Apple’s earnings decline again: third time unlucky? | Responsible Investor Weekly Newsletter, August 5th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “Apple’s earnings decline again: third time unlucky?”, and was written on August 5th, 2023.

Weekly summary in a paragraph

The US stock market indices were lower this week, as all the major indices were spooked by Fitch downgrading to AA+ the US national debt and by mixed labour market data. The European stock market was also weaker on negative sentiment caused by poor Q2 earnings and 2024 forecasts. The 2-10y spread shrunk again and significantly this week, but it is still inverted at -73 basis points. The Bank of England raised interest rates to a new 15-year high, warning that its fight against inflation may require tighter borrowing conditions for a longer period. In corporate news, one third of the S&P500 companies reported Q2 earnings with Amazon beating and Apple underwhelming investors. Next week more S&P500 companies will report Q2 earnings, including Disney, UPS and Novo Nordisk to name a few.

Asset classes weekly performance

This week the Dow finished -1.1% lower (+5.8% year to date) while the S&P500 lost -2.3% (+16.6% year to date), the Nasdaq depreciated -2.9% (+32.9% year to date) and the Russell 2000 was -1.2% weaker (+11.1% year to date). Gold finished -1.5% lower (+2.7% year to date) while Silver slid -5.0% (-4.4% year to date). Crude Oil appreciated +1.0% (+8.4% year to date). The 10-y US treasury yield gained +2.6% (+7.0% year to date). The European stock market tanked -3.8% (+16.7% year to date). The Euro lost -0.1% against the US Dollar (+2.8% year to date).

Weekly pitch

We don’t typically feature individual stocks in the weekly pitch: the comments on Apple that follow are meant to illustrate the link between earnings and stock prices. As a general, well-established trend, stock prices follow earnings and earnings expectations. Last Thursday Apple reported the third consecutive quarterly decline in sales in a row. While the Services income reached an all time high, the decline in overall earnings may put pressure on the stock price, at least until the new lineup of models is presented in September. Responsible Investor has owned Apple on and off over the years (mostly on!), though we are not buyers at these levels. Responsible investors should review their positions during the earnings season, exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market.

Weekly Portfolio Update

Here are this week’s movements: we have taken full profits on our Draftkings (+52.9%), Yelp (+28.4%) and Range Resources (+14.3%) long positions and partial profits on our KWEB (+10.5%) long position. We have accumulated our Zimmer Biomet Holdings long position and initiated long positions on Newmont Mining, Hershey’s and Gilead Sciences as well as a short position on XPO Logistics. Cash, US treasury bills, precious metals and hedges amount to 43.5% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

iPath Series B S&P500 VIX Short-Term Futures +12.8% (Volatility ETN)

ProShares UltraPro Short QQQ +9.5% (3x inverse Nasdaq ETF)

Duerr AG +4.5% (Industrial Machinery)

ACI Worldwide +4.4% (Packaged Software)

Halliburton +3.6% (Oil Services)

Portfolio Asset Allocation

US stocks long positions 48% (increased)

EU stocks long positions 8.5% (unchanged)

US stocks short position 2.5% (unchanged)

Hedges 8.0% (unchanged)

Silver & Gold 2% (unchanged)

US Treasury bills 2% (unchanged)

Cash 29% (reduced)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +11.3% (excl. dividends) vs the S&P500 gain of +7.9%, which corresponds to a 3.4% market beat.

Invest responsibly!!!

Q2 earnings decline: now what? | Responsible Investor Weekly Newsletter, July 29th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “Q2 earnings decline: now what?”, and was written on July 29th, 2023.

Weekly summary in a paragraph

The US stock market indices were higher this week, with all the major indices advancing on news of generally good earnings and positive economic data. The European stock market was also stronger though this week’s gain was offset by the Euro depreciating relative to the US Dollar. The 2-10y spread shrunk after two weeks of widening and is still inverted at -91 basis points. Economic data this week included the FED’s decision to hike by another 0.25%, as widely expected, and core PCE continuing to decelerate. The Bank of Japan surprised markets by announcing it first shift from a decade-long period of monetary easing. In corporate news, one third of the S&P500 companies reported Q2 earnings season with notable beats from Meta, Google and Intel. On the flipside, Procter & Gamble’s 2024 outlook disappointed and Chipotle’s earnings were mixed. Next week 170 S&P500 companies report Q2 earnings, including Apple, AMD, Amazon and Starbucks to name a few.

