Hello, friends! It’s another beautiful rainy Monday, and that means another week of opportunities. As usual, I’m starting the week out with a preview of some important earnings reports and economic news for the week ahead. You can use them to inform your investing, or just use their definitions to one-up the office know-it-all.
This week is going to be heavily focused on housing and retail data. Obviously, there two big housing reports this week – housing starts and existing home sales – which track the number of homes built and sold in October. But the earnings reports will tell us something about housing and consumer confidence as well.
Consumers shop at Best Buy (BBY), Home Depot (HD), and Target (TGT) in part to fill their homes. If home sales are down, or if consumers are unconfident about the housing market, it is likely that sales at these retailers will be down as well. (Granted, there are still rentals which people shop in these stores for, but consumers tend to invest less in a rental home than in a purchased home).
Given the strong housing news we have seen the past few months, I’m expecting good news out of Best Buy. Not to mention, Best Buy should get a boost from iPhone 6 sales. I would have said the same for Home Depot if it weren’t for their massive data breach recently. That means loss of sales from scared customers, plus huge fees to handle the credit card crisis. While analysts are expecting strong earnings growth, there’s a chance their earnings last quarter suffered in response to the breach.
I’m not quite as sure about Target. This is another company that got hit hard by a credit card breach, and earnings were down 62% last quarter as a result. The company also lowered their full year earnings prediction, indicating that this past quarter would have lower than expected earnings as well. That said, the stock actually traded up slightly after the earnings announcement, and is up about 17% since (a move similar to Wal-Mart’s).
Unlike Wal-Mart, I like Target as an investment. I like their business model, shopping experience, and growth initiatives. Plus, they pay a handsome dividend at 3% of their stock price. I will likely stay away before this earrings announcement, since I am still uncertain about it. But, I would definitely consider buying it before the results of the holiday shopping season come out (those are likely to be positive).
Regarding the economic news, I have no predictions which would be either accurate or interesting. Instead, I’ll explain what each of the terms mean. Even though I’m sure you could figure out most of them on your own from their helpfully descriptive titles :).
Housing Starts – the number of residential units on which construction began in the past month.
FOMC Minutes – also known as the Fed meeting minutes. This is the release of the notes form the meeting on Oct. 28-29. We already know what happened in the meeting – the Fed ended its bond buyback program – but these notes can give more details into the reasoning behind decisions.
Consumer Price Index – this measures how much a set level of goods and services has changed in price over a period of time. It’s the most widely used tracker of inflation, and is monitored monthly. It’s also a cost of living index, so it’s used for labor contracts, and social security and tax decisions.
Jobless Claims – this tracks unemployment levels by measuring the number of people who filed for new unemployment insurance in the past week.
Existing Home Sales – Ok, duh. The number of pre-built homes sold last month. Housing starts and existing home sales come in the same week because home starts track the supply side of the housing market, while existing home sales track the demand side.
Also, this one didn’t make the pretty picture, but China will be hosting its first ever “World Internet Conference” this week. Number one, it just sounds important, and number two, investors will likely pay more attention since Alibaba’s CEO, Jack Ma, will be in attendance.