😴 Boring Stocks Beating The Market

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Happy Sunday!

Welcome aboard to all the new +250 subscribers who joined us this week!

This week's newsletter will be a bit slightly shorter than usual due to Memorial Day.

As a token of appreciation for your support, I've put together a free website where you can find all the earnings visuals for notable companies that have recently reported.

Thank you once again for being part of my community!

Some key data bites from this week that you should know: 

• Walmart $WMT store managers can make $500,000/year.

• Apple’s $AAPL iPhone sales in China increased 52% in April.

• T-Mobile $TMUS will acquire the rest of UScellular for $4.4B.

• Lucid $LCID plans to cut 6% of its total workforce.

• Elon Musk’s xAI raises $6B at an $24B valuation.

• Robinhood $HOOD announces a $1B share buyback plan.

• Activist Elliot Management disclosed a $2.5B stake in Texas Instruments $TXN.

• One in five households use a buy now pay later payment plan.

• Palantir $PLTR won a $480M AI Deal with the U.S. Army.

• U.S. bank profits increased 79.5% in Q1 2024.

• Nelson Peltz sold his Disney $DIS stake, making around $1B.

• Netflix $NFLX leads in customers that subscribe for over 6 months.

In today’s newsletter:

• 🌎 Global Stock Market Returns

• 😴 Boring Stocks Beating The Market

• 🏀 Everybody Loves Dick’s Sporting Goods

• 🍗 Costco’s Q3 FY24 Earnings

• 🌭 Costco’s $1.50 Hot Dog Combo vs Inflation

Let’s dive right in!

The S&P 500 is not the only index that has been performing well.

Italy’s FTSE MIB, Japan’s Nikkei 225, India’s Nifty 50, and Russia’s MOEX have all seen returns exceeding 20% in the past year.

Europe's PIGS countries—Portugal, Italy, Greece, and Spain—are also shining with robust stock market performance, riding on mid-single-digit GDP growth since the pandemic.

This marks a turnaround for Europe, which has lagged behind the U.S. for some time now.

However, some economists caution that this growth may not last, as they believe its fueled primarily by pent-up post-Covid demand.

Meanwhile, China's stock market is facing challenges, registering losses due to a real estate downturn, a slow post-Covid recovery, and government crackdowns on big tech.

Since then, the government has pushed a variety of measures hoping to revitalize the stock market.

Speaking of great performances, let’s focus on a couple of boring businesses.

You don’t need to invest into the next big thing to get extraordinary returns.

Consider FICO, the credit score software creator, or Cintas, which supplies businesses with uniforms and safety gear.

10 years ago, a $10,000 investment in FICO could have grown to $234,625, and in Cintas, to $122,753.

Comparatively, the same amount in the S&P 500 would have returned $33,055.

Other examples include Copart, an online vehicle auctioneer, and Crocs, the quirky footwear brand.

Even household names like Domino’s Pizza and Costco have been strong performers, beating the S&P 500.

These "boring" stocks showcase how steady companies can deliver outstanding returns.

And these are just a handful of names. Other companies like Celsius, Chipotle, and Waste Management have also outpaced the index over the last decade.

Dick’s Sporting Goods is yet another example of a boring business.

While retailers like Lululemon and CVS have been struggling, Dick’s has been resilient.

The company jumped over 20% this week after reporting stronger than expected earnings.

Here are the numbers:

• 🟢 Earnings: $3.30 vs. $2.95 Est.

• 🟢 Revenue: $3.02B vs. $2.94B Est.

• 🟢 Comparable Sales: 5.3% vs. 2.4% Est.

The company surpassed expectations across the board, thanks to higher sales driven by increased customer traffic and spending.

On the earnings call, CFO Navdeep Gupta highlighted a 2.7% rise in transactions and a 2.6% boost in average ticket size.

Dick’s is also optimistic about the future, raising its full-year 2024 guidance for comparable sales growth to 2% - 3%, surpassing analyst estimates.

They also exceeded analyst expectations for full year earnings, expecting it to fall in the range of $13.35 and $13.75.

In the past year, the stock has climbed over 75%.

If you were lucky enough to buy during the Pandemic lows, Dick’s stock has more than 10X’d, delivering a whopping +1,200% return.

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Costco stood out as the main player in last week's earnings lineup.

The quarter brought no surprises, with Costco exceeding all major expectations.

Here are the highlights:

• 🟢 Earnings: $3.78 vs. $3.70 Est.

• 🟢 Revenue: $58.52B vs. $57.98B Est.

• 🟢 Same-store Sales: 6.6% vs. 6% Est.

Quarterly revenue jumped 9%, and earnings soared by 29%.

The company is benefiting from customers looking for budget friendly prices on essential goods.

E-commerce also thrived, growing by 20.7% thanks to strong sales in appliances, gold/silver bullions, and gift cards/e-tickets.

Total cardholders increased by 7.4% to 133.9M, and paid memberships rose by 7.8% to 74.5M, with a remarkable worldwide membership renewal rate of 90.5%.

While Costco's shares have risen by 25% this year, it's worth noting that the stock has never been more expensive, trading at a record earnings multiple of 53x.

One thing all Costco fans love is the company’s hot dog combo.

On the earnings call, CFO Gary Millerchip said, “To clear up some recent media speculation, I also want to confirm the $1.50 hot dog price is safe.”

Since its introduction in 1984, Costco's $1.50 hot dog and soda combo has remained a beloved staple, famously resisting inflation thanks to the company's commitment to affordability. 

In fact, Costco co-founder Jim Sinegal once famously warned the CEO, “If you raise the [price of the] f*cking hot dog, I will k*ll you. Figure it out.”

The hotdog combo has maintained its price since its original release.

I personally crunched the numbers, and adjusting for inflation over time, the equivalent value of the $1.50 hot dog combo from 1984 would be $4.45 today.

📚 Recommended Reading

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Notable Companies Reporting Earnings Next Week:

• Monday (6/3):

  • GitLab $GTLB

• Tuesday (6/4):

  • CrowdStrike $CRWD, Ferguson $FERG, Hewlett Packard Enterprise $HPE

• Wednesday (6/5):

  • Lululemon $LULU, Dollar Tree $DLTR

• Thursday (6/6):

  • Samsara $IOT, J.M. Smucker $SJM

All of the companies that are reporting earnings next week can be viewed here.

Buys

• Thomas Kean Jr (R)

  • Company: Illumina ($ILMN)

    • Amount Purchased: $1K - $15K

• Susie Lee (D)

  • Company: Rheinmetall AG ($RNMBY)

    • Amount Purchased: $1K - $15K

Sells

• Thomas Kean Jr (R)

  • Company: Nike ($NKE)

    • Amount Sold: $1K - $15K

Buys

• Oxford Lane Capital Group ($OXLC)

  • Insider: Jonathan Cohen (CEO)

    • # of Shares Purchased: 4,630,000

    • $ Amount: $25,002,000

    • SEC Forms: [1]

• FTAI Aviation ($FTAI)

  • Insider: Joseph P. Adams Jr. (CEO & Chairman)

    • # of Shares Purchased: 59,000

    • $ Amount: $4,838,000

    • SEC Forms: [1]

Sells

• Walmart ($WMT)

  • Insider: Robson Walton (Director)

    • # of Shares Sold: 2,495,239

    • $ Amount: $162,110,475

    • SEC Forms: [1]

• Meta Platforms ($META)

  • Insider: Sheryl Sandberg (Director)

    • # of Shares Sold: 105,000

    • $ Amount: $50,054,450

    • SEC Forms: [1]

🤝 Review of the Week