Weekend Update #203
Thank you for your continued support and engagement. Each week, we're sharing what companies we're researching and the what, the who and the how that we think makes the companies interesting and unique. This roundup is brought to you weekly by a group of interns, creative minds, artists and investors who believe that through best in class investing along with the democratization of financial education we can do great things together. Enjoy, Explore and Share.
Equities fell this week as big tech earnings did not impress enough on the upside for investors who continue to weigh political and economic risks in the market. While tech largely continues to beat consensus estimates, there is a higher bar as investors start to demand more clarity on the return potential of such heavy investment into next-generation products and AI. The pause on historic gains was seen across asset classes with increasing volatility as the United States heads into presidential election next week.
Economic data this week was mixed as anticipation for the presidential election, strikes, and both Hurricane Helene and Milton impacted results. On Tuesday, Consumer Confidence revealed that consumers turned more optimistic about the labor market in October, but largely the report represented a mean-reversion following September’s weak figures. However, also on Tuesday, the JOLTS jobs report showed a further reduction in available jobs, while layoffs rose to the highest level since January 2023. Wednesday’s quarterly GDP figure for Q3 2024 showed a slightly lower-than-expected growth at 2.8% vs. the expected 2.9, but this continues to outpace the FOMC’s 2.0% projection. Wednesday’s ADP jobs report showed the biggest monthly gains since June 2023 at 233,000 job additions.
Following the initial positive economic reports, Thursday’s PCE report showed a slightly hotter-than-expected core PCE year-over-year increase at 2.7% as well as stronger-than-expected personal spending at 0.5% month-over-month in September. Finally, Friday’s jobs report showed the weakest job additions since December 2020 at just 12,000 while the U.S. labor force shrank by 150,000 jobs and the unemployment rate remained at 4.1%. This report was impacted by the 44,000 workers reported to be on strike as well as 512,000 not at work due to the weather following the two hurricanes.
Earnings this week included Alphabet, Amazon, AMD, Apple, Caterpillar, Coinbase, Intel, Lilly, Meta, Microsoft, Roku, Super Micro, Starbucks, and Visa. Overall, companies reporting this week showed an economy that remains resilient and solid business results, but valuations took a bit of a pause after strong stock gains have greatly raised the bar for results going into 2025. The AI story especially came into focus this week as investors are demanding to see near-term profits on what companies see as multi-year investment cycles into new products and technology. Investors will be hyperfocused on the Tuesday, November 5th presidential election to inform the economic and stock-specific implications of the next U.S. president.
Friday’s Close (Weekly Performance)
S&P 500 5,728.80 (-1.37%)
Nasdaq 18,239.92 (-1.50%)
Dow Jones 42,052.19 (-0.15%)
Thank you Blue Room Analyst JARED FENLEY.
Leading into election week, we have seen increased volatility in share prices. The S&P 500 ended on a positive note but was down overall for the week. Fund One performance followed a similar path.
The ongoing earnings season has played a significant role in this volatility, with stocks responding dramatically to both earnings beats and misses. This week, our standout performers were Mobileye and Snap, both surging over 20% following solid earnings reports.
Mobileye: A Leader in AI-Powered Mobility
Mobileye continues to establish itself as the leader in drive-assisted collision avoidance technology. With over 20 years of expertise in AI-powered mobility, the company is dedicated to enhancing driver safety and behavior. Their recent earnings release has reinforced our confidence in their trajectory and positioned Mobileye as a core portfolio holding.
Snap (Snapchat): Navigating Expectations
Snap Inc. also delivered impressive results, beating consensus expectations in several key areas. Snap reported Q3 2024 results with a 9% year-over-year growth in daily active users, slightly exceeding expectations. While the initial market reaction to Snap's results saw shares swing dramatically intraday—from a 7.5% decline to an 8.3% gain—investor sentiment seems to reflect a broader belief in the company’s long-term potential, especially with upcoming ad platform enhancements anticipated to drive growth in 2025.
Roblox: Strong Growth Amid Risks
While Roblox, a virtual gaming platform, also saw a 20% increase in share price, as a short position it was a detractor to performance. Despite strong quarterly results, several risks remain, including the need for continued engagement, monetization improvements and infrastructure and safety spend. We remain bearish on its outlook.
In conclusion, we remain optimistic about the trajectory of Fund One as we navigate the complexities of the market. With key earnings reports on the horizon, alongside significant economic updates and election results next week, we will continue to keep you informed.
Thank you Blue Room Investing President JOHN FENLEY
_
INVESTMENT THESIS :
FREEDOM
TO
COMPETE
by
MINYOUNG SOHN
BLUE ROOM FOUNDER AND CIO
Advanced Micro Devices was founded in 1969 and became a public company in 1972.
Similar to its long time rival, Intel Corporation, the story of AMD also begins with Fairchild Semiconductor, the legendary Silicon Valley pioneer which would seed dozens of companies spawned from the ranks of its prodigious talent pool.
