👉 The Investing Week Ahead: 12/05/22

“Federal Reserve officials have signaled plans to raise their benchmark interest rate by +0.5 percentage point at their meeting next week, but elevated wage pressures could lead them to continue lifting it to higher levels than investors currently expect… 

A smaller +0.5-point increase would mark a new phase of policy tightening as they calibrate how much higher to lift rates. Policy makers expect price pressures to ease meaningfully next year, but brisk wage growth or higher inflation in labor-intensive service sectors of the economy could lead more of them to support raising their benchmark rate next year above the 5% currently anticipated by investors.” — WSJ

“Finally, the labor market, which is especially important for inflation in core services ex housing, shows only tentative signs of rebalancing, and wage growth remains well above levels that would be consistent with 2 percent inflation over time. Despite some promising developments, we have a long way to go in restoring price stability.” — Fed Chair Jerome Powell on Wednesday (11/28)

Takeaway: Keep stacking cash if possible. Deploying it will be very fun in 2023.

What We’re Watching:

SentinelOne has been able to grow their quarterly revenue from $18M at the start of 2020, to now $100M+ just last quarter. They’ve reported tripled-digit ARR growth for six consecutive quarters — all while expanding their margins. We’ll be looking to see what they report for… Total Customers (+60% last report), Customers w/ >$100K ARR (+117% last report), and Net Retention Rate (137% last report).

You’ve heard us talking… we love Academy Sports & Outdoors as a long-term play. In 2021, the company had Revenue of $6.8B (+19.1% YoY), Net Income of $671M (+117% YoY), and a Diluted EPS of $7.12 (+87.9% YoY). More to come on ASO tomorrow in a separate post! 

Costco has officially been named the Yahoo Finance 2022 Company of the Year — and can you argue otherwise? For the fiscal year-ended Aug. 28, Costco posted a +14.4% overall same-store sales increase, a 93% renewal rate for U.S. members, the addition of 7.3 million members, and a slight increase in net profit margins (a win in the hyper inflationary environment).

With a market cap of nearly $219B and still being up +166% over the last five years, this doesn’t seem like the ideal time for building a larger position. But boy are we hoping that we get the chance.

This week — MoneyLion will be hosting its Investor Day in New York City, where they are expected to reinforce their focus on profitability and bolstering the company’s growth through unique enterprise and marketing strategies.

JPMorgan expects Lowe’s to reiterate full-year guidance to help close the operating margin gap with Home Depot. JPM also sees Q4 comparable sales and margin outperformance as potential catalysts heading into a likely turbulent time in the markets.

There’s big time drama going into this event. The Southwest Airlines Pilot Association will be holding an ‘Informational Picket’ at the event to “let investors and management know that the mistreatment of its employees to reward shareholders is not acceptable at the LUV airline.”

What We’re Watching:

As interest rates continue to soar and savings rates continue to be as low as possible — watching Consumer Credit is important. Throughout the Great Recession, credit took a long, downward plunge. In the most recent quarter, which ended in September, consumers’ overall credit card balances increased by +15% — the largest year-on-year increase the New York Federal Reserve has measured in more than 20 years. In aggregate, balances are nearing $1 trillion, not adjusted for inflation, for the first time ever.

"Unemployment being low is still a major contributor to delinquencies not going so high,” said Michele Raneri, VP at TransUnion. We’re watching how much the inability to make credit payments may increase with the rise of the unemployment rate.

According to CNBC, there may be some early evidence of demand being impacted in the US. Logistic managers are preparing themselves for delays in the delivery of goods from China as a result of canceled sailing of container ships.

DoorDash (DASH) Laid Off 1,250 Employees:

With 8,600 corporate employees at the end of last year, DoorDash realized it was about time to shrink its headcount. The company recently announced the slashing of 1,250 jobs. You may remember that DoorDash went public at the end of 2020 and had a wildly successful IPO — soaring +80% over its initial listing price. We have fond memories of riding out some of those gains (and exiting) with some of you.

If layoffs impact you personally — please remember that it doesn’t mean you are inadequate. They are happening across many sectors and are likely to continue. Recessions lead to the best workers, the best companies, and the greatest measures of strength. Hold the line and keep moving forward! We’re always here to help in any way possible.