As we kick off earnings week, I noted something interesting about the behavior of corporate executives. They aren’t buying their own stock. If I look back at September, I see a huge stream of Chief Financial Officers who gobbled up their stock. And my screens show a massive wave of stock swoons in the wake of those insider purchases.
The Only Insider Buy
But October is different. This month, I only see one official cash purchase from a CFO, and it was a single $100,000 purchase of a small-cap biotech stock that no one had ever heard of until about five minutes ago (INVO Bioscience). That’s an interesting pick given that the stock is already up 16% since the purchase…
That’s all, though. It’s been total silence in the world of CFO buying since. This tells me that the people in charge of the balance sheets are very cautious ahead of earnings season. And if they’re cautious, naturally everyone else should as well.
You likely know me best for my views in macroeconomics, but we must turn our attention to the microeconomic elements of a business moving forward. One of the essential microeconomic factors to consider is the global supply chain and how it impacts a company’s stock price and suppliers.
Supply Chain Challenges
If you own any stock for the long-term, you need to be an active participant in earnings this year. Specifically, home in on their relationships with suppliers, their suppliers’ ability to procure materials from their suppliers, and how those suppliers impact your company’s ability to get products to market in the fourth quarter.
This is going to be the most important micro-factor of this earnings season. I know that a few months ago, I was talking about labor, but the global shipping crunch appears to be in just the third inning. I stress that you cannot just sit back and hope for the best.
You need to listen to the conference calls. So, contact their investor relations and make sure that you hear exactly what the analysts hear. This could be a very rocky period. In many ways, it is completely unprecedented, given a large number of uncertainties in the economy.
I remind you, however, that for every industry struggling in this supply chain shortage, there will be winners. We will see large rotations of capital into shipping firms that can hike rates and guarantee delivery. We will see a shift to a different area of consumer spending. I’ve said before that this might be the year that we end up getting more people flowers as a gift than a new iWatch.
We must be creative with our speculation. And we must be realistic about the challenges ahead. I believe that the oil and gas sector and the banking sector will be the two biggest beneficiaries in the months ahead. But if I had to pick other horses, I’d look at silver miners, staffing services, and waste management. We’ll talk about these ideas all week.