Hi! Welcome back to the MSI weekly newsletter!
The week that was:
As the earning season is approaching in a few days, companies continue to deliver heaps of bad news. For example, Restoration Hardware(RH) is a furniture and home decor company. Their products are very expensive, and are mostly bought by rich people. In both May and June, RH reported that they have seen a decrease in demand. People usually buy furniture and home decor when they buy a new house. And people usually buy new houses when the interest rates are low. When rates are high, people will buy less houses. And less furniture. This will cause companies like RH to lose business.
The housing market always affects the rest of the economy. If the housing market is doing poorly, that is bad news for the rest of the economy. RH announcing this news confirms that the economy is in bad shape. The rich people are usually the last to get infected by the recession virus, if it even happens, so this shows that the rich people are also being affected now. That means the inflation problem is getting very serious.
Because of all the negative news, it is feared that the forecasts of this earning season will be very poor or uncertain. However, a lot of damage has already been inflicted on the market, and there is not much more that can happen. The market will probably continue to go down, but hopefully the bottom is near. And you can get some really good bargains in this environment.
For example, Nike recently reported their earnings for the second quarter. The results were not good, but not as bad as it was feared. The stock price still went down, and it is now at a 52 week low. Nike has also announced a buyback for $18 billion. This means that Nike will buy back some of their one shares and retire them. This is a great time to announce a buyback as the price is currently very low. NKE stock will not stay down for too long. I have used this rare opportunity to add to my position.
Earnings season begins next week. That should bring some interesting movements in the stock market. It is possible some stocks have bottomed while some stocks may see another leg lower. Starbucks and Dominos appear to have bottomed along with some tech stocks. I am keenly watching tech stocks such as Ansys, Autodesk, and Adobe.
My strategy stays the same: to wait for good opportunities to buy blue chip stocks. Bear markets are exciting and fun because they give investors an opportunity to buy good stocks at fire sale prices. While most investors are scared of bear markets, young investors should pray for and be thankful for such opportunities.
Thanks for reading my newsletter! Happy investing!