What Walmart earnings tell you about which stocks to buy next

Howdy!

A quick welcome to everyone who’s jumped on board with 5 with Fitz and One Bar Ahead Family this past week.

Futures were down hard following earnings from the likes of Home Depot and Walmart. What they tell you is no surprise, at least not to us anyway.

It’s possible that the markets may catch a bid—meaning there will be some buying—but I’m not holding my breath.

Here’s my playbook.

Why Walmart earnings should (really) get your attention

What’s happening. Walmart beat holiday expectations, which is no surprise considering how budget conscious shoppers have become. Net income jumped to $6.28B or $2.32, from $3.56B or $1.28 a year ago. Same-store sales rose 8.3%, excluding fuel. (Read)

What this really tells you. Walmart is not only the nation’s largest retailer, but also the nation’s largest grocer. The key takeaway here is that consumers are so strapped, they’re being forced to make an “either-or” decision, as opposed to an “and” purchase like they would have previously. (Watch)

Why you should care, especially if you’re an investor. Walmart’s results reinforce the need to prioritize companies making “must have” products and services, especially when they pay dividends.

The vast majority of investors are totally unprepared, which is why, of course, they could get pummeled again!

Home Depot: thud

Home Depot missed on revenue for the first time since November 2019 and issued subdued guidance for 2023. Management says the company would have done well had lumber costs not dropped—which strikes me to sound like JPow talking about how rates would be lower if only fewer people had jobs. (Read)

Thud.

Not that I’m surprised, considering how many times we’ve talked about how consumers are hunkering down, even when it comes to home repairs. It’s the worst quarterly performance in 2 years.

I think Lowe’s is the better stock, but I won’t touch either for the foreseeable future under the circumstances. High mortgage rates will increasingly prevent consumers from “improving in place”—a $5 way of saying that they’ll hunker down rather than buying a spiffy new pad.

Most investors could double defense stocks yet still not have enough

Putin’s now blaming the US for starting the war while lashing out at oligarchs who have betrayed him. (Read)

Most investors could double defense tech holdings and still not have enough. Russia may collapse if Putin loses control, and that would, in turn, create an opening for China to move on Taiwan. Short-range missile defense systems and critical munitions will be key.

One of my longtime favourites, Lockheed Martin (LMT), has tacked on 21.94% over the past 12 months versus the S&P 500, which has lost -6.20% and seems set to fall further. My other favourite is ready to rumble—and, in fact, arguably already is, considering that it’s beating the S&P 500 by 14.08% over the same time frame.

Members of the OBA Family who are already on board may do very well if the markets reward savvy investors for being there first, like I think may be the case! Well done, everyone!

Cathie Wood dumps NVDA, should you?

Tech maven Cathie Wood has apparently shed shares of NVIDIA in her flagship ARK Innovation ETF while also lightening up in the ARK Fintech Innovation ETF and the ARK Next Generation Internet ETF. (Read)

Should you?

Two things stand out.

1. Selling would be very foolish. NVDA is up 44.31% YTD, according to Yahoo! Finance and could go one heckuva lot higher than people realize. Shares are still up 246.97% over the past 5 years, even after all the selling.

2. She’ll be back when the time comes. Wood is likely making a tactical move to free up capital so she can buy other tech, not selling out.

MyPOV: Many investors talk out of both sides of their mouth about wanting security AND growth yet fail to latch on when a stock like this one is so very critical to AI, data centers, security, the metaverse, and more. AI is in its infancy, and NVDA is clearly an industry-leading innovator at a time when demand for its products will skyrocket.

I won’t let you make that mistake on my watch!

El Zucko’s 2023 business plan = copy Musk

Meta CEO Mark “El Zucko” Zuckerberg has just announced a subscription-based model for users who will receive a blue check mark after submitting a government ID and forking over $11.99 for the privilege via the web and $14.99 a month on iOS, presumably to make up for higher fees. (Read)

Gee, where have we heard that before??!!

Zuckerberg’s entire business plan seems to be “copy Musk.” The risk of a backfire is especially high, for reasons I laid out this morning during a conversation with Maria Bartiromo. Perhaps not surprisingly, Musk, tech ace Dan Ives, and I all agree with the former calling the move “inevitable” and the latter saying it could alienate consumers. (Watch)

I could see the stock pop a few bucks anyway as the technorati fall all over themselves to laud the move. Longer term, it’s not a needle mover.

Bottom Line

Being a trader and an investor isn’t always sunshine and rainbows. You will have losses. You will make mistakes. You will question yourself. Even so, YOU CAN WIN if you find an edge and stick to it.

Let’s get after it and, as always, MAKE it a great day.

You got this—I promise!

Keith