Update - November 8, 2022
Big Day… Big Week
Busy times for the market and our portfolio.
Last week, it was the Fed and the rush to interpret its decision and remarks. This week, of course, it’s the midterm elections. The next 24 hours will be quite interesting. But don’t forget that we’ve got critical inflation figures due out Thursday morning as well.
The market is much more likely to move on the consumer price data on Thursday than on the midterm results. Estimates put October’s rise in prices from a year ago at 7.9%… down a bit from September’s hotter-than-expected 8.2% figure.
Any significant variation from the best-guess estimates will move the markets strongly.
It’s a trading opportunity.
Within our portfolio, we had several positions open their books last week… creating some very interesting results and share price movements.
We’ll start with our latest play, Extra Space Storage (EXR). We published our November issue just hours before the company released its latest figures.
It easily beat expectations. Funds from operations, or FFO (a key profit figure for a REIT), rose to $2.21 per share, beating estimates of $2.18 per share. The number was quite a bit higher than the year-ago figure of $1.85 per share.
It highlights the growth I mentioned in the issue.
Doing a bit more math, we see that the company’s good news doesn’t come from only its acquisitions. Same-store rental income (cash received from existing units) rose by more than 15% year over year.
The only bad news in the company’s report was that it tightened its full-year guidance range – from FFO of $8.30-$8.50 to FFO of $8.30-$8.40.
The figures are still within the range of the company’s original projection, just in the lower half of it.
That, combined with the market’s extreme reaction to Jay Powell’s commentary, pulled shares lower.
But as the other plays in our portfolio have proven, it won’t last. This is a tremendous buying opportunity.
If you haven’t gotten shares of Extra Space Storage yet, get them now… before they rise again.
The action from Prudential Financial (PRU) last week proves my bullish thesis. Its shares also dipped when it opened its books Wednesday evening. But the share price still finished the week higher.
The big number was the company’s top-line revenue of $21.6 billion. It flat-out smashed sales estimates of $12.8 billion. It represents premium growth of 10% over the last year.
That’s strong.
Holding things back a bit were the company’s payouts and expenses, which rose by 15%. In the short term, it creates some headwinds. But almost all of the jump in expenses came from near-term variables… meaning once they go away, the real value of that premium growth will shine through.
Combine that with the news the company bought back another $375 million worth of shares during the quarter, and we know why shares are climbing… and will continue to climb.
We’re already up by double digits on the stock… and if you’re a Manward Letter Premier subscriber, you know our special option play has nearly doubled in value.
Very nice.
There’s a lot more to come.
I feel the same way looking at the latest figures from Globalstar (GSAT). It’s another double-digit winner that’s showing strong bullishness.
Its earnings report was just what we’d expect from a growth-focused company that’s working in a competitive and speculative industry. Its top line beat estimates, while its bottom line lagged.
Most importantly, though, the company announced a mixed-shelf offering. There aren’t many details available, but with shares trading at long-term highs, it’s not surprising. It’s a prudent time for the company to raise some extra cash… especially given that its growth opportunities have never been greater.
I’m confident it will put that fresh cash to good use… and reward shareholders substantially.
Globalstar will hold an investor day next week. I expect more details then.
It’s going to be another interesting (if not historic) week. I’ll keep you updated.