Topics Discussed : Q2 Earnings, Unemployment, Retail Sales, New Lockdowns, Stock Ideas, Team Stevens Nation

Very busy week let’s look at the highlights:

This week kicked off Second Quarter (April through June) earnings reports. As mentioned beforehand, companies provide earnings reports every 3–6 months as an obligation to shareholders and the public. These numbers help investors create a true value for the business. For most businesses, numbers are going to suck; it really is a matter of magnitude.

Earnings Are an Expectations Game

You could see some really poor numbers but since they aren’t as poor as expectations the stock(s) could trade up. But with every earnings season the most important thing to look at is forward commentary. A company could have a great earnings report but have cautious forward comments and the stock will trade off (see Netflix), and vice versa. For all business except for the stay at home plays, expectations are for cautious forward comments.

Banks

Many of the banks reported this week, given how low interest rates have fallen it wasn’t a surprise to see poor results, as well as many taking loss reserves for COVID. The positive for the Banks was trading revenues were up significantly somewhat saving their businesses, but it should be a bumpy ride. Eventually these stocks will look interesting, but we may still be a ways off.

Vaccine

The big news of the week was Moderna’s COVID-19 vaccine. In 45 patients it appears safe and also effective, how effective remains to be seen. The company will now enroll 30,000 this month. There are also several other drug companies starting trials. But the market is betting on someone figuring this out in the relatively near future. I am hopeful, but cautious.

Retail Sales

Retail Sales looked much better than I was expecting, they were UP year over year in June. Online up 25%, Sporting Goods up 20%, Grocery 11%, Cars/Parts 7.5% ; Declining categories included Furniture, Health, Dept Stores, Electronics, with Clothing and Restaurant/Bars being the hardest hit down over 20% (but you could argue that isn’t all that bad given the restrictions, as well when you look at growth from last month the trend looks good). But as we always talk about on M2S, what does it look like going forward? This gets us to the new lockdowns.

New Lockdowns

We must remember that the new lockdowns haven’t been factored into any data yet and this will likely put a pause to job growth, retail spending etc. Which is why on a day of better than expected retail results, the market traded off. As well, we have many of the unemployment benefits rolling off at the end of the month which won’t help the economy.

Stimulus

New stimulus seems inevitable. I have no idea how we can just print money, but it appears necessary and likely if we are going to continue with slowly reopening the economy. I also think there are political reasons for both parties to get something done very soon.

Safe and Speculative Stock Ideas.

People like when I talk about individual stocks, and is tough to make recommendations unless we communicate often. Everyone has a different time frame, risk tolerance etc. So I will do stock pitches for you, and just know they aren’t recommendations, just my current thoughts on a current name. I could always be wrong. But I am just trying to help you understand how I think and maybe it will help you develop your own thesis.

Safe Idea

Digital Realty Trust — DLR. I do not own this company, as I am sort of waiting for a pullback but it may be a dumb strategy as I may never get the pullback. But what I like is it has a lot working for it. DLR is a REIT, or Real Estate Investment Trust. Now you may be thinking why the hell I would want to be exposed to Real Estate in this environment. I will tell you why. First, DLR although a REIT, provides space for Data Centers. As the world moves further and further into the cloud, the demand for Data Centers will increase. Secondly, REITs are great at returning capital to shareholders. Currently DLR has a dividend yield over 3%. Lastly, REITs can take advantage of very low interest rates and usually do very well in low-rate environments. So this is a company that is well positioned for the long-term but can also take advantage of near term interest rates to grow its business. It isn’t much of a secret as the stock isn’t down much from its peak, but it also hasn’t raced away like many of these beneficiary stocks like ZM, PTON etc. It also trades at a premium to other REITs, but my bet is it grows into its valuation with strategic acquisitions given the current rate environment. It is not a get rich quick stock, but a good story you can invest in for the long term and likely make money, and is a somewhat defensive play.

Speculative Idea

Brainstorm Cell Therapeutics — BCLI — I have friend dying of ALS. You can follow his story at www.stevensnation.com. I’ve been watching this stock ever since I’ve heard about Eric’s story with ALS. Eric and his family have done an incredible job raising awareness around new therapies and it appears there is finally one that works, and that is Brainstorm’s drug Nurown. Before we get into the details of the company you need to understand something about Small Cap Biotech Companies. They are very risky; they usually have no revenue, burn through a ton of cash and constantly dilute shareholders with equity raises. But if a drug works these stocks can be home runs. It’s the biggest form of gambling in the stock market. But here is what intrigues me about Brainstorm and its drug Nurown. Because of social media we are seeing visual evidence of slowing and or reversal of ALS symptoms with patients in clinical trials for Nurown. People who have been barely able to walk, are now able to run. We are seeing people getting out of their wheel chairs etc.

We also have catalysts upcoming. Phase 3 data is expected by the end of the year, and if it is good I believe the drug will be fast tracked for approval given ALS death rate is currently 100%. Also the stock currently has no analyst coverage, yet I would expect that to change given the likely need for equity raises. They were recently at a Raymond James conference; my guess is they may be the first to publish. Daily trading volume is picking up as I believe investors are getting ahead of the data, which means whispers are for good results. The stock is up a lot lately, 400%, but If Nurown gets approved, and becomes really the only therapy showing benefits for ALS patients, this stock should go a lot higher and the company likely gets acquired down the road. People focus on a small addressable market but only because patients die so quickly. If it does work as planned the market will be much bigger than previously thought. Lastly, and most importantly, you can help give ALS patients the right to try drugs by sending letters to congress. Team Stevens Nation makes it very simple at https://stevensnation.com/help-us/ . I bought a little BCLI this morning, it will be by far my riskiest asset I own, but I want to put my money where my mouth is and I am hopeful and betting on Team Stevens Nation.

That is it for this week, I cut a lot out to keep it short so will likely send another early next week. As always if you are getting these emails from someone else and would like to subscribe on your own you can at www.my2streets.com