Investing Thread

[JWags85]

Thought of you when I read this, Wags. Thought you might be interested.

https://seekingalpha.com/article/4335804-luckin-coffee-crashes-76-thursday-what-you-need-to-know

Very interesting read.  Appreciate it.

Bloody day for it. A lot of people snapping up LK debt and shorting as a hedge.  Will keep an eye on it here, maybe grab more under 5 if it holds $4 in the coming days.  Earnings should be coming up in the next week or two, would expect a pop there.

[MU82]

Market gave it all back today.

[JWags85]

Market gave it all back today.

Gave up the gap and spike but not yesterday’s gains, not even the late day spike. But I think this is constructive. It’s probing technical ranges, respecting support and resistance levels. The ranges are HUGE and comparing it to, say, this time last year makes it look wild, but there seems to be some rhyme or reason at least.

Tomorrow and Thursday will be interesting. Still think we probe higher to open up downside ranges for the next week or two when earnings start to come out.

Oh also, LK halted. Rumors of a T12 halt, meaning the SEC would be requesting information and exploring further which is a half that can last days, not hours.  Seems like a coin flip of being sent to OTCs, or satisfactory findings give them a further all clear and it pops back to double digits. As if the market wasn’t exciting enough 

[Chili]

Jim Bianco
@biancoresearch
Another day another amazing stat...

Today the DJIA was up over 4% and closed down on the day.

Since 1925 (95 yrs!), up more than 4% and closing down on the day has happened only one other time ... Oct 14, 2008 (Tsy Sec Hank Paulson forced the banks to take TARP money).

(1/2)

7:21pm · 7 Apr 2020 · Twitter Web App

Reply to @biancoresearch
biancoresearch's avatar
Jim Bianco @biancoresearch
25m
The S&P 500 was up 3.5% at the high and closed down on the day.

Since April 1982 (daily H,L,C began) has happened three other times...Oct 3, 08, Oct 14, 08, and Oct 17, 08.

This mkt continues to trade like Oct 08. It was six months and another 25% down before the low.

(2/2)

[MU82]

Gave up the gap and spike but not yesterday’s gains, not even the late day spike. But I think this is constructive. It’s probing technical ranges, respecting support and resistance levels. The ranges are HUGE and comparing it to, say, this time last year makes it look wild, but there seems to be some rhyme or reason at least.

Tomorrow and Thursday will be interesting. Still think we probe higher to open up downside ranges for the next week or two when earnings start to come out.

Oh also, LK halted. Rumors of a T12 halt, meaning the SEC would be requesting information and exploring further which is a half that can last days, not hours.  Seems like a coin flip of being sent to OTCs, or satisfactory findings give them a further all clear and it pops back to double digits. As if the market wasn’t exciting enough 

Yeah, I was talking about today because folks had commented here early today about the big market jump, wondering how it was possible.

[Chili]

Lots of volatility and slow growth ahead...

https://www.marketwatch.com/story/more-stockmarket-volatility-less-buying-the-dip-and-slower-earnings-per-share-growth-ahead-goldman-sachs-says-2020-04-07

Also, look for a multi shaped growth curve. The way the fed is structuring the support some areas will be V, small biz a U, and if if you're not really supported L.

Other words...BUMPS!!!!

[MU82]

Couple of interesting blurbs I read today on Seeking Alpha.

First, about the earnings season ...

First quarter earnings season kicks off in under a week, starting with the financial sector, with reports expected from JPMorgan and Wells Fargo on April 14.

This time around, "beats or "misses" will largely be irrelevant, because the results will be lowered by a tremendous increase in provisions for loan loss reserves, as well as considerations for a difficult economic cycle through 2021.

Some analysts haven't even updated their estimates since before Feb. 19, when the S&P 500 hit its last closing record, meaning consensus estimates are dulled by "stragglers."

Then, some serious doom-and-gloom stuff from former Cisco CEO John Chambers ...

"Companies are running out of cash," said John Chambers, the legendary tech CEO who turned Cisco (NASDAQ:CSCO) into a powerhouse, expecting the worst over the next nine months to year.

He sees the pandemic as a three-axis disrupter to the economy, healthcare system, and global supply chain, with the travel and airline industries recovering much more slowly than retail and financial institutions.

"Companies will either be destroyed or break away if they follow their North Star," he cautions, adding that "for many, it will be like a second chance to do an IPO."

During the interview with MarketWatch, Chambers also dropped names like Shake Shack (NYSE:SHAK), Zoom Video (NASDAQ:ZM) and Delta Air Lines (NYSE:DAL) as examples of large businesses that have taken the necessary steps to transform their operations in the digital age.

