Optimistic regarding demand signals.

Arguments to be bullish-
1)Positive Momentum
2)AI Optimism and Data Center Cap Ex Spend
3)Rate Cut Expectations

Arguments to be bearish-
1)Ultra Mega Cap Valuation Concerns
2)Government shutdown
3)Tariff and Raw material uncertainty
4)Recession risk from slowing Global Growth

I remain cautiously optimistic regarding demand signals. Market participants continue to reward companies on future promises of top-line expansion from the inclusion of AI in business operations. Corporate leadership consistently point to the cap ex dedicated to AI and its future rewards. These upcoming earnings calls will be heavily scrutinized as at some point market participants will require promises to materialize on financial statements through margin expansion and increased profitability.

Chipotle shares disappoint after negative comp sales.

The fast-casual chain reported a second quarter of negative comp sales, its most significant decline since Q2 2020. TTM Revenue growth of 9% was below the trailing 12Q average of 14%. TTM Profit Margin of 13% was marginally higher than the trailing 12Q average of 12%. Speaking with CNBC, Scott Boatwright, CEO of Chipotle, talked about technology initiatives such as produce slicers and high efficiency equipment package that “includes a dual-sided plancha grill, three-pan rice cooker and a high-capacity fryer,” and cited better Consumer Sentiment, new restaurant offerings, engagement through rewards and expansion of the catering program as key drivers for performance in the second half of 2025. The stock closed at 46.76 on 7/26/25, a level last seen in early 2024. The 50-D and 200-D moving averages for the stock were 55.01 and 42.94, respectively. The stock can test its 200-day moving average level.

Costco shares consolidate after results.

Shares of Costco have been consolidating following its most recent earnings report. The big-box retailer reported 6% revenue growth and continued its trend of a 2.9% profit margin. At last close of 950.95, shares traded around 326 times their profit margin of 2.9%. The trailing 3-year average price-to-profit margin for COST was around ~249x (plus or minus 58). An actionable bottom for Costco Wholesale (COST) appears to be around 850 to 900.

Netflix- A two-standard-deviation story.

Netflix reported results for the month ending June 2025. TTM revenues of 41.6B were 15% higher than a year ago. UCAN and EMEA region revenues increased by 14% and 17%, respectively, compared to 23% in the APAC region. The streaming firm reported a 25% profit margin, 7% and 8% better than the trailing 3Y and 5Y averages of 18% and 17%, respectively. Profit Margin of 25% was two standard deviations better than the trailing 3-year average of 18% (plus or minus 4%). What grabbed my attention from the company’s commentary on its results was the emphasis placed on international, i.e, non-English content. The company noted that its “local for local” strategy of “developing shows and films that deeply connect with audiences in their home countries” has translated to non-English language series and films representing “more than one-third of all Netflix viewing in the first half of the year.” At the last close of 1209.24, shares traded ~49 times the price-to-profit margin, two standard deviations away from the trailing 3-year average of ~30 times (plus or minus 9). An actionable bottom for Netflix (NFLX) appears to be 1000.

Notes on June 2025 CPI Print

Headline YoY CPI for June 2025 was 2.7% compared to 2.9%, 0.7% and 0.2%, a year, five, and ten years ago, respectively. Taking a different perspective, the Median CPI and Sticky CPI measures provided by the Federal Reserve of Cleveland and Atlanta, respectively, suggest YoY readings of 3.6% and 3.3%. The Median CPI published by the Cleveland Fed excludes “all price changes except for the one in the center of the distribution of price changes, where the price changes are ranked from lowest to highest.” The Sticky CPI from the Atlanta Fed breaks down the various components of the Consumer Price Index into sticky and flexible categories, whereby the Sticky CPI index only includes “price changes for a particular CPI component occur less often, on average, than every 4.3 months.”  By comparing the larger dataset against a refined one, it allows for the removal of noisy data points. In general, the Median and Sticky CPI suggest a certain inelasticity in prices.

Palo Alto Networks Inc (PANW) and ServiceNow Inc (NOW) look interesting. 

Santa Clara neighbors Palo Alto(PANW) and ServiceNow(NOW) currently trade near their long term averages. Compared to the SP500, these California-based tech firms have gained ~60%. Considering the AI trend is repeated and reinforced in the market narrative, PANW and NOW do stand a chance to pick up their momentum one more time. ServiceNow(NOW) closed at 961.78, whereas Palo Alto(PANW) closed at 190.72 on 7/14/25.

Carlisle Companies Inc(CSL) range= 350 to 580.

Scottsdale, Arizona-based Construction Materials and Weatherproofing Technologies firm Carlisle Companies Inc(CSL) is down 4% on a 52-week basis, closing at 412.69. Not that long ago, the stock traded below its 100D and 200D moving averages. So far in 2025, the company completed the purchase of Bonded Logic and ThermaFoam, made new appointments to its Board of Directors, and restructured its leadership team. The stock appears to be on the move, and I find it interesting because it plays into the narrative that the “imminent” Fed rate cuts can “positively affect the construction industry,” as “lower borrowing costs make it cheaper for developers to finance new projects.”  A company like Carlisle(CSL) can benefit from this conceivable trend. Considering the company maintains a profit margin of 20-25% and the market rewards the stock with a 17-24x multiple, the stock can trade between 350 and 580.

A very important quote.

As paraphrased by my favorite financial presenter, Tom Keene of Bloomberg Radio, it’s not the prices of assets that spook investors, but rather the rate of change.

Every day during the trading week, Mr. Keene’s “good morning, good morning, good morning” at 7:00 a.m. serves as a personal point of focus. It offers an opportunity to listen to a well-respected market observer and commentator who is hyperattentive towards the pedigree of the market participants in discussion and focuses on the whispers rather than the noise of the crowd. By blending economics, investment, finance, and most importantly, international relations, Mr. Keene’s observations of the market are pretty insightful and informative. What started as an opportunity to learn the English language evolved into a habit, as behind the curtain of market analysis and news, was a well-informed market education.