🏀 Defense Wins Championships

Plus, these stocks may do okay with rising rates.

Happy Sunday to everyone on The Street.

Let's begin with last week's poll in which we asked, "if you would like a shorter version of the Street Sheet that was sent out every weekday." Here are the results:

  • 🟩🟩🟩🟩🟩🟩 👍 Yes (74%)
  • 🟨⬜️⬜️⬜️⬜️⬜️ 👎 No (26%)

Now, we received some fantastic comments as well. Here are a few:

  • "One of the things that differentiates your newsletter is that it has a weekly focus, as opposed to a daily focus. That filters out a lot of transient noise and you don’t have a lot of competition in doing that."
  • “Keep it very short, please.”
  • “Shorter versions on weekdays would be great!”
  • "A quick look at the day's announcements (earnings, etc.) would be useful. But it would have to be very brief to avoid information overload. Moreover, following the markets on a day-to-day basis has become totally unnerving. The weekly Street Sheet is extremely helpful and has even provided information that I've used to make some good investment decisions."

This feedback is incredibly helpful — thank you! I personally agree with everything above.

On the one hand, I feel like a weekly format differentiates The Street Sheet from all the daily briefings out there. It's a very long read, but we send it on Sunday, so you have some time to parse through it at your leisure.

On the other hand, I think a weekday briefing could add tremendous value. If we did this, I would indeed keep it short and extremely digestible. Right now, I'm thinking a combination of headlines you missed, those that will shape the following day's conversation, a scrollable chart or two, and maybe one trading idea.

If we do launch a daily edition, I'm also thinking about sending it out after markets close. There are a lot of other newsletters that get sent out in the morning, including one of our own: The Flag. I think a shorter Street Sheet PM edition might be the ticket, but again –you tell me, please.

Here is the same poll from last week, for those of you who missed it. I want to get as much feedback as possible before we embark on this next phase. We'll only do it if there's consensus, because we don't want to fix something that's not broken. Right now, however, it looks like there's overwhelming support for a short daily edition, and if that's the case, we will try to make it happen. 



US stocks finished lower Friday as concerns over regional banks and Credit Suisse continued to weigh on Wall Street. Large financial institutions recently committed $30 billion to First Republic Bank, while the Swiss National Bank lent $54 billion to Credit Suisse. Still, both stocks finished lower to close out the week ahead of the likely 25-basis-point hike by the Fed this Wednesday.

In earnings news, FedEx beat the Street’s bottom line expectations, with earnings per share of $3.41, compared to the expected $2.73. Revenue came in slightly below projections, but the company increased its full-year earnings forecast, adding that its cost-cutting measures had offset weakening demand.

On the economic front, the Michigan Consumer Sentiment index dropped for the first time in four months, from 67 to 63.4. The market expected the figure to remain flat. All three components of the index – including individual financial situation, near-term economic outlook, and long-term economic outlook – saw a relatively even decline.

In company-specific news, Google indicated to its recently-laid-off employees that they would not get paid for their remaining time off, including maternity and disability leave approved before they were let go. Over 100 former workers have organized a group asking Google executives to honor the pre-approved benefits in advance of their standard severance packages, which are expected to arrive as soon as March 31st.

Meanwhile, Nvidia stock caught an upgrade from Morgan Stanley. The investment firm suggested continued tailwinds from increasing demand for artificial intelligence would benefit the chip company.

In total for the week, the Dow Jones Industrial Average finished 0.4% lower, while the S&P 500 added 1.2%. The Nasdaq Composite surged 4.1%.


On Tuesday, existing home sales for February will be released. In January, existing home sales decreased 0.7% month-over-month, marking a full calendar year of consecutive decreases.

On Wednesday, the Federal Reserve will give its next interest rate decision. The central bank raised the fed funds rate by 25-basis-points last month, dialing back the size of its hikes in each of its 2023 meetings. Chairman Jerome Powell has reiterated his commitment to raising rates until the Fed’s 2% inflation rate target is reached. But recent turmoil in the banking sector has some investors thinking the central bank might pause hikes for the immediate future.

On Thursday, Wall Street will get reports for jobless claims and new home sales. Jobless claims fell to 192,000 for the week ended March 11, well below market expectations. Unemployment numbers remain near record lows, signaling a still-tight labor market.

On Friday, a flurry of economic reports are due, including orders for durable goods, as well as S&P Global’s Services, Manufacturing, and Composite PMIs.

Earnings Spotlight

Tomorrow, Chinese ecommerce company Pinduoduo (PDD) will kick off the earnings week. Investors will want to hear about the success of Pinduodo’s Temu shopping app. The app was growing remarkably even before its popular “Shop like a Billionaire” ad ran during the Super Bowl. In the week ended January 29, Temu posted a record $46 million in gross merchandise value.

