Everything you need to know this weekJan 03, 2022
Happy New Year! Every year always brings a lot of change, but 2021 seemed to take the cake and then some.
We hope you all were able to have a good year even with all the craziness. And we're wishing you a safe and happy 2022!
And now for our weekly edition of everything you need to know for the week ahead. As always this report contains news on the crypto world, stock market & earnings news. We've highlighted the most important topics in each section!
There's no hot IPO this week but Q1 will definitely bring some big names! We'll be excited to report on them once IPO season kicks off.
Most Important Companies Reporting Earnings This Week:
Constellation Brands (STZ), January 6th:
If you don't know this company they're the parent brand to companies like:
- Beer: Corona, Modelo Especial, Negra Modelo, Pacífico, etc.
- Spirits: Svedka Vodka, Casa Noble Tequila, High West Whiskey, Nelson's Green Brier Tennessee Whiskey, etc.
Last we covered them (see it here), we were projecting a 25% increase for the stock and they're almost there!
If you've seen our recent posts, even though we've called for a slowdown in retail sales growth, we believe SIN stocks (companies operating in gambling, tobacco, alcohol, defense, cannabis, as well as adult entertainment industries) like these will continue to perform well over 2022 as they're relatively defensive.
To give you the summary in case you missed it: Retail sales growth has been outpacing personal income growth since 2020. For the last 20+ years growth in retail sales has grown lockstep with the growth in personal income. Aka you make more money, you spend it. But over the last two years that gap has widened and people have spent more money on retail items than they have historically because of the savings they accumulated during the pandemic in addition to added stimulus checks. Looking at the graph above, we can see this happening in real time as the green line (sales) has spike relative to the red line (income). This trend will not continue forever and we're projecting for a drip in retail sales growth at some point in 2022.
But during this earnings report we're expecting strong sales numbers for their basket of brands as they've been outperforming in 2021 and we see this trend continuing.
Walgreens (WBA), January 6th:
If you saw our report recently on our top healthcare stocks (see it here), you may have noticed that Walgreens was not included. And this isn't because we don't believe in Walgreens, but more-so due to the strength of UNH & CVS.
However what Walgreens earnings will be helpful for this week is to get a gauge on how demand was progressing into year end. We can use these demand numbers as a proxy for CVS going into their earnings report later this month.
If Walgreens beats expectations, there is a good chance that not only will CVS beat as well, but their stock will increase too! This is because Walgreens is the second largest pharmacy in the US while CVS is the first!
With Omicron spiking across the US, we believe there is a strong chance that WBA beats expectations as demand for pharmaceutical and medical products is likely to surge going into year end.
Bed, Bath & Beyond (BBBY), January 6th:
With BBBY down 50% YTD, the story for the company keeps getting worse and worse.
BBBY's share of listed wedding registries has fallen to 30% which is their lowest-ever market share in the six years that Baird has conducted this annual survey.
The reason this is important is because wedding registries are often used as an indicator of brand strength as this can be a proxy for brand loyalty.
With Amazon continuing to eat into their market share across this field as well as many others, BBBY needs to do something quickly in order to turn the ship around.
While we wouldn't be surprised to eventually see a successful turn around, this is a stock we're definitely avoiding for the foreseeable future.
Earnings expectations across the street have shot down significantly and even if they beat expectations, it'll still spell trouble the company going forward.
In the face of supply chain issues, paired with severe business headwinds, we are short BBBY for the foreseeable future!
Bitcoin Hash Rate Hits An All Time High
The hashrate of Bitcoin refers to the amount of computational power used by the miners when verifying transactions on the blockchain.
This is extremely important because a higher hashrate means more network security and strength.
In the graph below, we see that the hashrate significantly decreased in the summer of 2021. This happened because a large percentage of the mining that occurred was within China. Once China banned cryptocurrency from within their walls, many of these miners had to cease operations, which hurt the security of bitcoin.
However since the drop last summer, the numbers have been slowing rising to the point where they ended the year at an all time high. This shows that other miners either entered the network or miners from China moved elsewhere.
In any case, this is a great sign for bitcoin as the strength of the network has not only resumed but has been better than ever. Even with a very rocky end to the year for bitcoin, this is great news for the long term security of the leading cryptocurrency.
If you want our long term outlook for the coin, be sure to check it out: here