Welcome to the 5% World - 9/26

Morning Watchlist: Saturday Edition             

A quick note from Behind the Markets

It's Saturday morning, and the week's most important price wasn't a stock. On Wednesday, the 5-year Treasury yield crossed 5% for the first time since 2007. By Thursday the 10-year had touched 5.11% and the 30-year was trading at levels last seen two decades ago. When the safest money on Earth pays five percent, every other asset in the world gets called back in for a job interview.

The week didn't start that way — Monday was the Nasdaq's best day since early August. Then the bond market took the microphone, two presidents took the White House, and Tehran spent three days alternating between olive branches and threats. By Thursday's open, stocks were falling again and oil was back in the $90s.

Saturday is when we mark every call against that tape, misses first.

Two scheduling confessions before we start. We go to press Thursday midday, so Friday's session belongs to you, not to us. And Friday's edition promised you a Costco grade today — a promise Costco's own calendar wouldn't let us keep, because the report landed Thursday night, after this page was set. Sunday's edition owns that grade; your Monday checklist below has the questions to ask it.

Four stops on the tour. Let's get into it.

1) The Rain Check Bounced 

Follow the barrel through the week. On Tuesday, Iran's president floated reopening the Strait of Hormuz within seven days, and West Texas crude fell 3.2% to $89.42, a two-week low. On Wednesday, President Trump called three hours of U.S.–Iran talks at the UN "very productive." By Thursday the two sides were trading threats again, and crude snapped back — WTI up through $93, Brent back above $100.

We wrote it Thursday morning: an offer at a podium is not a tanker through the strait. It took about 48 hours for the market to agree.

Alaska Air — Thursday's re-flagged Watch at $41.91 — traded at $39.01 by Thursday midday, down about 7% from the flag. The kill switch we named, talks collapsing and crude snapping back, is precisely what the week rehearsed; it's the second time this quarter diplomacy has offered this airline a rain check and then bounced it. Standing outside the ring saved seven percent in two days. Still Watch — the trigger stays what it was: Hormuz actually open, and WTI holding in the low $80s.

Copa — Sunday's Buy at $130.98 — is the other side of that same coin, the unhedged airline that gets paid the morning peace actually arrives. It marked time at $128.35, down about 2%, while peace kept rescheduling. It grew double digits at war prices; falling crude remains the free option, not the thesis. Still Buy.

The Andersons — Tuesday's Buy at $69.59 — slipped 3% to $67.50. The news flow leaned our way: Treasury Secretary Bessent said Wednesday the trade truce extends through January 10, giving Beijing's politically driven soybean purchases runway, and the summit's first headline had Trump declaring no move toward AI guardrails — "our guardrail is the DOJ." The full readout lands after our deadline; the bushels are already on the barge. Still Buy.

And Axcelis — Tuesday's Watch at $109.32 — sprinted to $118.43 by Wednesday's close, up 8% with the melting-up memory complex, then handed 4% back Thursday morning to $113.55 as the summit and a jittery AI tape arrived together. Nothing about our entrance printed: the order book still hasn't inflected, and China is still 46% of revenue with the summit readout pending. A tape getting excited is not a bookings line turning up. Still Watch.

2) The Money Kept Talking  

Monday we bought the Berkshire playbook the week everyone eulogized its author. By Tuesday, Berkshire itself was demonstrating the playbook — filings showed it building a 10% stake in Lennar while Wall Street rates the builder a Sell.

Markel, Monday's Buy at $1,787.65, traded at $1,743.86 Thursday, down about 2.4% — a five-percent-world markdown on a company whose float earns more in that exact world. The investment portfolio is still bigger than the market cap. You don't grade a compounding machine on a red week. Still Buy.

Builders FirstSource — Thursday's Watch at $60.87 — did what patient Watches are supposed to do: it drifted toward us, down 4.4% to $58.17, closing in on the sub-$56.56 washout we named as one entrance. Lennar itself gave back most of Tuesday's Berkshire pop, trading at $80.29 Thursday. Omaha can wait a decade; we're being paid to wait a few weeks. Still Watch, both of them.

Travel + Leisure Co., Thursday's Buy near $63, eased to $62.01 — one day old, too young to grade honestly. Still Buy.
Cinemark, Wednesday's Buy at $36.25, slipped 1.5% to $35.69 as Morgan Stanley trimmed its target to $40 — still above the price. The court-monitored film floor didn't move. Still Buy.
And MGM, Friday's newborn Watch, did its falling right on schedule: down 10.5% Thursday to $33.87, almost exactly our $34 flag, as Barry Diller's withdrawn $48.30 bid worked through the tape and Bank of America resumed coverage at Neutral, $40. The buyer kept his 27% key to the garage; we keep our entrance — a washout toward $29, or the late-October print showing Vegas holding. Still Watch.

3) The Record Quarter That Got Billed  

TD SYNNEX — our September 7th Buy near $263 — reported Thursday morning and cleared every bar we set: record revenue of $21.6 billion against $18.9 billion expected, earnings of $5.68 a share against $4.70, gross billings up 40%, and fourth-quarter guidance far above consensus.

The stock fell 12% by midday, to $253.09 — from $287.89 Wednesday to about 4% below our flag.

Why? The cash. Free cash flow ran negative by nearly a billion dollars in the quarter — the working-capital build we flagged as the watch item in Friday's edition. A distributor grows by writing checks before its customers do, and when it's growing 40%, the checkbook empties fast. Think of a caterer landing the biggest wedding season of its life: the profit is real, but the groceries get paid for months before the receptions do. The market billed that gap Thursday. The demand is not in question — the guide says next quarter is bigger still — so our call is unchanged, and cash conversion is now the tell at the next report. Still Buy.

