The Wall Street Journal, July 17, 2023

…

Companies are now starting to report their second-quarter results, and from the looks of it, this earnings season will be remarkably bad…Analysts estimate S&P 500 net income fell by 11.4%… [end quote]

It will be hard to support continued increases in stock prices if net income falls. This suggests a trend change in the near future.

Wendy

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This suggests a trend change in the near future.

No it doesn’t. This doesn’t have to affect the stock market at all. Will there be a minor retrenchment? Maybe. Only because it always does that and never doesn’t do it. No bear market. Anything less is not a trend change. A trend change because of not enough once in a generation inflation? C’mon.

If this has any effect at all on the market it will be because the few thousand people who actually own it will decide “Hey let’s…”
That was the source of most of the inflation in the first place.

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It’s the law of supply and demand.

The supply of people willing to pay what the companies are demanding has dried up.

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When people say the word “recession” that implies a 30% reduction in earnings.

How can this be a surprise? In addition investors know very well which segments will be hit hardest.

When talking heads say be selective in your choices, that is what they mean. Did some not understand?

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On my list of 68 stocks I track, yesterday EIGHT made new all time highs!

AAPL    Apple Inc.                         193.99
LSCC    Lattice Semiconductor Corp.         96.45
ODFL    Old Dominion Freight Line, Inc.    383.28
SPSC    SPS Commerce, Inc.                 193.73
APPF    AppFolio, Inc.                     193.16
PSTG    Pure Storage, Inc.                  38.51
SMCI    Super Micro Computer, Inc.         302.05
AEHR    Aehr Test Systems                   52.17

The Captain

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A contrarian view at SeekingAlpha but the comments tend to disagree:

Finally, The U.S. Markets Are Making Sense Again!

Granted, the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio outperformed the market-cap weighted market last year, but things are finally making sense again. With the risk-free-rate yielding more than most U.S. equities, dividend growth and most income strategies are now under pressure. This makes perfect sense to us. The strongest U.S. companies are now back on track with Apple (AAPL), Microsoft (MSFT), and the areas of big cap tech and large cap growth leading the way so far in 2023. This makes perfect sense to us.

2023 is looking pretty good for the covered call strategy.

The Captain

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Counter-point.

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They can always pump up their bottom line by cutting worker’s pay, like RS did.

Steve

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Today SEVEN more all time highs

LSCC  Lattice Semiconductor Corp.       96.79
ODFL  Old Dominion Freight Line, Inc.  394.20
SPSC  SPS Commerce, Inc.               194.81
APPF  AppFolio, Inc.                   193.92
PSTG  Pure Storage, Inc.                38.60
SMCI  Super Micro Computer, Inc.       318.40
MCHP  Microchip Technology Inc.         93.34

The Captain

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And Nvidia got awful close as well. Nearly 8 all time highs today!

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Nvidia was not on my list. It would have made an all time high on my list as I use closing prices while Yahoo uses intraday high which for NVDA was last Friday.

The Captain

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And more good news on tech stocks today! Oh… wait… hmmm… :frowning:

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Isn’t that like the reverse of survivor bias?

Mike

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It took another 25 years for RS to go toes up. The people who were cutting the pay of the store staff in 89-91, had made their loot and gone by then.

Steve

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Volatility happens! Got whacked good yesterday, Tesla down 9.74%. :frowning:

Funny thing, one of my deep ITM call options was assigned on Wednesday which cut days to expiration by nine days which improves the yield. Another is expiring today which means I might be able to sell more calls on Monday.

The Captain

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I know, right? It’s back to the same price as three weeks ago. The horror of it all! As you say, volatility. And also as you know, sometimes it can be your friend :blush:

Pete

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People who operate and people who ride rollercoasters love it! People who fly airplanes not so much.

Option sellers love volatility, the premium is correlated to volatility. Everything in my port is up pre market. I’m going to find myself some calls to sell.

The Captain

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