The Perfect Storm for Shanghai containers

Quick Hits from Grit

Happy Friday Everyone 👋

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Flora Growth shares are up nearly 150% this week (on +100MM shares traded)! Why? The Colombian government just passed legislation aimed at boosting the cannabis industry. Flora already had one of the lowest production costs in the game, this is like giving Tom Brady an extra down on offense*!

*as of 4pm ET, 7/29/21

1. MACRO

GDP grows 6.5%, misses estimates

Experts were expecting the economy to grow by a hefty 8.5% in Q2, aided by revenge and vaccine spending (with a boost from Uncle Sam). Those numbers came up short, though, slowing momentum.

The BEA reported notable increases in consumer spending in food and accommodation services and pharmaceuticals products. Businesses saw increased investments in transportation equipment and research & development. Government spending decreased as the Paycheck Protection Program (PPP) was phased out.

GRIT’S TAKE: The biggest surprise from the BEA’s report was a drop in inventories, which were expected to increase. This means we could see a ton of pent-up inventory rebuilding growth in the quarters ahead (great for the economy!). The other reasons for the underwhelming growth? A drop in fixed investments, a rise in continued imports, and less government consumption.

GRIT’S ACTION: Staying the course with Diamond Hands.

2. DEALS & IPOs

Maybe Robinhood should’ve halted trading on $HOOD?

Robinhood shares began trading yesterday at $38, which put Vlad Tenev’s net worth at an estimated $2.4B. By market close that overall net worth took about an 8% hit, as no amount of memes could keep $HOOD shares above their opening mark. It’s a shock trading wasn’t halted altogether ; )

Tenev says he’s striving for a “large portion” of Robinhood’s new customers to become long-term investors. Perhaps he skipped the section in the S-1 showing that options (aka lottery tickets) accounted for ~38% of revenues?

GRIT’S TAKE: Robinhood smartly priced shares at the bottom of its targeted range in an effort to look good on its first day of school, but it looks like the customers who got 20-25% of pre-IPO shares weren’t digging the style.

GRIT’S ACTION: Still a ‘hard no’.

3. STOCK MARKET

Earnings galore pt. 2 (FAAMG edition)

#EarningsSZN continues and this week and FAAMG stole the show:

  • Google: earnings $27.26 vs $19.34 per share, revenue $61.88B vs $56.16B

    Revenues from YouTube increased 83% YoY

  • Apple: earnings $1.30 vs $1.01 per share, revenue $81.41B vs $73.3B

    Total revenue up 36% YoY, led by the iPhone which increased 50%

  • Facebook: earnings $3.61 vs $3.03 per share, revenue $29.08B vs $27.89B

    Revenue grew 56% YoY, Ad revenues on fire +51% (Average price per ad +47% y/y)

  • Microsoft: earnings $2.17 vs $1.92 per share, revenue $46.15B vs $44.24B

    Their Intelligent Cloud segment led growth with $17.38B in revenue, a 30% increase YoY

  • Amazon: earnings $15.12 vs $12.30 per share, revenue $113.08B vs $115.2B

    Revenues grew 27% YoY, but it wasn’t enough to meet Wall Street’s expectations as shares dived after hours

GRIT’S TAKE: These 5 companies have a combined market cap of $9.37T (that’s almost 10% of the entire world’s stock market), and they’re not showing any signs of slowing down (for the most part).

GRIT’S ACTION: I own all these stocks except for Facebook. When is Zuck going to have a bad quarter so I can finally buy?

4. COMMODITIES

The Perfect Storm for Shanghai containers

Last weekend, eastern China was devastated by a typhoon that forced over 100k people to evacuate the Zhejiang province. Shanghai was also hit hard by the storm, shutting down some of the world’s biggest ports for days.

Mother Nature’s timing on this could not have been worse as Shanghai container rates have been rising relentlessly for over a year, and are now firmly in AYFKM ( "Are you f*$#%^& kidding me?”)  territory at nearly $10,000 for a 40’ container.

GRIT’S TAKE: Shipping costs around the world have seen a similar rise and we likely won’t see that trend let up until there’s a shift towards consumption of more services over goods, and people start flying more (increased commercial air cargo capacity). These are things we’re already seeing pick up, but won’t hit their full stride until COVID fears subside.

GRIT’S ACTION: I am long airlines + cargo carriers. Ready for the re-open trade!

5. ENTERTAINMENT

SPACs: What’s the worst that could happen? THIS!

I’ve personally never prepared an earnings report myself, butI imagine anyone could have done a better job than ATI Physical Therapy, who went public via SPAC last month ($ATIP).

Shares have dropped by more than 50% this week after the company’s earnings debut featured sharply lower revenue projections and high employee turnover, among other things…

“The release also lacked a share count, a balance sheet, a cash flow statement” - Michael Petusky, Barrington Research

GRIT’S TAKE: ATI had 5 buy ratings and a price target of $13 before earnings. Now it’s got at least 5 law firms urging investors to contact them for securities fraud investigations…

GRIT’S ACTION: Using this as a case study!


Under the Radar…

New World wants to enhance the relationship between user and creator. That’s why they built the first ever augmented reality NFT platform where consumers can interact with their favorite artists, musicians, celebrities, and companies on a global scale. They were just acquired by publicly traded DeFi firm Graph Blockchain!
More than 26 million people are affected by Chronic Heart Failure (CHF).Cardiol Therapeutics is fighting CHF with an ultra-pure, high concentration cannabidiol (CBD) formulation, CardiolRx™, that is currently being studied in an FDA approved Phase II/III trial. Cardiol’s shares are in the process of being uplisted to NASDAQ!
Calling all bankers! Have a client that is looking for a large injection of cash? Did you know you can make up to $150,000 in UPFRONT commission with JUST 1 referral? Let me introduce you to TVT Capital. A market leader in bridge loans of up to US$15MM in industries like O&G, Cannabis, Law Firms and Wholesalers. Contact them NOW!
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*SOURCES
1. BEAZerohedge
2. Bloomberg
3. CNBCCNBCCNBCCNBC
4. Bloomberg
5. Fortune

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