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☕ An Apple a day can keep naysayers away, if you throw it hard enough

Nov 01, 2024

Good morning! 👋

All three indices are powering higher as I type.

Right on cue.

I noted yesterday during a chat with CNBC’s Tyler Mathison and Contessa Brewer that the [earnings] numbers really aren’t all that bad and, in fact, are pretty good. (Watch)

And as long as you stay focused on that… the good stuff… the world class companies… the ones putting up numbers despite it all… chances are you and your money will do just fine.

Investing is not a game of rushed decisions.

Here’s my playbook!

1 – Less jobs = faster cuts

Or so goes the thinking.

Traders are betting that the Fed will view today’s “weakest, lowest growth since 2020” report as an incentive to continue lower rates. Potentially even accelerating that process.

I don’t think so but, hey, I’ll take it.

You?

2 – Intel's hat trick

I will be the first to admit I didn’t think Intel had it in ‘em.

CEO Pat Gelsinger pulled off an incredible hat trick reporting a double beat – meaning the company beat earnings expectations on the top and bottom line. Then raised guidance. (Read)

Will I reconsider and buy it?

I’d love to but nope.

Intel still reported a net loss of -$16.99B and revenue slipped by -6% YoY. Worse, gross margins dropped to 15%, a history making low for Intel.

So… remind me again why shares are UP today? 🤦

The big money is not falling for the whole guidance thing even though retail investors seem to have taken the bait, hook and all.

Intel is up as I type, buuuuuuuut has returned –40% over the past 12 months versus 234.13% and 44.72% from NVDA and AMD respectively.

At the risk of sounding like a broken record… buy the best, ignore the rest.

3 – Apple 1, Naysayers 0

I’ve made no bones about the fact that Apple is totally misunderstood and that services – not iPhones – will increasingly be the thing to watch. I’ve also noted repeatedly and specifically that services would be a “$100B” business several times in recent weeks.

Margins are, of course, jaw dropping. (Read)

And as much as I hate the expression, “I told you so” I did… tell you point blank and repeatedly to ignore the early reports that iPhone sales would be weaker because I thought the analyst who raised the stink a while back was off base. Super smart and well spoken, but off base nonetheless.

Don’t get me wrong, I am not telling you this to brag. I could easily have been the one who was offsides here… heck knows, I make my share of mistakes.

What I want you to take away from this is just how important it is to prioritize company information as part of the investing process over media hype.

Particularly when it comes directly from the top and particularly when it’s a world class company like many of the names we talk about regularly.

The other thing to think about is that there’s a tremendous difference between companies at the top of their game – like Apple – and companies that are grasping at straws because they want to be – like Peloton.

Apple posted strong results across the board: (Read)

iPhone revenue grew to $46.22 billion, +6% YoY
Services grew to $24.9 billion, +12% YoY
Mac revenue grew to $7.74 billion, +2% YoY
Apple’s cash reserves stand at $156.65 billion, and it returned $29 billion to shareholders through share repurchases and dividends.

You know what to do.

$275.

4 - Chevron: Dinosaur juice pays plenty

I love investing!

You do a little homework, focus on great companies, put your money to work… and voila, suddenly your money is working for you.

Chevron beat Q3 earnings and revenue estimates (Read)

Earnings per share: $2.51 adjusted, vs. $2.43 expected
Revenue: $50.67 billion, vs. $48.99 billion expected, -6% YoY

Chevron produced 3.36 million barrels of oil equivalent per day, equating to a 7% increase YoY, mainly fueled by record production levels in the Permian Basin. The company also returned $7.7 billion to shareholders through buybacks and dividends – a record!

Hopefully, you’re on board.

Keith’s Investing Tip: You might see –6% YoY and worry. Don’t. Oil prices have indeed fallen from Q3 2023 to Q3 2024, so it’s logical revenue is down. That doesn’t bother me because a) oil and gas output is actually up and b) Chevron’s got a super-efficient balance sheet which means the company is well-positioned to weather any economic uncertainty because it has greater financial flexibility. Its peers, not so much.

5 - Rail unions not ready to “pull a Boeing?”

This catches my attention.

For the first time in 61 years, Union Pacific and CSX have opted out of traditional national labor talks with railroad unions, choosing to negotiate locally instead. Other railroads, like BNSF and Norfolk Southern, are still pursuing a national deal.

I can think of a few reasons this is a smart move.

Negotiating locally means:

Being able to construct better deals for their members by tailoring the issues at hand
More bargaining power because they can pool tighter resources into smaller bargaining units
Both unions and the companies they work with can be more flexible while potentially reaching consensus faster

Which stock is better?

I don’t own either right now, but I’d be inclined to go with CSX because it has a higher True Shareholder Yield (TSY) at the moment. (4.16% versus the listed 1.39% dividend yield most investors are familiar with).

My research shows very clearly that stocks with higher TSYs tend to outperform over time, even when, in many cases, the listed dividend from alternative choices is higher.

For example, one of my favourite energy producers – and a core holding in the One Bar Ahead® Model Portfolio - has a True Shareholder Yield (TSY) of 8.54% which is roughly double the listed yield of ~4%. Similar story with the new recommendation that comes out later today in the November issue.

Over time, that’s a ‘uge edge.

If you’ve got this under control and are happy with your income-related investments, ab-fab! If you’re not and you’d like to up your game, you know where to find me.

Meanwhile, now you know something new. 😀