Morning Note

Trading Observations

• We thought October 10^th was the top. Not because Trump riled up the Chinese trade war, although that was kindling in the fire, but the match was Crypto.

• Crypto has now lost over $1T in value in 40 days for its investors, and we think the leverage in that world is very high, exacerbating the move. Although a bottom will be found, leverage in the stock market system thanks to 700 levreaged ETFs and $170B in value also is high, making moves to the downside stronger.

Futures

DOW +274

S&P +26

Nasdaq +123

Financials / Consumer / Healthcare

GAP – Up 7% - Celebrity colabs adding value to the comp set. +5% comp sales beating the retail average.

BBWI – Baird downgrades to neutral after the guidance slam. Late. 6x EBITDA begs the question when too cheap.

ROST – Up 3% - Comps +7% underscores that folks trade here when things are tight, not dire (job loss).

WMT – Most notes positive. They are another trade into retail name that saw great comps, mostly driven by e-comm. The 37x P/E out to 2027 worries us.

BJ – Up 2% - Solid EPS beat, but the comp sale of +1.8% vs +2.3% street missed. It’s much cheaper than COST, which is helping.

WYNN – Upgraded to buy at Biti.

LLY, NVO (Both RVER Holdings) – Allowed to start selling obesity drugs straight to employers. This is genius for companies that self-insure and want to drive down cost of healthcare.

Technology

TKO, DASH – Announce a partnership where you can watch UFC/WWE and gorge yourself. Sounds lovely.

NVDA- ARKK was a buyer yesterday.

Industrials 

AEC, J – Both downgraded to neutral at Baird. Industry demand is consistent but not accelerating. Valuations high on positive AI impact.

WSC – Upgraded to outperform at Baird. Valuation call as mid-teens FCF yields just too juicy to wait. They are hoping the slow bleed since 2023 has tapered.

NVRI – Up 37% as it agrees to be acquired by Veolia.

Latest Media

$ORCL, Big Capex Dreams on Small Capex Cash Flow.

How to pay for it?

Enter shareholder dilution.