DataTrek remains positive on U.S. large cap stocks, but expects more bearish commentary related to valuation in the days ahead ...

Core Viewpoint - Intel's stock experienced a significant surge of 23% following Nvidia's announcement of a $5 billion investment and partnership to co-develop new products, indicating strong market confidence in Intel's potential turnaround [2][3]. Investment and Market Sentiment - Nvidia's investment marks a major endorsement of Intel, alongside SoftBank's recent $2 billion investment, both signaling optimism about Intel's future [3]. - The collaboration with Nvidia aims to enhance workloads and applications across various market segments, including hyperscale and enterprise [2]. Financial Performance - Intel's revenues have been declining, with a 9.4% average annual decrease over the past three years, contrasting with a 5.3% increase for the S&P 500 [8]. - In the last 12 months, Intel's revenues fell from $55 billion to $53 billion, a decline of 3.7%, while the S&P 500 saw a 5.1% increase [8]. - Quarterly revenues showed a slight increase of 0.2%, remaining at $13 billion compared to the same quarter last year, while the S&P 500 grew by 6.1% [8]. Valuation Metrics - Intel's current price-to-sales (P/S) ratio is 2.5, which is lower than the S&P 500's ratio of 3.2, indicating that Intel is valued in line with the overall market [5][6]. - Despite the recent stock surge, Intel's valuation does not reflect its ongoing struggles, with the stock price near $30 not considered attractive for new investments [13]. Profitability and Financial Health - Intel's operating income over the last four quarters was -$4.4 billion, resulting in an operating margin of -8.3%, significantly lower than the S&P 500's 18.6% [14]. - The net income for the same period was -$21 billion, leading to a net income margin of -38.6%, again well below the S&P 500's 12.6% [14]. - Intel's balance sheet appears strong, with a debt of $51 billion against a market cap of $134 billion, resulting in a debt-to-equity ratio of 38.2% [14]. Stock Performance History - Intel's stock has seen significant declines in the past, falling 63.3% from a high of $68.26 in April 2021 to $25.04 in October 2022, compared to a 25.4% drop for the S&P 500 [15]. - The stock has not yet regained its pre-crisis peak, with the highest level since then being $50.76 in December 2023, and currently trading near $31 [15].

Core Viewpoint - LoanDepot's stock has more than doubled recently due to positive assessments of its mortgage servicing portfolio, which provides stable income despite fluctuations in loan origination volumes [3]. Company Performance - LoanDepot's stock price increased from below $2 to approximately $4.50 per share in a few weeks, driven by Citron Research's favorable evaluation [3]. - The company has seen a 30% increase in loan origination volume in Q2 2025 compared to Q1, alongside revenue growth, indicating improved operational execution [5]. - Despite recent revenue growth of 20.5% over the past twelve months and 22.4% year-over-year in the latest quarter, LoanDepot has not recorded an annual profit since 2021, with a negative P/E ratio of -13.6 and a P/FCF of -2.0 [6]. Market Conditions - Anticipations of decreased interest rates due to a weak August jobs report have led to increased optimism among investors regarding mortgage lenders [5]. - The affordability crisis in the U.S. and slower household formation may limit growth potential, although political focus on housing affordability could enhance mortgage demand [7]. Investment Outlook - LoanDepot presents a high-risk, high-reward investment scenario, with short-term catalysts and servicing stability on one side, and ongoing profitability challenges on the other [7].

