The Boys of Summer
Nobody on the road. Nobody on the beach. We can feel it in the air. COVID-19 has put the summer out of reach. Or so we thought…
The boys of summer aren’t gone. They’re just a little late to the pandemic party. Yes, dear reader, baseball is back … social distancing and all. I’ve got my hair combed back and sunglasses on, baby.
But, if you find baseball as exciting as golf with extra steps, both the NBA and the NHL are set to resume their seasons in about a week. Personally, I’m holding on for another 45 days until America’s real pastime starts up again: the NFL.
Not that I have any real hopes for the season as a Cincinnati Bengals fan. I mean, can Joe Burrow really turn things around? (Email me and give me hope!)
But I digress…
For investors, the real interest surrounding the return of sports is the potential impact on your portfolios. It means ad revenue for cable TV, more streaming packages and major implications for sports-betting firms like DraftKings Inc. (Nasdaq: DKNG) and FanDuel, owned by U.K.-based Flutter Entertainment Plc. (OTC: PDYPY).
It’s not all about the “boob tube,” you know.
According to Morgan Stanley Analyst Tom Allen — no relation to Tim, I’m sure — there’s a considerable amount of pent-up demand for sports betting. And with shortened seasons due to COVID-19, a lot of cash could flow into these companies very quickly.
So far this year, DKNG is up more than 200%, while PDYPY has gained a measly 19.6%. With the S&P 500 essentially flat for 2020, both gains look rather appetizing.
But the fates of DKNG and PDYPY are only part of the story. As Barron’s reported back in May, sports bettors turned to day trading the stock market to get their fix.
Herein lies a major concern for the stock market. Will sports bettors return to, well, sports betting? If they do, what does that mean for the market?
While I can’t tell you the direction the market will take following the exodus of this much speculation, you can be certain that more market volatility is on the way. Assuming sports bettors do return to the other great American pastime, that void in the market will need to be filled.
The market will take a bit of time to adjust. That means more volatility.
Just remember that Great Stuff’s love for you will still be strong, after the boys of summer have gone.
Out on the road today, I saw a deadhead sticker on a Cadillac. A little voice inside my head said: “The best volatility-beating strategy is a simple one.”
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The Good: Taiwan Inside
Last week, we learned that, due to severe production problems, Intel Corp. (Nasdaq: INTC) considered the unthinkable: outsourcing semiconductor production for the first time in company history.
Speculation ramped up considerably after Intel’s “outsourcing” announcement, leading many analysts to jump on the Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) bandwagon.
J.P. Morgan Analyst Gokul Hariharan believes that TSM is Intel’s backup plan. Hariharan reiterated TSM’s overweight rating and boosted his price target by 33%.
Taiwan Semiconductor was already in bull mode before the Intel speculation. On July 16, the company beat Wall Street’s second-quarter earnings and revenue targets, and it guided higher for the rest of the year.
Throw additional demand from Intel into the mix, and Taiwan Semiconductor now appears to be the king of the semiconductor space. It’s starting to look more and more like Apple Inc. (Nasdaq: AAPL) was smart to ditch Intel chips.
(Click here for the No. 1 tech stock to own for the second half of 2020!)
The Bad: Bored Games
The pandemic should’ve been a boon for Hasbro Inc. (NYSE: HAS). The company makes some of the most iconic board games in the world: everything from Monopoly to Jenga to Twister. I’m still waiting on a Death Row themed board game, Hasbro!
“Should’ve been” are the keywords, however. Hasbro swung to a loss of $33.9 million in the second quarter from a profit of $13.4 million last year. Both revenue and earnings whiffed Wall Street’s expectations. Even “Peppa Pig” couldn’t save Hasbro, with revenue at recently acquired Entertainment One falling 30%.
So, why did the board game maker fail to capitalize on what should have been a home run quarter? Production issues. According to Hasbro, factory shutdowns in the U.S., Ireland and India limited supply and impacted earnings.
But the company said it fixed those problems now, expecting a strong holiday season. Well, barring more shutdowns, that is.
I’m calling it now: Death Row Monopoly will be the hottest present under the tree this holiday season. Do it, Hasbro.
The Ugly: Mo’ Money, Mo’ Volatility?
If market volatility has a poster child this year, it’s Moderna Inc. (Nasdaq: MRNA).
Moderna stock rallied as much as 10% today, after plunging more than 17% heading into the weekend.
So, what drove MRNA today?
Why another $472 million cash infusion from the U.S. government, of course. So far, Moderna has received nearly $1 billion in U.S. funding for its COVID-19 vaccine. The latest round of funding goes to support a phase 3 trial that includes more than 30,000 participants.
