A Perversely Bullish Signal From the Dollar Store

The 'help is on the way' trade... The Dow hits a new high, but Nvidia was down... Heavy is the head that wears the crown... It was inevitable... Trouble for everyday Americans... What's going on at Dollar General... Numbers from Uncle Sam... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The 'help is on the way' trade... The Dow hits a new high, but Nvidia was down... Heavy is the head that wears the crown... It was inevitable... Trouble for everyday Americans... What's going on at Dollar General... Numbers from Uncle Sam... --------------------------------------------------------------- Stocks were mixed again... The first two trading days this week were mixed "at best," we wrote, and yesterday was a downer across the board. Today, each of the major U.S. stock indexes opened in the green but sent different signals by closing. The Dow Jones Industrial Average gained roughly 0.6% to make a new all-time high. The small-cap Russell 2000 Index enjoyed the day's largest gain, up 0.7%, while the benchmark S&P 500 Index was almost flat, and the tech-heavy Nasdaq Composite Index was 0.2% lower. As per usual, but in various forms, the action reflected a mix of earnings updates and "important" U.S. economic data. If you're looking for someone to tell you something more salacious, I (Corey McLaughlin) am not your guy – at least for today. I'll just call today's behavior what it looks like to me: a "help is on the way" trade. Two earnings stories help tell the tale... One is from the land of artificial intelligence, and the other is about a company that operates dollar stores... The first was a good but inevitably underwhelming earnings report – at least to Wall Street analysts – and the second was much worse and reflective of the financial strain felt by many everyday Americans. After yesterday's close, AI darling Nvidia (NVDA) reported its most recent quarterly earnings and outlook. It posted a record $30 billion in quarterly revenue, above Wall Street analysts' consensus expectations and up 122% from a year ago. But investors found reason to not like what they heard about the future. Notably, Nvidia projected its third-quarter gross margins would be 75%, down from 78% in the first quarter – its first sequential decline since 2023. Those are still high margins, of course, and they're 5 percentage points higher than a year ago. A well-managed business can put that much money to good work. But still, Nvidia's "forward guidance" was below expectations. Nvidia CEO Jensen Huang also confirmed a delay in producing a new "Blackwell" chip into at least the fourth quarter. Nvidia shares were down in post-market trading yesterday and finished down more than 6% today. Heavy is the head that wears the crown. Meanwhile, Dollar General (DG) reported quarterly results this morning... and shares were down an astonishing 32% today. The dollar-store chain beat consensus revenue estimates, but its profits slumped by more than 20% year over year to $550 million, and it cut its sales and profit outlook for the year. The company said it expects same-store sales to be up only by 1% to 1.6% in 2024, lower than its previous projection three months ago of 2% to 2.7%. Dollar General CEO Todd Vasos said while announcing the results in a public release... We believe the softer sales trends are partially attributable to a core customer who feels financially constrained. You think? It's also interesting that Dollar General said same-store sales actually increased from the previous quarter because of more foot traffic. But the company said this good news was "offset by a decrease in average transaction amount," meaning people are spending less per visit. Let's get into both a little deeper... My take on what the story with Nvidia might mean for the market: It's neutral. The pace of growth (and expectations moving ahead) for one of the companies that have led the "market" higher since 2022 may be slowing down. This was inevitable after the initial AI buzz wore off and after the company posted 262% year-over-year sales growth in May. As Stansberry's Investment Advisory lead editor Whitney Tilson wrote in [his free daily letter today](... Analysts expect Nvidia to generate $122 billion of revenue and earn $2.75 per share this year (ending January 2025), which means that today, with a roughly $3 trillion market cap (nearly 3 times that of Berkshire [Hathaway]!), it's trading at about 25 times revenue and about 45 times earnings. Those are nosebleed valuations, especially when the year-over-year comparisons are going to get much more difficult going forward after such explosive growth – which you can see in this chart of revenue and net income over the