Core Insights - Warren Buffett emphasizes investment decisions based on business fundamentals rather than market conditions [1][5] - The S&P 500 has shown significant recovery and growth, advancing 12% year-to-date and rebounding 32% from its April low [1][2] Investment Strategy - Buffett's investment philosophy focuses on acquiring competitively advantaged businesses at reasonable prices, regardless of market highs [5][6] - A rational price is defined as trading at or below historical average valuations, with Apple’s price-to-earnings (PE) ratio serving as an example [5][6] Market Performance - Historically, the stock market has performed well after reaching record highs, with the S&P 500 achieving an average return of 9.4% in the 12 months following record highs, slightly better than its average return of 9% from non-record highs [7][8] - The S&P 500's forward earnings currently trade at 22.5 times, above the 10-year average of 18.5 times, indicating a potentially expensive valuation environment [9] Berkshire Hathaway's Investment in Apple - Berkshire Hathaway's investment timeline in Apple shows a progression from purchasing shares at 11 times earnings in Q1 2016 to selling at 39 times earnings in Q4 2024, highlighting the changing valuation landscape [10]

Core Insights - Snap's stock increased by 6% over a week following the launch of its fifth-generation Spectacles and Snap OS 2.0, which aims to improve user experience [2] - Despite this recent uptick, Snap's stock has fallen by 30% this year, indicating ongoing struggles primarily due to disappointing financial results [3] - The current stock price of $8 is considered unattractive due to high valuation, despite average operational and financial performance [4] Company Overview - Snap has a market capitalization of $13 billion and offers a camera application with features like messaging, Snap Map, Stories, and Spotlight, along with Spectacles eyewear [5] - The company has experienced an average annual growth rate of 7.7% in revenue over the past three years, with a 13% increase in revenues from $5.0 billion to $5.6 billion in the last 12 months [10] - Quarterly revenues grew by 8.7%, reaching $1.3 billion compared to $1.2 billion a year earlier [10] Financial Performance - Snap's operating income for the last 12 months was -$654 million, resulting in an operating margin of -11.6% [10] - The company reported a net income of nearly -$546 million, indicating a net margin of approximately -9.7% [10] - Snap's debt stands at $4.2 billion, leading to a debt-to-equity ratio of 32.3%, while cash (including cash equivalents) accounts for $2.9 billion of total assets of $7.4 billion, resulting in a cash-to-assets ratio of 39.1% [10] Stock Performance - Snap's stock has seen a significant decline of 90.7% from a peak of $83.11 on September 24, 2021, to $7.76 on October 21, 2022, compared to a peak-to-trough decline of 25.4% for the S&P 500 [11] - The highest price since the decline was $17.45 on February 6, 2024, with the current trading price at $7.74 [11] - The stock also experienced a 56.5% decline from a peak of $19.25 on January 23, 2020, to $8.37 on March 18, 2020, but fully rebounded by June 1, 2020 [11]

Core Insights - JetBlue Airways Corporation (JBLU) has reported impressive booking trends during the peak summer season, leading to an improved outlook for capacity growth and operating revenue per available seat mile (RASM) for the September quarter [1][3][8] Financial Performance - JBLU anticipates available seat miles (ASMs) for Q3 to be flat to up 1% year over year, an improvement from previous guidance of down 1% to up 2% [3] - The company expects RASM to decline by 1.5%-4% year over year, better than the prior outlook of a 2%-6% decrease [3] - Non-fuel unit costs are projected to increase by 3.5%-5.5%, down from the previous expectation of 4%-6% [4] - JBLU has lowered its average fuel cost per gallon guidance for Q3 to $2.45-$2.55 from $2.50-$2.65, which is expected to positively impact the bottom line [5] Valuation - JBLU is trading at a forward 12-month price-to-sales (P/S) ratio of 0.19X, significantly lower than the industry average of 0.67X and below the median level of 0.25X over the past five years, indicating an attractive valuation [6][8] Debt Concerns - The company's long-term debt has risen to $7.7 billion at the end of Q2 2025, up from $3.1 billion at the end of 2022, raising concerns about financial stability [9] Stock Performance - JBLU shares have declined in double digits this year, underperforming the Zacks Airline industry and peers like Southwest Airlines and Delta Air Lines [13] Conclusion - Despite attractive valuation and positive air travel demand, high labor costs and elevated debt levels are significant concerns for JBLU, suggesting that investors should wait for a better entry point [16][17]

