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One way to play MSFT tonight-no options required

Jan 24, 2023

Good morning!

The markets are red as I type, which makes total sense considering that Wall Street’s pirates are keen to set up the next shakeout.

My guess is that it’ll be MSFT tonight.

Here’s my playbook.

One way to play MSFT tonight—no options required

MSFT is up 13.51% since its November lows. Yet, FactSet and other whisper numbers suggest that Team Nadella may post growth of 3% but an EPS drop of -6–8% when it reports tonight after the bell. (Read)

What’s an investor to do?

Here’s a simple way to help lock in profits and protect against losses if things don’t go as planned.

➤ Buy a corresponding number of Direxion Daily MSFT Bear 1X Shares (MSFD) to offset every regular share of MSFT you already own. Doing so will absorb any negative price action in the overnight markets.

➤Then, regroup in the morning after a good night’s sleep and a warm cup of coffee. At that point, you can decide on a course of action rather than letting your emotions get the better of you, which is what most investors will do.

There are some important caveats, of course.

Like any inverse fund, MSFD should ONLY be used by investors who understand the extremely short-term nature of what I am suggesting. This is an overnight trade at best.

Here’s the reason: Because of the way inverse funds are constructed, they can lose money even if the underlying stock (in this case MSFT) goes nowhere—meaning it’s flat. What’s more, inverse funds can lose money even if the underlying stock falls over a period longer than a single day.

Check with a financial professional if you have any questions whatsoever!

Supreme Court kicks the can on social media

What’s happening. The US Supreme Court has delayed a decision on whether or not to take up two cases challenging social media laws in Texas and Florida. Justices are still scheduled to hear two cases related to Section 230 of the Communications Decency Act that shields online services from being held liable for their users’ posts. (Read)

Why you should care. All four cases could materially change how social media providers promote, censor, and remove content. Critics say that allowing the government to mandate decisions private companies make could challenge critical First Amendment standing, but I say, like that hasn’t already happened??!!

Twitter, the FBI, the DOJ, DHS, the CDC… they’ve all been in cahoots for years, and an increasing body of evidence supports that—much to the chagrin of those who insisted it wasn’t happening.

MyPOV: There’s no doubt change is coming. The world has finally woken up to the fact that social media companies have preyed upon the rest of us by encouraging the dissemination of our most intimate personal details. Yet, they’ve never been held responsible for the divisiveness doing so has created.

Meta is at severe risk, which is why I continue to steer clear. So’s Google. Ironically, I also think that Musk’s Twitter may emerge as the gold standard when the smoke clears.

BBBY: +17.1% YTD despite BK warning 🤦♂️

BBBY is up 5.78% yesterday and is up 17.1% YTD… despite warnings about potential bankruptcy and despite getting a delisting notice. (Read)

I worry that more folks are going to get caught offsides.

It’s still only $2.94 a share, so there’s not enough room for putskies, unfortunately.

The upside to a downside housing market

Big Tech layoffs could crater an already rocky housing market. We talked about this a few months ago, but the narrative is picking up steam. Now I’m hearing rumors that legions of highly paid tech employees are looking to dump their real estate as quickly and efficiently as possible.

Opendoor Technologies (OPEN) could ride to the rescue. The company specializes in “iBuying,” meaning it buys homes for cash so you can save yourself the trouble to have potential buyers traipsing through your house for months. Then, it presumably flips and re-sells those homes it’s picked up at a discount for a ginormous profit.

Zillow tried but couldn’t make it work and ultimately took a $405 million write-off. When that happened (in November 2021), shares tanked -25% on the news. But OPEN trades at $1.74, which means it’s a cheap punt even if it loses.

Hmmm...

LMT rocks it (again)

Lockheed Martin has reported a “disappointing” outlook that isn’t expected to return to growth until 2024, or so says the WSJ this morning. (Read)

Wanna bet?

Revenue grew 7.3% to $19 billion versus a Refinitiv forecast of $18.27 billion. The company’s backlog increased 11% to $150 billion. And it generated $1.2 billion in free cash flow.

Russia isn’t backing down anytime soon. China’s agitating. The Middle East isn’t exactly a bastion of calm. Defense spending will increase, but as unfortunate as that is, profits will not be far behind.

I can easily see a return to $500 this year.