Netflix Crushes Estimates, Stock Soars in After Hours, Wedbush Bear Humiliated

This afternoon Wedbush analyst, Michael Pachter, tried to scared longs out of NFLX, by suggesting the company was in dire straights with regards to its cash flow. Here was the CNBC exchange.

And here is the subsequent results of the blockbuster NFLX quarter.

The gains were fueled by monstrous gains overseas, adding 4.14 mln vs 2.60 mln guidance.

Domestic additions missed the mark by a wide margin, adding 1.07m subs v guidance of 1.42m. America simply isn’t that important to the NFLX story anymore.

As a result, Netflix is guiding up.

Netflix sees Q3 $0.32 vs $0.22 Capital IQ Consensus Estimate; sees revs $2.97 bln vs $2.88 bln Capital IQ Consensus Estimate

Here’s the full breakdown, excluding DVDs, which is a meaningless metric.

Long live FAANG.

Who’s ready to jump back into shopping mall stocks?

SHLD is higher by 10.3%, M +3%, CONN +11%, TLYS +4.6%, ANF +4,4%, GES +3%, RH +4.3%. Look at all of them gains.

Separately, AMZN broke $1,000 to the upside, based off market share gains in the shopping mall.

In other words, retail stocks are shooting higher because traders think losing market share to Amazon is somehow an enticing proposition for profits.

For the youngsters out there, please know that, eventually, fundamentals mean something. The day to day fluctuations are often misinterpreted and trades are mistaken for trends.

This is the true state of retail.

AMZN v M over the past 5 years.

Back in 2014, Einhorn launched his ‘bubble basket’ as a method of betting against stocks that were overvalued, using traditional valuation metrics. Enamored by this idea, I reached out to David to find out how it was constructed. I extracted as much information as he would permit and then tried to mirror it inside Exodus, where I have my very own bubble basket. I do not have an active short portfolio, but use it to gauge risk in the markets.

Like Einhorn’s, it is an actively managed index of potential shorts. Unlike Einhorn’s, mine is limited to 25 names. From what I’ve gathered. Einhorn’s bubble basket is broadly diversified — constituting as many as 100 stocks.

So when the lugnuts from CNBC pen an article, saying Einhorn is ‘getting killed’ by his AMZN and TSLA shorts, you should know that this is bullshit.

Do the math. If Greenlight has 10% of their assets in a bubble basket, spread out over 100 stocks, how are they ‘getting killed’ by two stocks inside his basket of shorts?

Here’s CNBC spreading falsehoods about Einhorn, a fund merely down ~2% but ‘getting killed’ according to the author — making it sound like he’s getting Ackman’d.

Billionaire hedge fund manager David Einhorn, who is known for his prescient short bets against stocks like Lehman Brothers, is not happy high-flying cult stocks are crushing the market this year.

The investor told his clients he is “frustrated” with the performance of his bets against technology companies such as Tesla and Amazon, which he calls the “bubble basket.”

Einhorn’s Greenlight Capital was down 4 percent in the second quarter, bringing its performance for 2017 through June to negative 2.8 percent, according to an investor letter. In comparison the S&P 500 rose 8.2 percent in the first half of this year.

“The second quarter was a bit of a head-scratcher. Our five biggest longs reported earnings that met or exceeded expectations, while our shorts announced earnings that mostly disappointed. Nonetheless, we lost money in the quarter,” Einhorn wrote in the investor letter Friday. “The bubble basket was particularly frustrating.”

Tesla and Amazon shares are up 53 percent and 34 percent this year, respectively, compared with the S&P 500’s 10 percent return through Friday. In the second quarter, Tesla rose 30 percent, while Amazon rallied 9 percent.

The hedge fund manager is skeptical over Amazon’s $13.7 billion acquisition deal for Whole Foods Market. He cited how the internet giant is buying brick-and-mortar physical stores of “mostly leased” retail space for more than $800 per square foot.

“When companies announce large acquisitions, they typically explain the implications and strategy. AMZN has said nothing and left the interpretation to the market’s imagination, which for the time being skews optimistic,” Einhorn wrote.

The hedge fund manager also explained why a key popular bull thesis for Telsa doesn’t make any sense.

“TSLA bulls look at Elon Musk, think of the Steve Jobs, and decide TSLA is the next Apple. We have read many critiques of TSLA and we won’t repeat them here, but we will offer a few distinctions from Apple,” he wrote.

Einhorn said when Apple released the first iPhone it was “immediately profitable” unlike Tesla. In addition, he cited how the smart phone maker’s customers buy into the company’s product ecosystem. Apple’s products have a “network effect” as more users leads to more applications, according to the manager.

“TSLA is unlikely to sustain a competitive advantage by having a network of charging stations or by accumulating driver data,” he added. “Competition was very slow to develop for Apple … By contrast, every major car company in the world intends to compete with TSLA in electric vehicles.”