[Jockey]

Another look at what a recovery might look like.

https://theconversation.com/coronavirus-the-economic-recovery-wont-only-be-u-shaped-itll-look-like-a-wheelbarrow-135969

The economic effects of the coronavirus crisis will be severe but short-lived, according to much of the recent commentary. The cautious revival in stock markets points in the same direction, while recent polling suggests that 75% of business people share this view. Most of them expect economic activity to rebound this year.

The rationale is that the economy before the coronavirus was in great shape. Stock indices were hitting new highs, with the Dow Jones average flirting with 30,000 in early February (it’s now around 22,500). The US unemployment rate was 3.5% in February, a level not seen for over 50 years. If the economy is fundamentally sound, the reasoning goes, the worldwide lockdowns are merely hitting a pause button for a short time.

We hope that this optimism is correct, but the economic recovery will most likely be long and slow. We are talking U-shaped at best – and probably more like a wheelbarrow than a wok.

What lies ahead
Even with massive government interventions such as the US$2 trillion (£1.6 trillion) stimulus package in America, businesses and markets will take longer to recover than people might think. There are likely to be many bankruptcies. Businesses continue to operate during a bankruptcy reorganisation, but it severely limits their ability to plan, react to market changes, hire employees, or just have any of the flexibility that is essential to succeed.

The average bankruptcy takes 260 days to work out. During that period, businesses will have a hard time rebuilding. Management will be distracted, while most employees will be thinking about getting more secure employment. And even companies that don’t need bankruptcy protection will need time to rebuild credit facilities, rehire personnel and re-establish customer relationships.


Try running an airline under bankruptcy protection.
Now consider the complexity of the global supply chain. More than 90% of Fortune 1,000 companies have at least one tier-2 (secondary) supplier in Hubei, the Chinese province around Wuhan. Fewer than one in five of these companies have a tier-1 supplier in the region, but one failed link can disrupt the whole chain. The link can be replaced, but it takes time. While this happens, businesses up and down the supply chain have to cool their heels.

Existing weaknesses
There were also pre-crisis weaknesses in the world economy that will now be even harder for the sunken economic system to handle. While the average ratio of stock prices to corporate earnings was not bad pre-crisis considering the level of interest rates, most of the juice was in FAANG (Facebook, Apple, Amazon, Netflix and Google) and Microsoft. These tech goliaths account for around one-fifth of the total value of the S&P 500.

More disturbingly, 40% of all US corporate debt was rated BBB, just above junk, going into the crisis, while only 30% of the world’s outstanding stock of non-financial corporate bonds were rated A or above. A huge name like Kraft Heinz was downgraded to junk in mid-February, meaning it is considered high-risk and will pay higher borrowing rates on its debt. Historically, about 5% of BBB bonds are downgraded to junk each year. In the current crisis, expect a lot more.


Devil is in the debt-tail.
Despite central bank interest-rate cuts, borrowing costs for companies are now rising dramatically. With further downgrades from credit ratings agencies all but guaranteed, especially with many big earnings announcements due after Easter, some companies will lose access to credit altogether. Moody’s estimates that the default rate for junk-rated companies could hit an astounding 10%, compared to a historical average of 4%.

Scenario planning
The old saying goes, hope for the best but prepare for the worst. A wheelbarrow is our most likely scenario that businesses and governments should prepare for – a long, drawn-out bottom and a slow, upward recovery – but even this assumes that the coronavirus restrictions are fully lifted in the next few months.

In reality, they might not be. There is lots of talk about herd immunity, but it’s not yet clear the degree to which immunity is developed by infected people who survive. Authorities may be reluctant to completely loosen controls, given how much we don’t about the coronavirus.

As for the race to develop a vaccine, flu vaccines are relatively ineffective. They reduce your risk of becoming ill by 40% to 60%, compared to 97% for measles vaccines and 88% for mumps. We could easily end up in a situation where a COVID-19 vaccine solves part of the problem but doesn’t erase the need for some restrictions. Lockdowns might end, while other measures like social distancing, limits on gatherings and travel restrictions continue – perhaps on a seasonal basis.

South Korea could be a glimpse into the future. It has so far avoided an Italian-style health crisis without a lockdown, but has still imposed various restrictions on the economy. It has postponed the spring school semester and has advised people to work remotely, avoid crowds and meetings, and wear masks.

