Tonight I hosted the 6th official call. We had 8 students on the line so we got right into the economic data. On Wednesday, the FOMC announced it’s monetary policy and they kept the Federal Funds rate steady @ 2.25-2.50%. Their dovish comments sent bond yields diving.
The 3 months and 10 year bond spread inverted on March 22, 2019. I asked the students, what is the significance of an inverted yield curve? They didn’t recall that an inverted yield curve was one of the most important economic triggers. A yield curve inversion occurs before every recession. So, I went over all of economic triggers we had covered again in detail.
On this call, reviewed our stock holdings in detail:
- Target stock traded at $80. We closed our short position and recorded a loss of $443.
- Amazon is at $1,814. We missed this stock as it continues to move up.
- Aurora Cannabis jumped 20% from our last call. We agreed to take a $1,000 profit on the stock. A partial sell was executed on most of the shares from our previous call.
- Google stock moved up slightly.
- Z-Scaler is at $70.74. I closed 25 shares for a profit of $197 and we have an unrealized gain of $189.
- CyberArk Software is at $119, with an unrealized gain of $224.
- BP is at $44, with an unrealized loss of $67.
- Next-Era Energy is at $190, with no gain.
- Valero Energy is at $86, with an unrealized loss of $40.
So far we are making money.
Next, we reviewed the growing business of E-Sports. As most of the students are gamers, they understood the significance of this market. The majority of the students agreed that Activision Blizzard was the best option to benefit from the growth trends. To wrap up the call, we covered another important economic trigger: S&P Earnings Estimates
S&P earnings Estimates: incorporates 500 companies from all different industries. The S&P 500 uses a market capitalization weighting method, giving a higher percentage allocation to companies with the largest market capitalization. Each year, analysts compile estimates from each of the companies and publish their earnings estimate for these companies. The market value of each of the 500 companies totals about $15 trillion today.
Then to have a more manageable number for the index level, the $15 trillion is divided by a scale factor called the divisor. One can think of the divisor as if it were the number of shares outstanding of a company. A company’s stock price is it’s total market value divided by the number of shares. Likewise, a company’s EPS is it’s total earnings divided by the number of shares. The analogy is that the EPS for the S&P 500 is total earnings of the 500 companies, divided by the same divisor used to calculate the index.
For our next stock, I asked them to research another QUAD 3 asset, GOLD. I asked them to research the best way to profit: buy stock, buy the gold, etc.