Superbowl showdowns in stock

LevelFields Weekly, Feb. 12, 2023

A Week of Battles

Markets vs Fed

Last week’s Superbowl matchup between the Eagles and the Chiefs was just one of many topics being discussed, with the market vs the Fed taking center stage. Despite several strong weeks, the market seemed to realize that the Fed plans to keep interest rates high through 2023, leading to pressure on an already cooling economy. Fed officials only helped to further stoke these concerns.

This led to all of the U.S. indexes posting losses for the week, with growth stocks also taking a hit. Even the expensive growth tech investing exemplar, ARKK ETF, saw a decline of over -7% for the week. As the Fed continues to maintain its course, interest rates will likely continue to be a factor for the foreseeable future. Investors should stay vigilant and keep a close eye on market developments throughout the rest of the year.

Bull vs Bear Rally

As the market rally faded, the bears came out of their caves and began touting reasons the last few weeks was yet another bear market rally. Bullish investors expressed their views that with inflation in the rearview mirror, the latest pattern reflects the beginning of a longer bull market rally. We’ll find out who is right soon enough. Our view remains there is more downside ahead. We’ve been going into our reasons in great detail as well as how to position for it each week in the Level 2 newsletter.

Lockheed Martin vs UFO

Last week, U.S. pilots flying Lockheed F-22 jets shot down an unidentified object over Canada at the request of the Canadian government. While the details of the object remain unclear, it’s suspected to be a Chinese spy system. This is the third such incident in recent weeks, with the U.S. also shooting down objects near Alaska and South Carolina.

These events have caused Lockheed Martin’s stock price to rise by +4% to around 480/share. As the situation continues to develop, investors will be keeping a close eye on Lockheed Martin’s stock and other defense stocks, as they may be poised for further gains.

Russia vs Europe

Despite diplomatic efforts, the war in Ukraine continues to rage on, and the Russian government is still determined to punish Europe for its support of sanctions and Ukraine. Recently, Russia reduced its oil output by 5%, which has caused a surge in oil prices and energy stocks. This news has led to Exxon reaching an all-time high, while Diamondback Energy (FANG) has seen a nearly +9% increase in shares over the week.

FANG is set to report its earnings results in 10 days, and it has a solid track record of beating estimates, increasing its dividend steadily for years, and growing earnings by almost +90% last year. As investors and owners of FANG, we remain bullish on this stock and believe it has significant potential for growth in the coming months.

KNOWLEDGE CORNER: MULTIPLE CATALYSTS

We’ve setup the scenarios to be homogenous events, but that’s not the only way to identify good trades. Often the best plays happen following multiple event catalysts. These events might happen in sequence, separated by earnings reports, or around the same time.

Salesforce is a good example. An activist investor came in, then the company announced it would shed costs through layoffs, the co-CEO was pushed out, then more layoffs were announced before yet another activist investor joined.

The events together compose a typical cycle of bullish events that will alter the company’s trajectory going forward, as seen in the U-shape of the stock’s price over the past six months.

The events mark single day and multi-month trades, so it’s important to keep in mind there’s more to LevelFields’ data than speedy trades.

We’ll get into the details of this more and dive into one stock that’s done +870% and still going strong on the back of events in this week’s Level 2 newsletter.

HIGHLIGHTS FROM LAST WEEK

Microsoft vs Google

There’s a lot of buzz in the tech world as Microsoft recently announced that it has $113 billion in cash to spend. With this kind of financial firepower, some have speculated that Microsoft may be taking on Google. However, the integration of ChatGPT, Microsoft’s AI-powered chatbot, seems to be having the opposite effect — some analysts believe that it could be a game-changer that will give Microsoft an edge over Google.

As evidence of this, Microsoft’s stock price has been on the rise, and some analysts have upgraded their ratings on the company. Meanwhile, Google’s shares have taken a hit, dropping by -8% last week after its new AI search tool, Bard, failed to impress anyone. As the competition between these tech giants heats up, it will be interesting to see how things play out in the months ahead.

Pepsi, Where’s My Dividend?

Pepsi made a bold move last week by increasing its dividend by 10% to over $5 per share, despite having announced layoffs just a couple of months ago. While the company beat estimates for earnings and revenue in Q4, its lackluster growth forecast for 2023 dampened investors’ enthusiasm.

Despite this, some analysts remain bullish on Pepsi’s long-term prospects. The company has a solid track record of generating steady profits and returning value to shareholders through dividends and share buybacks. As the market continues to evolve, it’ll be interesting to see how Pepsi adapts to changing consumer preferences and emerging trends.

Uber vs Lyft

Lyft’s stock price fell by -30% after projecting revenue declines in 2023, with its shares down -87% since its IPO in 2019. The company’s weak guidance also impacted Uber, whose shares fell 6%. To remain profitable, both ride-hailing companies will need to make strategic moves in the highly competitive and rapidly changing industry.

SPOT the Activists

Shares of Spotify rose 4% after the news reported an activist investor has taken a position in the music streaming company. Shares of SPOT are up over +50% the past three months after falling almost -70% last year.

Key Earnings Announcements This Week

February 13

• Palantir Technology (PLTR)
• $0.03 EPS is expected- representing a 50% YoY growth rate. PLTR is down -42.80% in the last year.
• Notable Earnings:
• Advance Auto Parts (AAP)
• Avis Budget (CAR)

February 14

• Coca-Cola (KO)
• KO has been benefiting from its wide variety of products: sparkling flavors, juice, dairy, sports drinks, tea, coffee, and plant-based beverages.
• Airbnb (ABNB)
• Factors to watch: Travel, consumer spending, rental listings.
• Devon Energy (DVN)
• Kevin Hern, a member of the Energy and Commerce Committee, bought DVN (reported on 12/30/22)
• Other Notable Earnings:
• Marriot International (MAR)
• GlobalFoundaries (GFS)

February 15

• Cisco Systems
• Slower spending on network equipment by enterprise clients amidst the company’s recent announcement of price increases.
• Generac (GNRC)
• With recent power blackouts worldwide, the electrical grid company may reveal an increase in the inflow of interest from investors and clients.
• Zillow Group (ZG)
• With the housing market in a state of panic amidst rising pressure from interest rates, ZG will be closely watched by investors as they announce earnings Wednesday.
• Other Notable Earnings:
• Barrick Gold (GOLD)
• Boston Beer (SAM)
• Albemarle (ALB) — lithium supplier

February 16

• DoorDash (DASH)
• With layoffs hitting the tech industry hard, DASH could benefit if wages decrease.
• Other Notable Earnings:
• Applied Materials (AMAT)
• Crocs (CROX)
• Hyatt Hotels (H)
• DraftKings (DKNG)
• Digital Reality Trust (DLR)

February 17

• Notable Earnings:
• AMC Networks (AMCX)
• AutoNation (AN)
• Deere (DE)

Economic Reports:

• 2/14
• US CPI (inflation report) — +6.2% expected
• 2/15
• Retail Sales
• 2/16
• Jobless Claims
• Household Debt

The LevelFields Team
support@levelfields.ai