TL;DR
- The Q2 earnings season has begun, with Tesla and Netflix the first big names to announce positive results
- It marks a pivotal point in the business cycle, with inflation back within target range and a potential change in Fed policy in the near future
- Many of the most exciting developments for investors are happening in tech, and investors should let 2022’s performance keep them from the sector
- Top weekly and monthly trades
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Major events that could affect your portfolio
Earnings season is underway and it’s one that investors should keep a close eye on. We’re coming into a transition period economically speaking, and savvy companies are going to be looking ahead already as to how their corporate strategy is going to adjust.
After the uncertainty of the pandemic, the backdrop has been pretty much unchanged since the second half of 2021. Inflation has been high and rising, the Fed has been hiking rates in response, and the economic outlook has looked a little shaky.
For executives, that means efficiency and ‘battening down the hatches.’ Hence we’ve seen mass layoffs, consolidations of business operations and slower growth.
But that could be about to shift, with inflation back within the Feds target range. So far we’ve seen positive results from Netflix and Tesla, but next week is going to be one to keep an eye on.
We’ve got Meta, Alphabet, Microsoft, Amazon, Coca-Cola, General Motors, Ford, Snap and Spotify all release their figures next week, and you can see a calendar of notable announcement dates here.
The financial data from Q2 will be interesting, but the area to really watch will be the commentary on their future outlook. We should be able to glean some insight as to how companies are positioning themselves for the next stage of the economic cycle.
Keen eyed investors should look for clues that a company has the resources and strategy to make plays for expansion (through acquisition and/or organic growth), while others are on the back foot and remain in ‘efficiency mode.’
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There have been some major battlegrounds playing out in markets in recent years. Apart from AI and the major stoush happening in social media with Meta’s Threads looking to take down Twitter (see how that’s going here), there’s the so called ‘streaming wars.’
Just a few short years ago, Netflix was the only streaming game in town. Now, we have Disney+, Apple TV+, Paramount+, Hulu, Amazon Prime Video, HBO Max, Hulu, Peacock and dozens more. As the industry has become more fractured, so too has the content on each service. Where companies like Disney and NBC were originally comfortable doing a deal with Netflix, they’re all guarding their IP much more closely in order to maximize their own subscriber numbers.
While Netflix has been in the streaming business since 2007, the business model still isn’t mature. Netflix themselves are still playing around with revenue models, and most of the other services on offer are running at major annual losses.
Disney+ is in the red to the tune of $200 million a quarter, but even so they are planning to double down on the sector, with plans to purchase the remaining 33% stake in Hulu and maybe even sell off traditional TV assets ESPN and ABC.
What’s the takeaway? There’s a gold rush in IP right now, from Barbie to Marvel to Star Wars, and the streaming sector is far from settled. An outright winner of the streaming wars may never arise, but for investors there’s going to be plenty of opportunities for companies to increase their market share and drive stock market gains.
This week’s top theme from Q.ai
Outside of the Meta Thread’s launch, there is a ton of news out right now in the tech sector. To start with, Microsoft has launched their latest AI Copilot set of tools for their Office suite of products. It allows users to have a ChatGPT-like integration directly within Word, Excel and Powerpoint, offering up writing prompts and presentation designs at the click of the button. For enterprise clients, it boosts Microsoft’s profitability by a whopping 83%.
In other tech news there’s some fierce competition heating up in the electric vehicle space, with Ford slashing the cost of their electric F-150 ahead of the release of the Tesla Cybertruck. At the same time, Ford plus GM, Mercedes-Benz, Volvo, Polestar and Rivian have all switched to the Tesla charging standard, making them the de facto leader in the nation’s charging network.
There’s even some big news in crypto, with Coinbase stock soaring off the back of Ripple’s (XRP) initial win against the SEC, with the decision handed down that XRP is not a security. While it’s since come back to earth, there are hopes that Ripple’s verdict bodes well for Coinbase and Binance, who are both facing similar suits against the SEC for running an unregistered securities trading platform.
All that is to say, there are a lot of opportunities in tech right now, and Q.ai’s Emerging Tech Kit gives investors the opportunity to gain exposure to all of it. With the helping hand of AI, the Kit rebalances every week based on the latest predictions, making sure you’re always on top of the latest information.
Top trade ideas
Here are some of the best ideas our AI systems are recommending for the next week and month.
Bel Fuse (BELFB) – The electric circuit products company is our Top Buy for next week with our AI giving them an A rating in our Growth and Quality Value factors. Earnings per share is up 130.2% over the last 12 months.
Blue Rock Homes Trust (BHM) – The real estate investment trust is our Top Short for next week with our AI giving it an F rating in Quality Value. Earnings per share was -$0.70 over the last 12 months.
Mettler Toledo International (MTD) – The lab instrument company is a Top Buy for next month with an A rating in our AI’s Quality Value factor. Earnings per share is up 15.7% over the last 12 months.
Celsius Holdings (CELH) – The food and beverage company is a Top Short for next month with our AI giving them an F rating in Quality Value. Earnings per share was -$2.30 over the last 12 months.
Our AI’s Top ETF trades for the next month are to invest in cutting edge medical technology, small cap Brazilian stocks and biotech and to short small cap momentum stocks and Taiwanese stocks. Top Buys are the VanEck Brazil Small-Cap ETF, the Ark Genomic Revolution ETF and the SPDR S&P Biotech ETF. Top Shorts are the Invesco DWA Smallcap Momentum ETF and the iShares MSCI Taiwan ETF.
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