Wobbling, but Still Outperforming

TABLE OF CONTENTS

TAKING CARE OF BUSINESS

• Magnificent 7 Performance vs. S&P 500

• Keeping Score (Earnings Results)
• Not to Mince Words - Earning Roundup
• Polls: How You Voted

PERSONAL FINANCE FOR TECHIES

• Top 5 mistakes of big tech employees
• Tax Disasters Hall of Fame

SELF-CARE CORNER: PSYCHOLOGY & PHYSIOLOGY

• The Wisdom of Anthony Hopkins
• When Reason Fails, Where Do We Go?
• Sleepwalk With Me

TAKING CARE OF BUSINESS

Magnificent 7 Performance vs. S&P 500

The big tech stocks in the “Magnificent 7” wobbled in April, slightly down as a group. Yet an equally weighted portfolio of these names, what I call the MANATees, fell half as much as the S&P 500. And year to date, the 7 big tech stocks also outperformed the broader market, generating a return more than double that of the S&P 500 (Table 1).

Score Card for Q1?

Now that six members of the Magnificent 7 have reported results for the first 3 months of 2024, we can see two trends emerging — both related to AI. Across all 4 software companies (META, MSFT, GOOG, AMZN), revenue is incrementally higher on account of demand for AI-enhanced software and services. And all 6 companies reporting so far are ratcheting up their capex spending on AI infrastructure beyond initial estimates. All of this bodes well for Nvidia.

Not to Mince Words (Earnings Roundup)

Tesla (TSLA)

Tesla had a terrible quarter Q1 replete with:

• slowing sales
• lower margins
• increasing competition

But Elon pulled a rabbit or two out of his hat, promising an event in August dedicated to Tesla’s robo-taxi initiative and announcing the ahead-of-schedule launch of new car models in the first half of 2025. The stock was up after the call.

Meta (META)

Unlike Tesla, Meta delivered more, promised less….. and got punished by the market. Go figure!

There was much to like about Meta’s Q1:

• revenue growth of 27% y/y
• expense growth much slower at 6% y/y
• average price for advertisement up 6% y/y
• head count down 10% y/y

However, Wall Street was disappointed with Meta’s guidance: ?

• Q2 revenue of $36.5-39 billion, slightly lower than analyst estimates of $38.5 billion
• Slightly higher capex in 2024 on account of AI investments: $35-40 billion vs. earlier guidance of $30-37 billion

The stock was down ? 15% in the aftermarket. This looks like an overreacation in light of Meta’s:?

1. track record of solid execution
2. ambitions to become the world’s leading AI company
3. conservative valuation relative to its peers and to its own historical multiples

Alphabet (GOOG)

Alphabet was the bearer of good tidings this earnings season with higher than expected revenue, earnings, and guidance.?

And the cherry ?? on top? The announcement of its first ever dividend!

Highlights:

• Revenue growth accelerated to 15% y/y — the fastest pace since early 2022
• Earnings up an impressive 62% y/y
• Margin expansion expected for 2024 relative to 2023
• Plans for a $70 billion buy back of shares
• Dividend of 20 cents per share to be paid June 17

Microsoft (MSFT)

Microsoft delivered yet another solid quarter.?

Highlights:

• AI fueling robust growth in Azure cloud services of 31% y/y
• Cash flow from operations up 31% y/y
• Nearly 60% of the Fortune 500 now using Copilot?
• Capex in 2024 to increase y/y to prioritize investments in AI

Amazon (AMZN)

Amazon hit all the right notes when recounting its Q1 results, but was a tad more cautious in its guidance than analysts had anticipated.

Highlights:

• AWS accelerated to 17% y/y
• Advertising grew over 24% y/y
• Gain in market share
• Margin expansion expected for rest of 2024

Slightly Disappointing Guidance

Like Meta, Amazon slightly disappointed the Street in its Q2 revenue guidance, calling for a range? between $144B to $149B, slightly missing expectations of $150B.

Apple (AAPL)

Apple delivered a lackluster quarter, but apparently not as bad as analysts had expected. In spite of another quarter of falling revenue (the case for 5 out of the last 6 quarters), the stock is up over 6% in the after market.?

Highlights:

• Revenue fell ? 4% y/y
• iPhone sales down ?10.5% y/y
• Services revenue up 14.2%
• $110 stock buyback announced
• A 4% increase in Apple’s dividend to 25 cents.

Guidance

CEO Tim Cook sees a return to growth in the current quarter and plans to announce AI features in the coming months.?

——

Next up:

Nvidia?(NVDA) Earning Call May 22

Polls: How You Voted

PERSONAL FINANCE FOR TECHIES

Over the years I’ve seen a lot of things in Silicon Valley. One thing that hasn’t changed much? People making the same mistakes about equity compensation, taxes, and risk. That’s probably because the Bay Area has so many talented software engineers, who tend to have a “do-it-yourself” mentality. However, when dealing with complex matters where human behavior and specialized knowledge play crucial roles, a collaborative 'buddy system' almost always leads to better outcomes. ??If you'd like to work on any of the 5 items below and want to try out the 'buddy system', send me a DM. ??

