Below is an excerpt from the I/O Fund team on what to expect for the upcoming earnings season. We discuss some trends we will watch during the earnings season. We do it every quarter, and it is not an earnings call or prediction, as anything can happen during an earnings season. It’s an opportunity for us to go over our fundamental research with our members.
- Portfolio Manager Knox Ridley talks about the broad market. He compares ARKK, which includes innovators of the future companies, with the Dow Jones Industrial Average. ARKK has not even tested its bear market trendline and is only 5% off the October 13th low. On the other hand, the Dow has broken its bear market trendline and is 18% off the October 13th low. It suggests that the market is rewarding the value companies.
- The semiconductor sector is outperforming all the sectors since the October 13th low. We are investing in this new trend. On the other hand, Crypto and other high-beta stocks are getting punished.
- The two important themes for 2023 that we will closely watch is the weakening US Consumer and the Bank of Japan losing control of its bond market.
- Lead Tech Analyst Beth Kindig says that in the current environment, we will give out fewer company names to our premium members this year as it is difficult to clear the high bar set to be considered quality companies. We would mainly look for companies in this quarter that are accelerating bottom line, and if we get potentially accelerating top line, that would be a nice combo.
- On the trends, the ad-tech sector is not expected to do well in 2023. CTV ads will lead the market. We don’t want to front run ad-tech and want to wait for the evidence of a bottom.
- The semiconductor companies are expecting a turnaround in the second half of 2023.
- Equity Analyst Royston Roche says that most of the cloud companies have shown a notable sequential decline in growth from Q3 to Q4. So, we have been cautious until we get some concrete information, which is why we will remain on the sidelines and keep a watch on the earnings.
- Solar stocks were the winners in 2022 as they will benefit from the Inflation Reduction Act of 2022 in the next few years. The expected revenue growth rate is over 30% for the major renewable companies for the full year 2023. Q1 revenue growth is also strong.