🗞 Did You Forget Already?

WHILE YOU POUR THE JOE… ☕️
Lights, Camera, Action!

When that bell rings today at 4 pm, you will know two things:

1. It’s the weekend

2. You are one hour away from watching our first-ever YouTube video 📽️ 

Where we will give you the blueprint that took me from working a corporate job to being able to quit and live life in my own terms.

It doesn’t matter where you are right now, it’s a strategy you can use, and while it worked for me in the finance world, it’s something you can mold to whatever you work in.

That being said, I hope to see you there!

Speaking of blueprints, let’s get on with today’s email 📧…

SIMULATION
Scapegoats & Delusion

We broke down the manufacturing PMI index for you Wednesday morning, and some of you were so excited that you emailed us back asking for the Excel sheets that we use to track this economic data.

Well, all I can say is that, as long as you’re subscribed to our YouTube channel, you will get these free resources and more, but you will have to wait until we package it all and make it look pretty. 👀 

That being said, look at how prices (in blue) spiked out of nowhere in the past services PMI report… No bueno. 📉 

The Fed is looking to inflation and employment measures to justify further rate cuts, and the services economy is making that task much harder than it needs to be.

Remember that we’re already in a recession, something you’d know from reading this post from Monday morning, so the Fed started cutting rates as a reaction (not a precaution, it’s never a precaution).

That being said, let’s take a look at another measure for the Fed to consider: Employment.

Both prices and employment are a bit hotter than where they should be, however it’s all coming from one single industry.

The finance and insurance industry is seeing the most price increases, as well as the most hiring activity in the services sector, followed closely by the information industry. 💻️ 

Now you remember the whole H-1B visa debacle with Elon Musk and Donald Trump? Well, there’s a reason they’re getting the public ready for that trend, and it’s because the entire industry is tapping out on costs right now.

The industry cannot continue churning like it is right now and not implode, so offshoring work seems to be the most sensible solution right now.

Remember, a lot - if not most - of finance jobs are centered around operations, which is why the big banks have been setting up shop in places like Eastern Europe and Southeast Asia.

Cheap labor, low entry barrier, back office workers who are also borderline with IT jobs. A-ha! Makes sense to see both the information and the finance industry cover these two segments right?

Now let’s go and cover the new orders being made in the services sector shall we?

Of course Finance is leading the way… But.

We like how Transportation & Warehousing made a swift recovery after a particularly slow November, this is directly in line with the industries that we landed bullish biases on for the manufacturing PMI as well. ✅ 

I don’t know about you, but it looks like the dollar selloff and bond rally trade is starting to take on water here.

As always, be on the lookout for follow up posts about the PMI industry picks, where we will start to get to stock selection and bring you the A+ setups we find. ☕️ 

TRADE OF THE WEEK
Willy Wonka

This goes against what we at the InvestiBrew team are all about: a healthy diet filled with animal protein and little sugar or carbs.

But when it comes to investing, Hershey chocolate is just a different beast.

Especially at the discounts it’s gotten to recently, which is bordering 77% of the stock’s 52-week high price. 📉 

But the price alone is not what has gotten us to look, there are other specific factors out there tied to the fundamentals of this business, so let’s get into it.

For starters, notice that today's price is in the same price range not seen since COVID-19. And you’re telling me this stock is not a steal today?

Hershey is part of those domestic stocks, with enough international presence, that will likely attract a lot of investor capital in the coming quarters when the market starts to deleverage and crash down.

If you’re a technical guy, then you’d also love the fact that it has fallen into a multi-year Fibonacci golden ratio, making it a great stock for those chart lovers to look at.

Now here comes the financial breakdown to make us buy this stock as a long-term value play:

• 44.5% Gross margin

• 16.2% Net income margin

• 23.2% ROIC rates

If you’re familiar with value investing, then you know that the brand’s market share penetration and popularity worldwide take care of the qualitative side of the equation.

But, these basic financial measures take care of the quantitative side, especially this high ROIC to work as a wealth compounder at the right price.

So now the question becomes, is this the right price?

Well, look at the historical price-to-earnings (P/E) ratio and tell us.

This valuation is obviously within cyclical and historical lows, so if we can get this stock here and still tap into this 23%+ ROIC rate, then we figure we’re getting a tremendous bargain. 💵 

Valuation wise? Well we have three different scenarios:

• Worst case: $198, including lower than normal inflation, health trend changes and all the bad things that can come to Hershey.

• Base Case: $215, this is keeping our DCF projections within normal historical values, revenue growth/margins and all that.

• Best Case: $255, enough said.

Remember where we come from and where we’ve been trained, and keep in mind that every valuation and price target we give you is right in line with what Wall Street is pretty much expecting as well: 🫰 

NOW GO AND MAKE IT HAPPEN
Our Gameplan

Going on the same tone as our YouTube video, we want to give you one of the books that really helped us figure out how to really get this newsletter and everything else started.

It’s author, Nicolas Cole, has made two newsletters that scaled to over $1 million in annual revenue, so today’s book recommendation 📖 has a gem or two attached to it.

To your success,

G. 🥃