past 14 quarters: Failing to meet "sky high" expectations was why the stock was down today, Whitney wrote, and he cautions against buying for the long term at today's prices. I agree. That doesn't mean Nvidia's not going to keep growing – it still will, and probably more than most companies. But it won't likely grow by as much as it has been over the previous year... or, just as importantly, as much as Wall Street analysts would like to see. And that rate of change and narrative turn tends to matter for the short-term direction of the stock. As Reuters reported in its first paragraph of a write-up on Nvidia's earnings report... Nvidia's quarterly forecast on Wednesday failed to meet lofty expectations of investors who have driven a dizzying rally in its stock as they bet billions on the future of generative artificial intelligence. Frankly, it would be unthinkable (at least to me) for Nvidia to keep jumping the bar of expectations it has set over the past year. And we're starting to see the tiniest slipup be good fodder for bears. So nobody should rely on Nvidia to help prop up the S&P 500, at least for the next few months. But that also doesn't mean the "market" can't rise. Just look at today: NVDA was down, while three of the four major U.S. indexes were up and the Dow made a new high. As for the story with Dollar General, it looks perversely bullish, with a bearish risk signal. Dollar General's earnings show that lower-income Americans are hurting financially... If you're not familiar with Dollar General, it's a small-format discount store with 20,000 U.S. locations, including 20 here in Baltimore alone. Some think of the stores as much smaller Walmarts for folks who can't get to a Walmart. When more people go to Dollar General but spend less per visit, like the company just reported, that's very telling of the kind of thing going on in towns and cities across the country. Some parts of Wall Street apparently think the same... Dollar General's quarterly report today also dinged shares of the competing Dollar Tree (DLTR) by 10%. We've also seen more Americans fall behind on their credit-card bills at a rate not seen in at least 12 years. That's another sign of financial strain for everyday Americans and a signal of potential further slowdown in consumer spending – of which 70% of the U.S. economy is tied to. The Federal Reserve Bank of Philadelphia published a report last month and the following was the first line of the executive summary... The share of credit card balances past due reached the highest level since the start of the data series in 2012. Now, the folks at the Fed aren't making decisions based on the buying habits of dollar-store customers. But their perception of a weakening "consumer" may be part of the case for interest-rate cuts. And that means Fed "help" should be on the way, which Mr. Market likes. Remember, though, this kind of injection of monetary juice only happens when the economy is slowing more than the central bank prefers... or, at a minimum, that such a slowdown is plausible enough to avoid too many objections from analysts, investors, and the media. Another justification for rate cuts would be inflation slowing down. But there's a fine line the Fed doesn't want to cross into "deflation" territory. Lord knows that if dollars become more valuable over time, that would be disastrous to our debt-based system, even if it would help those who enjoy sound money. Then there's that government data... Today, Wall Street read through Uncle Sam's latest update on second-quarter GDP. Today marked the "second estimate" from the Bureau of Economic Analysis. Here's the money paragraph... The price index for gross domestic purchases increased 2.4 percent in the second quarter, an upward revision of 0.1 percentage point from the previous estimate. The personal consumption expenditures (PCE) price index increased 2.5 percent, a downward revision of 0.1 percentage point. Excluding food and energy prices, the PCE price index increased 2.8 percent, a downward revision of 0.1 percentage point. Translation: GDP in the second quarter was a little bit better than previously thought, and inflation was a touch lower, as was "core" PCE – the Fed's preferred measure of inflation. Inflation is "down," they say – and more than thought! – so the cost of borrowing can go lower again. Yet... GDP is already doing just fine without a rate cut? Never mind that. It's back to regular business for the Fed – helping to create inflation in the future – and on it goes... This is not new... And the knee-jerk reaction in the stock market in times like these? Bullish. Do you have your ticket yet for our upcoming Stansberry Research Conference & Alliance Meeting in Las Vegas? It's coming up soon: October 21 to 23... It's our most popular event of the year, and tickets are selling quickly... Our hotel-room block is filling up fast, too, so do not wait to reserve your seat. [Click here to get your ticket before they're all sold out](. 