Preview of the week starting 05Feb2024 - can Palantir take off?

Public Holidays

There are no public holidays in the USA for the coming week.

Hong Kong will be closed for the Chinese Lunar New Year (CNY) from 10 to 13 Feb 2024.

China will be closed for the Chinese Lunar New Year (CNY) from 9 to 15 Feb 2024.

Singapore will be closed for the Chinese Lunar New Year (CNY) from 10 to 12 Feb 2024.

Here is wishing all a blessed Chinese New Year.

Economic Calendar (05 Feb 2024)

Notable Highlights

• The Chinese-speaking world should be closed as they celebrate the Chinese Lunar New Year. Celebrations start on 09 Feb 2024 for many of the Chinese-speaking nations like China, Hong Kong & Singapore.

• PMI. S&P Global Services PMI has a forecast 52.9 which suggests improvement in the services outlook. ISM non-manufacturing PMI & prices will also be released. This sheds light on the demand for services (from the manufacturer’s point of view) and also an inflationary of the prices.

• Initial Jobless Claims - This reflects the impact of unemployment, a data point for the Fed’s interest rate decision. The unemployment rate will also reveal the job and jobless situation in the USA.

• Crude Oil Inventories can be seen as forward indicators of market demand and consumption. If the trend of excess inventories continues, this is demand erosion that can lead to reduced production & weakening consumer spending.

Earnings Calendar (05 Feb 2024)

There are a few earnings of interest for the coming week starting 05 Feb 2024 including Palantir, McDonald’s, Ford, PayPal, Disney, Alibaba & Pepsico.

Let us Look at Palantir.

Observation:

• Revenue grew from $595M (2018) to $1,906 (2022). for TTM, it reached $2,125B.

• For net income, it finally broke even with its TTM net income standing at $147M.

• For EPS, the TTM amounts to 0.07 with -0.18 (2022).

Palantir’s stock grew 89.23% from a year ago and the P/E ratio stands at a steep 245.65.

For the coming earnings, the EPS and Revenue are 0.0758 and $602.86M respectively. Will Palantir be able to beat estimates?

Market Outlook - 05 Feb 2024

Technical observations of the S&P500 1D chart:

• The Stochastic indicator is on a downtrend but a potential top crossover may happen. If this crossover is completed, there is a chance for an uptrend - a change in trend.

• The MACD indicator is showing an uptrend.

• Moving Averages (MA). Both the MA50 line and the MA200 line are on an uptrend. The last candle is above both the MA 50 line and the MA 200 line. Thus, it could be read as bullish for the long-term and mid-term.

• Exponential Moving Averages (EMA). The 3 EMA lines are moving in a fanned-out pattern, thus implying an uptrend. Once, all 3 lines converged, a new downtrend would be confirmed.

From the 1D technical indicators above, there are a total of 22 (Buy), 0 (Sell) and 0 (Neutral). Investing recommends the “STRONG BUY” recommendation based on the technical indicators above (1D chart for S&P500).

From the data above, the market should have an uptrend in the coming days. A reversal to a downtrend could be on the cards.

News and my thoughts from the last week (05 Feb 2024) - BYD, Red Sea & CRE

• Three US Army soldiers were killed and more than 30 service members were injured in a drone attack overnight on a small US outpost in Jordan - CNN

• More bombs are not the answer to bombs. Don't feed the black Swan.

• Nearly one-third (32%) of respondents are worried their business will not survive through the end of the year and 38% saying they are more concerned about their company heading into this year than last. - Fox Business

BYD's net profit attributable to shareholders is expected to be between RMB 29 billion ($4 billion) and RMB 31 billion in 2023, up 74.46 percent to 86.49 percent year-on-year, according to its earnings preview released today.

• The right and timely response following good or bad news is more important than having an accurate outlook.

• let us not forget that twitter, X has laid off 80% of their staff. Twitter has yet to collapse. Are the tech companies having excesssive resources? What are the VC & LP thinking as Twitter steers away from excess towards profits?

• The Red Sea conflict has put profits back into logistics industry, starting with the shipping lines as Red Sea diversions rise. This has strengthen the financials of a weakening supply chain despite operational complexity. - FreightWaves

• The bustling ports of Los Angeles and Long Beach, California, gateways to the American consumer market, have become notorious for chronic congestion. But in January 2024, the logjam will reach a new level. - FreightWaves

• There is a difference between a tech company and tech enabled company.

• Are we seeing port congestion again? how will this affect inflation and supply chain?

• Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates have confirmed they are joining the BRICS bloc after being invited last year - Straits Times

• 70% of executives saying their businesses are suffering financially because their workforces lack the right competencies. - Yahoo Finance

• Applications for a mortgage to purchase a home fell 11% last week from the previous week & were 20% lower than the same week a year ago. Low existing housing supply is limiting options for prospective buyers & is keeping home-price growth elevated. - CNBC

NVDA is the only Magnificent 7 stock seeing an increase in earnings revisions. The company is almost the sole beneficiary of the recent AI advancements, contrasting sharply with others that have only experienced hype without any fundamental improvement. From Twitter user Octavia Costa

• "Hold cash maybe more rewards in the coming months" - advice from my friend Mr Chow.

