📄 Dunder Mifflin Bulls

Happy Sunday to everyone on The Street.

"The hottest initial public offering of 2023 was a golf company you’ve never heard of that was significantly in debt, had almost no sales, was short on supply of its most important component and claims to be manufacturing shafts at a facility that local officials have never seen or heard of."

That's how Golf Digest described Sacks Parente (SPGC), a small putter outfit in California, that went public a few weeks ago, pricing its IPO at $4 per share. Almost immediately the stock popped to $32 per share, closing at $29.67, locking in a 624% gain in one day.

Out of nowhere, the company was valued at $467 million, which was strange given the fact that it only generated $90,000 in sales this year and is carrying a $917,000 net loss on its books according to its IPO prospectus. Odd, to say the least.

Shares are now trading at $1.63 and some think "organized manipulation" might have caused the initial spike. Zooming out, it's a reminder to be cautious, do your own due diligence, and don't get caught up in the hype. As in golf, you can grip it and rip it, but sometimes you'll end up in the cabbage.

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With Magnifi, you can not only see all your stocks, funds, 401Ks, and IRAs in one place, but you also get the transformative power of AI to help you manage and optimize your investments:

• Uncover hidden risks and fees

• See real-time performance and portfolio news

• Research and build investing plans

• Evaluate new ideas with pro-level data

• Invest at your speed

Magnifi is your investing co-pilot — a conversational AI that helps you take control of your financial goals, in one whole view. Put it to work analyzing your existing accounts like Robinhood and Fidelity, or buy and sell right in Magnifi’s commission-free brokerage.

Experience it for yourself. For a limited time, new members can sign up for just $1.

_{Fees and expense ratios vary by holdings. Not all investors will have nvestments with high fees. Mutual Funds and Exchange Traded Funds (ETF’s) are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.}

Review

US stocks rose on Friday but still ended the week in the red, as investors continued to worry about the Fed’s future interest rate policy.

Market expectations are low for a rate hike at the central bank’s policy meeting later this month but forecasts diverge when it comes to the following FOMC meeting in November.

In company news, supermarket chains Kroger and Albertsons are selling more than 400 stores to C&S Wholesale Grocers for $1.9 billion to secure antitrust clearance for their proposed merger.

Kroger also agreed to settle the majority of claims related to the opioid epidemic. As part of the settlement, Kroger will pay $1.2 billion to US states and subdivisions and $36 million to Native American tribes over 11 years, plus attorney fees and costs.

Elsewhere, the Federal Aviation Administration ordered SpaceX to keep its Starship Super Heavy rocket grounded until the company takes 63 corrective actions to prevent a recurrence of April’s mishap, which saw the rocket explode mid-flight.

Finally, Stellantis has offered a pay raise to its hourly workers represented by the United Auto Workers to avoid a costly strike. The proposed deal would provide a 14.5% wage increase over the four-year term of the proposed deal for most of Stellantis’s roughly 43,000 UAW-represented hourly workers.

In total for the week, the Dow Jones Industrial Average finished 0.8% lower, while the S&P 500 declined 1.3%. The Nasdaq Composite fell 1.9%.

Preview

The U.S. economy relies heavily on consumer spending. As we’re heading towards the holiday shopping season, it matters how Americans are feeling about the economy. This week’s data releases will help shed some light.

First up, August consumer price inflation is due on Wednesday. In July, inflation accelerated slightly to 3.2% year-over-year, the first increase after falling for 12 months straight. Investors will also get an update to the current 30-year fixed-rate mortgage, which sits above 7%.

On Thursday, August retail sales will illuminate consumer spending at the end of the summer. And following the previous day’s CPI, the August PPI – wholesale inflation –will be released. This inflation measure tracks how much U.S. producers sell their products for.

On Friday, the week will close out with an early look at results from the University of Michigan’s consumer sentiment survey in September. In August, confidence dipped to 69.5 from a 21-month high in July. Reports on import and export prices and industrial production will also come in. The latter rose 1% in July, the most in six months.

Outside the consumer theme, the NFIB Small Business Optimism Index for August will be reported on Tuesday. In July, this measure of economic confidence increased for the third straight month. Additionally, 21% of business owners reported inflation as their single biggest concern. On Friday, investors will also watch for August industrial production numbers after the July data blew expectations out of the water.

