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Morning Commentary

CAL-MAINE LAYS AN EGG

By Charles Payne, CEO & Principal Analyst
12/30/2021 9:55 AM

The insidious nature of inflation is not only eating up your paycheck, but it’s also attacking your portfolio. Take the case of Cal-Maine Foods, the largest producer and distributor of shell eggs in the United States, which saw its shares slammed on higher costs to produce its products.

Dolph Baker, Chairman and Chief Executive Officer of Cal-Maine Foods, Inc., stated, “We were pleased to report higher sales for the second quarter of fiscal 2022 compared with the prior year, driven by improved shell egg pricing.  For the second quarter of fiscal 2022, the net average selling price for all eggs increased 11.9 percent to $1.373 per dozen compared with $1.227 per dozen in the prior-year period.

Our results reflect the current inflationary environment with higher costs for feed, labor, packaging and delivery. Farm production costs per dozen for the second quarter of fiscal 2022 were up 21.6 percent…primarily tied to higher feed costs…which were up 29.0 percent.”

2Q FY2022

Nov 2021

Nov 2020

Revenue

$390,903

$347,328

Cost

$347,146

$288,877

Gross Profit

$43,747

$58,451

Gross Margin

11.2%

16.8%

Average Selling Price

$1.373

$1.227

Considering historical pricing, I’m not sure why management didn’t hike prices further. Still, I suspect because all food costs are higher, there is little wiggle room before people begin to skip it altogether.

Ring the Bell & Sound the Alarm

The S&P 500 took a pedestrian stroll to another all-time high while the NASDAQ struggled for most of the session.

Market Breadth

NYSE

NASDAQ

Advancing

1,830

1,869

Declining

1,524

2,756

52 Week High

150

124

52 Week Low

87

439

Up Volume

1.01B

1.19B

Down Volume

1.39B

2.08B

The S&P 500 notched its 70th record close, further solidifying its spot as the second-best year for that particular milestone.

S&P 500 Advance / Decline Line

We are so spoiled that even those few rough spots were nothing in historical context.

NASDAQ Struggles

The NASDAQ Composite is a big, crowded place where 3900+ names trade each day. That means the good and the bad companies and the hot and cold stocks share the same space. This year, the influx of new issues (all hot until they turn ice cold – like the way ice would feel in hell) and overbought names that are mostly good companies have conspired to be a huge drag. Yesterday’s session was the latest example.

While the NASDAQ is spinning its wheels, the NASDAQ-100 (NDX), which features the elites, acts much better. There are several ways to read this:

Watching Omicron

The trends that matter most continue to move in the right direction – good news for markets, great news for humankind. It boggles my mind, as there is such a ferriferous debate over tighter restrictions including fewer days on the sideline. However, there is a serious reason vaccine uptake slowed and remains far below many other nations – too many Draconian actions and confusion from the Centers for Disease Control and Prevention (CDC) and others.

Portfolio Approach

There are no weighting changes this morning in our Hotline Model Portfolio.

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Today’s Session

Futures have been slightly higher all morning with little news or events. There is the Chicago PMI later this morning, but that’s about it.  The Omicron story is now focused on children with a number of media outlets screaming about the spread without reference to severity.  There is the China region of Xian that has a number of cases that will slow some chip production (which means American company chip production).

There are aspects of the Omicron, including crowding out Delta, which is really positive.  I know the media is loath to promote anything positive, especially when potential deaths are involved, but it’s been malpractice not to point out positive aspects in this two-year trek with Covid-19.

Manufacturing has been an intriguing part of the economy and a great place to measure the race between higher prices to produce goods and the ability to pass those cost along.

Good News: Continued jobless claims edged lower to 1.716 million, the lowest level since March 2020.

United States Continuing Jobless Claims

Cryptocurrency

I have a Coinbase account but have yet to buy anything with it, which is good since crypto has been slammed since I opened the account and the infrastructure bill passed.

I’ve spoken with lots of experts in the space in hopes of offering a service to WSS subscribers. But I have to say, based on reactions to dips in billion-dollar companies taking market share that will be in business long after we all die, I’m not sure most folks can handle the routine wild gyrations.

I’m still kicking the tires and will share when I actually buy something. In the meantime, nothing produces better tweets than the self-deprecating humor of crypto traders (and their haters).

Red Ranger

@Yellow_RangerV

Ah s**t, here we go again #bullrun #BTC #cryptocrash

 


 

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