On Tuesday, investors will get earnings reports from Gamestop (GME) and Nike (NKE). For the preceding quarter, Nike reported $13.3 billion in revenue, up 17% year-over-year, driven by record sales growth on Black Friday and Cyber Monday.

Wednesday marks a big day for pet owners and investors alike. Petco (WOOF) and Chewy (CHWY) will both report earnings. Along with its announcement, Chewy may look to ease concerns of antitrust violations regarding its relationship with PetSmart (PETM). The two pet care giants separated in 2022, but still share some board members across both companies.

On Thursday, both Accenture (ACN) and General Mills (GIS) will report earnings. Notably, the Cheerios owner recently raised its forecasts and expects full-year profit growth between 7% and 8%.

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Four Defensive Ways To Play the Market

Low Debt and Earnings Upside

Markets are volatile, and investors need a safe haven. What better place than with stocks that have low debt, are growing earnings, and have buy ratings on Wall Street? Four that fit the bill are Microsoft (MSFT), Corteva (CTVA), Linde (LIN), and Equinix (EQIX).

The four companies operate in different industries but share similar qualities. They have low debt, dividend yields of more than 1%, and a three-year beta of less than one, meaning the stocks are less volatile than the rest of the market.

Earnings growth from the group is at least 1%, and the majority of analysts who cover them rate them a buy. That’s against a backdrop of uncertainty, as the Federal Reserve contemplates more interest rate hikes and the tech sector undergoes massive layoffs.

Microsoft & Corteva: Wall Street Favs

Take Microsoft for starters. Its three-year beta is 0.9, and its debt-to-equity ratio is 42.6%. To fit the "low debt" bill, the company’s debt-to-equity ratio must be below 150%. The software behemoth pays a dividend with a yield of 1.1% and is poised to grow earnings by 1% this year. Not necessarily impressive per se – but, given the current environment, commendable. Nearly 70% of Wall Street analysts who cover Microsoft rate it a buy.

Its foray into AI with its ChatGPT has gotten some on Wall Street giddy about the company’s prospects. Credit Suisse analyst Andrew St. Pierre thinks the company can generate more than $40 billion in revenue from integrating ChatGPT into its Office and other applications.

Corteva, the agricultural chemical and seed company, is another Wall Street favorite, with a three-year beta of 0.8 and expected EPS growth of 8% this year. Its dividend yields 1%, and its debt-to-equity ratio is a low 6.9%. Over 60% of analysts have a buy rating on the stock.

Equinix & Linde Make the Cut

On the real estate investment trust front, Wall Street is smitten with Equinix for good reason. Of the four, it has the lowest three-year beta, coming in at 0.6. Its dividend yields 2% and is projected to have earnings growth of 8.5% this year. It has the highest debt-to-equity ratio of the group, coming in at 143.1%. But of all the analysts covering this REIT, 73% rate it a buy.

Rounding out the four is Linde, the global chemical company hailing out of Germany. Its debt-to-equity ratio is close to 47%, and its three-year beta is at 1. In its most recent fourth-quarter adjusted earnings, $3.16 per share blew past Wall Street’s forecast of $2.90 per share. In a CNBC interview, Linde CEO Sanjiv Lamba said the company is “hugely resistant” to market fluctuations given its products are used in every industrial application.

With volatility front and center, investors need a place to take cover. These four stocks may not be growing like gangbusters, but they could provide shelter in tumultuous times.

These Stocks May Do Okay With Rising Rates

Staying Ready for Rising Rates

There's a slight chance the Federal Reserve may pause its rate hike campaign when it meets this week. That doesn't mean the relentless rate hike campaign is over for good, however. In fact, companies that are sensitive to rising interest rates, or those with lofty valuations, are still in for a bumpy ride. 

But some stocks may just be buttressed for a rising rate environment, including Fair Isaac (FICO), Illinois Tool Works (ITW), and, believe it or not, Meta Platforms (META). Let's begin with the first name on the list.

Fair Isaac – the company behind FICO, one of the more common consumer credit scores – might benefit from a rising interest rate environment. With the cost of debt rising, consumers are more focused on their credit scores and will turn to FICO for help. On the business side, companies use Fair Isaac’s FICO technology to improve operations when it comes to credit risk, fraud, and compliance, among other aspects.

The company also has a solid track record in good and bad times. Shares have appreciated 3,200% over the past 15 years (26% annualized), and revenue has doubled during the last decade. And it boasts gross margins of 78% and net margins of 28%, for good measure. So far this year, shares have risen by about 10%.

Industrials Holding Up

Illinois Tool Works, an industrial company that makes everything from components to equipment, has been around for 110 years and has a long track record of growing earnings and its dividend. The industrial industry has held up in the wake of rising interest rates and is expected to continue to do so.

Illinois Tool Works operates in several sectors, including automotive, food equipment, electronics, construction, and more. The company has an impressive 18,000+ patents pending and has been able to last so long thanks in part to innovations and acquisitions that help it grow in tough economic times.

