After the market close on October 5, Costco Wholesale (COST) reported that sales for September had climbed 10.1% to $21.46 billion. Total same-store sales rose 8.5% in September, beating Wall Street’s estimate of 6.3% growth.
Copper gained after the London Metal Exchange said it will restrict new deliveries of the metals from Russia’s Ural Mining & Metallurgical Co. and one of its subsidiaries.
Today, Wednesday, October 5, OPEC and its allies, including Russia, approved a two million barrel-a-day cut in oil production. This is the largest cut in production since the onset of the pandemic. Here’s the key paragraph in the OPEC+ statement: “Adjust downward the overall production by 2 mb/d, from the August 2022 required production levels, starting November 2022 for OPEC and Non-OPEC Participating Countries as per the attached table.” On the news, oil and oil stocks extended the rally that began on news leaks yesterday.
Yesterday, September 29, after the close of trading DRAM chipmaker Micron Technology (MU) reported fiscal fourth-quarter earnings of $1.35 a share and adjusted earnings of $1.45 a share. That was down from $2.42 a share in adjusted earnings in the fiscal fourth quarter of 2021. Wall Street was looking for earnings of $1.37 a share. Revenue fell to $6.64 billion from $8.27 billion a year ago. Analysts had been looking for revenue of $6.73 billion. The drop in earnings and revenue was widely expected. Which is why the stock closed up 0.18% today after the earnings. You’d have to say that the big hurt from Micron’s news–and especially from its report that it would cut total capital spending by 30% year over year and spending on wafer fab equipment by 50% year over year–fell on chip equipment makers.
My one-hundred-and-ninetieth YouTube video: “Quick Pick Nvidia” went up today. This week’s Quick Pick: Nvidia (NASDAQ: NVDA). I believe Nvidia will be the dominant chip stock for the next decade–but the stock is struggling during this bear market and the shares were down 58% year-to-date as of September 26. The company has come out with a new line of chips, the GeForce RTX 4000 Series, which offers a 2-4x performance boost over the last generation chip. But in order to get that boost, early reviews indicate, a computer game has to use Nvidia’s DLSS software. Currently, almost no games use DLSS. So Nvidia finds itself in a build it and they will come situation. (“Build it, and they will come,” as James Earl Jones said in Field of Dreams.) Nvidia now awaits the uptake from companies that will be using this chip of the future. Because this product doesn’t “do anything” right now, Nvidia’s upcoming earnings on November 16 won’t reflect this new product. In the short-term, I look for the stock o sell off further on the earnings report. In other words, a better buying opportunity still awaits those who can be patient.
Shares of Eli Lilly (LLY), a pick for my Jubak Pick’s Portfolio in a post yesterday, are up 8.89% today as of noon New York time, September 28, on news that an experimental Alzheimer’s drug from Biogen (BIIB) and Japan’s Eisai(ESALY) slowed cognitive and functional decline by 27 percent in a clinical trial. Today shares of Biogen are up 38.07% and shares of Eisai are up 62.6% on the news. Why the pop in Lilly? As I explained in my post yesterday, Lilly has its own Alzheimer’s drug in development and positive results out of Biogen/Eisai are thought to be a positive for that drug too.
This week’s Trend of the Week is “Drug Stocks Aren’t a Safe Haven Anymore.” Drug stocks seem to have lost their safe haven status. As of September 20, the Health Care Select Sector SPDR ETF (XLV) was down 4.6% in the last month, and Pfizer (PFE) was down 7.55%. Why? Investors who were looking for safe havens may have decided they don’t need them any longer if the volatility continues to not be as bad as expected on the downside. Or many analysts cut their estimates with the signing of the Inflation Reduction Act, which took steps toward drug price negotiations for Medicare and Medicaid. Or since drug stocks have been falling maybe they’re no longer a safe haven. (And yes, that’s circular logic.) Some of the ETF dips can be attributed to one stock: Moderna (down 12.46% in the last month) which is considered by much of the market as a one-trick pony–a Covid stock. However, I’m adding Moderna to the Jubak Picks Volatility Portfolio on September 27 because the company has a pipeline full of new vaccines based on the success of their Covid vaccines. Overall, drug stocks may not be the safe havens that they once were but there are still selective buys in the sector.
