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Why “yeah but” matters when it comes to earnings

Oct 25, 2022

Good morning!

‍Earnings season has become a game of “yeah but” – meaning that executives talk about the results their companies have achieved. Then comes the caveat or at least the buzzword bingo.

People are still focused on the results but it’s the guidance that really matters. The “yeah, buts … “

My thoughts earlier today with the terrific Maria Bartiromo. (Watch)

Here’s my playbook.

KO ‘k-ohs” it

Owning quality companies is paramount in today’s challenging conditions. Anything else is a risk you don’t want in your portfolio.

KO is a great example. The company just posted great results AND raised the full-year outlook. (Read)

This stands in stark contrast to choices like …

UPS fails to deliver

UPS posted mixed results with a disappointing earnings guidance and an earning “beat.” Not surprisingly, the declines came from the supply chain solutions division which includes freight management. (Read)

Investors have a choice. You can buy a company like UPS (or its cousin, FDX) and worry. Or, you can put your money on a stock with an operating margin giving you plenty of room and peace of mind.

One Bar Ahead® Action: Companies making must-have products and services with higher operating margins will plow ahead. Investors who own ‘em will be handsomely rewarded. On the other hand, companies like UPS/FDX are gonna fight for their lives.

Morgan Stanley still doesn’t get TSLA

Morgan Stanley cut its price target citing “unexpected headwinds” ahead. Analyst Adam Jones says he wants to “make room” for a greater margin of safety in terms of supply chain, as well as incremental pressures from foreign-exchange headwinds, input cost inflation, startup costs and, to some degree, demand destruction,” (Read)

Before you panic, keep in mind that Jonas reduced his price target from $350 to $330. The stock is trading at $211.

If anything, sell some cash secured-puts to capitalize on the more aggressive premiums available. Like the one I suggested yesterday to Trade with Keith subscribers. Upgrade to Trade with Keith

Dan Ives and I agreed on $300 a few weeks back, BTW. The stock is right where I want it and dirt cheap IMHO.

GM’s earnings: Yeah but

GM posted yet another big beat while missing on revenue. I liked the fact that the company held guidance.

My interest melted the moment CEO Mary Barra launched into her, “yeah but” statement about “actively managing the headwinds we face.”

I wonder what’s going to happen to GM Financial as rates rise and the potential for consumer defaults grows.

REIT investors may be in for a nasty surprise

Many REITs have paid handsomely over the years, including periods of prior market turbulence. Now yields are uncharacteristically high.

Dividend cuts are going to leave ‘em crying in their beer, especially when it comes to mortgage originators like AGNC Investment.

Ordinarily, I’d consider shorting or at least a few putskies, but at $7.62 a share so what. There are bigger fish on the menu.

Bottom Line

The “best” profits often come from stocks that “feel” the worst.

Just sayin’…

As always, let’s get out there and make it a GREAT day!


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