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☕ Buy Microsoft before earnings?

Jul 29, 2024

NOTE: Sorry for the delay in getting today’s 5 with Fitz to you - this is on me. We got hit with a power outage just as I was making ready to push it into cyberspace. Every UPS in the office worked flawlessly, except yours truly moved the fiber connection to an unprotected circuit a few weeks back. Doh! 🤦‍♂️

Good morning! 👋

Hope you had a great weekend as we did here in the PNW.

Monster week of earnings ahead, particularly for tech with the likes of Apple, Amazon, Meta, and Microsoft all on deck.

As I noted in last night’s Sunday evening update, it’s going to be a tale of two markets with companies like Microsoft crushing it and companies like McDonald’s getting crushed (which, of course, did come to pass earlier this morning). (Watch)

Keep your eye on the ball.

Companies making “must have” products and services are a very different proposition from those making “nice to haves.”

Invest accordingly – your portfolio will thank you! 😊

Here’s my playbook.

1 – Keep your eye on the BIG picture

Earnings season is about what I expected so far. Many folks are getting caught up in the headlines when what they should be doing is keeping their eye on the bigger picture.

As of last Friday and according to FactSet:

41% of the S&P 500 has reported

78% of which have reported positive EPS surprises and 60% have reported positive revenue

The blended earnings rate so far is nearly 10%, which is the highest since Q4 2021 on the heels of Covid.

Buy the best, ignore the rest!

2 – MCD’s not lovin’ it

As I suspected would be the case, the company posted results that left a lot to be desired earlier today with both a revenue and earnings miss. Same store sales fell for the first time since the pandemic. Profits were off 12%. (Read)

Incredibly, the stock is up in early going.

No thanks.

The company introduced a $5 value meal to bring back customers and it didn’t work. Management has admitted customers think prices are too high.

That tells me fewer burger runs are on order and that there could be more rough sledding ahead. The app appears to be flatlining and customer backlash against the kiosks continues to mount, at least anecdotally speaking.

Putskies, short or avoid.

3 – Buy Microsoft ahead of earnings?

FBN anchor Stuart Varney put it to me this morning, would you buy Microsoft 36 hours ahead of earnings?

Yep, that’s the plan. (Watch)

In fact, I did after getting off camera.

Tactically speaking, it’s too early to tell how MSFT stock will move into earnings.

The pattern lately has been to run tech stocks up ahead of time, then engineer a “rug pull” after great results. But the public is starting to catch on to that MO.

My guts tell me traders may try to keep things down to a dull roar this time around by lulling everyone who isn’t paying attention to sleep. Then spring into action afterwards.

Either way, I smell opportunity.

Buying a few shares ahead of earnings could work just as nicely as setting a LowBall Order in place for afterward to pick up shares at a discount. If I see a Straddle developing, I’ll let you know.

People ask me all the time “which” path they should take, and my answer is always the same.

There's no need to get fancy or split pennies.

If you want to own shares, do something about it.

4 – Bitcoin: If he doesn’t do it, somebody will

First things first, remember we do money. Not politics.

Period.

I’m watching candidate and former President Trump talk about Bitcoin and the question that keeps rocketing around in my pea brain is “why now?”

Funny enough, I’m reminded of Japan.

Let me explain.

Economists and the usual crew of suspects in the legion of doom (you know, the ones who have correctly forecast 10 of the last 2 recessions) have continually hammered on Japan for decades... saying that the debt was impossible to sustain... saying that the country would fail as a result... yada yada. Only it never got the memo.

The Japanese government can sustain massive debt at levels that confound Western economists because Japanese citizens are regularly encouraged to buy Japanese bonds as part of their retirement planning.

The ongoing demand 1) ensures a stable source of funding, 2) helps keep interest rates, and 3) gives everyday Japanese citizens a patriotic path forward.

What does this mean for our money?

Two things.

First and if he’s elected, I believe Trump is likely to push for some sort of partially-asset backed national currency reserve that includes Bitcoin and possibly Ethereum. I can envision oil, gold and even some form of long US Bonds being included in the “basket” too. And if he doesn’t, I see whatever administration is elected taking up that mantle late term or possibly next term. It's potentially the ONLY way to defend the USD against a digital Yuan.

And second, both scenarios will create a new run on blockchain related tech including, specifically, digital clearing which, not surprisingly is right in my favourite bank’s wheelhouse and has been since roughly 2017.

Shares have returned 37.75% versus the S&P 500 which has returned 20.97% over the past 12 months. Nearly double, an advantage I see building over time if I’m even halfway as right as I think I am on this. (Learn more)

MyPOV: Digital currency is inevitable.

5 – Heineken’s drop could pop

I learned a long time ago that the surest, most profitable path to profits requires two things:

Buying world class companies making must have products and services when nobody else wants ‘em; and,
Keeping risk as low as possible at all times by using the right tactics

Pardon the pun, but I’m look at Heineken this morning drooling.

The company just reported a $1B sales hit and shares are off -9% as I type. (Read)

I think the street has it wrong.

It’s a one-time impairment charge, sales of NA beverages are up 14% and the company continues to hit other metrics.

Seems to me that a few shares of HEINY might be worth a swig–pun intended.

Keith’s Investing Tip: People constantly ask me about “hot stocks” but the question they should be asking is which companies will be there when you need ‘em. Proost!