The bears were taking a break this week, with the market pausing after a selloff to digest the macro news and while everyone awaits the next CPI report coming Tuesday. With the federal reserve set to continue hiking rates aggressively, the bumpy ride is far from over. However, the dire warnings of impending doom are subsiding.
Frome inside LevelFields, we see some trends. Put volume has been very heavy on Silver and American Airlines, as seen in the trends section. Both the silver ETF and American Airlines stocks were down, with American staging a recovery this past week.
In the Quick Sprints scenario, an alert went out about the breakout in Toast (TOST) stock - a fintech that enables more efficient ordering at restaurants. The stock rose 12% in two days and its rise, along with the rise of the Cloud Computing ETF (WCLD), seem to be indicating a comeback in high growth tech stocks which have had a horrendous year thus far.
The week prior, a Quick Sprints alert reminded us of the incredible bull run happening in the coal industry right now, as they rush to supply Europe with fuel for heating and manufacturing needs in the face of natural gas supplies being choked off by Russia. ARCH is up 60% over the past year and the stock looks like it's taking a breather before the next leg up.
Play of the Week
MOGU Stock Buyback:
Mogu, an online fashion and lifestyle platform based in China, announced a new share repurchase program Friday. The company is authorized to repurchase up to $10 million of its shares, effective until August 2023. The announcement sent the stock flying: closing at +30%. The e-commerce stock was up +44.44% last week alone, however. MOGU is down nearly -80% in the last year. Investors are still wary of China listings on U.S. exchanges, due to the threat the U.S. will force removal of companies that do not comply with U.S. securities laws. As such, it is uncertain if the repurchasing program will keep the upward trend alive.
Event Impact: +30%
- Market Cap: 21M
- Avg 30-Day Volume: 8.74 K
- Last Quarter's Revenue: 90.86 M with net income losses
Did You Miss?
Kroger (KR) Stock Buyback
Kroger released earnings Friday, revealing strong growth and an EPS of $1.00. The news was welcomed positive market feedback that the consumer has been able to bear the rising costs. Kroger CEO commented: "Kroger delivered strong second-quarter results propelled by our Leading with Fresh and Accelerating our Digital strategy." The supermarket retailer also announced the authorization of a new $1 billion share repurchase program. The announcement sent the stock up 7.4%. Kroger is up over +21% in the last year. With consumers trimming expenses for big ticket items like travel, eating out and home furnishings, it's likely Kroger will continue doing well.
- Market Cap: 37.17 B
- Avg 30-Day Volume: 5.51 M
- Event Impact: +7.4%
Buy the Dip?
MSTR - Crypto Adoption
Business intel company, MicroStrategy Inc, announced Friday that they have filed with the SEC to sell as much as $500 million in stock and that proceeds may be used to buy more Bitcoin. This comes less than a month after D.C Attorney General Karl Racine accused Michael Saylor of evading $25 million in district taxes. The lawsuit also names MicroStrategy as a defendant. Last June, MSTR revealed $1.98 billion in losses. The company is mostly a Bitcoin holding company at this point, as it puts seemingly every dollar it can produce into the cryptocurrency. As such, it has become a back-door method to trade Bitcoin using stock options.
- Marketcap: 2.96 B
- Revenue (Last Q): 123.3 M
- 1-Year Performance: -59.24%
- Event Impact: +11.71%
Learning Corner
How do I trade Buybacks?
A company authorizes a stock buyback or repuchase agreement as a way of increasing the value of each share of stock. When the buyback is issued, the price will typically move by at least the value of the buyback. For example, if the company authorizes a $5 billion dollar buyback on a market cap of $50 billion, the share price will typically adjust to the anticipated buyback by +10%. The market does not always price things efficiently right away. Sometimes the share price will rise quickly, other times it will rise more slowly over the day.
Buyback authorizations are announced outside of regular trading hours, because they are material to the share price. The company waits until the share price drops to a low point before repurchasing the stock.
There are several entry and exit points after a buyback authorization is announced. The stock usually rises immediately on the news, then pulls back after initial profit taking, which could be 90 minutes after the announcement or the following morning pre-market, and again around 10am ET. Some traders buy right at 930am and sell within 20 minutes. Others buy the 10ish ET dip and sell later in the day. And others stay in the stock over the long term if they believe in the company's future.
A few caveats: before buying the stock, check they actually have enough cash on hand to purchase the stock. Some companies announce buyback authorizations as a way to bolster the share price but don't have the cash to make it happen. It's also good practice to ensure the company is in a sector that rewards buybacks - often growth stocks are punished for the decision as investors believe they mark an end to revenue growth.
Looking Ahead
Highlights from the LevelFields Calendars section and beyond.
Sep 14
Palo Alto Networks Inc. (PANW), 3 for 1
Notable Upcoming Earnings Releases:
Sep 12
- Oracle (ORCL)
- Earnings Est: $1.08
Sep 13
- Core & Main (CNM)
- Earnings Est: $.49
Sep 14
- BRP (DOOO)
- Earnings Est: $2.63
Sep 15
- Adobe (ADBE)
- Earnings Est: $3.35
Sep 16
- Manchester United (MANU)
- Earnings Est: -$0.18
Other Events:
- September 12
- U.S Consumer Inflation Expectations
- September 13
- U.K July Unemployment Rate
- U.S CPI (the one the whole market is watching)
- U.S Inflation Rate (MoM, YoY)
- September 14
- U.S PPI (MoM, YoY)
The LevelFields Team