Genevieve Sold a Tech Favorite for +74% Gain... 👀

1. Story of the Week 👉 NETFLIX EARNINGS

2. Genevieve’s Corner 👉 RISK OFF - TIME TO BE CONSERVATIVE

3. Matt Allen’s Corner 👉 INVESTING PRINCIPLES

4. What’s Moving The Market 👉 MACRO ANALYSIS

5. Comin’ Up 👉 EARNINGS AND ECONOMIC DATA

Get that weekly finance edge in 5 minutes! 👇

1. Netflix Earnings

ARE YOU STILL WATCHING?

Netflix exceeded profit expectations and met revenue predictions. The company reported earnings of $3.73 a share for the third quarter, compared with the consensus estimate of $3.49. Revenue came in at $8.54 billion, in line with analysts’ expectations of $8.54 billion. The company forecasts that profit margins will increase to at least 22% in the upcoming year, with potential for further expansion in subsequent years.

In July, Netflix announced a surge in paid subscribers by 5.89 million during Q2, culminating in 238.39 million global subscribers, reflecting 8% growth year over year. Despite expectations from analysts predicting an addition of only 1.769 million new subscribers for the quarter ending June 30, Netflix surpassed this number. This was also the same period when Netflix began alerting users in the U.S. and several other nations that account users outside their households would either have to join as an "additional member" or purchase separate subscriptions.

By the beginning of 2023, Netflix ceased to include predicted subscriber growth in its quarterly financial updates.

Throughout Q3, in tandem with the larger Hollywood community, Netflix felt the repercussions of the recently resolved writers' strike and the ongoing actors' strike, impacting their production activities.

Starting Wednesday, the streaming service announced U.S. monthly prices for its Premium plan will increase to $22.99, up from $19.99. Meanwhile, the Basic plan will now cost $11.99, up from $9.99. In July, Netflix discontinued the Basic plan option for new subscribers. However, the rates for the ad-supported and Standard plans will remain unchanged.

Netflix highlighted the triumph of "One Piece," a live-action version of a popular manga series. The series sparked significant buzz on social media and attracted 62 million viewers.

🎯 GRIT TAKE:

Netflix had incredible earnings after being under the limelight for below-average earnings…Upgrade to a VIP below to read our full GRIT takes! 🤩Get 50% off one year of your annual subscription now! Ends October 31st. 🎃

2. Genevieve’s Corner

RISK OFF - TIME TO BE CONSERVATIVE

Hi everyone! 👋

What a week it's been with earnings, layoffs, retail sales, Jerome Powell speaking, and some moves in my portfolio.

Let's get into it!

EARNINGS:

Netflix shot up by +15% on earnings beat and a sneaky price hike. Who knew not letting people share passwords could be worth billions? 😉

Tesla faced a more challenging quarter, and the stock dropped on an earnings miss. But here's the kicker: Tesla's balance sheet is rock solid, boasting a record $26 billion in cash, positive free cash flow, and minimal debt. Regardless of valuation, this is the kind of balance sheet you want heading into uncertain times.

The financial sector in the U.S. reported solid earnings across the board, including JP Morgan, Goldman Sachs, Morgan Stanley, BlackRock, Wells Fargo, Citigroup, and even Bank of America. However, the sector dipped slightly (-2%) over the week, possibly due to investors noticing some yellow flags. Moody's warns that U.S. banks could face over $650 billion in unrealized losses in their securities portfolios. Bank of America, in particular, raised eyebrows with unrealized losses of over $131 billion. The good news is that large banks are likely to weather the storm as they can hold these securities to maturity and avoid losses, but smaller regional banks may not be so lucky – will we see another bank failure?

RETAIL SALES

U.S. retail sales figures for September were off the charts, surpassing expectations at +0.7% compared to the anticipated +0.3%. But hold on a second, and it's important to note that this looks backward. Pandemic savings are dwindling, credit card debt is at a record high, and employment is showing some yellow flags. Despite adding +336,000 jobs in September and the unemployment rate at a low of 3.8%, a RECORD +447,000 people are now juggling TWO full-time jobs. Over the last three months, full-time employment in the U.S. has dipped by 692,000. The last three times this happened were in 2020, 2008, and 2001 (according to the Kobeissi Letter).

LAYOFFS

Notable layoffs this week include Bank of Nova Scotia shedding 3% of its workforce and UBS starting its next wave of job cuts with 10% of support staff.

In other sectors, we saw layoffs this week:

· LinkedIn: 3%

· Rolls-Royce: 6%

· Flexport: 20%

· Qualcomm: 2.5%

And in the last few months:

· Washington Post: 10%

· Epic Games: 16%

· T-Mobile: 7%

· Barstool Sports: 25%

· Farmers Insurance: 11%

· Juul: 30%

· Coindesk: 16%

· Roku: 10%

· Ally Financial: 5%

· Airtable: 27%

JEROME POWELL:

Adding fuel to the fire, Jerome Powell spoke on Thursday. While he suggested the Fed's inclination to keep interest rates steady at the next meeting, he didn't rule out future hikes if there are signs of strong economic growth. Two things he said that surprised me:

It is essential to note the odds of a rate hike at the November meeting are now down to nearly zero, with a 98.2% chance of rates staying the same!

🎯 MY TAKE: I've taken steps to reduce risk in my portfolio this week. I sold one position with a +74% gain, trimmed a tech stock, added to a financial stock, and initiated a new position in an energy company with an +8% yield.

