Hello. I am back with the Middle School Investor weekly newsletter for this week!
The week that was:
The stock market volatility has continued this week. At this time, I prefer to invest in low risk companies with profits and dividends. Companies have also continued to report their quarterly results. The stock price of companies with bad results are getting punished badly. An example of such a company is Facebook(FB, now called Meta) and PayPal(PYPL).
Facebook's quarterly results were not good, and the price crashed by 26%. Usually when the price of a good company like FB goes down that much, it is a good time to buy that stock, but I am not so sure about Facebook. As soon as their results came out, Amazon(AMZN) went down because it was expected that Amazon would have results similar to Facebook. However, the results were good, and the stock price went up again. The same thing happened with Pinterest and SnapChat. Clearly the problem is with Facebook, not the other social media companies.
Facebook's most popular products are Instagram, Whatsapp and Oculus(Virtual Reality). However, all three of them were independent companies that were bought by Facebook. FB also started including reels in their products, and that was copied from Tik Tok. Facebook is clearly not very creative, as their growth depends on buying other companies, and copying ideas. Facebook has also started to change their business model, and invest in the Metaverse so much that they changed their name. They have invested 10 billion dollars on research for the Metaverse. It may not even be a real thing. The government thinks that Facebook is too big of a company and it is unlikely that the government will allow them to buy more companies. FB needs to innovate to grow, and they are not innovating.
PayPal also had bad results and the price went down by 30%! The payment companies are not doing well in general. PayPal's main problem is that they have too much competition from companies such as Block, Affirm, Visa, and Mastercard. The competition is preventing PYPL from growing too much.
Sentinel One: Sold 5 at $44.51 (Position closed)
Sentinel One(S) is a stock with growth prospects in the future, and they do not have any profits. S will be a good stock in the future, but it is too risky to have a position in such a company at the moment. One day, the stock price went up 10% and I used the opportunity to get rid of my position for now.
Medtronic: Bought 10 at $102.12
Medtronic(MDT) is a stock that manufactures medical devices. As the Covid rules are easing, medical procedures will occur more often as it was not safe when Covid was at a peak. Medical devices will always be needed, even if there is a recession. MDT is also a profitable company with a history of paying good dividends, so it is a safe stock to own in a volatile environment.
Twitter: Bought 15 at $36.32
TWTR is also a social media company but does not have the problems that Facebook does. TWTR is also a much smaller company than FB, and is not making anay big changes to their business. Twitter's results will probably be better than FB. Recently the price has been going down, and I used the opportunity to add to my position.
What I am watching out next week:
Quarterly results for Unilever and Twitter are coming out. If Unilever reports bad results like Clorox did last week, I will certainly be buying more shares.
Disney(DIS), Ross(ROST) and Burlington Stores(BURL) are also reaching attractive levels, and I am keeping an eye on them. These are companies that will do well whether there is a recession or not.
Thank you for subscribing and reading my newsletter! See you next week!