🚘 ‘Even Bigger Bubble’ Than Nikola

Plus, Monster Beverage's next growth driver...



Happy Sunday to everyone on The Street.

While past performance is never indicative of future results (yada, yada), historically September has been one of the worst months of the year for the markets.

Over the past two decades, the S&P 500 has moved higher in 12 of those 20 years (60%), yet the average return for the month is -0.4%. Compare that to November which has averaged 2.1% returns over the last 20 years and moved higher 80% of the time.

Over the past decade, the S&P 500 has performed even worse in September. It has moved higher in five of the last 10 years (50%) and has lost an average of -1.4%.

As for other indices, the NYSE Composite has witnessed upward movement in September in 11 of the last 20 years. That is 55% of the time, but the index has still averaged a loss in September of -0.4%.

Coming into the month, Energy, Consumer Cyclicals, and Industrials were the strongest performers over the summer. Let’s see how this fall fares. Wake me up when September ends?


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Review

US stocks were mixed on Friday following the release of a fresh batch of jobs data.

The U.S. unemployment rate unexpectedly rose to 3.8% in August, up from 3.5% in July. While that’s the highest level since February 2022, it is still near historic lows.

The U-6 unemployment rate, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, increased from 6.7% to 7.1%, the highest since May 2022.

Overall, the U.S. economy added 187,000 jobs in August, slightly more than in July. It was the third straight month with fewer than 200,000 jobs created, a sign that the labor market might be cooling.

Last week also saw a federal appeals court vacate the Securities and Exchange Commission’s rejection of an application by Grayscale Investments to convert its Grayscale Bitcoin Trust into a spot ETF on Tuesday, ordering a new review of the application. Grayscale first applied for the ETF conversion, which would simplify and mainstream Bitcoin investing, in October 2021.

In DC, the Department of Health and Human Services sent a recommendation to the Drug Enforcement Administration suggesting that cannabis be moved from its current Schedule I drug classification, which groups it with substances like heroin deemed to have no medical benefit, to a Schedule III drug, the same class as ketamine.

The landmark recommendation sent cannabis stocks soaring higher on the possibility of relaxed federal marijuana regulations. The AdvisorShares Pure US Cannabis ETF was the top-performing ETF in August coming off the regulatory news, gaining more than 20%.

In total for the week, the Dow Jones Industrial Average finished 1.4% higher, while the S&P 500 added 2.5%. The Nasdaq Composite surged 3.2%.


Preview

It’s a quiet start to this shortened week for investors, who will get an update on July factory orders on Tuesday. In June, new orders increased by 2.3% from May to $592 million, the biggest jump since January 2021.

On Wednesday, investors will get a look at the health of the services industry by way of the ISM Services PMI for August. In July, business activity in the sector fell, coming off a four-month high reached in June. There will also be an update to the 30-year fixed-rate mortgage, which currently sits at 7.31%.

On Thursday, the Labor Department will report how many Americans filed for unemployment benefits. Investors will also get an update on labor market productivity, which increased 3.7% in the second quarter of 2023, the biggest increase in 3 years.

On Friday, we will look out for the Fed’s report on consumer credit in August.

Earnings Spotlight

Thanks to the Labor Day holiday, Tuesday will be a busy day for earnings, with reports coming in from Asana (ASAN), Aerovironment (AVAV), Gitlab (GTLB), and Zscaler (ZS). In particular, investors have high expectations for Gitlab’s call, as the AI-powered DevSecOps platform was just awarded the 2023 Google Cloud Technology Partner of the Year award for the third consecutive year.

On Wednesday, the earnings reports will keep flowing with C3.ai (AI) turning in its report card and likely speaking on its most recent partnership with the US Air Force. Dave and Busters (PLAY) and American Eagle (AE) will also offer updates on their respective businesses.

On Thursday, DocuSign (DOCU) is due for earnings and could discuss competition from Google (GOOGL), which just added functionality to accept e-signatures within Google Docs.

On Friday, Kroger (K) will give investors a rundown of its most recent quarter and discuss its proposed merger with Albertsons. This deal currently faces opposition from at least seven states. Rent the Runway (RENT) will round out the week with an update to investors.


