In this weekly Jarvis® market‑update, Left Brain’s Director of Research Brian Dress, CFA, and CEO/CIO Nolan Langford discuss the broad market rally driven by stronger earnings, falling interest rates and lower oil prices. They recap index performance (S&P +2%, Nasdaq +4.6%, Russell 2000 +1.8%, ARKK +13.3%), a declining VIX toward 20, and 10‑year Treasury yields easing to the low‑2% range. The conversation then pivots to specific earnings: Starbucks (SBUX) and EPAM Systems (EPAM) posted solid results, suggesting resilience despite macro headwinds in China and the Ukraine conflict, and are viewed as attractive at lower valuations. By contrast, retail names Crocs (CROX) and Revolve Group (RVLV) delivered weak earnings, highlighting sector‑wide challenges such as supply‑chain delays, inflation‑driven cost pressures, and a post‑COVID shift from goods to services. The hosts also note positive momentum in technology, citing InMode’s strong earnings and AMD’s mixed but resilient performance, emphasizing long‑term growth potential over short‑term misses. They attribute the overall sentiment shift to a “floor” in valuations, ongoing M&A activity, and a more sanguine investor outlook despite broader news pessimism. Finally, they outline investment opportunities in data‑analytics, healthcare, and other growth stocks that exhibit double‑digit revenue growth, strong free cash flow, and founder‑CEO leadership, encouraging listeners to consider these beaten‑down areas. The episode concludes with calls to engage with the Jarvis Weekly newsletter, research services, and a reminder to like, share, and subscribe.
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Markets are surging as earnings keep rolling in. We cover the rapid change in sentiment and more on this week's Jarvis Update. I'm your host, Director of Research here at Left Brain, Brian Dress, joined as always by our CEO and Chief Investment Officer, Nolan Langford. Nolan, welcome to the program.
Happy to be here on this first week of football Thursday.
That's right. Preseason counts even for me. Let's let it go.
All right.
A quick preview for everyone as we get started. Markets continued higher this week, buoyed by improved earnings and also falling interest rates and falling energy prices. We got two topics as we usually cover on the program this week. The first is going to be a continued discussion of earnings as they kept coming in. And then the second is going to be the clear change in sentiment that we've definitely observed over the last few weeks. Before we get into that, a few announcements. First announcement is we produce this show for you, the everyday investor, whether you have a 401(k) or an IRA, handle your own investments, or work with an advisor that buys mutual funds and ETFs. If you'd like a second opinion, we'd love to talk with you. Make sure to give us a call at the number below. And also, if you're an institutional investor, we have something for you as well. That's our investment research service. We cover 8 to 10 companies per month. And we also have The Chosen, which is our favorite stock and favorite income opportunity each month. That just came out this week. So if you want to get access to that, make sure you subscribe. We'll have the details for you below. Either way, sign up for our biweekly newsletter. That's the Jarvis Weekly, which is on this week. So check for that, sign up below and you'll be able to get that in your inbox every Saturday morning. With that, let's jump right into the market recap. So the S&P was up around 2% this week. The Nasdaq was the leader, certainly with 4.6% increase. And then the Russell 2000, that's the small-cap index, was up 1.8%. So all three indexes that we cover were up this week, broad-based rally again, but it was really led by the more growthy names. We always look at the ARKK, the ARKK, the ARKK Innovation Fund for some sense of how things are going in the growth land. And it was up 13.3% this week. So certainly very strong there. The VIX, as we keep telling you, keeps moving toward 20, which is that barometer that we're looking for, for a more normal market. The 10-year Treasury rate dropped almost to 2.5 this week but jumped back up to 2.7. But certainly we are far below where we were before, which was 3.5%. So, Nolan, with all that in mind, what are your initial thoughts this week?
Good. It's good to see a few back-to-back weeks. The market's sort of getting back to doing what it does. Remember, we are at the beginning of the month. And we tend to get fund flows at the beginning of the month, so that's helpful. And then all the metrics that you mentioned are helpful. Interest rates are down, oil prices are down, and I think as long as the news doesn't get worse, you know, into the year-end, things look pretty good from here.
