RIP To The Goat
It was another quiet day for the stock market indexes, but a lot of movement happened under the surface. However, much of that was overshadowed by Warren Buffett’s Berkshire Hathaway dropping some sad news after the bell. Let’s see what you missed.
Today’s issue covers the buy-now-gain-later trend, fast-fashion retailer Shein testing the U.S. IPO market, and Berkshire Hathaway confirming Charlie Munger has passed away.
Here’s today’s heat map:
8 of 11 sectors closed green. Consumer discretionary (+0.58%) led, & healthcare (-0.51%) lagged.
The Case-Shiller home price index showed that U.S. home prices rose for the eighth consecutive month in September, with prices increasing 0.7% MoM to a new all-time high. National median rents dropped 0.9% MoM, according to Apartment List, sitting about 3.5% from its all-time highs.
U.S. consumer confidence stemmed three straight months of losses during November, with the 55 and up age group seeing the most improvement in confidence. Overall, consumers remain worried about high-interest rates and lingering inflation. While many survey participants expect a recession in the next six to twelve months, they’re still employed and spending.
Oil and other energy commodities rebounded on reports that OPEC+ will further its oil production cuts at this Thursday’s meeting despite an ongoing quota disagreement between producers.
China’s Premier Li Qiang said the country opposes protectionism and wants to strengthen supply chains with all countries. The comments came at the first China International Supply Chain Expo (CISCE), with the official adding that the international community needs to be “more wary of the challenges and risks brought about by protectionism and uncontrolled globalization.”
Geopolitical tensions have continued to boil as the U.S. and other Western countries work to diversify their supply chains outside of China. Just yesterday, Apple iPhone maker Foxconn announced an additional $1.5 billion investment in India as it diversifies its manufacturing.
Canadian Miner First Quantum continued its November collapse after Panama’s top court ruled that its 20-year contract to operate a copper mine in the country is unconstitutional. This will lead to a long and unpredictable road of international arbitration, causing investors to run for the hills.
SpringWorks Therapeutics’ shares jumped 19% after the U.S. Food and Drug Administration (FDA) approved its non-cancerous tumor treatment.
Other symbols active on the streams: $GME(+13.27%), $COIN (+7.10%), $CLSK (+14.34%)
Here are the closing prices:
| S&P 500 | 4,555 | +0.10% |
| Nasdaq | 14,282 | +0.29% |
| Russell 2000 | 1,793 | -0.46% |
| Dow Jones | 35,417 | +0.24% |
Buy Now, Gain Later?
Yesterday, we mentioned that strong Black Friday sales numbers boosted e-commerce-related stocks. And that trend is continuing today with Cyber Monday numbers rolling in.
As a reminder, U.S. Black Friday spending rose 7.5% YoY to a record $9.8 billion as consumers took advantage of big deals. Today, Adobe Analytics’ report indicated that Cyber Monday sales also hit a new record, rising 9.6% YoY to $12.4 billion. Both numbers topped economists’ expectations.
Overall, online spending during the five days between Thanksgiving and Cyber Monday was up 7.8% YoY to $38 million. Although consumers have been cautious about spending on goods, it’s clear that promotional activity can still spur demand.
E-commerce sales rose to 16% of U.S. retail sales, but over 200 million people shopped online and in-person during these five days. According to analysts, favorable weather conditions and the Thanksgiving holiday falling earlier this year were also a tailwind.
Despite the shopping spree, reports indicate holiday shoppers still have about half of their holiday shopping left between now and the end of the year. However, they’ll continue to wait for bargains before pulling the trigger on purchases.
Given the solid economic numbers, investors and traders are once again paying attention to e-commerce-related stocks, many of which have been battered over the last few years.
One of those is the buy-now-pay-later company Affirm, which can be seen below hitting 1.5-year highs. With roughly 15% of the stock’s float sold short, traders are betting they can buy now and make gains later in $AFRMshares. We’ll have to see if the rebound continues and if more analysts join Jeffries, who upgraded the stock this morning.
Additionally, shares of PDD Holdings (the parent of online retail platforms Pinduoduo and Temu) rose 18% after its earnings and revenues soared 35% and 94% YoY. It joins JD.com, Alibaba, and other retail giants who have reported stabilizing sales this quarter but have been overshadowed by the geopolitical tensions between the U.S. and China.
The community is bulled up on $PDDshares as they hit 2.5-year highs, betting on a continued positive trajectory for the Chinese (and global) economy.
Shein To Test Markets & Regulators
The 2023 U.S. initial public offering (IPO) improved versus last year’s dismal turnout but was still lackluster considering the Nasdaq 100’s nearly 50% rebound. However, several big-name companies are prepping to test the market in 2024, including Shein, Reddit, and others.
First is Chinese fast-fashion retailer Shein, which is looking to raise funds to expand its global reach. The company confidentially filed to go public in the U.S., looking to top its last valuation of $66 billion in a 2024 IPO. People familiar with the matter said the company’s current valuation is a central topic of debate between Shein and its advisors.