Should this become the new semi-normal, the restaurant industry could generally disappear. Few restaurants can afford to operate at half-capacity at best. The live entertainment industry could go the same way, as would multiplexes. South Korea’s cinemas have experienced a 90% decline in attendances, for example.


South Korea’s love of cinema is on ice. Stadium sports are another obvious victim, and don’t be certain that TV subscriptions will make up the shortfall: the roar of the crowd has always been part of the attraction for viewers in bars and living rooms.

Perhaps more consequential is the potential impact on factories, warehouses and knowledge workers. There are at least hopeful signs that knowledge workers in everything from design to clinical research to law might be more productive outside the office. But will factories and warehouses need to be converted into the equivalent of clean or semi-clean rooms? Estimates for such a conversion run from US$100 to US$1,000 per square foot, which amounts to a considerable overall cost to the economy.

These are some of the things to bear in mind when commentators talk optimistically about where the world economy will be heading in the coming months. No one wants to sound alarmist, but it is better to start reflecting on these possibilities rather than being caught unawares further down the line.

[Chili]

Todays numbers are what I was unfortunately thinking was going to happen. I realize that analysts had been baking in declines to evaluations but when actual numbers come in much worse than expectations, markets react violently.

Hold onto your hats, keep good bottle of whisk(e)y around, and be kind.

[MU82]

As I write this, SPY up 3.5% after hours thanks to Gilead's successful remdesivir test in Chicago (which I mentioned in the treatments thread).

Obviously, if it proves to be a successful long-term treatment for COVID-19, it's huge for the country, and the whole world.

Very small side benefit:

My GILD position, which has been underwater almost since I bought it several years back, might finally get back to break even. It's up 16% AH right now.

[rocket surgeon]

drug company gilead stock up $2 during day, over $12 after hours-remdesivir

this is a company my eddy jones guy suggested a couple of years ago when it was $64-it's tickling $90

gotta have something to smile about

[JWags85]

Pretty amazing track record for GILD. Ground breaking in HIV treatment. Leader in Hepatitis, now potentially a trendsetter for COVID. Brilliant.

Interested to see the stock reaction. It’s been aggressively sell the rip the last few months. Every spike has been beaten back. This is obviously more substantive so it will stick. I’ve been in and out of calls. I stayed away after the lack of any China trial data. So naturally this happens 

[MU82]

GILD opened big (nearly to $86) but now pulling back a little - up 8% to $83-ish as I write this.

Trying to decide if I want to sell on this spike or just let it hang around my portfolio. It is my third-smallest position, so whether I keep it or sell it won't make much of a difference, so I might just keep it, collect the divvy and see if it can get back over $100 eventually. Hard not to at least consider selling, though.

[Coleman]

GILD opened big (nearly to $86) but now pulling back a little - up 8% to $83-ish as I write this.

Trying to decide if I want to sell on this spike or just let it hang around my portfolio. It is my third-smallest position, so whether I keep it or sell it won't make much of a difference, so I might just keep it, collect the divvy and see if it can get back over $100 eventually. Hard not to at least consider selling, though.

Sell half, then ride the rest. That's what I do in these situations.

[TSmith34, Inc.]

GILD opened big (nearly to $86) but now pulling back a little - up 8% to $83-ish as I write this.

Trying to decide if I want to sell on this spike or just let it hang around my portfolio. It is my third-smallest position, so whether I keep it or sell it won't make much of a difference, so I might just keep it, collect the divvy and see if it can get back over $100 eventually. Hard not to at least consider selling, though.

This is not investment advice...now I am caveated MU82 style

When I think about GILD, I look back at the brilliant solution they brought to market to cure, permanently, hepatitis. Cure as in eradicate it once you have it, not cure it as in vaccinate against it like small pox. And therein was their problem.

They had an enormous spike in revenue and profit from curing all the people suffering from the various forms of hep. And ironically, their success in curing people rather than making them dependent on a maintenance drug caused them to languish once they ran through all the back cases of hep. So my question is, does the same thing happen with a potential COVID* treatment?

If it does end up being the go-to treatment, they are going to see an enormous spike again and the stock is going to retest its all-time highs. But there are an awful lot of treatments being tested, some of which are also showing initial promise, AND longer term there is the possibility one of the vaccines being developed eliminate the need for treatments at all somewhere down the road. So in my mind those are the risk you have to balance.

Longer term, I am skittish about their incredibly successful HIV franchise. Like Hep-C, their drugs have provided enormous benefit to those with HIV, driving the disease to virtually undetectable levels in patients' bloodstreams. But the worries I would have are 1) Other companies are trying very hard to eat into that extremely profitable revenue stream, and 2) there are additional companies working on vaccines, some of which have been showing promise.

