Friday Four Play: The “Look at All Those Jobs” Edition
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After seeing the November nonfarm payrolls report, I have just one thing to ask you regarding the U.S. economy:
Are you not entertained!?
The U.S. economy added a whopping 266,000 jobs last month. Wall Street only expected 187,000. The unemployment rate dropped to 3.5% from 3.6%, and average hourly wages rose by 3.1% — just above the projected 3% gain.
That’s good news, right? The recession is now canceled (again), and the bull rally can continue forever and ever! (If you just said “amen” … I’m right there with you, friend.)
But … (you just knew there was a “but” coming, didn’t you?) as with everything in the U.S. economy, there are a few provisos.
Such as this: About 41,300 of those jobs represent General Motors Co. (NYSE: GM) employees returning to work following a months-long strike — which is helping to hide the fact that U.S. manufacturing jobs have seen practically no growth in the past year.
And then, there’s the ever-present question that I see every time a jobs number is reported: “How many of those are full-time jobs with benefits?”
Look, why can’t you just read the bullish headlines and be happy?
Honestly, I’m glad you can’t. If you could, you probably wouldn’t be reading Great Stuff right now.
The thing is, this is a really good jobs report. But it’s not the be-all and end-all bullish herald many on Wall Street are making it out to be. There’s still a U.S.-China trade war going on, remember?
So, be good for goodness’ sake … woah, somebody’s coming!
And that somebody is President Trump, who has yet to decide if he wants to make a trade deal with Chinayet. Until then, let’s not get too excited. Mmmkay?
And now for something completely different, here’s your Friday Four Play:
No. 1: How Close Is Close?
White House National Economic Council Director (man, that’s a long title) Larry Kudlow appeared on CNBC’s Squawk on the Street to talk about the U.S.-China trade deal this morning. If you were looking for more insight into just how close a “phase one” deal is, you’re going to be disappointed.
Kudlow reiterated that the two sides were “close,” a word we’ve heard ad nauseam for the past year. He also said that President Trump is prepared to walk away from a deal if it’s no good.
“The president has said many times if the deal is no good, if the assurances with respects to preventing future thefts, if the enforcement procedure is no good he has said we will not go for it. We will walk away,” Kudlow told CNBC.
Honestly, this isn’t news. I don’t even know why I’ve included it, other than the fact that a White House official is speaking on the U.S.-China trade war. The two have been “close” for so long, they should just start dating already.
But the financial media are going to heavily push both the “close” and the “we will walk away” narratives today, so I thought you could use some perspective.
And now you have it. Nothing to see here. Let’s move on, shall we?
No. 2: Shockingly Indecisive
When it comes to investing, I absolutely love it when analysts or financial talking heads take a stand. They might ultimately be wrong, but at least they had enough conviction to believe in their own analysis.
But today’s “bullish report” on Tesla Inc. (Nasdaq: TSLA) from Morgan Stanley makes me want to slap someone. In a note to subscribers, Morgan Stanley analyst Adam Jonas lifted his “bull case” price target on Tesla to $500 per share. Jones sees Tesla selling 100,000 Cybertrucks by 2024 and the company’s Chinese Gigafactory churning out 450,000 vehicles per year by 2024 or 2025.
However … Jonas also reminded subs that he maintains a “base case” price target of $250 on Tesla with an “equal weight” rating — essentially a hold.
So, let me get this straight: Adam Jonas thinks Tesla is either going to rally nearly 50% … or plunge roughly 25%? My cat could make predictions like that. In fact, if you’d like to get stock predictions from my cat — his name is Kylo, by the way — email me at GreatStuffToday@banyanhill.com. I’ll try to hook you up.
Have some conviction, man. Believe in yourself, Adam Jonas. I know you can do it!
You know who does believe in himself? Banyan Hill expert Paul . That man has strong hands, conviction and a firm opinion on Tesla.
So, if you’re tired of wishy-washy investing research from the “pros,” check out Paul ’s Profits Unlimited newsletter.
No. 3: Big Gains at Discount Prices
It never ceases to amaze me what will drive a stock on any given day. Take discount retailer Big Lots Inc. (NSYE: BIG), for example.
The company reported a profit of $3.25 per share on revenue of $1.17 billion. Analysts expected Big Lots to report a loss of $0.16 per share on sales of $1.16 billion.
That earnings figure looks amazing, doesn’t it? Well … about that.
Most of those earnings came from the sale of a California distribution center. Excluding that sale, Big Lots lost $0.18 per share. That significantly changes the picture, wouldn’t you agree?
Furthermore, Big Lots placed fourth-quarter guidance below Wall Street’s expectations. The company expects earnings of $2.40 to $2.55 per share, versus the consensus of $2.68 per share.
So, essentially, Big Lots missed on earnings and guidance, but beat on revenue. How has Wall Street dealt with this rather lackluster performance? By sending the stock more than 20% higher today.
What’s more, BIG now trades just below long-term resistance at $25. This looks like a potential opportunity to short Big Lots … if you’re into that sort of thing.
No. 4: Yeeting Yext
You up for a lesson in Gen Z slang? (You know, so you’ll know what the grandkids are talking about?)
Yeet: to throw something away (typically yourself). That’s my 13-year-old’s definition, at least.
Well, Yext Inc. (NYSE: YEXT) is getting yeeted today. (I’ll stop now.)
The stock is down more than 14% after Yext posted a third-quarter loss that was larger than expected and revenue that was merely in line. According to Yext’s report, it missed earnings because it went on a hiring spree to build up its workforce.
If you’re not familiar with Yext, the company specializes in Big Data and cloud-data management and integration. Yext, a startup that went public about a year ago, is competing with the big boys — such as Amazon.com Inc.’s (Nasdaq: AMZN) Web Services analytics and Microsoft Corp.’s (Nasdaq: MSFT) Azure cloud business solutions.
So, you might be able to understand why the company missed earnings — it’s got to get warm bodies in seats so it can compete. Revenue continues to rise, which is a good thing. However, investors have shown little patience for losses at tech unicorns this year.
And that’s why Yext is getting yeeted today.
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Until next time, good trading!
Great Stuff Managing Editor, Banyan Hill Publishing