Tesla CEO Musk isn’t above making fun of company’s skeptics. In April he taunted short sellers on Twitter.

Stormy weather in Shortville …

— Elon Musk (@elonmusk) April 3, 2017

However, Musk did admit the Tesla’s current stock price “is higher than we have the right to deserve” at the National Governors Association meeting on Saturday.

Greenlight Capital declined to comment on this story. Tesla and Amazon did not immediately respond to requests for comment.

I’m pretty superstitious when it comes to my investments. I don’t necessarily believe in black omens, but I do not like to feel jinxed either. When I read refuse like this, even weakly sourced stuff by third rate writers at CNBC, alarms go off in my head. It’s reminiscent of the dot com crash, and the behavior I witnessed just before the collapse. My old Italian barber was buying dot coms, had six figures in B2B stocks. I was too young and stupid to know any better then. I did see the signs again before the housing collapse in 2008, and was able to profit by shorting banks. This market run isn’t saddled with a 2008esque bubble, but it’s frothy.

When the normies start to get cocky, beware.

The oracle from Trian, famed investor Nelson Peltz, would like a seat on the PG board. Judging by PG’s tepid stock performance, +5% YTD, I don’t see why people shouldn’t give olde Nelson a chance to shake things up.

He’s launched a proxy battle for the hearts and minds of shareholders today.

Here are the details.

As of the date of this Proxy Statement, the members of the Trian Group beneficially own an aggregate of 37,612,012 Shares. As one of the Company’s largest shareholders and given P&G’s disappointing results over the past decade, as detailed below, we have a keen interest in helping the Company address the challenges it is facing, which include:

Weak Total Shareholder Returns. Over the past decade, the Company has underperformed relative to both its peers and to the S&P 500.[1] In fact, the Company’s total return to shareholders over the last ten years was less than half that of its peers.[2] We believe P&G needs to address the factors contributing to this consistent underperformance.

Deteriorating Market Share. Over the past five years, P&G’s organic sales growth has decelerated and the Company has lost market share across most of its categories.[3] The Trian Group believes that disruptive and existential threats are impacting the entire consumer packaged goods industry, including changes in technology and consumer behavior, and the Company must act with the greatest possible urgency to address the market share it is losing to both its peers and smaller local competitors, who are adapting to industry changes more effectively than P&G.

Excessive Cost and Bureaucracy. The Company’s management acknowledges the need to reduce cost and bureaucracy,[4] but it is clear to us that these critical issues have not been sufficiently addressed.

· Trian’s analysis shows that the Company’s $10 billion cost-cutting program, launched in 2012, has had no discernible impact on profits or sales growth. In particular, the program did not drive earnings growth given that operating profit was essentially flat from 2012 to 2016.[5]

· Although the Company has stated that it has identified up to $13 billion of additional cost savings, given P&G’s track record, the Trian Group is concerned that this initiative will be as ineffective as the 2012 program in driving sales growth, earnings growth and shareholder value creation.

In an interview with CNBC this morning, Peltz said the company is ‘inappropriately structured’ and a ‘suffocating bureaucracy’ was hurting PG shareholders. He said the company had too many large brands and they had become commoditized.

Obnoxiously, both Jim Cramer and Mark Faber tried to attribute PG’s underperformance stemming from the fact that they’re based in Ohio, with Faber suggesting a lack of available talent had hurt the company. Cramer also said the company might not be ‘worldly’ enough’, like it chief competitor Unilever.

CNBC's Cramer and Faber suggest $PG isn't 'worldly enough', being based in Ohio hurts their search for talent. "Too cloistered." pic.twitter.com/dlRigVEBZU

— The_Real_Fly (@The_Real_Fly) July 17, 2017

What a wonderful, wonderful market. Literally, nothing can stop it.

In light of all the positive vibes being shared throughout the country, with its people joyous and happy as clams in a cold bucket of sea water, Wall Street’s brightest took some time out from their busy schedules to upgrade their opinions of big cap tech.

Tableau Software added to Top Pick at BofA/Merrill
Apple target raised to $182 from $177 at Morgan Stanley
Microsoft target raised to $84 from $80 at Credit Suisse
Amazon tgt to $1200 from $1100 at UBS; Buy
Facebook target raised to $185 at Aegis Capital

Naturally, I agree with their assessment, only because I am long large cap tech. Providing I was short, I’d be vehemently against it — throwing my arms up in the air, saying “god damned it, I can’t take it anymore.” But, instead, you get gentlemen Fly, a person who complies with the ancient standards of decorum and chivalry.

Nothing is happening this morning, other than copper +1.4%, gold +0.6%, silver +1.3% and cryptocurrencies soaring. Ethereum is higher by +22%.