Luminar Technologies (LAZR) has pretty much all the characteristics the Bear Market hates most right now. The company went public via a SPAC (Special Purpose Acquisition Company), once the hottest “invention” on the stock market and currently one of the most scorned. The company has tiny revenue–just $37.11 million for the trailing 12 months. And big losses: the operating loss for the trailing 12 months is $327.88 million. (The company had $605 million in cash on hand on June 30, 2022.) No wonder the stock is down 56.4% for 2022 as of the close on September 23. The stock traded at $7.49 a share as of 3 p.m. New York time on September 26. But what puts Luminar on my list of Penny Stocks to Buy the Future is that this company is likely to be the largest pure-play supplier of LIDAR (Light Detection and Ranging–think of it as radar that uses lasers and light instead of radio waves) for self-driving cars and for enhanced safety and driver assist technologies on more conventional cars.
Shares of Costco Wholesale closed up 2.98% on September 26. The advance against the grain of a generally down market comes after the company announced a beat on both revenue and earnings for its fiscal fourth quarter on Thursday, September 22.
Today’s Quick Pick: JO (NYSEARCA: JO) otherwise known as Barclays iPath Bloomberg Coffee Subindex Total Return ETN Series B. As I’ve shown you in the video, I’m growing my own coffee plant to head off the coffee shortages we’re seeing now (first beans projected in 2028; enough for a cup? 2032), and will likely continue to see long-term. Brazil is the world’s largest producer of coffee but its inventory is projected to drop to about 7 million bags by March, (well below the comfort level of about 9-12 million bags.) A long-lasting drought is to blame for the shortages–and that dicey weather is likely to be with us for quite a while. Meanwhile, global coffee consumption is going up by 1.5% projected this year (2% last year). While JO is volatile since it trades on the commodity price, what interests me about it at the moment is that it’s NOT correlated to anything else like interest rates or inflation (though it definitely contributes to inflation as coffee drinkers well know.) This ETN will continue to go up, even if the market goes down. (JO is a member of my Volatility Portfolio on my subscription JubakAM.com site.)
My one-hundred-and-seventy-eighth YouTube video: “Ford Drops a Bombshell on the Market” went up today. Ford (NYSE: F) came out on Monday with a pre-announcement on third-quarter earnings that was pretty grim – not just for them, but for the market and global economy as a whole. Instead of Ford’s expected $3 billion in operating profits for the third quarter, the pre-announcement stated it will actually be closer to $1.4 -1.7 billion. This of course caused the stock to plunge by 9.18% by 11 am the following day. The reason the earnings were so disappointing is a continuing supply chain problem that has left them with 40,000-50,000 “uncompleted cars” awaiting computer chips. This is why I think it represents a larger problem within the global economy: supply chain issues and inflationary costs cutting into profit margins.
It’s time to move on from relief/enthusiasm/grudging acceptance of the $369 billion in the Inflation Reduction Act for programs designed to speed up the transition to clean energy and to de-carbonize the economy. The surprise–and in many quarters–appreciation that the United States is doing anything–and it’s a big anything–about climate change has led to big rallies in the stocks of electric vehicle charging companies and hydrogen-economy pioneers. For example, EVgo (EVGO), obviously, I think< an electric vehicle charging stock is up 48.14% in the last month as of the close on August 17. Plug Power (PLUG), one of those hydrogen economy pioneers, is up 84,15% in the last month as of the August 17 close.But I think it's time to go from the general amazement stage to an examination of what companies--and stocks--are actually going to be winners because of the Inflation Reduction Act. (And I say that not only because some of these early winners have started to show some weakness--profit taking perhaps. But also I would pay attention to these near-term trends. EVgo, for example, fell to $10.74 a share on August 17 from $12.02 on August 16. That's a 10.6% tumble.) The bill as finally passed is a masterpiece of compromises and add-ons that mean that many of the top line dollars won't wind up where recent headlines have suggested. My take?