Small Appliance Maker Making Big Impact

It’s Just the Beginning for SharkNinja

In the world of small appliances — think air fryers, cordless vacuums, and waffle makers — the name SharkNinja has been making waves.

With an expanding product line and annual increases in sales, the company’s innovation and consistency have paid off. Now, SharkNinja has one more reason to celebrate: the company recently made its US public debut. SharkNinja (SN) spun off from Hong Kong’s JS Global Lifestyle (JGLCF), launching its IPO as a separate entity in July.

Since the company’s current CEO, Mark Barrocas, took the reins in 2008, sales have climbed 20% annually. This year, SharkNinja is poised to post $4 billion in revenue. Although the company’s stock popped, then dropped after its US IPO, it’s been steadily climbing higher. Over the last month, for example, the stock has gained an impressive 34%. Bulls think this is just the beginning for SharkNinja.

You Scream, I Scream

SharkNinja’s somewhat unique public debut and the lack of analyst coverage are reasons for its depressed stock price, bulls say. Eli Samaha, a portfolio manager at Madison Avenue Partners says that will soon change.

Samaha’s firm owns SharkNinja shares, which he sees reaching $50. For context, they closed at $36.09 this past Friday. This confidence is mainly due to the company's consistent performance. SharkNinja has set itself apart through innovation and affordability in the small appliance market.

Take, for instance, the Ninja Creami, an ice cream maker. Two years ago, it generated around $50 million in US sales. Now, the $199 ice cream machine generates over $150 million in annual revenue.

Risks When Swimming With The Sharks

The company's ability to bring products to the market quickly is another advantage investors may like. SharkNinja has a team of over 700 engineers and designers placed globally, and products are churned out at a steady pace.

This rapid production is complemented by a top-notch marketing team that enlists influencers and leverages social media to promote its brands.

The SharkNinja story does have some risks to consider. The company's heavy reliance on the consumer market makes it vulnerable to economic and spending trends. There have also been concerns over the company's ownership and control: 57% of SharkNinja stock is still owned by their chairperson C.J. Xuning Wang, who is also the CEO of JS Global.

Still, there's a lot to like, and the company has had great success in a tough market, which is why many bull (sharks) are keeping SharkNinja on their radar.


Monster’s Reign At The Top Might Not Be Over

Growth Poised To Resume

Going strong for over two decades, only a few companies in the realm of energy-drink makers have had the monstrous success enjoyed by Monster Beverage (MNST).

Sitting on an undefeated 58% annual return, not only has Monster's stock outperformed fellow beverage makers Coca-Cola (KO), PepsiCo (PEP), and Boston Beer (SAM), but also the tech giants Apple (AAPL), and Microsoft (MSFT).

The company’s 25-year run marks the best performance of a US stock during the period. Even though shares dipped nearly 5% on Aug. 4 following disappointing Q2 earnings, bulls remained unruffled.

From Monster Girls — an energy drink for women — to a line of alcoholic beverages, the company is reputed for its knack for finding niche markets. Monster's growth has a long way to go, bulls say.

Much Ado About Nothing

Michael Lavery, an analyst at Piper Sandler, upgraded his rating on Monster stock to Buy. While the company's second-quarter earnings were lower than expected, the analyst pointed out that there's nothing too concerning.

Considering the numbers, Lavery makes a compelling case. During the second quarter, Monster reported earnings of 39 cents per share and sales of $1.86 billion — slightly below Wall Street's expectation of $1.87 billion in sales.

Looking forward, Monster expects sales to grow by 14% this year, and by 12% in 2024. This forecast does align with the company’s historical rate of growth, according to FactSet.

Is Alcohol the Next Growth Driver?

The company's most recent venture — alcoholic beverages — has been generating quite a buzz.

Monster entered the market in 2022, acquiring the hard seltzer company, CanArchy Craft Brewery for $330 million. Next year, alcohol is projected to account for 4% of Monster's total sales — a conservative target according to some analysts. Moving into new markets outside the US could also give Monster a boost.

