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- 👉 Week in Review: 5 Stocks I'm Buying in April
👉 Week in Review: 5 Stocks I'm Buying in April
And two others I'm watching closely...
Happy Sunday, everyone.
We begin with three quick callouts:
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Next — Despite Chick-fil-A always being closed on Sundays…
the company still figured out how to generate $9,374,320 per store per year. That’s a +7% increase over 2022’s figures and +39% increase over 2018’s.
When accounting for all 2,050 locations — we’re talking about a fast food company generating over $19 billion in annual revenue selling chicken and waffle fries.
The highest performing store generated $19M in 2023, while the lowest performing generated $2.7M — that means their “worst” performing store generated more revenue than the average…
KFC
Wendy’s
Burger King
Taco Bell
Popeyes
The real question is …. why are they still privately-held?
Finally — a quick shoutout to everyone who read my post in February about the launch of the DXYZ ETF. Especially those of you who claimed your free shares!
And a special “Congrats!” to this anonymous subscriber who turned $22K into $102K in only a month — I wish I was lucky as you, haha.
Portfolio Updates:
April marks the turn of a new month, which means an increase in investable capital. This month I’ll be deploying $5K toward my Dividend Growth Portfolio and another $3K toward my Cryptocurrency portfolio.
Specifically, I’m interested in growing my positions in the following:
Google (GOOGL)
The company is trading perfectly in-line with it’s historical earnings multiple — and if Wall Street’s expectations (dotted blue line pointing up and to the right) are correct, this stock might see $200 / share sooner than we think.
Adobe (ADBE)
When you ignore the Covid-19 bubble and the recent AI-craze, Adobe’s stock likes to follow the company’s operating cash flow (blue line). At the moment, they’re slightly below their historical valuation, which bodes well if look toward 2025 and 2026 expectations — potentially pushing the stock toward $750 / share.
Meta Platforms (META)
We all remember the story behind this one — Zuckerberg decided he wanted to spend every dollar on building out the metaverse, hence the “V” shaped free cash flow line above (in blue). After deciding it was a waste of time, he stopped the spending + leaned into AI — the stock has been on a tear ever since.
At current levels it’s certainly frothy — however, Wall Street expects the company’s free cash flow to continue trending higher over the next 18-24 months, hopefully taking their stock with it.
Amazon (AMZN)
In my opinion, Amazon has the potential to be “Meta 2.0" — specifically when you look at the company’s historical operating cash flow. We can all see where it’s headed in 2025 and 2026. I’ll continue to expend my Amazon position solely because of their discount to future cash flow.
Mastercard (MA)
A name no one is talking about because it’s not “sexy” is Mastercard. This company’s current valuation (earnings) is priced to perfection, while Wall Street’s expectations show green pastures ahead. I wouldn’t be surprised if this stock began inching closer and closer to $700 / share by 2026.
Cryptocurrency continues to be an asset class I chip away at — with $3K invested toward the above this week. As you all know, I believe cryptocurrency will continue to trend up and to the right over the next 18-months, and I want to be along for the ride!
Once my price targets are hit, I’ll sell the cryptocurrency and use it to buy hundreds of thousands of dollars worth of SPYI and QQQI.
Something to add to your watchlist — Vital Farms (VITL).
One of our long-time subscribers, Jacob, emailed me the other week bringing this company to my attention. Not only is this company building an incredibly loyal customer base, their total addressable market is massive, their margins are superb, and at $1B in market capitalization there seems to be upside potential.
I’ll continue to do more research over the coming days and of course will let you all know if I open a position.
Key Earnings Announcements:
Levi’s wholesale revenue plummeted by -18%, and Conagra Brands expands marketshare in the single-serve frozen category to record levels.
Levi Strauss (LEVI)
Key Metrics
Revenue: $1.5 billion, compared to $1.6 billion last year
Operating Loss: -$0.4 million, compared to $157.4 million of op. income last year
Net Loss: -$10.4 million, compared to $114.7 million in net income last year
Earnings Release Callout
“The momentum in our global DTC business continues, with DTC up in all segments. Our efforts to stabilize our wholesale business are delivering results. We are on our way to transforming this company into a best-in-class DTC-first apparel retailer, setting the stage for our next phase of sustainable profitable growth.”
My Takeaway
The company delivered expectation-beating revenue and profits — despite being lower year-over-year.
They reported gross profit margin expanded of +240 bps year-over-year, including +150 bps increase in product costs — demonstrating their ability to navigate a continued inflationary environment. Their denim skirts and dresses’ sales are were tripled-digits year-over-year, proving product diversification remains robust.
Unfortunately, management shared guidance of revenue remaining flat in 2024 — as wholesale revenue plummeted in Q4 (-18% YoY).
In my opinion, Levi Strauss isn’t a company I’d be eager to add to my portfolio / watchlist. Sure, there is continued margin improvement and opportunities for expansion — but this is materially offset by the unpredictable challenges, such as a slowdown in denim (as displayed by their wholesale revenue decline).
Unless something changes, there’s no “investment opportunity” with this one for me.
Conagra Brands (CAG)
Key Metrics
Revenue: $3.0 billion, compared to $3.1 billion last year
Operating Income: $363.5 million, compared to $391.8 million
Profits: $308.8 million, compared to $342.2 million
Earnings Release Callout
“Volume trends in our domestic retail business continued to improve as targeted investments, particularly in frozen, generated strong lifts and unit share gains. Outstanding progress on our cost savings initiatives allowed us to support strategic investments in our brands while sustaining margin recovery.