Asset classes weekly performance

This week the Dow finished +0.7% higher (+7.0% year to date) while the S&P500 gained +1.0% (+19.3% year to date), the Nasdaq jumped +2.0% (+36.8% year to date) and the Russell 2000 was +1.1% stronger (+12.5% year to date). Gold finished -0.2% lower (+3.7% year to date) while Silver slid -1.4% (-1.4% year to date). Crude Oil appreciated +1.3% (+5.8% year to date). The 10-y US treasury yield gained +1.5% (+4.6% year to date). The European stock market gave up +0.7% (+21.6% year to date). The Euro lost -0.95% against the US Dollar (+2.9% year to date).

Weekly pitch

With 51% of the S&P500 companies having reported Q2 earnings so far, an attempt to draw some preliminary conclusions can be made. Q2 earnings decline is presently -7.3%, lower than expectations of -7.0% at the beginning of the quarter. If this figure is confirmed, it would be the third quarterly earnings decline in a row and the highest since the disastrous Q2 2020 which was due to the pandemic. Even if the forecasted earnings growth in Q3 and Q4 were confirmed, the expected earnings growth for 2023 is a meager +0.4%. Therefore, responsible investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market.

Weekly Portfolio Update

Here are this week’s movements: we have taken partial profits on our Meta (+129%) and Campari (+19.3%) long positions. We have accumulated our Disney, Raytheon and Zimmer Biomet Holdings long positions and initiated a short position on Molson Coors Brewing. Stop losses were triggered on our XPO Logistics, Rivian and Overstock short positions. Cash, US treasury bills, precious metals and hedges amount to 44.5% in our portfolio (unchanged compared to last week).

Top 5 Weekly Portfolio Performers

The Gap +13.4% (Apparel)

KraneShares CSI China Internet +12.7% (Internet services Chinese companies ETF)

Meta +10.6% (Tech)

Google +10.6% (Tech)

Yelp +9.0% (Tech)

Portfolio Asset Allocation

US stocks long positions 47% (unchanged)

EU stocks long positions 8.5% (unchanged)

US stocks short position 2.5% (reduced)

Hedges 8.0% (unchanged)

Silver & Gold 2% (unchanged)

US Treasury bills 2% (unchanged)

Cash 30% (increased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +11.9% (excl. dividends) vs the S&P500 gain of 12.5%.

Invest responsibly!!!

A new bull market is born…or is it? | Responsible Investor Weekly Newsletter, June 10th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “A new bull market is born…or is it?”, and was written on June 10th, 2023.

Weekly summary in a paragraph

The US stock market indices finished higher this week, with the S&P500 breaking out and officially entering in a bull market by rising 20% off its October 2022 lows, and the VIX hitting pre-pandemic levels. The weakness in the European stock market was offset by the Euro strength relative to the US Dollar. The 2-10y spread continues to widen and has now an inverted value of -84 basis points. In economic data, the US jobless claims jumped to a two-year high. In corporate news, DocuSign earnings exceeded expectations while Nio missed. Notable moves to the upside were observed in Netflix, thanks to the new password crack-down policy, and in Tesla who announced a new gigafactory in Spain. Next week all eyes will be on the May CPI report which will be published on Tuesday and on Wednesday’s FOMC meeting.

Asset classes weekly performance

This week the Dow finished +0.34% higher (+2.2% year to date) while the S&P500 gained +0.4% (+12.0% year to date), the Nasdaq rose +0.14% (+26.7% year to date) and the Russell 2000 jumped +1.9% (+5.9% year to date). Gold finished +0.1% higher (+4.3% year to date, we are long) while Silver gained +3.2% (-0.83% year to date). Oil lost -2.5% (-8.6% year to date). The 10-y US treasury yield was +1.41% higher (-1.27% year to date). The European stock market finished -0.6% lower (+16.0% year to date). The Euro gained 0.37% against the US Dollar (+0.37% year to date).