2024 is shaping up to be our best event yet, with incredible speakers like bestselling author Michael Lewis (The Big Short, Moneyball, and The Blind Side), former CIA Chief of Disguise Jonna Mendez, Pulitzer Prize-winning columnist Dave Barry, former Texas Governor Rick Perry, artificial-intelligence expert Zack Kass, and many more. You'll also hear top ideas from Dr. David "Doc" Eifrig, Eric Wade, Dan Ferris, Greg Diamond, Marc Chaikin, Joel Litman, and others. Note: The past few years, in-person conference tickets have completely sold out. It's no wonder, when we give away so many new, actionable recommendations live on stage – it really pays to be there... [Click here to reserve your conference seat right now](. --------------------------------------------------------------- Recommended Links: [Our Most Controversial Message of 2024]( The man who called the 2020 and 2022 crashes says a massive market move set to begin September 9 could be "lights out" for one of the U.S. presidential candidates... And it could double your money 10 times as it unfolds – as he showed during 2020's election year. [See his outline (and three favorite stocks) here](. --------------------------------------------------------------- [No. 1 Stock for the Rare 'Millionaire Window' Opening NOW]( According to Wall Street legend Whitney Tilson, an extremely rare window in the markets is about to open. It's an often-misunderstood market setup we've only seen 13 times since 1920. 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[Get his No. 1 stock (with 500%-plus upside potential) for this rare market event now](. --------------------------------------------------------------- New 52-week highs (as of 8/28/24): American Express (AXP), Berkshire Hathaway (BRK-B), Brown & Brown (BRO), Intercontinental Exchange (ICE), iShares U.S. Aerospace & Defense Fund (ITA), JPMorgan Chase (JPM), Coca-Cola (KO), Lockheed Martin (LMT), London Stock Exchange Group (LNSTY), Altria (MO), Motorola Solutions (MSI), Northrop Grumman (NOC), Novartis (NVS), Omega Healthcare Investors (OHI), RadNet (RDNT), Rithm Capital (RITM), ResMed (RMD), RenaissanceRe (RNR), Sherwin-Williams (SHW), Texas Pacific Land (TPL), ProShares Ultra Financials (UYG), and Health Care Select Sector SPDR Fund (XLV). A quiet mailbag today. It appears we've reached our Scooby-Doo limit... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. All the best, Corey McLaughlin Baltimore, Maryland August 29, 2024 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios. Returns represent the total return from the initial recommendation. Investment Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,356.7% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,308.8% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 984.7% Extreme Value Ferris WRB W.R. Berkley 03/16/12 811.5% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 723.7% Retirement Millionaire Doc HSY Hershey 12/07/07 477.0% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 462.4% Retirement Millionaire Doc AFG American Financial 10/12/12 460.3% Stansberry's Investment Advisory Porter NVO Novo Nordisk 12/05/19 387.6% Stansberry's Investment Advisory Gula TTD The Trade Desk 10/17/19 385.7% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter/Gula 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Engel --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Investment Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,470.2% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,128.5% Crypto Capital Wade MATIC/USD Polygon 02/25/21 736.2% Crypto Capital Wade OPN OPEN Ticketing Ecosystem 02/21/23 279.3% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams PNC Warrants PNC-WS 6.16 years 706% True Wealth Systems Sjuggerud Maxar Technologies^ MAXR 1.90 years 691% Venture Tech. Lashmet Silvergate Capital SI 1.95 years 681% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. --------------------------------------------------------------- Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment Symbol Duration Gain Publication Analyst Band Protocol BAND/USD 0.31 years 1,169% Crypto Capital Wade Terra LUNA/USD 0.41 years 1,166% Crypto Capital Wade Polymesh POLYX/USD 3.84 years 1,157% Crypto Capital Wade Frontier FRONT/USD 0.09 years 979% Crypto Capital Wade Binance Coin BNB/USD 1.78 years 963% Crypto Capital Wade You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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