A Big Week Ahead

1. Genevieve’s Corner

S&P 500 HAD A DOWN WEEK

Hey Everyone!

The S&P was down slightly this week.

 BUT some big things happened.

 And are about to happen (read until the end)

 Let’s recap:

 - NVIDIA now more valuable than the entire S&P 500 Energy Sector

 - NVIDIA the 3rd most valuable company in America by marketcap. Surpassed Google and Amazon for the first time in history

 - Goldman Sachs CEO gets a 24% pay boost to $31 million for 2023 while profits dropped 24% (biggest pay jump of all big US bank CEO’s)

 - Jeff Bezos has sold another $2 billion of Amazon stock, bringing his total sales to $6 billion in the past week

 - 82% of companies reported, S&P 500 Q4 GAAP earnings per share are up +14% YoY, the 4th straight quarter of positive YoY growth and highest growth rate since Q4 2021

 - S&P’s top stocks haven’t been this concentrated in 50 years. Combined value of the top 10 companies in S&P 500 makes up 33% of the index's total value - Inflation: Both U.S CPI and U.S PPI inflation come in above expectations in January

 - Inflation adjusted US gov spending since 2020 is more than combined spending of: World War I + World War II + 1970 to 1990

 - Only 8.5% chance the FED cuts rates in March, down from +70% a month ago

 - U.S retail sales dropped by the most in nearly ONE YEAR in January (prior month also revised down)

 -IMF now "very confident" the world economy will see a soft landing

 - Japan and U.K officially enter a recession

 - Bitcoin up +7.7% this week. Hits $1 trillion market cap for the first time since 2021

 - BlackRock & Fidelity now hold 191,657 of Bitcoin worth over $10 billion in their spot Bitcoin ETFs

 - Lyft CFO makes typo in earning release, stock soars +60%. Stock still up +37% this week

 - Coinbase stock surges +14% after posting first quarterly profit in 2 years

 - ARM stock up another +7% this week after being up +62% last week. (IPO lockup expires March 12th, watch out drop could be big!)

 - Michael Burry closes his short positions on semiconductor stocks like NVIDIA and AMD

 - Natural gas prices down 56% in just 3 months

 - YouTube TV and GOOGL now has +8 million paid subscribers, making it one of the largest TV providers in the U.S

 - OpenAI launched 'Sora', a text-to-video model that allows users to create videos using prompts

 - Cathie Wood's Ark Invest has destroyed $14 billion in wealth over the past decade, Morningstar has said

 - Corporate America has announced plans to cut 82,307 jobs in January, up +136% from December and the 2nd-most of any in January since the aftermath of the financial crisis in 2009

- Home Depot and Walmart kick off quarterly earnings reports for a host of retailers next week, offering investors a crucial glimpse into the financial health of US households

 The most important thing to look out for this week is: NVIDIA reporting earnings on Wednesday!

 Brace yourself; if they miss, the market will likely come down hard!

Genevieve Roch-Decter

2. Matt Allen’s Corner

HOW TO READ A Cash Flow Statement

Hi Everyone! Today, I’m highlighting one of our sections in GRIT VIP! Below, I share part of my article, How To Read A Cash Flow Statement

A cash flow statement is a financial document that clarifies the variations in a company's cash balance (referring to cash and cash equivalents found on the balance sheet) over a specified timeframe. Reading a cash flow statement is one of the routine evaluative processes all investors use when considering an investment. Now, you can do it too!

It indicates how effectively a company handles its cash resources, particularly in covering operating costs and meeting debt commitments.

Additionally, the cash flow statement reveals the amount of cash generated by the business that is available to its owners, known as "free cash flow" (FCF). This aspect further underscores the significance of analyzing the cash flow statement to gauge a company's financial performance.

In contrast to the income statement, where revenues and expenses are recorded based on when the associated benefits are realized, the cash flow statement consistently tracks the actual cash disbursed or generated within a specific period.

For instance, if a company pays its employees in advance for the entire year, this expenditure would appear in the cash flow statement for the first quarter. However, this cost would be distributed across the entire year on the income statement.

The key elements of the cash flow statement are as follows:

1. Operating Activities: This section shows the cash generated or used by the company's core business operations during the period.

2. Investing Activities: This reflects the cash invested or received from the sale of assets, such as property or equipment, indicating how the company allocates resources to maintain and expand its operations.

3. Financing Activities: This area details the cash flows between the company and its debt and equity investors, showing how much capital was raised or paid back to these stakeholders.

This article will use Microsoft’s cash flow statement as an example.

Operating Activities

Operating activities on an income statement represent the core functions of a business that generate revenue and incur expenses. These activities are central to the company’s primary mission and directly affect its profitability.

Microsoft offers a comprehensive example of operating activities.

1. Revenue Streams: Microsoft's operating activities generate multiple streams of revenue. These include:

   • Software Sales: Profits from selling operating systems like Windows and software suites like Microsoft Office.

   • Cloud Services: Revenues from Azure, its cloud computing service, a major growth area for the company.

   • Hardware Sales: Income from selling devices like the Surface tablets and Xbox gaming consoles.

   • Subscription Services: Earnings from subscription-based services like Office 365 and Xbox Game Pass.

   • Licensing Fees: Income from licensing its technologies to other companies.

2. Cost of Goods Sold (COGS): This comprises the direct costs of creating Microsoft's products and services. It includes:

   • Manufacturing Costs: For hardware products, it involves material, labor, and overhead costs.

   • Operational Costs: For software and cloud services, expenses related to server maintenance, electricity, and other data center operations are included.

3. Research and Development (R&D): A crucial part of Microsoft's operating activities, R&D expenditure goes into:

   • Innovating New Products: Developing new software, cloud solutions, and technologies.

   • Improving Existing Offerings: Enhancing the features and security of existing products.

Read the full resource here. 📚

Cheers,

Matt Allen

3. Comin’ Up

EARNINGS AND ECONOMIC DATA

💰 Earnings:

Monday: N/A

Tuesday: Walmart, Home Depot

Wednesday: Nvidia

Thursday: Lloyds Banking Group, Square

Friday: Berkshire Hathaway

📈 Major Economic Events:

Monday: President’s Day

Tuesday: U.S. leading economic indicators

Wednesday: FOMC minutes

Thursday: Initial Jobless Claims

Friday: N/A

The author of this newsletter owns ETF’s (exchange traded funds) that may hold ownership interests in the companies discussed in this newsletter as of the published date of this newsletter.