Earnings Spotlight

Oracle (ORCL) will kick off this slower week of earnings reports. Management could speak on the company’s recent top-secret approval to host sensitive information on Oracle Cloud Infrastructure.

On Tuesday, carbon chemistry company NanoXplore (GRA) will report its latest quarterly earnings. The company’s management may offer more specifics on its recent deal to supply a well-known commercial vehicle OEM with lithium-ion battery cells.

Adobe (ADBE) is set to report earnings on Thursday and could give investors more insight into its AI plans. The software company has implemented generative AI into its offerings. Its popular Firefly product, which uses AI image and text generation, is already available through a beta version of Photoshop. Now, the company is working on rolling out these AI features to Adobe Express, its all-in-one cloud-based design platform.

On Friday, Lennar (LEN) earnings will round out the week. The nation’s second-largest homebuilder recently made headlines for securing an investment from Warren Buffet’s Berkshire Hathaway, which sent the company’s shares higher.

Real-Life Dunder Mifflin Bulls Don’t Think International Paper Should Be In The Recycling Bin

Pandemic Darling

International Paper (IP) may not be enjoying the same level of pandemic-driven demand, but that’s no reason for the company’s stock to drop to the bottom of the heap.

As the world started recovering from the pandemic, consumers began to relish their time stepping away from their computers, opting for shopping trips, outdoor excursions, and nights out instead.

Following the demand for online shopping, the market for boxes and packaging material saw a drop as well. This shift in trends is shown in the value of the pulp and paper company’s stocks. Shares of International Paper dropped by 43% from their peak in June 2021.

Is it warranted? Bulls say no. Here’s why.

Online Shopping Still Trending

Online shopping escalated like never before during the pandemic. Has it regressed to the norm?

Not quite. According to Commerce Department data, consumer behaviors learned during lockdowns have not disappeared. In the second quarter of 2023, ecommerce accounted for 15.4% of retail sales, compared to 11.2% in the fourth quarter of 2019, right before the pandemic.

As shopping trends shifted, the excess inventory left in the hands of retailers posed a challenge for International Paper. Many have since addressed surplus stock issues. In fact, the Institute for Supply Management cautioned retail packaging inventories may now be too low.

International Paper reported a similar situation. Inventories of North American corrugated packaging customers, which were too high at the start of the second quarter, are now nearing target levels at the beginning of the third quarter. Shopping online appears to be going strong — and, along with it, the packaging.

Worth the Paper It’s Written On?

Online shopping may not be what it was during the pandemic, but ecommerce is still thriving. If retailers can manage their inventories effectively, International Paper could remain stable, too.

With lockdowns in the rearview, trends are changing. But pandemic darlings are adjusting to them, and it may just be too soon for a sell-off.

Bet On Online Gambling As NFL Season Starts

Kickoff Liftoff

Fans have already seen their first kickoff. The champs have already taken their first loss. The stage is set for an NFL season for the ages. Now just one question remains. Who are you rooting for?

For some, at least, the answer isn’t teams, but stocks. Over the past three years, investors have noticed an increase in online betting stocks in the days surrounding the first kickoff. Analysts at the Bank of America (BAC) consumer trading desk, however, say those gains were given back within ten days of the season's launch.

Investors looking to bet on sports betting can try their luck with one of three options: pure-play, casino stock, or exchange-traded funds.

DraftKings Is King

When it comes to pure-play and online betting stocks, DraftKings (DKNG) is in the lead. Sporting a market capitalization of over $12 billion, the company is the biggest pure-play for online sports betting that's traded publicly. With shares up more than 150% this year, investors are clearly paying attention.

Most analysts expect a replay of DraftKings' past performances, saying the stock could get a boost at the beginning of the NFL season. In fact, 21 of the 32 analysts at Refinitiv have given DraftKings shares a Buy or Strong Buy rating.

There’s an ETF for That

Going beyond pure plays, investors can also get their hands in the game through companies that operate both online and physical sports betting businesses.

Caesars Entertainment (CZR), MGM Resorts International (MGM), and PENN Entertainment (PENN) — to name a few — are active contenders here. The latter just swapped its branding partnership from Barstool Sports to Disney’s (DIS) ESPN.

