Hodled To Death
Great Ones, I owe y’all an apology.
Back in January, I fell victim to one of the classic investing blunders: believing more in an idea and its potential gains than reality.
The hardest part about all of this is that … I already knew the answer.
Today, we’re selling Coinbase Global (Nasdaq: COIN) in the Great Stuff Picks portfolio. And I’m sorry to say that we’re banking a near-78% loss on the position.
Some of y’all might want to continue holding COIN stock in the hopes that the company will come back. And it probably will … eventually, someday … maybe.
For now, however, everything I’m seeing about the company tells me that losses will get much worse before they get better.
Let’s get into the nitty-gritty:
First, Great Stuff recommended Coinbase back on January 5 as part of our stock picks for 2022.
Back then, the U.S. economy was finally stretching its legs after being locked inside for nearly two years. Supply chain concerns were starting to ease up, and everything was looking hunky-dory for a second-half rebound in the market.
Both Coinbase and cryptocurrencies appeared poised to take Wall Street by storm.
Then Russia invaded Ukraine … and everything went to hell in a handbasket.
As I have always said, Great Stuff’s COIN stock recommendation was based on a long-term outlook, not a short-term reactionary investment. Even after the Russian invasion, the long-term outlook for Coinbase remained intact.
The company appeared to have solid leadership, even if it was pursuing an ill-advised NFT marketplace. That should have been a red flag, but everyone and their mother was pursing NFTs earlier this year.
So I discounted it as “business as usual” for the crypto market. NFTs themselves weren’t a direct risk to cryptocurrencies, but, as we would find out, Coinbase management was coming off the rails.
How off the rails? How about rating employees “off the rails?” We’re talking Black Mirror levels of “off the rails” here:
Coinbase is experimenting with having employees rate each other…
Staff are reportedly asked to evaluate one another after meetings and other interactions based on how well they model 10 core values. Employees can give their colleagues a thumbs up, thumbs down, or neutral review… — Sarah Jackson, Yahoo Finance
Which brings us to today’s Coinbase news…
The company announced this morning that it is slashing 1,100 jobs — about 18% of its workforce — in a bid to cut operating expenses. Additionally, Coinbase will spend between $40 million and $45 million on restructuring … also to cut operational expenses.
Building out that NFT marketplace now looks like a really, really bad idea. I mean, if you’re struggling with operating expenses, dropping massive cash on a dying fad is not a good business move.
Also, I wonder how those 1,100 Coinbase employees fared in the ratings system. Clearly, y’all Great Ones were right about how this whole “rating employees” thing would end.
This is where I lost hope in a COIN stock rebound. I lost faith in the company’s management following this string of ham-fisted moves and their inability to see the writing on the wall when it came to NFTs.
So are we gonna address “I already knew the answer?”
This is the second reason we’re selling COIN stock … and, sadly, I realized that if I’d just listened to myself, Great Stuff Picks never would’ve bought COIN stock in the first place. It’s a hard pill to swallow, for sure.
Back in November 2021, I wrote:
The problem is this: Cryptocurrency investors hold. That’s what they do. They hold so much that there’s the “hodl” meme making fun of how much they like to hold and not sell their cryptocurrencies.
Crypto traders hodl when times are good, and they hodl even harder when things are bad. Minus the Russian invasion of Ukraine, this hodling might not have been too bad, and Coinbase should’ve seen increased revenues as crypto buying picked up the pace throughout the year. And we would’ve never known just how insane management had become.
Given that Coinbase makes money off of trading volume, hodling is bad for the company. This combination of crypto traders doubling down on hodling and management’s inability to deal with continued stock market trouble has created a perfect storm for COIN stock.
In short, I no longer believe that Coinbase management can help Great Stuff Picks recoup our losses anytime soon.
For clarification: It’s not cryptos or the current crypto crash that’s driving us to sell COIN stock. It’s the company’s management and its focus on transaction fees for revenue.
I still like certain cryptocurrencies as investment options — especially at these prices. I just don’t trust Coinbase as an investment possibility right now. The company has a lot of thinking and restructuring to do before I’ll even consider COIN stock again.
The bottom line: Sell COIN stock.
Coinbase aside, if you’re still sticking with crypto amid the *ahem* buying opportunity … we’ve got you covered there too! Here’s something worth hodling:
Ian King has just released his top crypto recommendation. This one coin has plummeted from its all-time high — meaning it’s dirt-cheap. And it’s positioned to roar back to life.
Experts are saying it will be 20 times bigger than bitcoin. Billionaires Elon Musk, Ray Dalio and Mark Cuban have all loaded up on this one coin. Follow the hodlers!
Go here to see how you can get Ian’s top crypto recommendation.
Good: Head In The Cloud
After last night’s trip to the earnings confessional, it’s clear that cloud software company Oracle’s (NYSE: ORCL) demand hasn’t dried up like some people thought it might.
For the quarter, Oracle beat both Wall Street’s earnings and revenue figures by a country mile:
• Earnings per share: $1.54 versus $1.37 expected.
• Revenue: $11.84 billion versus $11.66 billion expected.