The confidential filing will allow the fashion giant to communicate with the U.S. Securities and Exchange Commission (SEC) and adjust its filings in private, only to make it public once ready to move forward with an IPO. With that said, the company will be testing both investors’ and regulators’ appetites. With tensions high between the U.S. and China, some analysts say the “mystery” in which the company operates could hamper its ability to win the trust of U.S. regulators.
Additionally, it’s been reported that social media giant Reddit is once again ready to test the IPO waters. Bloomberg reported on Monday that the company is holding talks with potential investors for an initial public offering, roughly two years after it confidentially submitted a draft registration statement to the SEC. It was considering a valuation of $15 billion at the time, but it’s unclear how it’ll be valued in today’s environment. 🗫
And lastly, cold-storage giant Lineage Logistics is reportedly eying a $30 billion IPO in what could be one of 2024’s largest listings. It’s called on Goldman Sachs and Morgan Stanley as lead underwriters, but no final decisions on the size or timing of any listing have been made.
Overall, seeing how these giants fare in the public markets will be interesting. As the $IPO ETF below shows, it’s been a rollercoaster ride for investors in the space over the last five years. Although prices have stabilized and rebounded in 2023, they’re still well off their peak, lagging the broader market’s performance by a wide margin.
Charlie Munger Passes At 99
The investing world is mourning the loss of investing sage Charlie Munger, who passed away today at age 99.
Berkshire Hathaway released a statement that he peacefully died this morning at a California hospital. Warren Buffett, CEO of Berkshire Hathaway, said, “Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom, and participation.”
In previous interviews, Buffett said this of his right-hand man, “We think so much alike that it’s spooky. He’s as smart and as high-grade a guy as I’ve ever run into.”
In addition to being Berkshire Hathaway’s vice chairman, Munger was a real estate attorney, chairman and publisher of the Daily Journal Corp., a member of the Costco board, a philanthropist, and an architect. In early 2023, his fortune was estimated at $2.3 billion.
His investing prowess and success with Warren Buffett in building Berkshire Hathaway will be studied for many lifetimes to come. Here are some of investors’ favorite Charlie Munger quotes:
- “Show me the incentives and I will show you the outcome.”
- The big money is not in the buying and the selling, but in the waiting.”
- “People calculate too much and think too little.”
- “Like Warren, I had a considerable passion to get rich, not because I wanted Ferraris – I wanted independence. I desperately wanted it.”
- “A majority of life’s errors are caused by forgetting what one is really trying to do.”
- “We have three baskets for investing: yes, no, and too tough to understand.”
- “I would argue that passion is more important than brain power.”
Rest in peace to one of the investing world’s GOATs.
Bullets From The Day:
🤖 Amazon announces an AI chatbot for businesses. The company says developers and non-technical business users will be able to ask Amazon Q questions, which can be connected to a variety of business software tools. The tool will start at $20 per person per month, with several of its capabilities available now for users to preview. It’s the latest salvo in the battle among tech giants to capture as much of the artificial intelligence and cloud market as they can. CNBC has more.
📱 Instagram is the latest social platform to lose advertisers. Meta is facing allegations that Instagram’s Reels algorithm delivers overtly sexual content to accounts that only follow children, as well as ads for big brands alongside them. The Wall Street Journal created test accounts that followed children-focused accounts and found that Instagram’s algorithm began to show it “more-disturbing content” alongside ads for companies like Disney, Walmart, and more. Bumble and Match Group have suspended advertising as more brands look into the issue. More from Mashable.
⚔️ Two U.S. projects highlight the divide over which carbon removal approach is best. Oil and gas producer Occidental Petroleum is constructing a facility to suck 500,000 metric tons of carbon dioxide out of the atmosphere annually, planning to inject some of the captured carbon into oil fields to increase pressure and raise crude production. Meanwhile, a consortium of companies is working on a similar direct air capture (DAC) project that will use underground storage. The different approaches signal continued uncertainty around this unproven technology. Reuters has more.
🤯 Oxford study says internet use doesn’t harm mental health. The Oxford Internet Institute performed one of the largest studies ever on mental health and internet use, declaring that there is no “smoking gun” linking the internet with psychological harm. They studied two million people aged 15 to 89 in 168 countries, finding that in the last two decades of increasing online connectivity, there have only been minor shifts in global mental health. It acknowledged some limitations in its study, calling for increased collaborative efforts between independent scientists and the internet-technology sector. More from TechCrunch.
⚠️ U.K. watchdog could quash Adobe’s $20 billion Figma acquisition. The Competition and Markets Authority (CMA) has provisionally determined that Adobe’s bid would harm the product design software market and will block the deal until its competition concerns are addressed. The merger would remove Figma as a threat to Adobe’s flagship Photoshop and Illustrator products, reducing consumers’ choices significantly. The regulator says possible remedies include blocking the merger entirely or forcing the divestiture of “overlapping operations” in each market where the deal could cause a substantial lessening of competition (SLC). The Verge has more.