The Week Ahead 01/17/2022

“Rarely do we find men who willingly engage in hard, solid thinking. There is an almost universal quest for easy answers and half-baked solutions. Nothing pains some people more than having to think.”

Happy Martin Luther King Jr. Day!

Above is one of my favorite quotes from the American trailblazer. While it may sound corny, I’ve looked back on this quote numerous times over the years — thinking about how some of my best investments required such rigorous analysis and a ridiculous amount of time in thought.

Here’s to hoping that 2022 will be a year that better honors MLK Jr’s vision of peace, lack of hate, and the advancement of the American Dream.

Expected Read Time: 7 mins

Earnings Season

We’ve officially shaken off the dust of the new year and you know what that means…It’s about to be the first full-blown earnings season of 2022.

Let’s break down everything you need to know for the investing week ahead!

Upcoming:

Tuesday (Jan. 18) — A Different Angle: Top Glassdoor Stocks
Wednesday (Jan. 19) — Supply Chain Concerns and Considerations
Thursday (Jan. 13) — My Favorite Stocks Right Now
Friday (Jan. 14) — Social Media Recap
Sunday (Jan. 16) — Week in Review

In this post, we’ll cover:

Hot IPOs taking place this week
Quarterly financial reports worth reading
Investor events to keep an eye on
Major economic releases

The Investing Week Ahead – Too Long, Didn’t Read:

This week’s IPOs feature a respectable REIT & new-age bitcoin mining company, a flood of financial earnings announcements, we find out if I’m doing well with my UnitedHealth conviction, the world awaits the first ‘major’ earnings report of the season from Netflix, introducing a new segment to the Week Ahead, and an updated heat check of the US housing market.

IPOs to Watch this Week:

The week’s IPOs are highlighted by the newest REIT joining the public markets and a unique bitcoin mining company that loves to keep it cool.

Four Springs Capital Trust (FSPR)

This New Jersey-based real estate investment trust (REIT) was founded to “acquire, own and actively manage a portfolio of single‑tenant, income producing industrial, medical, and necessity retail properties throughout the United States that are subject to long‑term net leases.” The company is planning to raise $252 million through an IPO.

The offering is expecting to price between $13 and $15 per share.

The company generated $27.8 million in revenue in 2020, and $53.9 million in the nine months end Sept 30, 2021 — with profits of roughly $4.1 million.

The company’s portfolio consists of 156 commercial properties across 32 states, with a remarkable 99.8% of properties leased as of December.

We love a good REIT, and on the surface this one seems interesting. While poking around on their location map, I noticed quite a few companies with deep underlying demand for their services despite macroeconomic environments.

Dollar General, Advanced Auto Parts, Fresenius Medical (Dialysis Clinic), FedEx, and countless other high quality names. There’s 154 properties spanning the United States, with 68 different tenants writing them checks. The best part? The average remaining lease term across these 68 tenants is 10 years — that’s ten years of predictable income.

It’s going to be very telling as to how to market prices this predictable income when volatility seems so apparent. If you’re like me, however, and you don’t exactly want to pick your real estate investments one by one — just DCA into a position on Fundrise. My real estate investments were up +18.5% in 2H21 on there.

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Rhodium Enterprises (RHDM)

This Texas-based digital asset technology company founded to “utilize proprietary tech to self-mine Bitcoin and create innovative technologies with the goal of being the most sustainable and cost-efficient producer of Bitcoin in the industry,” is planning to raise $107 million through an IPO.

The offering is expected to price between $12 and $14 per share.

The company generated $4.5 million in revenue during their ~9 months of operation in 2020, $82.1 million during the first 9 months of operation in 2021, but is on track to rake in about $100 million for calendar year 2021 — with 89% gross profit margins.

They’re running an operating margin of 29%, which is incredible. Not free cash flow positive just yet, as they’re investing $10s of millions back into the business. Adj. EBITDA, however, is $74.4 million and they have $272.1 million on their balance sheet.

The company currently operates a bitcoin mining compound in Texas. Their current facility is running at a 125 megawatts of capacity, but they’re currently building a second Texas site expected to deploy an additional 225 megawatts of miners by the end of 2022.

Nathan Nichols, the company’s CEO, was the VP of Biz Dev at a liquid-cooling company — which led to Rhodium developing proprietary liquid-cooling technology to mine Bitcoin. Haven’t done enough due diligence to prove that it makes them the most efficient, but damn doesn’t that sound kickass?

