Alchanati Campbell & Associates
Elon Musk, money and happiness, volcano eruptions, and lost art.
The Market. S&P 500 closed up 1.28%, DOW closed up 1.39%, and Nasdaq closed up 1.71%. Apple led the market up 4% after Berkshire Hathaway added 75 million shares of Apple in Q1.
Fortnite in the Blizzard? Now, unless you’ve been oblivious to social trends throughout 2018, you've obviously have heard of something called Fortnite. What exactly is a "Fortnite"? Its simply the hottest, most popular video game in recent memory. With 45 million players as of January 2018, its easy to see Fortnite as a wrecking ball within the video game industry. As millions of players flock to the game, they are leaving other games behind them. Investors are taking notice, with major video game publishers being down since Fortnite's domination began. Activision-Blizzard ($ATVI) and Take-Two Interactive ($TTWO) are both down double digits since March. The big three publishers of the aforementioned two and Electronic Arts are releasing their 2018 Q1 results throughout the beginning of May. Activision Blizzard led the way as the first major interactive entertainment company to release Q1 results, as they reported their numbers this past Thursday.
Nearing the end of trading hours on Thursday, Dow Jones made a mistake; it released incorrect headlines for Activision-Blizzard based off of old numbers before the actual earnings was released. This led to a 6% intraday drop at one point. Eventually, all this confusion was settled as the shares made back their loss and then some based off strong numbers. The company made their own record revenue for Q1, and coasted past estimated earnings. The company accomplished while competing against perhaps the fastest rising game of all-time, Fortnite, and without having a release of a major title. Officials within the company attributed this to the ability for their game franchise's long-lasting capabilities. Furthermore, the company put across the message the impact of Fortnite is short-sighted, as signature released during the fall gaming season should allow all major video game companies to bounce back.
The Musk attack. Tesla’s shares fell as much as 8.6% Thursday after Tesla’s conference call. Elon Musk said, “I think that if people are concerned about volatility, they should definitely not buy our stock…” This past quarter, Tesla burned through $1 billion of cash, EPS beat estimates at -$3.35 with revenue beating estimates at $3.41 billion. The company says it expects profitability in Q3 and Q4.
No excuses now for not getting a job. Unemployment rates just hit their lowest point in 18 years. Today, the Department of Labor Statistics revealed that the US unemployment rate has fallen to 3.9%, the lowest since 2000’s 4% rate. April marks a record setting 91 consecutive months of job growth. Wages have increased just above the rate of inflation at 2.6%, prompting the FED to consider three benchmark rate increases this year in this weeks meeting. Recent history tells us that when the economy is producing such high volumes of jobs, downturn is imminent. Both the 2000 low of 4% and the 2007 low of 5% were followed by significant recession and job loss.
Eruption on the main island. Hawaii’s Kilauea volcano erupted Thursday. Lava spewed into a residential neighborhood, prompting mandatory evacuations. Since the last eruption in 1924, most of Kilauea’s activity has been nonexplosive.
Money can’t buy happiness. A study shows that people seem to be happiest right before they buy a coveted item and once they have that item, their joy fades quickly. Highly materialistic people are more happy than their peers shortly before buying their desired item. The reason for this is because they think this item will somehow transform their lives for the better. People with low levels of materialism were less prone to believing big purchases could have a great impact on their lives. People expect more and overestimate their purchases and then are let down. One recommendation is to put more thought into your purchases.
Growth versus value. Growth stocks have been beating value stocks in this bull market. But some believe that the valuations for growth stocks remain stretched. During the last 5 years, the S&P 500 Value Index was up 46% while the S&P 500 Growth Index was up 85%. Historically, value has outperformed growth and now with interest rates rising, value stocks are more favored.
“The Museum of Lost Art”. Our understanding of art history is skewed by survivorship bias (AKA the pieces that are still alive). What has been destroyed includes “more masterpieces than all of the world’s museums combined.” To understand the art we still have, it is critical to put it in the context of what’s been lost.
The Alchanati Campbell and Associates Team
WHAT'S UP FRIDAY? is a weekly newsletter that will give you a summary of "What's up?" on Wall Street, in the US and around the World written by The Alchanati Campbell and Associates Team. What makes us unique is we focus on long-term knowledge; knowledge that will still be useful to you 10 years from now.