The stock has increased about 13% per year on average for the last 30 years, surpassing the S&P 500’s 11% average return. Its dividend yields 2.2% and has increased on average by 9% a year over the past five years.

Meta a Diamond in the Rough?

Technology stocks usually don't come to mind in a rising interest rate environment, but Meta, formerly known as Facebook, is one worth considering. It is the biggest social media platform by volume, with 3 billion daily active users across its platforms, which include Facebook, Instagram, and WhatsApp. Facebook alone brings in close to 2 billion daily active users. Nonetheless, Meta’s shares have been flat for the last five years, although in that time sales grew to $117 billion annually from $40 billion. It also boasts gross margins of close to 80%.

One reason it's worth considering is its aggressive cost-cutting measures. This past week the company announced it's laying off another 10,000 people and instituting a further hiring freeze as part of the company’s “Year of Efficiency”. The restructuring comes less than six months after Meta announced another round of 11,000 redundancies. As you can see above, the company has no problem making money, so the top line looks fine. If they can get their bottom line under control, which is where these layoffs come into play, it might be a boon for the stock. 

Additionally, whether you like it or not, Meta is well positioned to capture an updraft that comes around every four years as a result of US presidential elections. In fact, this past Friday, Former President Donald Trump just posted his first message on the platform two years after he was banned. 

Rising interest rates look like they're here to stay for at least a little while longer. For investors looking to ride the wave, they may want to consider these three stocks.

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It's Showtime for GE Healthcare

Shares Could Soar

It's showtime for GE HealthCare Technologies (GEHC), which was spun out of General Electric (GE) earlier this year. It's had a strong showing out of the gate, outperforming the S&P 500 so far in 2023.

To keep up the good times, GE Healthcare will have to show investors it can deliver on a consistent basis. That means churning out new products and improving profit margins, all while proving it can take on the big players in its industry including Bayer (BAYN) and Siemens Healthineers (SHL).

The good news: Wall Street bulls think it can deliver, which may drive more upside in the stock. “Despite the attractive setup, GE HealthCare shares are still trading at a … discount,” Mizuho Securities analyst Anthony Petrone wrote in a recent research report. That discount should diminish as the company has execution wins this year, noted the analyst.

GE Healthcare in the Lead

That's not the only reason to be optimistic.

GE HealthCare Technologies is also a leader in medical imaging, with millions of GE MRIs, CTs, PETs, and ultrasound scanners in the marketplace. It also offers patient-care and pharmaceutical diagnostic products. And, unlike most recent IPOs, it can't exactly be characterized as small. It ended 2022 with $18.3 billion in sales. Of that, about half comes from recurring parts and services.

Moreover, GE Healthcare is innovative, which is key to winning in this industry. It recently launched a handheld ultrasound tool and rolled out AI-based software to improve diagnostic accuracy. These product releases could drive future sales.

On the other hand, it has to spend a lot on research and development to churn out products the market wants. But that’s not preventing it from earning a profit. In 2022, GE Healthcare spent $1 billion on R&D. In the coming years, it earmarked 6% to 7% of its sales for R&D. Despite that spending in 2022, it had an operating profit of $2.9 billion. Wall Street expects it to have an operating profit of $3 billion this year and $3.2 billion in 2024.

More Upside in the Cards

Shares of GE Healthcare have been performing well – but it still hasn’t garnered much coverage from Wall Street. That too may change. As it stands, four analysts cover it and only two have price targets on the stock. Petrone of Mizuho rates it a buy and thinks the stock can hit $90 a share. On Friday, the stock closed at $75.84. When initiating coverage, the analyst said there is a lot of pent-up demand for scans and procedures since the end of the pandemic, which should drive sales.

The company trades for about 12.8x estimated EBITDA. Rival Siemens Healthineers trades at 16.6x EBITDA. If GE Healthcare can close that gap, the stock may get near $90 a share. If the company can meet its goals of growing sales in the mid-single-digit range and expanding margins to around 20%, that could yield even more upside. Can anyone say $110 a share? That’s what the bulls are hoping for at least. Now, it just needs investors to agree.

Last Week's Poll Results

Are you bullish or bearish on Boot Barn over the next 12 months?

🟩🟩🟩🟩🟩🟩 🐂 Bullish

🟨🟨🟨🟨⬜️⬜️ 🐻 Bearish

Are you bullish or bearish on Chubb over the next 12 months?

🟩🟩🟩🟩🟩🟩 🐂 Bullish

🟨⬜️⬜️⬜️⬜️⬜️ 🐻 Bearish

Which stock do you think will outperform this year?

🟩🟩🟩🟩🟩🟩 Sea (SE)

🟨⬜️⬜️⬜️⬜️⬜️ Rio Tinto (RTNTF)

🟨⬜️⬜️⬜️⬜️⬜️ Alibaba (BABA)

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