You’ve probably heard me say it before but I’ll say it again — I prefer to just straight up own cryptocurrency over investing into companies like these. Would I love to have serious ownership in a bitcoin mining endeavor or simply wish that I mined some myself to stack some satoshis? Absolutely. But I don’t and I likely won’t be buying stock in many companies that do.

However, something I think would be amazing is if this company had some sort of roadmap to paying a sustainable dividend. I think at the end of the day that’s the only reason people mine Bitcoin to begin with — for sustainable passive income.

With all that being said, Bitcoin mining can be a very lucrative business and I wouldn’t be surprised to see them do well. The CEO is the Chairman of the Texas Blockchain Council’s Mining Committee — so I’d bet that he knows a thing or two about the space. Excited to see if this company gains national attention.

Key Earnings Announcements:

The crazy thing… these aren’t even half of the earnings calls this week. However, these are the most critical to spotlight in my eyes.

January 17: Market closed for MLK Jr. Day

January 18: BNY Mellon (BK), Charles Schwab (SCHW), Goldman Sachs (GS), Interactive Brokers (IBKR), Pinnacle Financial (PNFP), PNC Financial (PNC), Truist Financial (TFC)

January 19: Bank of America (BAC), Discover (DFS) Morgan Stanley (MS), Proctor & Gamble (PG), United Airlines (UAL), UnitedHealth Group (UNH), US Bancorp (USB)

January 20: American Airlines (AAL), Netflix (NFLX), Travelers (TRV)

January 21: Ally Financial (ALLY)

I’m specifically excited to get continued insights from the banking / financial services sector, check in on if my high conviction with UnitedHealth is going smoothly, and see how Netflix has progressed after the Squid Games mania. Those with portfolio access may recognize that I did not include Netflix in my 2022 portfolio. However, if the company reveals continued, successful global expansion — I may be inclined to reconsider.

Last week we saw Netflix announced a +10% price hike on their membership ($18 to $20 per month) — their stock moved higher because of it. I have a funny feeling Netflix will have seen a massive bump of international subscribers driven by the 30+ languages you could watch Squid Game in. How sticky are these subscribers, though? That’s the big question.

Event-Driven Winners:

Introducing a new addition to the Week Ahead, courtesy of our friends at LevelFields.

They take the time to scrub through thousands of data points and determine how events affect stock prices. This info may help you with forming your swing trading theses (if that’s your thing), or simply seeing what actions cause stocks to jump!

The five largest event-driven increases over the past week:

Apogee (APOG): +6.0% on the day of its +10% dividend hike and an expanded stock buyback program, +4.7% on the week
Ally (ALLY): +4.4% after the announcement of a +20%(!!) dividend increase and a massive $2B stock buyback program
RE/MAX (RMAX): +4.1% after the announcement of both a stock buyback and announcing their CEO’s departure
UMH Properties (UMH) +3.2% after boosting its dividend by +5.3%
Kaiser Aluminum (KALU) +3.0% after boosting its dividend by +7%

Investor Events:

I don’t consider any of the investing events this week worthy of reporting on, especially given the much more important earnings season. But here’s a couple of events from $1.5-3B market cap companies that you may care about.

January 18: 23andMe (ME) holds its first R&D Day & Astra Space (ASTR) is set to test the first flight of its small satellite launcher from the Cape Canaveral Space Force Station.

Major Economic Updates:

We’ll see renewed insights into the housing market and check in on if jobless claims have another reading above market expectations.

January 19: Building Permits & Housing Starts from the US Census Bureau

January 20: Existing Home Sales from the National Association of Realtors (NAR) & Jobless Claims from the US Department of Labor (DOL)

Remember — an important thing we’re watching throughout the year is if the housing market is going to remain hot or hit the brakes. I’ve been vocal about my belief that the housing market will continue to rip for the next 18-24 months. I’ll be sure to include a detailed breakdown in the next Week in Review.

Don’t forget, with more homes built comes more furniture to be purchased to make these houses into “homes.” Keep your eye on Restoration Hardware and Arhaus. Here’s a recent note from Wall Street re: Arhaus.

Have a great start to your week! If you find these Week Ahead posts valuable, please consider sharing with a friend!

Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.