I think we're starting to shed that cloak of negativity in the market. Very positive for investors out there. We'll jump right into our topics. So topic one, as it's been for the last few weeks, earnings continue. We're talking a little bit more about earnings. Of course, our favorite time in the investment calendar, and that's when we get the most information about the companies that we cover. So we're going to talk about two of the stocks that we cover that, that had earnings this week. The first is Starbucks. That's SBUX. That stock's been strong this week, all week. Definitely a positive earnings report. And then we heard this morning— this is Thursday— from EPAM Systems, EPAM. This is a company we've been following for a number of years, but certainly for all of 2022, as they have a lot of operations there in Eastern Europe and Ukraine. And the company has been definitely challenged in that context. Both stocks have been weak for 2022, but finally starting to show some strength. Nolan, what do you think about these stocks? What do you think about their earnings report? Does their reporting or their price action help you draw any broader conclusions beyond just these two companies?
Both companies have the things that we're looking for. One is business is getting better in both cases. Starbucks been down a lot, you know, if you go back over the last year or so, it's up, down over 30%, um, over, over its recent highs at roughly the $120 mark. So it's nice to see it bounce. Uh, business is better. And for those people looking to participate in a China recovery We think Starbucks is definitely an interesting way to play it, um, as they get a lot of their revenues from, from China. As far as EPAM goes, you're right, this company's involved in digital transformations. We've always said this business is healthy. They definitely have a tailwind and catalyst. No matter what happens in the macro, corporations still need to modernize their front office, back office, and communicate with customers in a digital format. and EPAM, uh, really is the go-to for doing it. Uh, we've seen that their business has not been impacted from a revenue or from a client standpoint. Where they were having problems is about 40% of their workforce, uh, the software developers and engineers are in Russia and Ukraine, as you mentioned. And so, uh, that caused some heart— heartburn. But this morning, um, back to business as usual. Revenues are growing over 30% a year. Free cash flow accelerated, and we think the shares are relatively cheap. So both of those names responded well to earnings.
Yes, and I also want to make this point that Starbucks and EPAM are two businesses that are the type of businesses we really like in an environment like this. The reason being, we like the way that business works in the micro sense, but macroeconomic factors, whether it be issues in China with lockdowns or also the war in Ukraine, have directly impacted the stock price, haven't really changed business too much. But we think, you know, we like these companies at a lower, lower valuation, at a lower multiple, and really think they're great candidates for comebacks for the rest of 2022. Shifting gears a little bit, Nolan, we heard from a couple of retailers this week and they were weak. The first was Crocs. That's CROX. That's the maker of the rubber clogs that you see all through the airport. And then also Revolve Group, RVLV. They have kind of a department store online. Both of those stocks fell by 10% or more today, Nolan, after they reported. With that all in mind, how do you think investors should approach retail? You know, after seeing the really terrible results there in Crocs and RVLV?
Cautiously, very cautiously. Um, retail has been weak, uh, whether we're going into a recession or not, not very relevant. They just have so many headwinds, particularly in apparel. If we have to play retail, uh, the way we like to play it is Costco. We like, uh, through the grocery side, and then we like the dollar stores as well. Um, maybe if you want to sprinkle in a Home Depot or something. But we think apparel is going to be challenged, furniture is going to be challenged, most parts of retail they're going to really have a tough go of it. And who knows, into the end of the year, you know, they had the supply chain issues directly impact these companies, and then the inflation does as well, whether it's the shipping cost or the cost of goods sold that goes up. They're not able to pass those on through to customers. And that, um, the supply chain really, uh, issues really mess with these retailers because they have to order those inventories months in advance. And what we've seen with the shipping times being elongated and more expensive And we've seen a lot of retailers, by the time they get the merchandise, is out of fashion, and then they have to do markdown. So it's the worst of all cases for, for apparel.
Yeah, absolutely. And I think I would add one, um, one quick point to your whole viewpoint here in terms of, of retail, is that during COVID consumers spent a lot of money on goods, and a lot of that money is shifting now to services. So that's really hurting a lot of these retailers, especially as you mentioned furniture and things along those lines in terms of home improvement. So Retail, no matter what they're selling, it's very challenged environment for retail. Um, Nolan, before we jump off of earnings, any other earnings that jumped out for you, um, that we ought to mention?