Tax Disasters of All Times

Can you spot these tax nightmares before they unfold? Guess how much dollar damage they might have caused you.

1. NEW SPOUSE, OLD 401(k) - You had an acrimonious divorce with your fist spouse, but eventually found your soulmate and got married again. Unfortunately, you just kicked the bucket (i.e. you’re no longer with us). More bad news: you forgot to change the beneficiary on your 401(k). Your former spouse is still designated as the sole beneficiary on the 401(k), now worth $3 million.
2. SORRY, KIDS! - You have a $1 million IRA and $ 1 million brokerage account.?As part of your estate planning, you decide to leave the IRA to your daughter, making her the sole beneficiary. The brokerage account will go to the Salvation Army.
3. JUST TRYING TO BE4 A GOOD CITIZEN - You are 58 years old. You have a $100,000 IRA account and a $1 million brokerage account. You decide to convert all the money in the IRA to a Roth IRA. While filling out the forms, you notice that your broker set the default tax withholding rate to 10% for federal and 0% for state. Thinking that you’d rather take care of the taxes now rather than deal with it next April, you raise the tax withholding rates for federal and state to your estimated income tax brackets of 37% and 13.3%, respectively.
4. NOT SO FAST, YANKEE - You were born in New York to British parents during their college study program abroad. Your family soon returned to the UK and you’ve lived in London ever since. You are a dual citizen of the US and UK. You have just sold your vacation home in Surrey for 2 million pounds, having originally bought it for 1 million pounds.
5. YOU'VE GOT TO BE KIDDING - You create an LLC on February 1, 2024, that you use for selling items online. You’re not aware of the new Corporate Transparency Act and fail to file the appropriate form to disclose the owners of the LLC (you) to the Financial Crimes Enforcement Network (FinCEN). It’s now December 31, 2024.

SELF-CARE CORNER: PSYCHOLOGY & PHYSIOLOGY

The Wisdom of Anthony Hopkins

Anthony Hopkins keeps a photograph of himself as a child on his phone. When faced with setbacks, instead of criticizing himself, he turns to the photo and reassures the child, saying, “We can handle it, kid. You and I, we’re going to make it.” This simple act allows him to comfort and encourage his inner child, offering protection, empathy, and self-approval.Hopkins explains that in these moments, he feels like a mature, experienced adult who takes pride in his journey. This perspective fills him with resolve and confidence in his capabilities.His approach removes self hate, emphasizing only acceptance, support, and love.

When Reason Fails, Where Do We Go?

I should have been in class with the other 8-year olds, but my mother let me skip school to spend the day with my grandmother.

I was staying in the guest room on the 2nd floor of her big house in Sacramento.

She made an elegant entrance that morning during the TV commercials between some Bugs Bunny cartoons and a National Geographic program. My grandmother was always a touch more poised, stately, and refined than any occasion called for.

This morning found her upset about losing an earring, and she was convinced it was to be found in that guest room.

She showed me the missing earring‘s twin, placed it in my hand, and left me with instructions to hunt down the errant sibling.

I decided I’d take a rational approach: I would divide the room into equally sized squares and simply look in each square until the missing earring announced itself. A flawless plan!

But after a couple minutes of inspecting empty squares, I felt like a dumb, unhappy, little robot.

Time for a break. I directed my attention to the National Geographic program.

It was about an African tribe. The people on the screen were beautifully slender, nearly naked, and wore gold ornaments - some on their wrists, some around their necks, some even in their noses!

They beat drums, sang songs, performed rituals, all while dancing around a bonfire that lit up their faces and figures on the backdrop of a moonless night.

This was so much better than 3rd grade!

I ran to the door to make sure I could hear my grandmother chopping vegetables in the kitchen below.

Then I hatched Plan B: I would join in the dance, and… who knows? ….maybe this would somehow help me find the missing earring. And at the very least, I would have fun.I excitedly stripped off my clothes, clasped the earring to my nose with one hand, closed my eyes, and let the rhythm of the drums guide my movements. The room was transformed into a ceremonial ground. I felt myself falling into a trance.

Then, all of a sudden….Steps on the stairs!I opened my eyes. And there it was! The missing earring was on the floor right in front of me!

The clicks of my grandmother’s high heels on the wooden staircase were growing louder with every step. In one fluid movement, I snatched the earring from the floor, the other one from my nose, yanked my pants on, and squirmed into my T-shirt.When my grandmother opened the door, there I stood triumphantly holding an earring in each hand.

She noticed my hair was in a mess, but didn’t ask how it got that way. I didn’t tell her exactly how I found the missing earring, and she was wise enough to never ask.” ??????

Sleepwalk With Me

While I’m pleased to see that I’m making progress with my sleeping goals, should I be concerned that I appear to spend more time sleeping than in bed? Is this Apple’s subtle way of telling me I’ve been sleepwalking? ??

Disclaimer: This newsletter is the opinion of Matt Lewis and is made from the perspective of a US tax payer. TechView Wealth Advisors LLC does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction or tax strategy.