Walmart is THE earnings report to watch this week

Good morning! 👋

Stock markets are going to be listless this week, for the simple reason that the bulk of earnings season has come and gone.

The click-bait artists will do their very best to distract you, but what’s new??!! 🤦‍♂️

I want YOU to do YOUR very best to ignore their machinations.

According to FactSet, 84% of S&P 500 companies have reported positive EPS while 65% have reported positive revenue surprises. The path of least resistance remains higher as the inevitability of a Fed pivot or pause looms.

Remember: Buy the best, ignore the rest.

Here’s my playbook.

Walmart is THE earnings report to watch this week

The super-savvy Stuart Varney asked me about retail earnings this morning ahead of the bell and which stocks I prefer. (Watch)

My take: Walmart is the one to watch.

At issue…

can retailers pass on price increases and

will consumers continue to tolerate ‘em?

I prefer another “big box” store’s stock, but that’s neither here nor there.

What you’ll want to think about is the same thing I’ll be thinking about.

How strong is the consumer… really?

Retail isn’t just about revenue like most people think but, rather, how much revenue consumers generate, on what products, and can margins hold.

Groceries and e-commerce are key.

Why I am (almost) ready to recommend Amazon

Stuart also wanted to get my take on Amazon, asking me whether I am ready to recommend buying the company’s stock.

In a word… “Almost.” (Watch)

I hate to hedge (and normally I wouldn’t), but I am literally not quite finished with my analysis.

Here’s what I’m thinking.

Amazon got caught flat footed when it came to AI, an unusual position for ‘em to be in. Now reports are surfacing that the company will build custom AWS chips in a bid to catch up to MSFT and GOOG. (Read)

I think it’ll be a needle mover.

AWS accounts for roughly 16.48% of AMZN’s revenues but 79.48% of the company’s net profits, according to the company’s most recent quarterly 10Q.

As an aside and on a related note, I believe the real competitive focus is NVDA as far as management is concerned, but that doesn’t change the fact that legions of Amazon customers could jump on board with new AWS projects.

That will, in turn, boost revenues and yes, boost profits that ultimately translate into higher stock prices if I’m right (and I think I am).

It’s the yen again

Japan adjusted its central banking policy this past July and, in doing so, sent 10-year Japanese bonds to the highest levels in nearly a decade. This morning, the yen tapped ¥145/$1, a level not seen since November 2022. (Read)

Speculation is rising that the BOJ will step in to “defend” the yen.

Shorting the yen could be a power play.

YCS?

Note: YCS is a leveraged ETF, so tread carefully or simply find another way into the trade.

What traders are getting wrong about Tesla (again) this morning

Tesla shares are under pressure this morning after the company announced Chinese discounts and subsidies for the Model Y Crossover and Model 3 Sedans. (Read)

Naturally, traders are poo-hooing the move.

I say good.

Tesla’s margins are far higher than the competition’s, which means that Tesla is cutting margins to build market share rather than preserve revenue.

Big difference.

I hope I’m smart enough to buy more.

Speaking of which, selling cash-secured puts could be a great way to get paid to shop (for additional shares) at far lower, deeply discounted prices.

Sorry, the cavalry isn’t coming

Personal finance expert Dave Ramsey put it bluntly when he said recently—and I’m paraphrasing here—that 90% of a problem is realizing that there is one.

Case in point, restarting student loans.

Economists are up in arms that this’ll crater the economy.

No, odds are it won’t.

What’ll happen instead is that companies like Apple will introduce new BNPL programs and, in the process, make even more money.

Moral of the story… if you don’t have it, don’t spend it.

Bottom Line

Now and as always, let’s MAKE it a great day!

Keith 😊