Weekly pitch

The break-out in the Nasdaq last week was replicated by the S&P500 this week, though the latter is sitting on the 61.8% Fibonacci retracement: some say that a new bull market is born…but is it? The S&P500 is now at the same level as 10 months ago, though most of the uncertainties that existed at the time are still around: anemic earnings growth, full employment, lack of clarity in monetary policy, liquidity drying up and the yet-to-be-resolved Russia-Ukraine conflict. Nobody knows where the markets will go from here. Why did many US politicians take profits on their long stock positions last week? Will the Dow also experience a break-out? Until a broader market participation is confirmed, responsible investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market.

Weekly Portfolio Update

Here are this week’s movements: we took profits on our Lithium ETF long position (+7.6%), our T-Mobile short-term trade (+4.9%) and our Take-two Interactive short position (+5.7%). We initiated a long position on ASE Technology Holding and short positions on Coinbase and H&R Block. Cash, precious metals and hedges amount to 41% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

The Gap +10.5% (Retail)

Desktop Metal +8.9% (Electronic Tech)

Orsted +7.5% (Renewable Energy)

Yelp +5.0% (Tech)

Plug Power +4.6% (Electronic Tech)

Portfolio Asset Allocation

US stocks long positions 49.5% (reduced)

EU stocks long positions 9.5% (unchanged)

US stocks short position 3% (increased)

Hedges 7.5% (unchanged)

Silver & Gold 2.5% (unchanged)

Cash 28% (unchanged)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +11.0% (excl. dividends) vs the S&P500 gain of +7.0%, which corresponds to a +4.0% market beat.

Invest responsibly!!!

Is this week’s good news enough to sustain the stock markets? | Responsible Investor Weekly Newsletter, June 3rd, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “Is this week’s good news enough to sustain the stock markets?”, and was written on June 3rd, 2023.

Weekly summary in a paragraph

The US stock market indices finished higher in this 4-day of trading week, in an environment where good news meant good news again, after the very strong jobs report was published on Friday and the debt ceiling agreement was reached. The European stock market didn’t participate in this rally as the ECB warned the Euro-area banks of liquidity risk should their clients begin withdrawing from their deposits. The 2-10y spread continues to widen and has now an inverted value of -81 basis points. In economic data, the aforementioned non-farm payroll jobs report came in at 339,000 for May topping the 190,000 estimates. In corporate news, Lululemon earnings exceeded expectations while Dollar General missed. In the tech sector Salesforce beat and raised guidance while cybersecurity darling Crowdstrike warned of slowing revenue growth. While most S&P500 companies have now reported Q1 2023 earnings, there are still a few to watch next week including Stitch Fix, DocuSign and Nio.

Asset classes weekly performance

This week the Dow finished +1.9% higher (+1.9% year to date) while the S&P500 gained +1.8% (+11.5% year to date), the Nasdaq rose +0.9% (+26.5% year to date) and the Russell 2000 jumped +2.6% (+4.0% year to date). Gold finished -0.3% lower (+3.7% year to date, we are long) while Silver gained +2.1% (-3.7% year to date). Oil gained +3.0% (-6.7% year to date). The 10-y US treasury yield was -0.24% softer (-2.69% year to date). The European stock market finished -0.3% lower (+16.6% year to date). The Euro lost -0.2% against the US Dollar (flat year to date).

Weekly pitch

With the long-awaited and somewhat expected resolution of the US debt ceiling now behind, the stock market can go back to concentrating on its more tangible drivers. All eyes are now on the next Fed meeting in mid-June at which the markets are expecting a pause of interest rate hikes. The focus will then turn to Q2 earnings season which will kick off in just one month’s time. It will be important to watch the Dow which is the laggard of the main US indices, while the Nasdaq broke out this week and the S&P500 is very close to replicating that move. Until a broader market participation is confirmed, responsible investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market.