The same AI-spending aisle produced the week's other creak. Our September 6th Powell Industries Buy named its kill switch in writing: an AI-capex retrench, where "an Oracle blink hits the whole aisle." On Thursday, Oracle blinked — reports said it sent a force-majeure notice to Blue Owl Capital seeking to delay payments on a New Mexico data center, citing higher costs and delays, and the stock fell more than 4%. Powell slipped 2.5% to $187.79 — still about 7% above our flag. One notice is not a retrench. But the financing chain of the AI build-out just creaked in public for the first time, and that promotes this from footnote to formal watch item. Still Buy, eyes open.

And Micron, September 15th's Buy near $925, traded at $1,055 Thursday — up about 14% from the flag — with its real exam Wednesday the 30th, where the Street wants roughly $31.49 a share. A cheap multiple on peak cyclical earnings remains memory's oldest trap; we said it going in and we'll say it going into the print. Still Buy.

4) Five Percent, and Everything Under It

Wednesday's five-handle repriced the whole discretionary aisle — McDonald's at a four-year low, Darden marked down, Starbucks closing stores — and our calls sorted themselves along the price ladder exactly the way the thesis said they should.

Dollar General, Friday's Buy at $120.60, was green on a red tape: $122.57 Thursday midday, up 1.6%, as it rolled out holiday $1-item plans and Instacart same-day delivery. The bottom rung holds. Still Buy.
Nike, Tuesday's Watch at $35.51, touched a fresh 52-week low of $35.35 during the week and sat at $35.61 Thursday — and the brand news kept leaning brand-broken: Kylian Mbappé ended a two-decade run with the swoosh to sign with On, and reports now question Nike's Dow seat. October 1st is the exam, and we're not enrolling early. Still Watch.
LKQ, Sunday's Buy at $23.83, drifted 3.3% lower to $23.04 with the consumer tape — AutoZone's Tuesday beat already graded the parts aisle fine-not-great, the German ERP discount is unchanged, and the ~5% dividend pays the wait. Still Buy.

Then there's the club aisle, where the referee blew the whistle Thursday night. Going in:
Costco traded at $900 midday Thursday, about 3% below our September 6th Sell flag, its multiple deflating on schedule while speculation swirled about a special dividend. Sell stands (for holders).
BJ's last verified print was $90.97, about 2% under our flag. Still Buy.
And PriceSmart — Sunday's Watch at $169.51 — rose 2% to $173.15, above the average analyst target, which is the crowd starting to find it. Still Watch.

Illumina — Wednesday's Watch at $238.82 — ran 12% in two days, trading at $267.44 Thursday morning, through its old high, as the FDA panel's yes turned into Medicare-coverage headlines. It ran without us, the AeroVironment story with a stethoscope; 42 times earnings for 5% growth is still the ticket price, and we still won't pay it. Still Watch.
Quest Diagnostics, Friday's Buy at $233, inched up to $234.79 as Truist raised its target to $260 — a newborn behaving. Still Buy.
Stevanato held at $21.69, flat at the flag. Still Watch.
Toyota gave back 3.9% to $186.40 on no company news we could find; a weak-yen paycheck doesn't reprice in four days. Still Buy.
Virtu — Monday's Buy at $57.26 — was the worst Buy on the card, down about 8% to $52.70, also on no real news. Its raw material is volatility, and the tape is manufacturing plenty; at roughly eight times earnings we re-read the thesis, not the ticker. Still Buy.
GATX passed its first report card: $181.91 Thursday, up 2.4% through a week that raised its own borrowing costs. Still Buy.
And SLB sat at the flag, $51.96, while quietly booking four multi-year Aramco well-construction awards Thursday — paid by the day, and it just booked more days. Still Buy.

Your Monday checklist, in order. First, Costco's Thursday-night numbers — comps ex-gas, traffic, renewals, and any special dividend — which grade our September 6th Sell-and-Buy pair and the PriceSmart Watch; Sunday's edition will cover those. Second, the summit readout: soybeans for The Andersons, the China half of Axcelis's income statement. Third, Friday's bond close — whether the five-handles held is the swing input under half this week's drawdowns. Fourth, oil and the strait: podiums or tankers, for Alaska Air's trigger and the energy shelf's cheerful-loss risk. Fifth, circle the calendar: Canada's import ban bites Tuesday the 29th (Polaris is listening), Micron sits its exam Wednesday the 30th, and Nike confesses Thursday, October 1st.

Before You Go

The scoreboard. Eighteen calls this week — ten Buys, eight Watches, no new Sells.

Through Thursday midday: Dollar General up 1.6% and Quest up 0.8% were the only green Buys on a week the bond market repriced; tuition ran from Cinemark's -1.5% to Virtu's -8%. The discipline column did the real earning: Alaska Air fell 6.9% and Builders FirstSource 4.4% after we filed them as Watches — declines we watched instead of wore — while Illumina's 12% sprint is what discipline costs when the crowd is right early.

And the older shelf kept score honestly in both directions: Micron up 14% into its exam, Powell up 7% through Oracle's blink, Costco 3% below the Sell flag with the referee's whistle already blown — and TD SYNNEX, the record quarter that got billed anyway. Same system as every week: buy the story at the fair price, name what kills it, and let the exciting version go to somebody else.