We also continued to deliver substantial improvements in free cash flow enabling us to meaningfully reduce our net leverage ratio over the first three quarters of 2024. Our long-term focus remains on executing our strategic priorities and generating value for our shareholders."
My Takeaway
For those of you who might not know, Conagra Brands owns the following names:
Now that we’re all on the same page, let’s jump into their quarterly results.
Volume, once again, showed sequential improvement — now for the 4th straight quarter. Management is expecting this trend to continue into 2024, but is still cautious as to not declare 2024 a “growth year” for the company.
Their marketshare reached a record level in the frozen single-serve meal category — increasing nearly +2% when compared to the prior year’s quarter. This is likely the result of the company’s continued merchandising efforts. Additionally, Wall Street was surprised the company’s gross profit margins actually expanded by +50 bps, compared to the -150 bps decline they were expecting. In their view, maintaining a responsible balance between margins and volume is the most important strategy moving forward.
With that being said, the company is absolutely prioritizing free cash flow growth — up +127% YoY. This increase has allowed the company to repay $700M of debt over the last 12 months, lowering their leverage to only 3.4X. If the stock market decided to assign value back to CAG stock because of this free cash flow growth, their stock price could trade up +50% over the next 12-months.
For that reason alone, this company is now on my watchlist.
Investor Events / Global Affairs:
Apple wants to hop on the robotics train, GE’s restructuring officially commences in the public markets, and the Strategic Petroleum Reserve (SPR) will not be refilled.
Apple Exploring Humanoids for Home
Apple is reportedly shifting its focus from self-driving cars to developing personalized home robots that could navigate your house.
This move comes after the company abandoned its EV project earlier this year. It's uncertain if these robots will become a reality — but it’s clear that Apple has felt a bit of a “push” in this direction after Figure AI raised ~$675 million from Jeff Bezos, Microsoft, Nvidia, OpenAI, and others.
“A nearer-term move into robotics would be a device Apple has been working on for several years: a table-top product that uses a robotic arm to move around a display. The arm could be used to mimic a human on the other side of a FaceTime call, shifting the screen to recreate a nod or a shake of the head. But this device, too, doesn’t have unified support from Apple’s executive team.
So for now, Apple will probably make more incremental improvements to its current lineup: new device sizes, colors and configurations, alongside accessories that could squeeze more revenue from the iPhone. That’s largely been the key to the company’s success during Tim Cook’s tenure as chief executive officer.”
General Electric (GE) Finalizes Breakup
General Electric's long process of divestitures and restructuring culminated in the split of its remaining assets into three companies: GE Aerospace (focused on jet engines), GE Vernova (specializing in electrical power systems), and GE HealthCare.
Once a diversified conglomerate, GE faced challenges due to debt and strategic missteps — leading to a series of sell-offs and spin-offs under CEO Larry Culp's leadership.
Culp’s moves helped to turn around shares of GE, which had fallen by -45% in 2017 and another -57% in 2018. Its shares nearly doubled — rising +95% in 2023, and +37% this year.
Strategic Petroleum Reserve (SPR) at 40-Year Low
The Biden Administration has officially canceled a plan announced last month to purchase up to three million barrels of oil as part of its effort to finally refill the U.S. Strategic Petroleum Reserve (SPR).
“The SPR is the world’s largest supply of emergency crude oil. It was established primarily to reduce the impact of disruptions in supplies of petroleum products and to carry out obligations of the United States under the international energy program.
The SPR is maintained by the U.S. DOE and its oil stocks are stored in huge underground salt caverns at four sites along the coastline of the Gulf of Mexico. The size of the SPR (authorized storage capacity of 714 million barrels) makes it a significant deterrent to oil import cutoffs and a key tool in foreign policy…
The reasoning behind the prediction was that in election years, presidents have tended to withdraw from the SPR to prevent rising oil prices leading up to the election. My prediction concluded with “By the time the summer driving season and the change to summer gasoline blends arrives in May, I think the SPR purchases will be suspended.”
Major Economic Events:
The jobs report beat expectations, the unemployment rate dropped a bit, and the consumer credit balloon continues to inflate.
Jobs Report + Unemployment
In March, nonfarm payrolls surged by +303K — exceeding the Dow Jones estimate of +200K and surpassing the previous month's gain of +270K.
The unemployment rate dropped to 3.8%, aligning with expectations, while the labor force participation rate rose to 62.7%.
Average hourly wages increased by +0.3% for the month and +4.1% year-on-year, in line with Wall Street predictions.
Consumer Credit
Total consumer credit rose +$14.2 billion in February — down only slightly from a revised +$17.7 billion increase in the prior month. That translates into a +3.4% annual rate, down from a +4.2% rise in January.
Economists had been expecting a +$12 billion gain. Credit growth was revised down in January from the initial estimate of a +$19.5 billion gain.
Revolving credit (i.e. credit cards) accelerated to grow at a +10.2% rate in February after a +7.8% gain in the prior month.
Non-revolving credit (i.e. auto and student loans) rose a slight +0.9% after a +3% rise in the prior month. This category of credit is typically much less volatile.
The Fed’s data does not include mortgage loans, which is the largest category of household debt.
“It’s not a surprise to see consumer-credit growth slow because interest rates are elevated, banks are still tightening lending standards and the resumption of student-loan repayments has kicked in…
Consumer credit tends to lag the cycle, so it is telling us more about what has happened over the past few years than telling us much about the outlook for consumers, which we still think is strong based on the ongoing strength of the labor market and the solid state of households’ balance sheets in aggregate.”
If you want to check out the full episode list of the Rich Habits podcast, click here.
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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.
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