New Highs for Alphabet, Amazon & Microsoft

Amazon's third quarter earnings surpassed expectations, with Amazon Web Services (AWS) contributing significantly to the company's profitability. The retail giant reported a profit when Wall Street anticipated a loss, leading to an all-time high stock price. AWS, which is now larger than Amazon's core retail operations, generated over half of the segment's operating income. The growth of third-party sellers on Amazon's platform also contributed to a reduction in operating expenses. With AWS's impressive growth rate, it's expected to surpass the overall ecommerce business in size in the coming years. Additionally, Alphabet, Google's parent company, reported higher-than-expected Q3 profits, and the new corporate structure seems to be working well. Overall, these tech giants continue to innovate and deliver strong financial results.

Tech giants Google (Alphabet), Microsoft, and Amazon are continuing to outperform with profits higher than expected, driven by their significant investments in cloud computing. Google announced a stock buyback plan and expressed caution towards large acquisitions, while Microsoft reported a blowout quarter with record-breaking profits and an all-time high stock price. Microsoft's growth may temporarily slow as they transition to cloud-based services, but investors can expect buybacks and a growing dividend. Microsoft, Google, and Amazon's dominance in the cloud market poses a challenge for smaller businesses, but alliances and collaborations may offer opportunities for growth. Additionally, the European Union's regulations requiring existing hardware infrastructure in each country for cloud-based businesses could create an advantage for these large tech companies.

Germany's e-commerce regulations favor large companies with local server farms, potentially hurting smaller players. Meanwhile, McDonald's had a successful week with better-than-expected Q3 profits and revenue, positive same-store sales in the US, and the introduction of breakfast all day. McDonald's is reorganizing its business to focus on similar markets and has seen positive comp sales across all segments, indicating a change in direction. However, franchisees have expressed concerns about supply chain management with the addition of breakfast all day. Steve Easterbrook, McDonald's new CEO, is likely feeling good about the company's progress, which has seen a 25% increase in stock price since his appointment. Companies like Google, Amazon, Microsoft, and McDonald's had strong weeks, but one consumer stock outperformed them all. Stratasys, a 3D printing company, had a rough week with preliminary Q3 results below expectations, marking the second quarter in a row for this occurrence. The challenges faced by Stratasys and other pure play 3D printers continue to mount.

The MakerBot acquisition by Stratasys in 2013, during the hype of the 3D printing craze, has turned out to be a significant financial disaster. The company is now predicting a net loss of up to $190 million related to the acquisition, and write-downs could total $370 million. This is in contrast to companies like Proto Labs, which have seen strong revenue growth and success in the 3D printing industry. The overoptimism and expectation of a mass market for 3D printers led to unsustainable prices and a significant amount of money being spent. Chipotle's mid to low single digit comps for the year are not a cause for concern, as last year's comps were an unsustainable 20%. The drop in Valeant Pharmaceuticals' stock price after a short report alleging fraud is a serious issue, with potential write-downs totaling $370 million, a significant amount for a company worth over $1 billion. The use of the phrase "Enron Pharmaceuticals" in the report is particularly damning for the brand.

Valiant Therapeutics, a biopharmaceutical company, has faced significant scrutiny recently due to both regulatory investigations and a damaging report from short-seller Citron Research. The report alleged accounting issues related to intercompany sales and revenue recognition. Additionally, Valiant's business model, which relies heavily on acquiring existing drugs and raising prices, has raised concerns about transparency and ethics. These issues, combined with the company's already negative public perception due to its minimal R&D spending and lack of focus on drug development, have led to a significant decline in its stock value. In contrast, stocks like Weight Watchers International experienced impressive gains this week due to positive news, such as Oprah Winfrey's investment and involvement with the company. Overall, it's crucial for investors to be aware of what they don't know and be cautious when dealing with companies facing multiple challenges, as Valiant Therapeutics currently is.

The latest earnings reports suggest that higher interest rates would significantly benefit the banking sector, particularly in the areas of traditional lending and investment banking. The lack of clear market direction has led to a sluggish trading environment, affecting banks heavily reliant on these activities. While the Federal Reserve's independence makes it unlikely to be pressured by specific sectors, the prolonged low-interest-rate environment and the global economic weakness may keep rates low for now. Citigroup, as the most globally diversified bank, is particularly affected by the strong US dollar. Despite regulatory challenges, the banks' growth and improved financial performance help mitigate criticism. However, the election year rhetoric around reinstating Glass-Steagall and potential regulatory changes could impact the sector.

The public's perception of banks is that they are necessary but not loved, and Square, a mobile payments company about to go public, faces significant competition and financial challenges as it tries to compete with larger, more established companies in the industry. Jack Dorsey, Square's and Twitter's CEO, is under pressure to dedicate more time to each company, especially as Square prepares for its IPO and Twitter navigates an identity crisis. The financials for Square show impressive revenue but significant losses, highlighting the need for substantial investment in growth. The comparison of Dorsey to CEOs like Steve Jobs and Elon Musk, who have led multiple companies at once, adds to the intrigue but also raises questions about his ability to effectively manage both businesses. Earning season is also underway in the business world, adding to the industry's buzz.

Despite the hype surrounding the new Star Wars film, The Force Awakens, some people, like the guest on this week's Motley Fool Money podcast, Kayla Tausche, have yet to see any of the previous Star Wars movies. Kayla shared her plan to watch them all for the first time in order, starting with Episode 4, and encouraged listeners to skip Episode 1 altogether. The group also discussed their favorite underrated and overrated candies for Halloween, with peanut butter Twix being considered underrated and Whoppers being overrated. Additionally, Disney's acquisition of Lucasfilm and the potential for editing down the Star Wars films to a single movie was brought up as a topic of interest. Overall, the episode showcased a mix of pop culture and financial discussion, with the hosts and guest sharing their personal opinions and experiences.

While some candies like Smarties and Candy Corn may be considered overrated, others like Rolos, Peach Rings, Andes Mints, and Under Armour are underrated according to the discussion. Rolos and Peach Rings are underrated personal favorites, Andes Mints are undervalued in the market, and Under Armour is a promising investment opportunity due to its strong leadership, growing footwear business, and massive market opportunity. Twitter is also a potential investment with its recent morale-boosting move by CEO Jack Dorsey to distribute his stake to employees. Illumina, a company making genomic sequencing machines, is another high-conviction idea due to the advancements in personalized medicine and the affordability of genomic sequencing.

The healthcare industry is seeing a growing trend among customers seeking to understand how diseases interact with individual patients. This trend presents a promising business opportunity, especially for companies like Illumina that generate over half of their revenue from high-margin consumables. In the past, genetic companies faced challenges due to high fixed costs and limited information at the genomic level. However, advancements in technology have significantly reduced these costs and improved the accuracy of genetic information. While there are other companies like Twitter, Under Armour that are interesting, Illumina stands out due to its strong revenue stream and potential for blockbuster drugs from understanding disease interactions at the genomic level. Overall, the future of healthcare looks promising as technology continues to advance and provide more accurate and personalized treatments for patients.