Short term shareholders could very well see a continued pop. For me, there are longer term risks that I am uncomfortable with and see other opportunities that have better risk/reward profiles IMO.



*As an aside, Kellyanne wants to know why GILD didn't work on treatments for COVID-1 through -18.

[MU82]

Sell half, then ride the rest. That's what I do in these situations.

I have done similar, Coleman, but this is a small position. Not worth doing that here. I am inclined to hang onto it, at least for a little bit, knowing full well that if bigger tests of the drug for COVID-19 fail, the price could plunge 30% in one sitting.

I am, however, looking at maybe dumping some of my Big Oil holdings, which are up big today, irrationally so IMHO.

I so hate selling anything, though, so I am usually much slower to do anything on that end than on the buying end.

[TSmith34, Inc.]

I find that making the decision to sell (at the right time) far, far more difficult than making the decision to buy.

[MU82]

I find that making the decision to sell (at the right time) far, far more difficult than making the decision to buy.

Yep. For one thing, unless one is building a cash stash, it involves 2 decisions: the sell and then the buy for the stock to replace it.

I ended up doing nothing today. Put in some "hero" limit sell orders and none hit. I'll use the weekend to think about it more, as I really don't like making knee-jerk investing decisions. I was just surprised that all the oil stocks surged today given that crude continued its freefall. Long-term, I'm not very high on the industry.

[Elonsmusk]

Think Ellenson Family Reunion gives some good advice above.  This dip is a great thing for you being 30 years out.  If you are a buy and hold guy, ideas I'd present would be:  AMRN, ETSY, ULTA, RVLV, SQ, BA, SHOP, CTAS.

Higher volatility biotechs I like (a sector invest 50% of my portfolio):  AXSM, FLGT, GNPX, NVTA, SAVA, AQST, IGMS.

Bloom Energy (BE) is also an interesting company with a bright future IMO.

Invest at your own risk above.  Just sharing some ideas.

The above aggregate are + 45% since March 20.  My next play is to short LULU.  I continue to accumulate AMRN shares weekly.  AMRN revs in Q1 2020 were $161M compared to $73M in Q1 2019.

I bought MRNA last week at $37.25 - they well may be the first to market with vaccine for COVID.  Tough entry point now at $53 up so much in one week..but if open to some risk..I'd still buy here.

Anybody have any other good ideas?

[Galway Eagle]

The above aggregate are + 45% since March 20.  My next play is to short LULU.  I continue to accumulate AMRN shares weekly.  AMRN revs in Q1 2020 were $161M compared to $73M in Q1 2019.

I bought MRNA last week at $37.25 - they well may be the first to market with vaccine for COVID.  Tough entry point now at $53 up so much in one week..but if open to some risk..I'd still buy here.

Anybody have any other good ideas?

Sold MRNA last week. Happy to have made some nice change but kicking myself now.

[Elonsmusk]

Sold MRNA last week. Happy to have made some nice change but kicking myself now.

So hard to know when to sell, but it's never a loss, taking a win/profits.  I'm kicking myself I didn't buy SHOP back on March 20 at $330.  I'd bought shop in January 2019 for $150, and sold out of it all some at $200 in early Feb and the rest at $225 by end of April 2019.

Thought the 50% gain in 3 months was too good to pass up.  It ended up climbing to $540 by Feb 19th.  Felt this recent pullback to $330 was a good opportunity, but couldn't pull trigger on such a high share price thinking % return probabilities as opposed to some other options.  SHOP now at $638.

[DegenerateDish]

I know it’s not literal because it’s speculative, but oil now at $2.17 (!!!!) a barrel.

I say this knowing it’s speculative, but in my wildest dreams I never imagined oil being literally worthless.

[JWags85]

I know it’s not literal because it’s speculative, but oil now at $2.17 (!!!!) a barrel.

I say this knowing it’s speculative, but in my wildest dreams I never imagined oil being literally worthless.

Crazy things happen when 2 major producers team up to attempt to cripple and/or bankrupt the oil producing industry in the country that produces the most oil in the world.

[DegenerateDish]

Crazy things happen when 2 major producers team up to attempt to cripple and/or bankrupt the oil producing industry in the country that produces the most oil in the world.

No argument here. Now at negative $7 a barrel. A producer will literally pay “you” to take oil off their hands.

[The Hippie Satan of Hyperbole]

No argument here. Now at negative $7 a barrel. A producer will literally pay “you” to take oil off their hands.

"Please store this worthless item for me."