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☕ Amazon’s pre-earnings set up is nearly identical to Meta’s

Apr 30, 2024

Good morning! 👋

The markets seem like they want to give back some ground on disappointing earnings, but we know the real story is inflation ahead of the Fed.

The employment cost index – which measures the cost of wages for civilian workers – jumped by 1.2%, which is .2% more than expected. Not surprisingly, the bellwether US10YR Treasury yield has jumped to 4.663%, up 0.051% as I type.

The go-fast crowd – meaning leveraged up to their eyeballs traders - is already backing away from stocks because they fear higher inflation data makes the Fed less likely to cut rates.

We know it’s all a bunch of baloney but there is a huge swath of people who fawn over every word because they think it matters.

Cool - I’ll be happy to take their money any day of the week and you should be too.

Remember... Chaos creates opportunity!

Here’s my playbook.

1 – Big #’s later today, so expect jitters all day

Amazon, AMD, and Starbucks all report after the bell today.

Amazon will be all about cost cutting and AWS/cloud demand while AMD will be about chips, accelerator growth and guidance.

Starbucks, meh.

Then again, I’m in the wrong business. Charging $10 for a cuppa flavored water I can make at home for $0.60 is a racket and half. Yeesh.

2 – Amazon’s pre-earnings set up is nearly identical to Meta’s

Okay sports fans.

I wrote yesterday that I found Amazon’s announcement about single day delivery to be suspicious and wondered on the keys if that could be because Walmart is mounting a challenge.

Now we have at least part of the answer.

Walmart is rolling out a new grocery brand called BetterGoods, the biggest such introduction in 20+ years. Reports suggest that most items will cost less than five dollars. (Read)

The media is portraying this as being about hanging on to the consumer, but I think there’s a bigger play at steak – pun and misspelling intended 🤦‍♂️

Walmart is the largest US grocer by revenue and roughly 60% of domestic sales come from groceries. A new $5 brand not only keeps consumers in the stores but online, too.

I think it’s a shot at Amazon.

We’ll know in a few hours when Team Jassy reports.

Trade Idea: Amazon’s set up strikes me as identical to Meta’s in that there’s almost no room for error. If shares are tracking higher into the close, I’m super tempted to buy ATM puts. Then exit come morning if shares are down for any reason. If they’re higher, I’ll have to eat it. Hmmm.

3 – Is luxury finally taking a hit?

VW is reporting a 20% drop in operating profit that it says is the result of falling luxury brand demand and rising sales. Porsche, which VW owns, experienced a 16% drop in sales globally. (Read)

So far, luxury products have held up, so this is interesting to me.

It's also a reason to buy Walmart imho.

Or, for that matter, another retailer that the OBA Family knows all about which is putting up monster numbers. Upgrade to paid.

4 – Coke v Pepsi

Dividend investors have long taken issue with the question.

Coke or Pepsi?

I bring this up today because Coke just announced strong earnings and raised guidance. (Read)

Pepsi did the same thing. (Read)

I’m with Pepsi.

The long-term performance is better and more consistent.

Pepsi, for example, has returned 59.37% over the past 5 years while Coke has turned in 49.79% according to Bloomberg.

You can really see the difference over a decade.

Pepsi has tacked on 172.89% while KO generated 109.95%.

Keith’s Investing Tip: Many people make it a point to own stocks like KO because billionaire investing legend Warren Buffett does but every now and then it’s worth doing a little extra research rather than following along blindly. And, yes, that applies to me, too.

5 – Like buying Palantir at $6, only you can drink it

I’ve learned a lot about collecting fine wine in the few years I’ve been doing it.

Fine wine has beaten the S&P 500 by nearly 4 to 1 since 1952 according to Forbes.
It has an ultra-low correlation to traditional financial assets according to various studies over the years.
And certain bottles can do considerably better than other collectibles if you pick carefully. Like, for example, the Château Rieussec Premier Cru Classé Sauternes 2011, which experienced a remarkable 52% increase in value over just twelve months.

The biggest surprise of all though is how little it took to get started.

This morning I’m focused – like I do every spring - on what’s called “en primeur” which is a fancy way of saying that I’ll be buying wine that’s still aging in barrels 2-3 years before it’s bottled.

Wines are sold en primeur every spring which means that you only get one shot at the previous year’s harvest, especially when it comes to the great cru classé properties in Bordeaux.

Buying wine “en primeur” is often less expensive than buying it after it’s bottled.

Many of the world’s fine wines are made in super small, limited quantities so buying en primeur can be a way to make sure you get the bottles you want, which is helpful if you’re planning to store ‘em, drink ‘em and even sell ‘em on a few years down the road like I am.

What’s more, I’ll admit there’s a certain satisfaction that comes from knowing I’ve got my mitts on something the rest of the planet doesn’t know about yet... kinda like buying Palantir at $6.

Are there risks?

Yep.

The biggest is that wines tasted and purchased while they are en primeur may not taste as good or score as highly after being bottled. So, the value drops.

Moreover, opinions are like belly buttons in that every wine critic has one. So high scoring en primeur wines can be rated like vinegar if the wrong critic or even a different critic gets a hold of it a few years from now.

I do have a backup plan, of sorts.

Fine wine is a physical asset which means I own my bottles and can crack one open with friends any time I like if values go to heck in a handbasket.

Anyway, it’s a lot of fun and something that’s interesting beyond the usual stocks, bonds, and lunacy we deal with daily.

Here’s a link to explore in case you are interested in learning more.

And in the interest of full disclosure, please know that I am both a client and a consultant to Oeno. I do not receive compensation in any form if you decide to buy from Oeno. Or not.