The stock could also get a bump thanks to some behind-the-scenes pricing items. During the pandemic, Monster avoided price hikes, even as the cost of goods sold increased. Shipping costs and aluminum prices are lower now, and the company also plans to raise prices, which should help margins improve.

Although second-quarter results were slightly disappointing, bulls still think Monster is a great way to energize your portfolio.


PRESENTED BY MAGNIFI

How do you know if you’re paying too many fees?

Meet Magnifi, the AI that CNBC calls “ChatGPT meets Robinhood.”

With Magnifi, you can not only see all your stocks, funds, 401Ks, and IRAs in one place, but you also get the transformative power of AI to help you manage and optimize your investments:

  • Uncover hidden risks and fees

  • See real-time performance and portfolio news

  • Research and build investing plans

  • Evaluate new ideas with pro-level data

  • Invest at your speed

Magnifi is your investing co-pilot — a conversational AI that helps you take control of your financial goals, in one whole view. Put it to work analyzing your existing accounts like Robinhood and Fidelity, or buy and sell right in Magnifi’s commission-free brokerage.

Experience it for yourself. For a limited time, new members can sign up for just $1.

Fees and expense ratios vary by holdings. Not all investors will have nvestments with high fees. Mutual Funds and Exchange Traded Funds (ETF’s) are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.


'Even Bigger Bubble' Than Nikola Was In 2020

$200B Market Cap

Vietnamese electric vehicle startup VinFast Auto (VF) has seen its shares catapult from under $11 at the time of its SPAC listing to over $82, giving it a heady valuation of more than $191 billion.

The strong gains have made VinFast the third most valued automaker after Tesla and Toyota Motors. Some on the Street are having a hard time believing this outsized valuation, leading to some interesting comparisons.

Black is Bear

Commenting on the development, noted Tesla investor and Future Fund Managing Partner Gary Black said VinFast at $200 billion market cap is an even bigger bubble than Nikola Corp (NKLA), which in 2020 traded at $60 per share and had a $25 billion market cap.

‘Hard to get the timing right, and hard to locate shares to short but likely to be an even bigger short,” the fund manager said.

In 2020 Black forecasted a 75% slump in Nikola shares to $15. Incidentally, the stock settled the year at $15.26. It has come off way below this level and is currently trading in penny stock territory.

Bigger Than The Biggest Combined

With the meteoric rise in stock price, VinFast has now left major legacy makers biting the dust. The Vietnamese EV maker's market cap is now more than the combined market cap of Ford, GM, and Volkswagen.

This is despite the registrations for VinFast’s EVs hitting only 137 in the U.S. in the first half of the year. The company expects to sell 50,000 EVs this year. The strong rally is seen as a function of limited float as Vietnam's richest person Pham Nhat Vuong, controls 99.7% of the company through the parent company Vingroup.


Last Week's Poll Results

Which stock will outperform through the end of the year?

🟨🟨🟨🟨⬜️⬜️ Tesla (TSLA) (31)

🟨🟨🟨⬜️⬜️⬜️ Toyota Motor (TM) (21)

🟨⬜️⬜️⬜️⬜️⬜️ Panasonic Holdings (PCRFY) (8)

🟨⬜️⬜️⬜️⬜️⬜️ Toyota Industries (TYIDY) (13)

🟩🟩🟩🟩🟩🟩 Hon Hai Precision Industry (HNHPF) (39)

If you had to pick one dividend stock to hold for the next five years, which one would you pick?

🟩🟩🟩🟩🟩🟩 Caterpillar (CAT) (38)

🟨🟨🟨⬜️⬜️⬜️ Deere (DE) (21)

🟨🟨⬜️⬜️⬜️⬜️ Eaton (ETN) (14)

Which stock do you think will underperform over the next 18 months?

🟩🟩🟩🟩🟩🟩 VCI Global (VCIG)

🟨🟨🟨⬜️⬜️⬜️ Electriq Power Holdings (ELIQ)

🟨🟨🟨🟨⬜️⬜️ Kenvue (KVUE)


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