A Week of Battles

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Markets vs Fed

The superbowl matchup between the Eagles and the Chiefs was one of many battles being discussed this past week. Front and center was the market vs the Fed. After scoring points the past four weeks, the market seemed to wake up to the fact the Fed will keep rates high through 2023, putting pressure on a cooling economy. Fed officials helped stoke this narrative further.

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The U.S. Indexes all posted losing weeks.  Growth stocks, which had a great 4-week run following a terrible 2022, sold off. The poster child of expensive growth tech investing - ARKK ETF - was down over -7% last week.

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Bull vs Bear Rally

As the market rally faded, the bears came out of their caves and began touting reasons the last few weeks was yet another bear market rally.  Bullish investors expressed their views that with inflation in the rearview mirror, the latest pattern reflects the beginning of a longer bull market rally. We'll find out who is right soon enough. Our view remains there is more downside ahead. We've been going into our reasons in great detail as well as how to position for it each week in the Level 2 newsletter.

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Lockheed Martin vs UFO

Using Lockheed F-22 jets, U.S. pilots shot down yet another "object" last week over Canada.  It's unclear what it was, but the action was taken at the request of the Canadian government.

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It seems likely to be another Chinese spy system but details have not been released. The U.S. shot down a second object near Alaska just a day earlier and a 3rd object a week ago near South Carolina.

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The incidents are driving up the price of Lockheed Martin stock, which was up +4% last week and sitting around 480/share. We sent an alert that LMT was experiencing tailwinds to our Level 2 subscribers October 2, 2022 when the stock was 386.

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Russia vs Europe

War is still raging in Ukraine, and the Russians remain hell bent on punishing Europeans for supporting sanctions and Ukrainians. Last week, Russia cut oil output by 5 percent, driving up oil prices and energy stocks with it.

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Exxon reached an all-time high on the news while shares of Diamondback Energy (FANG) rose nearly +9% over the week.  FANG is set to report earnings results in 10 days. It's been steadily increasing its dividend for years, beaten estimates the past four quarters and grew earnings almost +90% last year.

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We're owners of it and are bullish on it.

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KNOWLEDGE CORNER: MULTIPLE CATALYSTS

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We've setup the scenarios to be homogenous events, but that's not the only way to identify good trades. Often the best plays happen following multiple event catalysts. These events might happen in sequence, separated by earnings reports, or around the same time.

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Salesforce is a good example. An activist investor came in, then the company announced it would shed costs through layoffs, the co-CEO was pushed out, then more layoffs were announced before yet another activist investor joined.

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The events together compose a typical cycle of bullish events that will alter the company's trajectory going forward, as seen in the U-shape of the stock's price over the past six months.

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The events mark single day and multi-month trades, so it's important to keep in mind there's more to LevelFields' data than speedy trades.

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We'll get into the details of this more and dive into one stock that's done +870% and still going strong on the back of events in this week's Level 2 newsletter.

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HIGHLIGHTS FROM LAST WEEK

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Microsoft vs Google

Did Microsoft just wake a sleeping dragon with $113B in cash to spend in Google, or is its integration of ChatGPT a dragon slayer?

Judging by the price increase and analyst upgrades for Microsoft and the failure of Google's Bard AI to impress anyone, the latter looks more likely. Google shares tanked -8% last week after a poor showing and rollout of its competing AI search tool.  

Pepsi, Where's My Dividend?

In a shrewd move, Pepsi raised its dividend by 10% last week to over $5 per share after announcing layoffs just two months earlier.  Earnings and revenue for Q4 beat estimates, but enthusiasm faded when they issued a weak growth forecast for 2023.

Uber vs Lyft

In the battle for rides, Lyft dropped -30% after projecting revenue declines in 2023 in its guidance. Shares are down -87% from it's IPO in 2019.

"Last night's Lyft call was a Top 3 worst call we have ever heard as in our opinion as management is trying to play darts blindfolded with the expense structure going forward and gave an EBITDA outlook which was a debacle for the ages."

Uber shares also fell 6% on the news.

SPOT the Activists

Shares of Spotify rose 4% after the news reported an activist investor has taken a position in the music streaming company.  Shares of SPOT are up over +50% the past three months after falling almost -70% last year.

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Key Earnings Announcements This Week

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February 13

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Palantir Technology (PLTR)

• $0.03 EPS is expected- representing a 50% YoY growth rate. PLTR is down -42.80% in the last year.

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Notable Earnings:

• Advance Auto Parts (AAP)
• Avis Budget (CAR)

February 14

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Coca-Cola (KO)

• KO has been benefiting from its wide variety of products: sparkling flavors, juice, dairy, sports drinks, tea, coffee, and plant-based beverages.

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‍Airbnb (ABNB)

• Factors to watch: Travel, consumer spending, rental listings.

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Devon Energy (DVN)

• Kevin Hern, a member of the Energy and Commerce Committee, bought DVN (reported on 12/30/22)

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Other Notable Earnings:

• Marriot International (MAR)
• GlobalFoundaries (GFS)

February 15

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Cisco Systems

• Slower spending on network equipment by enterprise clients amidst the company's recent announcement of price increases.

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Generac (GNRC)

• With recent power blackouts worldwide, the electrical grid company may reveal an increase in the inflow of interest from investors and clients.

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Zillow Group (ZG)

• With the housing market in a state of panic amidst rising pressure from interest rates, ZG will be closely watched by investors as they announce earnings Wednesday.

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Other Notable Earnings:

• Barrick Gold (GOLD)
• Boston Beer (SAM)
• Albemarle (ALB) - lithium supplier

February 16

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DoorDash (DASH)

• With layoffs hitting the tech industry hard, DASH could benefit if wages decrease.

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Other Notable Earnings:

• Applied Materials (AMAT)
• Crocs (CROX)
• Hyatt Hotels (H)
• DraftKings (DKNG)
• Digital Reality Trust (DLR)

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February 17

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Notable Earnings:

• AMC Networks (AMCX)
• AutoNation (AN)
• Deere (DE)

Economic Reports:

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2/14

• US CPI (inflation report) - +6.2% expected

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2/15

• Retail Sales

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2/16

• Jobless Claims
• Household Debt

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The LevelFields Team