Want to know the names of these companies? Well, you'll have to upgrade to premium to find out! We’re having a 50% discount for current free subscribers. Don’t miss out! Ends Oct 31st. 🎃

Until next week! Incessantly Chasing ROI,

Genevieve Roch-Decter

3. Matt Allen’s Corner

COMPLEX FINANCIAL TOPICS MADE SIMPLE

Hey friends!

This is a cliche statement, but my favorite investor is Warren Buffett. I have read his annual letters dated back to 1959, watched all his shareholder meetings, and read many books about him. He takes the complexities of investing and makes them simple for the everyday person. In my corner this week, I will explain three investing principles that Warren Buffett inspires.

The first principle is that the stock market is like a pendulum that swings back and forth. When you invest in stocks, you want to buy when there is pessimism and sell when there is optimism. Many people are unsuccessful because they follow the crowd and chase investments. It will always swing back and forth from fear to greed, and it's a continual cycle that will never end.

When the stock market is fearful, this will give you an excellent opportunity to buy low and sell high when there is much greed. Most people are unsuccessful because they follow the crowd and buy stocks during moments of greed.

The second principle is recognizing and avoiding stock market bubbles. You should avoid stock market bubbles at all costs! A bubble is when the crowd goes crazy into a particular investment, and the bubble will eventually pop. So, as a general rule of thumb, if your friend who knows nothing about investing is telling you to buy into a particular asset, run far, far away! This is a sign that the herd has moved into a particular investment.

The third principle is to use dollar cost averaging. Many investors try to time the market based on their emotions and trends. However, no one knows what the market will actually do in the short term. The best thing to do is dollar cost average, which means to spread your investments out over time. For example, if you were going to invest $12,000 into one stock, you could invest $1,000 on the 15th of each month for a year. This would allow you to get the market average over a year. If you can invest at the bottom of the market, I recommend doing that. However, this is a very difficult thing to do.

🎯 GRIT TAKE:

Michael Jordan is the greatest basketball player ever, and he emphasized daily that he would work on his fundamentals…Upgrade to a VIP below to read our full GRIT takes! 🤩

Stay Gritty,

Matt Allen

4. What’s Moving the Market

MACRO ANALYSIS

What recession? The consumer is still strong, and Powell strikes a dovish tone. This week, we had two key events in the macro arena: retail sales and a Jerome Powell speech. September’s nominal retail sales were stronger than expected, rising +0.7% m/m vs. estimates of +0.3%, and the revisions were a net +0.3% higher. Retail sales ex motor vehicle advanced +0.6%. This figure has reinforced the current upward trajectory of the US 10yr:

Jerome Powell also took the stage at the Economic Club of New York to echo the sentiment of recent Fed speakers: Financial conditions are sufficiently restrictive and may be doing the Fed’s job for them. In the discussion, Powell interpreted the recent increase in longer-term yields as primarily due to term premiums rather than to changed expectations for the path of short-term interest rates. It’s looking like “No-Hike-November” with the Fed in wait-and-see mode for December.

🎯 GRIT TAKE: This print doesn’t change anything for November. Heading into the print, the odds of a hike…Upgrade to a VIP below to read our full GRIT takes! 🤩

5. Comin’ Up

EARNINGS AND ECONOMIC DATA

💰 Earnings:

Monday: Logitech, Cadence Design

Tuesday: Microsoft, Apple, Visa, Coca-Cola, HSBC, Verizon, Texas Instruments, General Electric

Wednesday: IBM, Boeing, CME, T-Mobile

Thursday: Amazon, Mastercard, UPS, Comcast

Friday: Exxon, Chevron, Abbvie

📈 Major Economic Events:

Monday: None scheduled

Tuesday: S&P Case-Shiller

Wednesday: New home sales

Thursday: Initial Jobless claims, GDP

Friday: PCE Index

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. An insider to GRIT also currently holds positions in JP Morgan Chase & Co (JPM). The insider to GRIT does not guarantee that they will maintain their ownership interest in JP Morgan Chase & Co (JPM) and may increase or sell such interest at any time.

^Sources

^{(1) Three takeaways from Fed Chair Powell following July hike decision (Elisabeth Buchwald- July 26 2023): https://www.cnn.com/2023/07/26/business/fed-powell-takeaways/index.html
(2) Microsoft Investor Relations (July 27, 2023): https://www.microsoft.com/en-us/Investor/default.aspx
(3) Mostly Borrowed Idea’s Twitter Account (July 25, 2023): https://twitter.com/borrowed_ideas/status/1684007357787918342}

^{(4) Microsoft Investor Relations (July 27, 2023): https://www.microsoft.com/en-us/Investor/default.aspx
(5) Meta Investors Relations (July 27, 2023): https://investor.fb.com/financials/default.aspx
(6) Alphabet Investor Relations (July 27, 2023): https://abc.xyz/investor/
(7) Siblis Research (July 27, 2023): https://siblisresearch.com/data/us-stock-market-value}

^{(8) Wall Street Breakfast: Cancel the Recession (Seeking Alpha - July 27 2023): https://seekingalpha.com/article/4620376-wall-street-breakfast-cancel-recession} 

^{(9) Netflix profit beats earnings _{https://www.cnbc.com/2023/10/18/netflix-nflx-earnings-q3-2023.html}}

^{(10) Netflix adds nearly 9 million subsribers _{https://variety.com/2023/tv/news/netflix-subscribers-q3-earnings-1235760620/}}