Discover more from Rate of Return by Austin Hankwitz
👉 The Investing Week Ahead: 8/28/23
Nearly $2 trillion of student loan debt, already with plenty of issues...
Welcome to your new week.
When seeing what’s going on with Nvidia (NVDA) it’s hard not to think of Google (GOOGL) after the ‘Dot Com Bubble’, or Pfizer (PFE) & Zoom (ZM) after the onset of Covid.
Google’s stock price more than 6x’ed before the Great Financial Crisis.
Pfizer’s stock price nearly 2x’ed between its Covid bottom and the ensuing explosion of Covid vaccine revenue.
Zoom’s stock price more than 4x’ed after the work-from-home craze began.
And what happened afterwards?
Google’s stock price didn’t revisit its pre-GFC highs (~$17) until nearly five years later.
Pfizer’s stock price is sitting at nearly the exact same value it was in October 2020.
Zoom’s stock price is sitting at nearly the exact same value it was in December 2019.
So what’s the point of mentioning this? Is Nvidia destined to give back all of its wild gains over the last few years?
Assuming their growth continues, probably not.
The point of calling this out is that if you grow to love a stock, and believe in its longevity, you will likely have a chance to buy it at a lower price than after a face-melting rally.
We can be bullish on NVDA long-term and have it on our watch list, without wanting to pile in at present prices.
Shoutout to one of today’s investment kings — Stanley Druckenmiller — for having strong conviction about Nvidia since last year (despite being bearish at a macro level).
See this great video from our friends at Grit Capital!
Key Earnings Announcements:
Salesforce and CrowdStrike are in focus.
Monday (8/28): Afya Limited, Heico, Nordic American Tankers
Tuesday (8/29): Ambarella, Best Buy, Big Lots, Box, Hewlett Packard Enterprise, Hewlett Packard, J.M. Smucker, Nio, Pinduoduo, Scotiabank
Wednesday (8/30): Brown-Forman, Chewy, CrowdStrike, Five Below, Mastercraft Boat Holdings, Okta, Patterson Companies, Pure Storage, Salesforce, Veeva, Vera Bradley
Thursday (8/31): Academy Sports & Outdoors, Broadcom, Campbell’s, CIBC, Dell, Dollar General, Lululemon, MongoDB, Ollie’s, Pagerduty, Polestar, Samsara, Sentinel One, Titan Machinery, UBS
Friday (9/1): N/A
What We’re Watching:
Salesforce’s guidance points toward a growth rate of +10% for revenues and +10% for contracted Remaining Performance Obligations (cRPO) — implying a sequential decline of -$450 million compared to the past two quarters.
Q2 guidance is taking a more conservative stance on overall revenue, but the prospect of improved margins appears to still be promising.
You can read my most recent breakdown of Salesforce stock here. Shares have returned +15% since this bullish call.
Analysts expect $1.90 EPS on Revenue of $8.5 billion.
You can explore the most recent CRM investor release here.
CrowdStrike is forecast to report decelerating growth, despite using AI in its cybersecurity business.
The cybersecurity company entered FY23 with a growth rate of +61% and started FY24 with a growth rate of +42%. The forecast is for FQ2'24 sales to only grow +34%-36% with revenue growth dipping below +30% to start FY25.
AI enhancements actually leading to more sales is the big consideration this week.
Analysts expect $0.56 EPS on Revenue of $724.3 million.
You can explore the most recent CRWD investor release here.
Investor Events / Global Affairs:
Instacart files its S-1 and Student Loan Repayments are already causing issues.
Instacart IPO Filing Revealed
Instacart has officially filed its S-1 with the SEC — the necessary step for an IPO.
The tale of the S-1 is that Instacart’s scale is remarkable. Orders climbed by +18% in 2022 to 262.6 million compared to 223.4 million in 2021.
Those numbers have remained more consistent in 2023 thus far, with orders totaling 132.9 million for the six months ended June 30 compared to 132.3 million the first six months of 2022.
Video coming soon, because this one is pretty dang exciting!
Student Loan Payment Complications Begin
Borrowers are finding the restart of repaying $1.6 trillion in federal student loans to be extremely complicated. If you need to repay student loans, we suggest you read this Wall Street Journal article.
As it relates to the overall economy / stock market — we can’t overstate the importance of realizing that this hasn’t happened before. This is a massive amount of debt that people completely disregarded and deleted from their monthly budget.
Student loan debt repayments should be an interesting headline throughout the remainder of 2023.
“A lot of folks just have no idea where to start… With the website and servicers not being super helpful right now, that’s leading to more confusion—newer borrowers are just throwing their hands up.”
Major Economic Events:
The final Core PCE and Jobs Report before the next Fed meeting on September 20th.
Monday (8/28): N/A
Tuesday (8/29): Consumer Confidence, Job Openings, S&P Case-Shiller Home Price Index (20 Cities)
Wednesday (8/30): ADP Employment, GDP (Revision), Pending Home Sales, Retail Inventories (Advance), U.S. Trade Balance (Advance), Wholesale Inventories (Advance)
Thursday (8/31): Chicago Business Barometer, Personal Income, Personal Spending, PCE Index (+ Core PCE)
Friday (9/1): Construction Spending, ISM Manufacturing, Jobs Report, Unemployment Rate
What We’re Watching:
Core PCE (Fed’s Preferred Inflation Gauge)
Last Core PCE (MoM) — +0.2%
Last Core PCE (YoY) — +4.1%
Projected Core PCE (MoM) — +0.2%
Projected Core PCE (YoY) — +4.2%
Last Nonfarm Payrolls — 187,000
Last Unemployment Rate — 3.6%
Projected Nonfarm Payrolls — 165,000
Projected Unemployment Rate — 3.5%
Which stocks moved the most last week.
Our friends at LevelFields scrub through thousands of data points each week to determine how events impact stock prices.
Shoutout to our friends for crushing the above Splunk alert! Be sure to give LevelFields a look (not a paid promotion).
If you’re starting your investing journey or are interested in buying T-bills yielding 5% or more, consider visiting Public.com.
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.