We should all expect equities to drift higher today, as it is our right as citizens of the free world to both share and bask in the profits of successful globalization. Our beloved leader, Mr. Donald J. Trump, is a fine entertainer and keeps the plebs at bay with his populist rhetoric. But at the end of the day, the show must go on and lower wages must be enjoyed in this very productive and splendid world.

Healthcare is dead, because John Mccain had some surgery. What the fuck?

Here I thought I was fixing to get some good and cheap insurance — to finance my future ailments. WRONG. I’ll just die in the gutters, penniless, after spending all of my money on expensive treatments and surgeries.

The Australian foreign minister joined Reebok and the litany of liberals, ‘taken aback’ by Trump’s compliment to France’s first lady. This is because liberals are genderless faggots, unable to conduct themselves as normal people within the human race.

Nigel Farage said Trump Jr. made a mistake by taking a meeting with the Russian lawyer, but quite literally ‘did nothing wrong.’

Former Trump campaign advisor and army veteran tells media and liberals to dial it down — someone is gonna get shot.

Lastly, CNN continues to get destroyed, one meme at a time. This one is the infield triple edition, top shelf stuff.

Lastly, in recognition of tonight’s Game of Thrones season premiere, I give you Donald Trump, the Game of Thrones edition.

I cannot take full credit for my recent success — because intuition has been eliminated from my stock picking prowess. But this is better, isn’t it? Returns can and will be replicated, without innate or nurtured talents. If you know how to build a strategy and understand the way our industry is evolving, shifting away from error prone human intuition — in favor for systematic approaches — you know that I am on the right path and you should follow me or help me improve on my system.

I’ve detailed it inside Exodus and welcome your feedback. You can scour my posts inside the Pelican Room, where I detailed exactly how the picks were generated (which are posted and emailed to users every Friday), using the algorithms of Exodus (technical and fundamental ranking system) to generate a whole portfolio of ideas.

In the 10 weeks since launching this feature, I’ve crushed the SPY in 9.

Here were this week’s results.

NVDA: bought @ $146.95, sold @ $163.83= +$16.88
SCHW: bought @ $43.42, still long= -$0.43
RAI: bought @ $64.61, still long= +$0.92
DHR: bought @ $83.03, still long= +$1.95
PYPL: bought @ $54.14, still long= +$3.05
REGN: bought @ $498, sold @ $506.12= +$8.12
CELG: bought @ $132.27, still long= +$2.24
GOOGL: bought @ $935.71, sold @ $972.38= +$36.67
PCLN: bought @ $1,898.99, still long= +$51.88

Overall, the portfolio crushed the SPY by 100bps, producing a +2% return. If I can make this work consistently and especially during downturns (I have hedging triggers in place), this will be, quite literally, the greatest achievement of my investment career — which is now solely dedicated towards systematic trading.

There are estimable risks associated with the Fed’s desire to extricate itself from their quantitative easing programs, put in place to save western finance circa 2008. The balance sheet is ~$4 trillion, up from $750 billion before the crisis. All of us trading stocks seem to enjoy this detente between risk and valuations, merrily cavorting throughout the asset classes like a breeze through a blue mist.

Subadra Rajappa, head of US Rates Strategy at Soc Gen, warned that an unseasonable chicanery might be produced once the Fed starts to unwind assets.

“I think the balance sheet unwind is an underestimated risk in the market. If you look at the amount of duration that is about to hit the market over the next 5 years, we, in out calculations, have come up with roughly $385 billion in duration… that’s going to hit the market over 3-5 years.”

She added, “And that, if you use the betas that you get from the Fed, amounts to 40bps in term premium over the next 3 years.”

In the meantime, the markets are hitting record highs, without drawdown, providing the holders of inverse VIX products with endless amounts of money to fund extravagant champagne parties.

It’s important to note that when QE was announced, it was priced into the market immediately, not during or after the fact. Ergo, as logic dictates, once the Fed officially announces that they will begin to draw down their balance sheet, markets should respond immediately.

After a week of pure chaos, I thought you’d enjoy this.

Watch.

As chaotic as Trumpism is, with little getting done other than provide the country with endless spy novel tier intrigue, markets have loved it. You must admit, the markets haven’t been this good in years. While it’s true, Obama was great for markets, it’s also true that markets hadn’t done much since 2013.

Even though 2014 sported gains of 13.4%, anyone who was trading that years knows and remembers that tech got absolutely poleaxed, with bubble stocks getting annihilated and cut in half during the first quarter. In 2015, markets trod water, up just 1.4%. And, finally, 2016 was a do nothing year, up until election night — which spurred a 10% rally in stocks into the New Year’s — placing the SPY ahead by 11.4%.

Halfway through 2017, markets are +11%, while the fag heavy Nasdaq is +21%. You cannot argue or debate the fact that Wall Street loves Trump. They may not like his ideas — but they positively love the fact that he’s in there, cheerleading for America, while absolutely nothing changes but the date on the calendar.

Here’s an update on my positions.