More importantly, Oracle said it’s been attracting new clients to its cloud products despite stiff competition from Amazon Web Services and Microsoft Azure. In fact, unit sales increased by 36% this quarter, raising total cloud revenue by 19% to $2.9 billion.
There was some speculation among the Street’s talking heads over whether Oracle could maintain its pandemic-era business boom. But with many people splitting their time between home and office, cloud market demand is stronger than ever.
In fact, CEO Safra Catz said: “We believe that this [quarter’s] revenue growth spike indicates that our infrastructure business has now entered a hyper-growth phase.”
Investors liked what the Catz dragged in, lifting Oracle shares by nearly 9%.
Better: FedEx Delivers Dividends
Great Ones, if you like dividends — particularly ones shipped straight to your door — then you’re really gonna like FedEx’s (NYSE: FDX) plan to bring more value to shareholders.
See, the parcel company held a parley with activist investor D.E. Shaw. And after some serious negotiating, the two have finally agreed to add three more directors to FedEx’s board, while simultaneously increasing shareholders’ quarterly dividend.
Under the terms of the new agreement, FedEx will hike its dividend a healthy 53%, from $0.70 to $1.15. That’s a pretty big deal for investors who’re looking for passive income in this … how should I say this … piss-poor market we’re all wading through.
The move also comes just weeks after FedEx founder Fred Smith said “Sayonara!” to the company he built, leaving CFO Michael Lenz to take the lead on this morning’s announcement:
Cutting through the corporate speak, this tells me that FedEx is bullish on its own business even as freight prices get more problematic.
FedEx investors responded positively to this bullishness, bumping FDX stock up 13%.
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Best: Amazon Drones On
Not to be outdone by Walmart’s (NYSE: WMT) recent drone delivery program, Amazon (Nasdaq: AMZN) announced this morning that it’s nearly ready to start shipping goods via unmanned aircraft as well.
The first drone delivery shipments will roll out in Lockeford, California — a rural community 100 miles outside of San Francisco that’s isolated enough that Amazon can conduct its flight tests without much worry. You know, just in case…
To avoid unnecessary accidents, Amazon will also test the sense and detection tech it’s been working on to avoid mid-air collisions between drones — especially as more companies start to use these little buggers in place of boots-on-the-ground shipping services.
According to Amazon:
So long as said “people and pets” manage to avoid any delivery disasters, Amazon should start rolling out more drone tech sometime next year (though all further details are pending at this point).
If any of you Great Ones are lucky enough to try this new service out — and live in a remote enough area — let me know your experience with it at GreatStuffToday@BanyanHill.com. I’d love to know if it’s worth the hype.
While some consumers have been able to stomach the higher fares, especially for those who delayed travel plans during the pandemic, the dip in bookings shows that some are rethinking their appetite for getting on a plane. — Vivek Pandya, lead analyst at Adobe Digital Insights
Going somewhere soon? Ohhh, not without a brand-new Quote of the Week in your carry-on!
As you can tell, we’re still stuck in the crosswinds of inflation and consumer confidence — the airline industry, doubly so.
Today’s quote gets right to the meat of the moneymaking matter: All that pandemic-propelled traveling we’ve heard about from the airline stocks is starting to slip. Bookings have stayed “resilient” amid the inflationary pressures … but they are dropping.
U.S. airline bookings fell 2.3% in May for the second straight month. Considering spring and summer are supposed to be the biggest seasons for flying — geese would tell you otherwise — this doesn’t bode well for the airlines once summer is over.
But all this was to be expected. Why? It’s all about the money, money, money … the price tag.
While airlines eagerly wait for traffic to reach 2019 levels again, airfare has already hit pre-pandemic prices — and then some. Tickets are about 30% more expensive compared to 2019, and you can thank higher fuel costs for that one.
If I’m paying that much to fly, I at least want a whiff of that Jet A gas. Figures.
Hey, whatever floats your goat. As Pandya points out in today’s quote, sure, some travelers are fine with paying those higher prices … but other folks? Nope…
For the majority of Americans still seeing “incoming recession!” everywhere every day, it’s budgeting time. Time to stay grounded. Time for a staycation, if fuel prices don’t let up.
Aw, man. We just had two whole years of staycationing.
With consumer confidence at all-time lows … like, even lower than during the inflation crisis of the ‘70s … get used to it.
Elsewhere in the airline industry, analysts still have their fingers in their ears, mostly avoiding reality:
We have yet to see any cracks in airline bookings, and investors remain concerned about a potential slowdown post peak summer travel.
— Andrew Didora, airline analyst at Bank of America
Psst. Here’s your sign.
Bookings are already slipping (albeit just 2.3% for May). Airfare costs might finally be hitting that “too much” point for consumers, and we both know that the price hikes aren’t going to ease up anytime soon. I mean, this is the airline industry we’re talking about here.
It may not be a big, industry-dissolving crack … but it’s there. And it’s a-coming.
Anyway, if you have thoughts to share on Coinbase, delivery drones or ever-soaring airfare, drop us a line at GreatStuffToday@BanyanHill.com and let us know!
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Editor, Great Stuff