• The lithium market is being shaken up by a sharp, sustained slump in prices and a demand slowdown, which has disrupted projects and forced miners to cut production and look for cost-cutting measures, including layoffs. - Mining

• When the average household in the USA is unable to afford an average home in the USA, the cost of living is too high.

• Robert Kiyosaki thinks that America will be America's biggest adversary in the next 10-15 years because the country is coming apart at the seams.

• Higher losses tied to commercial real estate office exposure, increase in criticized loans tied to multi-family CRE [commercial real estate] are a reminder of ongoing credit normalization that we are likely to witness across the industry,” - CNBC

• Complexity can imply mastery. Simplicity is not the absence of mastery. Mastery can be found in the seemingly simple delivery of complex items. Same for music, same for life.

My investing muse - layoffs, top companies, recession and population crisis

Layoff news continued last week.

• Swiss wealth manager Julius Baer reported a net credit loss of $701 million related to troubled property group Signa Holdings.

  CEO Philipp Rickenbacher said he would step down. The bank also said it would cut 250 jobs this year. - CNBC

• One day after digital news start-up The Messenger was shuttered and 270 employees were laid off, now-former staffers filed a class-action lawsuit against their former employer on the grounds that they were not given proper notice. - Yahoo News

• Identity management company Okta (OKTA) is laying off seven percent of its workforce as part of a broader restructuring effort. The job cuts are expected to combat costs of up to $24 million in restructuring charges in the fourth quarter. - Yahoo Finance

• Deutsche Bank on Feb 1 said it would cut 3,500 jobs, buy back shares and pay dividends, after posting a 30 per cent drop in fourth-quarter profit. - Straits Times

• Zoom is cutting about 150 jobs, or close to 2% of its workforce - CNBC

• PayPal cuts 2,500 jobs, UPS to let go of 12,000 employees - LiveMint

• The layoffs were executed this morning and affected staff in the Cash App, foundational and Square arms of Block. Reportedly, around 1,000 people — or 10% of Block’s headcount — were impacted. - TechCrunch

• Among the companies cutting jobs this year are Flexport, warehousing provider Flexe and digital broker Uber Freight, the report said, as weaker freight volumes and high-interest rates leave firms feeling stretched. - PYMNTS

• Proofpoint is laying off about 6% of its global workforce, or 280 employees, the company confirmed to TechCrunch.

• The company also announced 12,000 layoffs as part of an effort to align resources in 2024. UPS’s 2024 outlook expects revenue to range from $92 billion to $94.5 billion. - CNN

• AMERICAN Airlines Group will lay off 656 employees who help passengers with lost luggage and other travel problems as their jobs are consolidated into other teams. - Business Times

Top Companies (charts from Visual Capitalist)

In this graphic, we compare the 15 largest Chinese and American companies based on their 2022 revenue, using data from the Fortune China 500 and Fortune Global 500. - Visual Capitalist

It is interesting to note that some of the companies with the biggest revenue are not necessarily the ones with the biggest market capitalization.

Most valuable brands in 2024 and Nvidia has gained much branding following the AI trend.

Population Crisis

Japan has the challenge of an ageing population. what can be done to improve this?

Most developed countries are facing issues of insufficient births. Without a strong immigration policy, population shrinkage is hard to avoid. A falling population could present challenges more immediate than that of a climate crisis.

Europe is bordering on recession

• *GERMANY 4Q GDP FALLS -0.3% Q/Q; EST. -0.3%; PREV. -0.1%

  *GERMANY ENTERS RECESSION

• *EURO ZONE Q4 GDP 0.0% Y/Y; EST. -0.1%; PREV. -0.1%

  *EURO ZONE AVOIDS RECESSION

Germany has entered a technical recession. For the Eurozone, they narrowly avoided recession even though they had 0% GDP growth. Eurozone will probably have to prioritize their internal matters over external issues with this financial crisis. Germany, one of the leading European powerhouses would have a reduced role as they deal with their economic challenges. How will this affect global trade?

Conclusion

This week has a mix of good and bad news. S&P500 & Dow Jones have hit recent record highs. The latest jobs figure showed 353K jobs created despite all the retrenchment news. All of the Magnificent 7 have finished their earnings except for Nvidia. Meta was the surprise of the lot but it is most welcoming as the stock surged to a recent high. Nvidia looks to enjoy good earnings due to its importance in the AI world.

With most of S&P500’s growth powered by the Magnificent 7, it is interesting to see how the 493 will perform. S&P500 represents some of the top businesses and significant revenue from outside of the USA. Thus, seeing the S&P500 as a US economy can be a weakening correlation.

Let us spend within our means, invest with what we afford to lose and avoid leverage. It is important to update our watchlist regularly so that we can buy great companies at good discounts when prices fall.

@TigerStars

$S&P 500(.SPX)$

$Palantir Technologies Inc.(PLTR)$