10/30/2022

10/30 Newsletter – A Trainwreck

Week of October 30, 2022

There’s a lot going on in the markets right now. Let’s dig into some critical updates!

$META’s troubles

$META shares tumbled 24% on Thursday to its lowest level in nearly four years following an earnings report that one Wall Street analyst described as a “trainwreck.”

While Facebook’s parent, $META, focuses on making a major investment in virtual reality, its current reality is looking bleak.

In September 2021, Facebook’s market capitalization reached a high of more than $1 trillion as revenue and profits surged.

But now, $META’s stock has plunged 67% as compared to a year earlier and its market value has declined to $268 billion as of Thursday.

Questions are swirling about its gamble on the metaverse while the core Facebook business is facing challenges due to many issues with advertising. Advertisers are cutting down on spending and consumer demand is declining, leading to declining advertising revenue.

Meanwhile, the decline in $META’s stock price has had a significant impact on Mark Zuckerberg’s personal net worth, which has dropped by over $88 billion in the last 12 months.

The challenges for $META are twofold.

The user growth rate has declined rapidly in recent times as other platforms like TikTok are accumulating more and younger users.

Meanwhile, advertising revenue has fallen, giving concern to investors. As the economy slows down, advertisers are beginning to cut spending. Concurrently, $META is reeling from the impact of Apple’s iOS14 privacy changes, which has reduced the ability to track users and which $META says has cost the company over $10 billion this year.

Tech has taken a beating this year.

And if $META, which has been one of the best performing tech stocks in the past decade, is struggling, you can only imagine the pain other tech companies are in right now.

Wages Rising

Wages and prices continued to rise rapidly through the late summer, keeping the Federal Reserve on track for more rate increases in order to bring down sky high inflation.

The employment-cost index, a measure of worker wages and benefits, rose 5% in the third quarter from the same period a year before according to the Department of Labor as employers competed for workers in a tight labor market.

Despite this news, nothing changes the current landscape of inflation.

The Fed is still on track to raise interest rates by 0.75% at their meeting next week and potentially by 0.50% in December.

So what does all of this mean for you?

Let’s analyze the latest developments more closely.

Prepare, Don’t Predict

$META’s troubles and steadily rising inflation are symptoms of an overall trend of the economy slowing down.

It’s tough to make market predictions at this time…are we close to the bottom? Possibly. Will the bear market continue to extend? Possibly.

What you can do in market conditions like these is prepare.

Here’s what the team at VJ Equities does:

  1. Hold the stocks of great businesses.
  2. Sell unprofitable, cash-burning tech stocks and other speculative investments.
  3. Hold plenty of cash.

Let’s dig a little deeper into this strategy.

Hold the stocks of great businesses

Strong, cash flowing businesses may experience a drop in their stock prices, but it’s always temporary. Eventually, the market will value them appropriately.

High quality companies are in the business of compounding growth and creating wealth for their shareholders.

This means holding these stocks will never go out of style.

Sell unprofitable, cash-burning tech stocks and other speculative investments

This is straightforward.

Get rid of all your speculative stock holdings.

Unprofitable businesses get destroyed in bear markets.

Make sure you’re not gambling in the market and focus on high quality businesses instead of speculative stocks.

Hold plenty of cash

Patient investors are profitable investors.

Plus, the market can stay irrational much longer than you can stay solvent.

For this reason, in a bear market, you want to have enough cash to navigate through the storm.

And you also want to have cash on the sidelines that you can readily deploy when you identify killer opportunities in the market.

So make sure you have cash when you need it.

Hopefully, these three tips give you some guidance on what to do to navigate the troubled waters of the upcoming months.

And as always, the team at VJ Equities will be by your side to help you uncover opportunities in the market.

We’ll return soon with some more stock recommendations in the coming days. Stay tuned.

DISCLAIMER

Compensation:

Virtus Junxit LLC has no stock, options or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. Further, there was no compensation received for this media distribution.

Regulatory:

You understand that the information distributed is not considered buy or sell advice, and independent due diligence should be conducted and/or advice from a registered investment advisor before making investment decisions.

Our Digital Assets, Virtus Junxit LLC, VJ Newsletters, VJ SMS, Virtus Junxit Equities and its contents are not to be construed, under any circumstances, as an offer to sell or a solicitation to buy or effect transactions in any securities.

Our Digital Assets may also contain company profile pages, which are indicated as such. Information about a company contained on a company profile page has been furnished by the company or third-parties. The owner/operator of Our Digital Assets has not made any independent investigation of the accuracy of any such information and no warranty of the accuracy of any such information is provided by Our Digital Assets, its owners, employees and affiliates.

No investment advice is provided or should be construed to be provided herein. Our Digital Assets and its owners, employees and affiliates are not, nor do any of them claim to be, registered broker- dealers or registered investment advisors. Our Digital Assets may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Such forward-looking statements of or concerning the companies mentioned herein are subject to numerous uncertainties and risk factors, including uncertainties and risk factors that may not be set forth herein, which could cause actual results to differ materially from those stated herein.

Accordingly, users of Our Digital Assets are cautioned not to place undue reliance on such forward-looking statements. Our Digital Assets undertakes no obligation to update any forward-looking statements that may be contained herein. Disclaimer continued, please read further at this link.