Core Viewpoint - Citi recommends investors consider Union Pacific Corporation (NYSE:UNP) as a stock poised for gains, indicating potential upside even if the merger with Norfolk Southern (NSC) does not proceed [2] Company Summary - Union Pacific (NYSE:UNP) is highlighted as a strong investment opportunity by Citi, suggesting resilience in its stock performance regardless of merger outcomes [2]

Group 1 - O'Reilly Automotive has recently experienced significant stock price growth, reaching an all-time high in early September, indicating strong market performance since its IPO in 1993 [1] - In the second quarter, O'Reilly reported total sales of $4.5 billion, a 6% year-over-year increase, with same-store sales rising over 4%. GAAP net income increased by 7% to $669 million, or $0.78 per share, aligning with analyst expectations [2][7] - The company raised its full-year 2025 guidance for same-store sales growth to a range of 3% to 4.5%, up from a previous forecast of 2% to 4%, reflecting positive sales trends [3] Group 2 - The current market conditions, including sluggish auto sales, are favorable for parts retailers like O'Reilly, as they benefit from reduced demand for new vehicles [4] - Tariffs impacting manufacturers, particularly foreign vehicle producers, are leading to higher component prices, which in turn benefits aftermarket parts retailers like O'Reilly [5] - Despite the stock being considered relatively expensive, there is optimism that it can continue to rise, supported by favorable industry trends [5]

Core Insights - Berkshire Hathaway has experienced significant growth under Warren Buffett, with stock surging over 5,520,000% since 1965, compared to the S&P 500's 39,000% [1] - The company has diversified into various sectors, including insurance, railroads, energy, and consumer staples, while building a substantial investment portfolio [2] - Recent leadership changes, including Buffett's retirement announcement and potential departure of key executives, have raised concerns among investors [4][5][6] Company Performance - Over the past five years, Berkshire's operating earnings grew at a compound annual rate of 15%, demonstrating resilience amid economic challenges [8] - Approximately 50% of operating earnings come from insurance subsidiaries, which are less affected by economic downturns, helping to stabilize overall profits [9] - The company's cash generated from insurance premiums, known as "float," increased from $129 billion in 2019 to $171 billion in 2024, providing capital for investments [9] Future Outlook - After the leadership transition, it is expected that the new CEO, Greg Abel, will continue to follow Buffett's investment strategies and focus on core business growth [10] - Berkshire's stock currently trades at 22 times last year's operating earnings, which is not considered overvalued compared to its historical valuation [11] - While there may be short-term underperformance relative to the S&P 500 due to leadership changes, long-term prospects remain positive if the business model is maintained [12]

Market Overview - The S&P 500 Index has increased by 12.5% year-to-date and 17% over the past six months, reaching an all-time high [1] - Despite strong market performance, investor sentiment remains bearish, with 49.5% of participants identifying as bears, 22.5% neutral, and only 28% bullish according to the AAII Sentiment Survey [1][5] Market Breadth - Major market indices are near all-time highs, but concerns have been raised that gains are driven by a few large tech stocks [2] - The NYSE New High-New Low indicator shows that new highs have consistently outnumbered new lows throughout August and September, indicating robust market breadth [2] Company News - Oracle's stock surged by 35% after announcing a contract backlog of $455 million [4] - Tesla shares rose following the chairman's statement that CEO Elon Musk is focused solely on the company [6] - OpenDoor's shares jumped approximately 80% after the announcement of a new CEO and investment [6] - Robinhood shares increased after being added to the S&P 500 Index, with the CEO announcing new products [6] - Nebius shares soared by 50% after securing a $17 billion data center deal with Microsoft [7] Upcoming Events - The Federal Reserve's interest-rate decision is anticipated next Wednesday, with markets expecting a high likelihood of a quarter-point cut [8] - The monthly options expiration is scheduled for next Friday [8] Summary - The week was marked by significant corporate news, particularly from Oracle, and a focus on the upcoming Fed interest-rate decision [9]