Wild Week Of Earnings As Facebook Shines And Amazon Misses

It is not the beauty of a building you should look at; its the construction of the foundation that will stand the test of time. David Allan Coe

One of the important attributes of markets is they are forward looking, meaning they price in future possibilities. When you look at your portfolio, it is a good idea to take each holding and say to yourself, “Does this company have a long term position which makes sense to me (versus its competitors)? As your portfolio is just the sum of its parts, by evaluating each piece, you can get a good sense of how well positioned for the future it may be (or not). I want a sense of optimism and confidence about what I own for clients and myself, and why we own it. From a psychological perspective, the process of routinely going over each position creates a strong awareness of what you own, so when one holding has a temporary setback, you know there are others which should pick up the slack. You see, markets are based on fundamentals, but they also involve a great deal of psychology, especially, when, ahem, things don’t quite go your way. So, yes, having a strong foundation matters with investing, especially when viewed from a mental perspective.

In the markets this week, there was a massive earnings deluge as the biggest and most well known companies in the world let us know how well they did. Naturally, the sharp eyed analysts at investment banks, mutual funds, hedge funds, private equity shops, and individual investors were all tuned in to see which companies met or beat expectations, many of which you could say are more than priced in. Facebook (NASDAQ:FB) impressed with a big revenue number (45% growth) and a nearly 4 billion dollar net profit figure. Mr. Zuckerberg’s creation has reached a value of nearly half a trillion, so you definitely say the market has rewarded his hoodiness, and then some. It’s internet brethren, Amazon (NASDAQ:AMZN), later in the week put up a 38 billion dollar revenue number and 25% growth, but the bottom line figure showed a big miss and the stock took a slight hit. At one point earlier this week, Mr. Bezos was the wealthiest person in the world, but the stock hit eliminated that situation. McDonald’s put up a nice number while investors jumped on Starbucks (NASDAQ:SBUX) for closing down it’s Teavana retail locations. In the oil patch, Exxon (NYSE:XOM) stumbled slightly, while Shell (LON:RDSa) and Chevron (NYSE:CVX) impressed as all benefited from marginally higher oil prices and strong downstream results. Don’t get your hopes up, but the price of black gold is slowly inching up past the $50 a barrel mark. A big wild card is what is happening in Venezuela, as Mr. Modero continues to press for a special election, which would force Donald to follow through with his threats to retaliate by restricting access for Venezuelan exports. Yes, Libya and Nigeria continue to increase production, and OPEC continues to need higher prices, while the frackers keep pumping. What an interesting concoction we have in the oil world, wouldn’t you say?

On the macro front, 2nd quarter GDP met the 2.6% growth figure and some believe the chances for another interest rate increase has gone up a tad. In the currency markets, the dollar weakened against the Euro, as did the Swiss dollar. Both sit at yearly lows, the former clearly helping oil prices. In mergers and acquisitions, next week could bring Discovery Communications Inc (NASDAQ:DISCA) tying the knot with Scripps Networks Interactive Inc (NASDAQ:SNI), while Charter Communications Inc (NASDAQ:CHTR) turned away Sprint’s (NYSE:S) latest attempt to find a suitor. Next week comes more from the oil patch along with plenty of others, including the big kahuna, that being Apple (NASDAQ:AAPL). Should be fun, wouldn’t you say?

Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.