Tuesday, Costco (COST)

From a top-down perspective, Costco will provide data relative to consumer spending and inflation. The warehouse club has done an exceptional job growing their membership numbers by keeping costs competitive on non-discretionary goods, including gasoline, through the pandemic. 

For a stock-picking perspective, alongside Walmart and Amazon, Costco is one of the three consumer staples stocks worth owning. Costco’s unique value proposition is well suited for an environment featuring elevated food and gasoline prices. Assuming a “business-as-usual” quarter, a post-earnings sell-off should be seen as a buying opportunity.   

Wednesday, Jefferies (JEF)

With the first round of highly anticipated IPOs – Arm Holdings, Instacart, and Klaviyo – launched, investors are curious how these offerings have affected the broader IPO market. Although these offerings had extraordinary day 1 launches, their performance thereafter is another story. 

Jefferies has the honor of being the first investment bank to update investors on the pulse of the IPO market at earnings. I do not have any specific thoughts on JEF. I expect results from JEF to weigh on the capital markets sector. The better the IPO-outlook, the more bullish we can be on the J.P. Morgan’s and Goldman Sachs’, of the world… Of course, the opposite is also true. 

Thursday, Nike (NKE) 

In part, this stock has become a proxy for China-U.S. relations. Starbucks (SBUX), Tesla (TSLA), and Apple (AAPL) face similar obstacles. 

Nike’s partnership with China has allowed them to outgrow competitors for more than a decade. In my opinion, a large part of this year’s underperformance is the market deciding that the cold war brewing with China jeopardizes an integral competitive advantage for NKE. 

While China is not Nike’s only fundamental problem, I believe the ~23% YTD decline captures the known risks. However, the stock is technically broken. I cannot see a fix until NKE gets even cheaper or the market is convinced China is not a concern.  

Friday, Carnival

Since the beginning of the year, skeptics have refused to buy the secular bull market in travel.  For most of the year, skeptics have been wrong. However, over the last few weeks, airlines have pre-released earnings shortfalls. It appears as though inflationary pressures have finally caused consumers to tighten their fiscal belts.  

Skeptics could finally be “right” if CCL confirms recent trends. The market’s embrace of these leisure names has always been tentative. Put another way, the sector has more renters (traders) than buyers (long-term investors). A substantial downside surprise on the guide could be “the straw that breaks the camel’s back”, resulting in further downside across the consumer discretionary complex. 

Disclosures:

• I am long COST.
• I have no position in JEF. I am long JPM, BAC, MS, and BX.
• I have no position in NKE.  
• I have no position in CCL.