👨💼📈 Insiders are BUYING Up Stock + 1M on YouTube!
Happy Wednesday all,
A huge thank you to anyone who has subscribed or watched a YouTube video of mine in the past 4 years. I posted my first YouTube video, an introduction to my channel back on July 18, 2019. It’s been 1378 days since then and we are about to surpass 1,000,000 Subscribers later this evening (as of writing this, our sub count is at 999,918). Another fun fact is that it has been exactly 777 days since I hit 100K - that was back on March 10, 2021!
Another big focus of mine besides the channel is developing this newsletter further - and also creating some free resources for everyone here. If you are enjoying our newsletters, make sure to like every edition of the newsletter you receive - it means a lot!
Enjoy this week’s Hump Days!
- Humphrey, Rickie & Tim
The Weekly Brief
Biden Officially Announces His 2024 Re-Election Campaign (Bloomberg)
Biden, age 80, pled to voters to let him “finish the job” and put aside any worries about his age as he begins readying his campaign for 2024 against a Republican field dominated by Donald Trump. Biden faces scrutiny about his age, already being the oldest person ever elected U.S. president but in a 3-minute video uploaded yesterday, he bets that voters will reward him for his decades of experience and record.
Why Does It Matter?
Biden announcing his re-election campaign is no surprise to anyone, especially with no major Democratic contender in his way to challenge him. Age, economic uncertainty, and a deeply divided nation all cloud his case for a second term but unless another Democratic candidate willing to address all these concerns just magically appears, Biden will be running for president again in 2024.
Corporate Insdiers Step Up Stock Buying After Banking Turmoil (WSJ)
March saw an uptick in corporate insiders rushing to buy shares of their own companies following the banking crisis. Financial firms were a significant percentage of buying activity, signaling a vote of confidence that their stocks would recover. Officers and directors at financial firms made up more than half of all insiders who bought company stock, the highest share for the section in two years.
Why Does It Matter?
Since corporate insiders typically have greater insight into their company’s outlook, investors pay close attention to what executives do with their stock. Big sell-offs from insiders are often a signal that confidence is dwindling or that they want to sell high because the stock is unlikely to maintain its current price.
First Republic Falls ~50% After Deposits Flee For Security (CNBC)
Shares of First Republic, a regional bank, hit a record low after reporting a 40% decline in its deposits in Q1 as customers pulled out their money following the collapse of Silicon Valley Bank. The bank said in a press release that it was “pursuing strategic options” to reshape its balance sheet, looking to sell up to $100B of loans and securities. A full sale to another bank is unlikely to happen, according to CNBC.
Why Does It Matter?
In the aftermath of the banking crisis, we saw money drain from smaller regional banks and pour into the large banks. JPMorgan was a key winner in the ordeal and big banks as a whole were seen as a beacon of safety as the banking sector continues to be in recovery mode.
Hump Days Scoop
Earnings season is in full effect! This week, we break down the basics of quarterly earnings and two interesting takeaways from Q1 reporting.
How does earnings season work?
Every quarter, all publicly traded companies in the U.S. are required to report their financials. It’s a whole phenomenon and it dominates headlines for a few weeks as company financials flood the market; some showing their stellar results and some trying to come up with reasons as to why they underperformed. Think of it as a quarterly report card.
Companies report a lot of information around this time including financial statements (cash flow, balance sheet, summary of earnings), analysis of the company’s performance, discussion around its future plans, and risks that it foresees. However, for the broader market, earnings season boils down to one number: earnings per share (EPS), which is the earnings left over for shareholders divided by the number of shares outstanding and can be interpreted as a per-capita earnings reading. Wall Street analysts make estimates and on the day of earnings results, those estimates are either met, exceeded, or missed, and stock price movements follow accordingly.
What are some interesting takeaways from this quarter’s earnings season?
Earnings season is often overwhelming considering the vast amount of reporting. It’s just hard keeping up with everything, which is why for the average investor, index funds that pool up hundreds of stocks together are the way to go, but this earnings season yielded two interesting stories which we wanted to bring to light in this week’s Hump Days.
We exited Q1 this year with very pessimistic estimates coming from Wall Street but the ultra-dire outlook analysts predicted never materialized and companies were rewarded more than usual for beating estimates.
What we saw was that companies in the S&P 500 that beat estimates saw a 2% jump in their stock price which is higher than the historical average of 1.5%. On the other hand, if a company missed on its earnings, they were given a “free pass” and only hit -0.9% compared to the historical average of -2.4%.
We saw major global brands adopt a “Price over Volume” strategy last quarter, where companies sacrifice a small amount of sales volume for higher prices, which led to boosted profits.
McDonald’s, General Motors, Nestle, and Procter & Gamble all posted solid Q1 profitability results with management teams citing in their earnings calls that higher prices lifted profits even though they took a small hit in volume. For example, P&G saw a 7% increase in revenue due to a 10% price increase offset by a 3% decline in volume.
This trend is likely to continue with many companies seeing the stock market reward price increases that result in greater profitability. Chipotle saw an 11% jump in revenue after raising prices and McDonald’s revenue rose 12.6% worldwide.
According to economists, consumers have more wiggle room in their budgets and have been receptive to price increases (for now). The concern in the future is how much longer are consumers willing to put up with higher prices in the face of greater profitability for corporations, especially as the economic outlook becomes more grim.
Chart of the Week
A new Pew Research Center survey reveals mixed opinions among Americans regarding the use of artificial intelligence (AI) in workplaces. While the majority oppose AI use in making final hiring and firing decisions, they acknowledge that AI could be more impartial in evaluating job applicants. Most Americans believe that AI will significantly impact workers over the next 20 years, but fewer think it will have a major personal impact. Views on the overall effects of AI in the workplace are divided, with some expecting more harm than help, others expecting equal benefits and harms, and a significant portion uncertain about the potential impact.
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