Relax. Bulls are still in the game (for now)
Critical MSFT + GOOG BRIEF Discussion. The like button keeps the bulls alive for another day.
Dear Public Investment Community,
You guys know I like to send public emails once a week. But these are chaotic times, and I want to make sure you are keeping level-headed as price action melts down.
This is a brief update - I will keep it very short.
Earlier this week when I sent out my previous note “Expect better days ahead, but extreme turbulence first as we head into critical FAAMG Earnings this week”, I was expecting exceptional levels of volatility. And we’ve gotten plenty of it.
I want to take a moment to talk about Microsoft and Google earnings. I’m already actively analyzing the earnings calls, and will give more frequent tactical updates inside Patreon, but anxiety is high right now so this update post is public to calm my community’s anxiety during these challenging moments.
I only have one ask if you enjoy this read: share my newsletter.
Okay let’s get into it!
First things first: Do we panic after the Nasdaq undercut the March lows?
To answer this questions, we have to do some bottom-up analysis. I’ll keep it high-level and brief.
Why are Microsoft and Google so important (MSFT more so)? It is because MSFT is owned in nearly every major growth mutual fund, hedge fund, asset management firm. Inside the Vanguard Growth Fund (VUG), MSFT takes a significant allocation (just behind AAPL). And that’s just one of the largest mutual funds.
Therefore, by weight, Microsoft earns the title of being a systemically important company (and stock) inside the the U.S. economy.
When MSFT reported a very weak outlook back in the dot com bubble, that led to a structural bear market within technology that didn’t recover for years.
That is NOT the case today - after the earnings results and outlook provided that have been released. In fact, MSFT has a new emerging business in Cybersecurity (what timing in this geopolitical environment and, oh my, what impressive growth metrics)
If MSFT can rise, then the stock will lift DIA, SPY, QQQ, VUG - all at the same time.
So if you are panicking after reading on CNBC that Google’s Youtube figures disappointed, realize that the social media sector (while very important) is not as important as enterprise spending (which is what MSFT does) for the QQQ.
At this point, Facebook is only a 1% weighting inside the S&P 500. And its peers Snapchat, Pinterest, and Spotify have even smaller weightings in the index.
The market can overcome Google’s miss. After all, Google’s core Search is still doing fine. A big miss on MSFT would be a different story. Thankfully, that’s not the case.
If you want, you can read all about their specific earnings, segment information, and other nitty gritty details. I’m not here to talk about that today.
I’m here to talk about what I believe the market actually cares about at this moment in time.
In a response to market participants betting against the stock or the technology sector in general, Google announced that it is doing a $70 BILLION dollar buyback.
Basically…telling short-sellers to back off. I like this move - a lot. It inspires confidence.
Do we trust bearish sellers who are making extremely complex, intricate forecasts about the economy and how it will impact Google? Or do we trust Google’s corporate insiders who create the actual product development plans and have a visible timeline of how it will add up to business results?
Oh, and did you know that Chinese Executive insiders sold their Chinese Internet stock positions years ahead of the 2021 crash?
I didn’t, and neither did the hedge funds or asset managers who found out too late.
Link to the WSJ article is inside my Community - if you want to read about it.
(WSJ article inside Patreon Dropbox Materials Folder)
Look folks, I don’t want to lead my own question too much as to whether you should trust the widely accepted bearishness/media narratives or actual corporate insider transactions.
Only you can make that call. I know which side I trust.
That’ll do for this short update.
If you’re looking to truly understand the investing environment we’re in, and want to support my research/work, let me help you inside my community. I’m on a mission to help people as many people as I can - hardworking, highly intellectual people like yourselves.
❤️ this email if you enjoyed the read. And see you in my next Youtube Video.
The next video….will be action-packed. Are you ready? Let’s press the like button and remind bears that this war isn’t yet over.
Your Investment Strategist,
Larry