Weekly Portfolio Update

Here are this week’s movements: we took partial profits on our Range Resources long position (+5.3%), and full profits on our Weight Watchers (+11.8%) and Johnson & Johnson’s (+7.3%) short positions. We initiated a long position on T-Mobile and Budweiser, and accumulated on our Hong Kong ETF. Cash, precious metals and hedges amount to 40% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

Desktop Metal +16% (Electronic Tech)

Freeport McMoRan +7% (Non Energy Minerals)

Plug Power +6.3% (Electronic Tech)

Centene +6.0% (Managed Healthcare)

Halliburton +4.8% (Oilfield Services)

Portfolio Asset Allocation

US stocks long positions 50.5% (increased)

EU stocks long positions 9.5% (unchanged)

US stocks short position 2% (reduced)

Hedges 7.5% (unchanged)

Silver & Gold 2.5% (unchanged)

Cash 28% (unchanged)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +7.9% (excl. dividends) vs the S&P500 gain of +2.5%, which corresponds to a +5.4% market beat.

Invest responsibly!!!

Is there an AI bubble in the stock market? | Responsible Investor Weekly Newsletter, May 27th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “Is there an AI bubble in the stock market?”, and was written on May 27th, 2023.

Weekly summary in a paragraph

The US stock market indices finished mixed this week, with the Nasdaq jumping 2.5% supported by Nvidia’s blow-out earnings report. The European stock market tanked on Germany entering into a technical recession after two consecutive quarters with a negative GDP. The 2-10y spread widened and has now an inverted value of -74 basis points. It was a slow week for economic data. In corporate news, Nvidia’s earnings exceeded expectations by a large margin as did their guidance. In the department store sector Target disappointed while Low’s beat expectations. While most S&P500 companies have now reported Q1 2023 earnings, there are still a few to watch next week including Broadcom, Crowdstrike, Salesforce and Five Below.

Asset classes weekly performance

This week the Dow finished -1.0% lower (-0.2% year to date) while the S&P500 gained +0.32% (+9.5% year to date), the Nasdaq jumped +2.5% (+24.0% year to date) and the Russell 2000 finished flat (+0.7% year to date). Gold finished -1.5% lower (+3.8% year to date, we are long) while Silver lost -1.7% (-4.7% year to date). Oil gained +1.1% (-5.4% year to date). The 10-y US treasury yield rose sharply by +2.45% (+0.45% year to date). The European stock market finished -1.8% lower (+17.2% year to date). The Euro lost -0.9% against the US Dollar (+0.2% year to date).

Weekly pitch

While no political agreement has been reached on the US debt ceiling this week, the chances of this crisis being resolved this week are high. Last week we warned on the risk the stock market faces is the drying up of liquidity as one trillion USD worth of bonds will have to be issued. The Nasdaq has suffered from the rise in interest rates in 2022 and lost 33%: the prospect of a pause and subsequent reduction in rate hikes has pushed it higher in the first quarter of 2023 and the recent AI frenzy has only exacerbated this move. Tech is the sector most at risk by a contraction in liquidity and might bring the Nasdaq rally to a screeching halt. Responsible investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market.

Weekly Portfolio Update

Here are this week’s movements: we took profits on our Fielmann (+11.9%), Zoom (+8.9%) and Fortinet (+3%) long position and partial profits on our Gold ETF (+10.4%) long position; a partial sell stop was triggered on our New Relic long position. We initiated a long position on Desktop Metal, a potential buyout target. Cash, precious metals and hedges amount to 41% in our portfolio (unchanged compared to last week).

Top 5 Weekly Portfolio Performers

Plug Power +8.4% (Electronic Tech)

The Gap +7.2% (Retail)

ProShares UltraPro Short Dow30 +6.3% (3x inverse the Dow)

MP Materials +4.5% (Non energy minerals)

iPath Series B S&P 500 Vix Short-Term Futures ETN +3.6% (Volatility ETN)

Portfolio Asset Allocation

US Long stock positions 49.5% (unchanged)

EU Long stock positions 9.5% (unchanged)

US Short stock position 3% (reduced)

Hedges 7.5% (unchanged)

Silver & Gold 2.5% (reduced)

Cash 28% (increased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +5.9% (excl. dividends) vs the S&P500 gain of +1.1%, which corresponds to a +4.8% market beat.

Invest responsibly!!!