Our Insights

call #3

Call #3, February 25, 2019

Tonight I hosted our 2nd official call and 8 out of the 10 students are on the line. We had a lot to cover so I jumped right into the market update. We went over the typical 5 data points:

  • S&P 500 Index
  • Oil
  • Interest Rates
  • Dollar Index
  • VIX

Over the next 10 weeks, my goal is for them to focus on several aspects of the stock market, not only the DOW JONES or S&P 500.

As agreed from our previous call, we shorted Target stock and the execution price was $72.87 on 100 shares. Target is currently trading at $73.10. Thus, we are down. I explained that we need the stock to decline in the hopes we can buy it back at a cheaper price and make money on the trade.
Last week I picked the December retails sales miss as a headline to see if anyone would question my data point. I figured they wouldn’t. So today I expanded this data point includes total sales for the entire 2018 shopping season. This includes October through December. I explained that retails sales actually increased 3.7% YOY.

My key takeaway for them was that in investing, you have to challenge headlines with data. Filter the information fed by the media and accept the parts that make sense.

The student’s homework was to analyze AMZN stock using PEG Ratio. I told them to text my personal line with the PEG ratio for Amazon stock. None of the students came up with the same information. They had trouble understanding how to use current P/E ratios and growth versus future P/E ratios and growth. It was a good exercise for them in using an analytic formula to determine an expected value of a stock. This also gives analysts a wide range of price targets for various stocks.

My assumption is they would want to buy Amazon stock as I know they are familiar with it. Many have used it for some purchases in the past. The consensus was to pass on Amazon stock due to valuation concerns. AMZN is trading at $1640 per share and they were hesitant to buy the stock because of the cost per share. The opportunity for us to make money on the stock is definitely more difficult. We would only be able to afford a small amount of shares.

As with each call, we review an economic trigger.
Tonight we covered job creation.

Every month, the Bureau of Labor Statistics contacts approximately 147,000 businesses to get detailed information about employment, hours and wages. The non-farm payroll includes those received pay during any part of that time frame. The reference pay period refers to the last pay cycle. A pay cycle can be the previous week or month.

The number of new jobs each month is the difference between the size compared to the month before. Hence, there were 227,000 jobs added in January.

We ended the call with the next stock to analyze. I ask them to research Green Thumb Industries that opened in 2014. They are a national cannabis cultivator, processor and dispensary operator.

Click here to read about Call #2