Moderna’s vaccine has shown considerable promise. It’s one of the leading vaccines in the great race to inoculate mankind against COVID-19. The company maintains that it’s ready to deliver 500 million to 1 billion doses of the vaccine per year, should testing prove successful.
That sounds great, Mr. Great Stuff! But why is this ugly?
Oh, how quickly we forget about patent disputes.
You see, Moderna’s vaccine requires a special delivery system in order to work. Unfortunately, Moderna doesn’t own the patent on that delivery system. Arbutus Biopharma Corp. (Nasdaq: ABUS) does. It’s why MRNA plunged roughly 17% in two days last week.
In short, Moderna will still make bank if its vaccine is successful. But if it has to share some of those profits with Arbutus (he-he … “butus”), investors might not be so happy with the lowered returns.
You get earnings! And you get earnings! Everybody gets earnings this week!
If you had any doubts that earning season is in full swing, take one look at today’s Chart of the Week, courtesy once again of our pals over at Earnings Whispers on Twitter. We’ve got 180 S&P 500 companies reporting this week — and a few Great Stuff Picks, to boot.
Let’s dig in:
Several current Great Stuff Picks walk into the confessional box this week, and first up is Amkor Technology Inc. (Nasdaq: AMKR). The semiconductor pro is already up over 40% from when we recommended you buy in, and it may be a critical look at the chip side of the tech supply chain.
Add in our other chipmaker, Advanced Micro Devices Inc. (Nasdaq: AMD), and we’ve got both the consumer and business side of the semiconductor market in the earnings crosshairs. We’re looking out for a possible profit-taking opportunity with AMD — especially after its recent run-up following the April-to-May doldrums.
Next up is Spotify Technology S.A. (NYSE: SPOT) — the former dark horse of the streaming sphere.
Yes, believe it or not, some people prefer to stream tunes all day and all night instead of constant Netflix blabber, and that’s exactly why it’s a Great Stuff play on the sector. We’ll see just how much of the world’s lockdown was spent groovin’ to Spotify — and how the company monetizes its exploding listener base.
Anyone else notice that last year’s “sin stocks” are just this year’s pandemic supply prep? Reporting throughout the week are the consumable champs, from ciggie connoisseur Altria Group Inc. (NYSE: MO) and pot stock Aphria Inc. (Nasdaq: APHA), to brewer Anheuser-Busch Inbev SA (NYSE: BUD).
Watch your wallets — we’re watching the bigwigs of spending this week too: Visa Inc. (NYSE: V), Shopify Inc. (NYSE: SHOP), PayPal Holdings Inc. (Nasdaq: PYPL) and Mastercard Inc. (NYSE: MA). This is our gauge on that whole consumer confidence thing, the influx of stimulus check splurges notwithstanding.
Then, for the other side of the consumer spending coin, we’ll hear from Amazon.com Inc. (Nasdaq: AMZN) and Apple. And we might as well throw in eBay Inc.’s (Nasdaq: EBAY) earnings for good measure. (EBay auctions for more $#!% that I don’t need — that’s the new face of gambling.)
Last and maybe least, we’ll check in on our present-day dinosaurs, including the cable cabal of Comcast Corp. (Nasdaq: CMCSA) and Charter Communications Inc. (Nasdaq: CHTR) and the washed-up General Electric Co. (NYSE: GE).
Depending on how its report shapes out, Boeing Co. (NYSE: BA) may join the endangered list as well.
Now, I know we’re glossing over some of the big names here. I mean, we haven’t even mentioned Facebook Inc. (Nasdaq: FB) and Google-parent Alphabet Inc. (Nasdaq: GOOG)! And that’s the kind of fast-and-loose action-packed earnings we’re headed into — just the way we like it here.
We’ll keep you up to speed with all things earnings season.
Great Stuff: Top Pulled Down, Radio On
Thanks for tuning in to another week of Great Stuff!
So … how about those sports, huh? Have you anxiously awaited their return? Or, are you getting your adrenaline fix with the latest-and-greatest earnings action? (Hey, we don’t judge here.)
Either way, write to us! We’re chomping at the bit to hear your rants and raves.
GreatStuffToday@banyanhill.com is all you need.
But if spinning a yarn with us isn’t your thing, do yourself a favor and at least check out One Trade — the simplest volatility-beating strategy around. Seriously: If there’s one strategy you check out today, make it this one.
We’ll be back tomorrow! But you can always keep up with us on social media: Facebook, Instagram and Twitter.
Until next time, stay Great!
Joseph Hargett
Editor, Great Stuff