Jerry Sanders, Founding CEO of Advanced Micro Devices
Jerry Sanders was born on September 12, 1936. He was four or five years old when his parents divorced, and he was raised by his paternal grandparents in Chicago, Illinois, in the rough South Side neighborhood. He was a bright young man, graduating as valedictorian of Lindblom High School in 1954. He was also scrappy and brave, qualities which nearly resulted in his early death that same year as he was severely beaten by members of a local street gang when he rushed to the aid of a friend, who fled the scene, leaving Sanders to fend for himself. This may have been the spark which made him value loyalty throughout his life and career.
Crowded subway in Tokyo
Jerry Sanders attended the University of Illinois at Urbana-Champaign on a scholarship awarded by the Pullman Company, and he graduated with a degree in electrical engineering. He learned to balance his interests across disciplines, while developing the ability to focus on innovative approaches to solve problems.
After graduation in 1958, he took a job with Douglas Aircraft, a dominant commercial aircraft manufacturer, to design air conditioning systems for the DC-8 narrowbody jet. The daily grind of repetitive tinkering didn’t suit Sanders well.
What really excited Jerry Sanders was the lifestyle associated with a high powered marketing executive. The sales pitch suited Sanders’ powers of persuasion, and he could leverage his academic background in engineering to be highly effective. Soon after he joined Motorola, “he became so good so quickly that four year old Fairchild (Semiconductor) took note and lost no time in extricating him from Moto.”
Three years out of college, Jerry Sanders joined Fairchild, the hottest company in semiconductors, in 1961. Robert Noyce, who led the division, had invented the integrated circuit just two years prior in 1959, and Jean Hoerni developed the revolutionary planar process for the manufacturing team led by Andy Grove. Amidst the legendary engineers, Jerry Sanders had a “meteoric” rise from District Sales Manager to Worldwide Marketing Director by the age of 29. However, trouble was brewing.
In 1967, Robert Noyce and Andy Grove, led the “Traitorous Eight” out of Fairchild. The men were livid that the semiconductor division, the largest source of profits for the company, did not adequately reinvest to maintain market leadership. Instead, the profits were directed to non-core activities which performed poorly. When Noyce was rejected in his quest to replace the outgoing CEO, that was the last straw for the eventual founders of Intel.
Sanders was not far behind. In 1968, Sherman Fairchild hired C. Lester Hogan of Motorola to lead the semiconductor company. The new management team took exception to Sanders’ sense of style and flamboyance, and installed a director above him, which prompted Sanders to resign. Soon after, Jerry Sanders recruited sales and engineering talent from Fairchild Semiconductor. Sanders called Robert Noyce to get a referral for an attorney with experience in launching new technology companies. Advanced Micro Devices was started in the home of Jerry Sanders in Los Altos Hills, California in 1969.
IBM PC: Intel Cross Licensing Agreement
Apple Computer was founded by Steve Jobs and Steve Wozniak in 1976. The company released Apple I later that year, and Apple II in 1977, which was a stunning commercial success. IBM was a mainframe computing company but saw enormous growth potential in the personal computing market.
In 1981, IBM introduced the IBM Personal Computer Model 5150, which would define the standard for all future personal computers across OEMs. Time to market was essential, and rather than internally source a microprocessor, which would take years, IBM selected Intel’s 8088 processor over rival processors due to 8088’s price to performance ratio and Intel’s ability to scale production. IBM was also committed to maintaining an open architecture, and entered into a procurement agreement with Intel, under the condition that the patented x86 instruction set was made available to a second source.
In 1982, Intel and AMD signed a cross licensing deal which satisfied this condition, and put AMD in the PC business.
According to Tom Skornia, AMD’s attorney, Intel preferred AMD as its designated direct competitor, rather than a company such as National Semiconductor, which caused consternation at Intel for their approach to copycat designs. Recognizing the opportunity and the potential legal challenges in the years ahead, Sanders deftly negotiated a “clasped hands arrangement,” which would cover the prevailing 16-bit technology standard as well as future developments over the ten year agreement.
10% OF ALL BLUE ROOM REVENUES GO DIRECTLY TO FUND OUR NON PROFIT TOGETHERISM.
WE CAN ACCOMPLISH ANYTHING TOGETHER.
These materials do not purport to be all-inclusive or to contain all the information that a prospective investor may desire in considering an investment. These materials are intended merely for preliminary discussion only and may not be relied upon for making any investment decision. Any discussion or information contained in this presentation does not serve as a receipt of, or as a substitute for, personalized investment advice from Blueroom or your advisor.
This publication does not constitute an offer to sell or a solicitation to buy any securities in any fund, market sector, strategy or any other product. Investing is speculative and involves substantial risks (including, the risk of loss of the investor’s entire investment). Past performance is not indicative of future results, and there can be no assurance that the future performance of any specific investment, investment strategy, or product will be profitable.
For more information about us and our general disclosures contact us directly.