You know, those were the big ones. There's a name that we like we mentioned last week, InMode. Uh, they had previewed earnings a few weeks ago, so we spoke about them here the last time we, we had this broadcast, but they actually did report earnings. Uh, the earnings were, were great, just like we expected. And then no names to mention, but in general, a lot of these companies that people have written off for day, a lot of these growth stocks, technology stocks, even the chip stocks, you know, we've seen AMD is the one that sticks out to me, Advanced Micro Devices. Um, it's a business that we really like. They're taking share from Intel. Of course, we know the strength in semiconductors. We think that's going to continue for a while. But with their new CEO, Lisa Su, Um, it's not only the Intel business they're taking. They're strong in GPUs, the data center. We've seen a little bit of weakness in the PC business, but this just tells you the environment we're in. They reported earnings. I think a lot of analysts considered it a miss, or at least a weak guide. After hours, the shares were down about 5%, rallied back nicely during the normal session to almost unchanged. So it tells you the environment we're in. The shares are down about 50% from where they were a year or so ago, or from their highs over the last 12 months. Um, so that one stood out to me. It's a business that we like from here, and we think it's been de-risked. And it's not only AMD, we've seen a lot of these companies swing and miss, and, uh, the market tends to look through it. And the market's looking at the next probably 2 to 3 years. And I think that's how we're looking at things in client portfolios. We're looking at these companies, we're looking at the earnings, not necessarily this quarter, but thinking about is this the type of business at this price that we'd like in the portfolio over the course of the next 2 to 3 years?
Excellent. No one— I think that's a perfect segue to topic 2. But before we get to topic 2, I want to remind you to like and share the video if you found it useful. Comment on the video. We'd love to engage with any, any thoughts you have or answer any investment questions you may have. And then finally, subscribe to the channel and hit the bell for notifications. Just so you find out when the next video comes out, which it does each Friday. So again, topic 2. So topic 2 is the change in sentiment underway. Nolan, as you mentioned, AMD is a great example of this. Not the best report ever, but the stock price rallied back and actually gained ground after that report. Resuming out here, this quarter's earnings season has been much different than the last one. We were seeing 20% and 30% and 40% down moves commonplace. Um, when, when companies would miss earnings estimates. But this quarter we're seeing much more muted reactions to bad news and even very positive reactions to mediocre news, kind of in the AMD case. How do we explain the change in sentiment, Nolan? And are we finally getting to a place in markets where investors can have a bit more confidence?
I think so. Um, you know, we deal with a lot of investors here. Of course, you know, we have an investor seminar this evening where we expect to hopefully meet a lot of prospective new clients. And so we, we try to keep the temperature of as far as what's happening with investors on the street. And there's universal pessimism. I mean, if you're watching the news, there's not much to smile about, but if you turn off the news and you just look at the market prices and you do like us and read transcripts and hear how, uh, CEOs are positioning themselves, you come away a lot more sanguine. And I think investors are starting to look at the next upcycle, and it's not just interest rates or the VIX or oil prices. You know, you look around, I think America is the best place to invest throughout the world generally. A lot of companies have been de-risked. The market has absorbed a lot of negative news and continued to, um, to keep trucking. I think the other thing, Brian, is we have a floor on valuations at this point. Maybe some of it has to do with M&A. We've seen a lot of corporation buyouts. We know that there's hundreds of billions, if not trillions, in private equity funds that have to get put to work because the clock's ticking for when they have to do a deal or give investor money back. And we've seen some deals happen at a valuation that you and I have spoken about. So I think all of those things combined to lead to better price action.
And Nolan, if we're getting more optimistic and more willing to put money to work, are there any areas that you think viewers should know about?
Yeah, we do. We, um, so going back to think about it, you know, the one area— well, there's a lot of areas to like, especially things that have been beaten down. And it's not just one area. Of course, there's a healthcare company, you know, that, uh, that we really like. There's a few companies that have caught our attention in data, and specifically data analytics. You know, we talk about this digital transformation. That just means that all corporations have data, whether it's in the cloud or in their individual office. And there's a few things you have to do with that data. One, you have to store it. Two, you have to analyze it. And then three, you have to protect it. And then there's companies in every, uh, sort of area, um, in, in that, that we like. Uh, valuations are down to prices that we think are more reasonable. And then we know that they are, they are catalysts. So we know that the businesses are good. In a lot of cases, you know, we're always looking for double-digit revenue growth. We like founder CEOs when we can find them. But what we really like is that free cash flow. And, um, we're starting to get a triple whammy on those. So yeah, there's a lot to like.
Well, it's good we can have positive news for once here, Noel. In the last few weeks, things have definitely changed and we're getting out of the pessimistic dumps. That's very good to see. Um, also great to see Nolan. Football starts, as you said, today, uh, with the Raiders versus the Jaguars. Um, it's preseason, so I'm not going to hate on the Raiders too much. But, uh, thank you, Nolan, and thank the viewer— thanks to the viewers for being with us, and we'll see you again next week.