Investors looking at the NFL season's short-term potential bump have one more option to consider: Roundhill Sports Betting & iGaming ETF (BETZ). Sitting on a cool $100 million in assets under management, the fund gives investors broad-based exposure to online betting. With shares up 20% year-to-date, the company opens the door to overseas markets, including the Dublin-based betting company that owns FanDuel, Flutter Entertainment (PDYPY).

Options abound, but it’s important to make your picks wisely, or else you could end up in the red zone.

PRESENTED BY MAGNIFI

How do you know if you’re paying too many fees?

Meet Magnifi, the AI that CNBC calls “ChatGPT meets Robinhood.”

With Magnifi, you can not only see all your stocks, funds, 401Ks, and IRAs in one place, but you also get the transformative power of AI to help you manage and optimize your investments:

• Uncover hidden risks and fees

• See real-time performance and portfolio news

• Research and build investing plans

• Evaluate new ideas with pro-level data

• Invest at your speed

Magnifi is your investing co-pilot — a conversational AI that helps you take control of your financial goals, in one whole view. Put it to work analyzing your existing accounts like Robinhood and Fidelity, or buy and sell right in Magnifi’s commission-free brokerage.

Experience it for yourself. For a limited time, new members can sign up for just $1.

_{Fees and expense ratios vary by holdings. Not all investors will have nvestments with high fees. Mutual Funds and Exchange Traded Funds (ETF’s) are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.}

Tractor Supply’s Delicate Balancing Act

Not Your Granddad’s Tractor Supply

New friends might be silver, but old friends are gold — or so the 85-year-old agriculture and home improvement retailer Tractor Supply Co (TSCO) might tell you.

Prior to the pandemic, the “rural lifestyle retailer” perfected the brisk business of selling axes, wood splitters, and tractor parts to experienced hobby farmers and ranchers.

The pandemic-led mass exodus of city dwellers heading to the suburbs drew record numbers to Tractor Supply. Customers weren't exactly sure what they were looking for, but they asked questions — tips on taking care of lawns and pets, how to avoid chopping wood, etc. — and they got answers.

These customers have stuck around since then. So Tractor Supply, too, is transforming, finding ways to keep the silver and the gold.

The newcomers come with new demands, such as pre-chopped wood, something traditional Tractor Supply customers would not have picked up. Tractor Supply knows it’s good business to keep both customers happy, but its strategy for doing so is still in the making.

Sales Taking a Pause

The Tractor Supply story is hardly uncommon. In fact, most companies are grappling with post-pandemic shifts.

Some habits adopted during shutdowns, like raising chickens and spending time in the backyard, have remained popular. Others, such as working out at home or opting for video chat instead of face-to-face interactions, declined.

Tractor Supply is still seeing demand, but sales have slowed. During the first year of the pandemic, sales jumped 27%. In 2021, they gained 20%. Last year, sales increased just 12%.

To keep sales growing, the retailer is opening about 300 new stores over the next three years, adding to its current count of roughly 2,400 stores in the US.

Appealing to Everyone

In an effort to appeal to its new customers, the company has stocked its stores with pre-chopped wood, chicken coops, and live plants. Meanwhile, more traditional items like metal tractor parts have been pushed further back in the store or sold mainly online.

But that doesn’t mean Tractor Supply is losing sight of its roots. Facing a bid to change the company name to better align with its new products, Tractor Supply opted to stay as is, leveraging the power of its near-century-old household brand status.

The company is keeping its strategy simple for now. Managers make sure that sales staff are attentive to customers, particularly those looking around the tractor aisle for things that may have been moved. Making everyone happy can be a tough act. The jury is still out if Tractor Supply can pull it off.

Last Week's Poll Results

Are you bullish or bearish on SharkNinja?

🟩🟩🟩🟩🟩🟩 🐂 Bullish

🟨🟨🟨⬜️⬜️⬜️ 🐻 Bearish

Are you bullish or bearish on Monster Beverage (MNST)?

🟩🟩🟩🟩🟩🟩 🐂 Bullish

🟨🟨🟨⬜️⬜️⬜️ 🐻 Bearish

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🟨🟨🟨🟨⬜️⬜️ 🐂 Bullish

🟩🟩🟩🟩🟩🟩 🐻 Bearish

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