Cybercrime Fast Times; Tesla Told-You-So’s; Royal Dutch Shell Game
Don’t Panic at the Disco
If you enjoy today’s edition of Great Stuff, you have only one person to thank: Great One, Mike B. (No relation to Mel B. of Spice Girls fame, I’m sure.)
Before Mike’s email hit our inbox, I was all set to talk about today’s market dip … the new strain of COVID-19 anarchy in the U.K. … and the new “stimulus” bill from Congress. If those topics interest you, let me sum them up briefly in order:
- The market dip is expected year-end sector rotation and profit-taking. Don’t panic.
- Anyone who knows anything about viruses knew this was coming. Don’t panic.
- If Congress thinks this bill is “stimulus,” I feel sorry for their family members — if you’re a congressional pet dog, it’s probably too late to panic. (You’re already bored out of your skull.)
Now, on to Mike’s email:
What’s the deal with CrowdStrike? It jumped 10% on Friday.
— Mike B.
Welcome back, Mike! It’s good to hear from you again. Channeling your best Jerry Seinfeld there, I see.
So, as you may or may not know, Russian hackers exploited a widely used security software this year. The attacks reportedly began in March and affected several crucial government agencies and critical American infrastructure.
An anonymous U.S. government official said: “This is looking like it’s the worst hacking case in the history of America. They got into everything.” And by everything, they mean everything.
Per the same anonymous sources, Russian hackers compromised most, if not all, government agencies as well as information from defense contractors, tech companies, telecom providers and the U.S. electrical grid.
While the hack began back in March, the news only reached Wall Street on Wednesday last week. As a result, SWI plummeted 40% on the news, while FEYE dropped 12%.
In a truly bizarre twist, FEYE skyrocketed 38% on Friday. Why? According to MarketWatch: “Analysts consistently noted that the hack will lead to a desperate need for forensic investigations and increase attention on prevention.”
Trusting FireEye to research a vulnerability that it helped create is like letting Equifax protect your credit rating after its data breach in 2017. That just makes no sense.
Holy cats! So, what about CrowdStrike?
CrowdStrike (Nasdaq: CRWD), Great Stuff Picks readers will be happy to hear, wasn’t part of this cybersecurity breach. In fact, SolarWinds turned to CrowdStrike to help patch its security hole. How’d you like them apples?
Furthermore, this is a critical time of year for cybersecurity firms, as businesses settle their budgets for 2021. Because of this, and the company’s role as pseudo-savior for SolarWinds, CrowdStrike stands to benefit considerably from the fallout.
That is why CRWD jumped 10% on Friday and why the stock is poised for even bigger gains in 2021. Great Stuff Picks readers are already well aware of how profitable an investment CRWD is. Since we recommended the stock back on January 8, CRWD is up more than 270%!
Congratulations, Great Ones!
I hope that answers your question, Mike. Thanks again for the timely and topical question.
Editor’s Note: It’s the “End of the Dow” … and I feel fine!
My colleague Ian King correctly called the 2008 crash — a move that sent his hedge fund soaring 1,700% in just two years.
But recently, King made an even bolder prediction: the end of the Dow. He reveals everything in a new, controversial video presentation, where you’ll see the real reason America’s favorite stocks, such as Intel, Boeing and J&J, are crumbling.
The Good: Just Did It
Who knew that selling products directly to the consumer could be so profitable? (And if I have to flag that as sarcasm, y’all need more help than I can give.)
Both figures put Wall Street’s estimates to shame, and it was all thanks to direct online sales.
Specifically, Nike saw direct sales soar 30% to $4.3 billion — and not just stateside. Nike saw double-digit growth across the globe. Furthermore, online sales surged 80%, backed by triple-digit gains in North America.
Nike’s solid performance despite the pandemic should give all investors a reality check. Even when things return to “normal,” it won’t be the normal you’re used to. And, honestly, it shouldn’t surprise anyone here — e-commerce is the new norm with or without a pandemic.
The Bad: Tumbling Tesla
I’ve talked about Tesla (Nasdaq: TSLA) falling for weeks now, it seems. The all-but-inevitable result of TSLA’s addition to the S&P 500. The end of the hype. The end of index funds buying TSLA.
Today is the official day, and TSLA now trades on the S&P.
I wanted to take a bit of a victory lap here, but … first, it’s too early for that, and second, every financial media publication on the planet already did that for me.
I’ve seen everything from “2 Reason Why Tesla Is a Risky Buy Right Now” to “Tesla’s stock debuts as S&P 500 member with a 4.1% drop, then falls further” to “Tesla falls on S&P 500 debut — is this the end of its meteoric rise?”
It’s not often that my contrarian roots argue with my realistic sensibilities, but Tesla manages to create just such a situation. On one hand, I know the company is overvalued — by a lot. This decline needs to happen sooner or later.
On the other, this much negativity often means that more sideline money can be brought to bear. Furthermore, the fact that so many index funds now own TSLA creates a bit of a price floor for the stock — maybe not a solid floor, but there’s more resistance to a sharp decline than before TSLA entered the S&P 500.
In the end, I see TSLA’s decline continuing for a while longer before bargain hunters ultimately step in. Whether TSLA is truly a bargain at that point remains to be seen.
The bottom line is still the same: If you already own TSLA, you’ll probably want to ride this volatility out and maybe even consider adding to your holdings once the shares bottom out. If you don’t already own TSLA, wait for better prices before getting in. They’re on the way shortly.
The “slightly below the bottom” line is also still the same: The crowded Tesla trade is far from your only way in on electric vehicles (EVs) — not when there’s a bang-up battery blowout going down. Click here to learn more!
The Ugly: Double Dutch Shell Game
Profits and write-downs. Put them under shells, and move them around. That’s the oil industry right now.
For instance, Royal Dutch Shell (NYSE: RDS.A) just announced that it’s slashing the value of its oil and gas holdings by $4.5 billion. This comes after nearly $18 billion in oil and gas write-downs in June … and thousands of job cuts.
It’s not just Shell. Back in June, BP (NYSE: BP) wrote down $17.5 billion in oil and gas assets. Both companies have cut dividends.
Shell, like most in the oil industry, blames the pandemic, its closed refineries and “onerous contracts for liquefied natural gas.” I honestly haven’t the foggiest what an “onerous contract” is. I guess Shell means the supply deals it signed before the pandemic sent the oil industry, and oil prices, into a tailspin.
For the time being, you can expect more write-downs and cagey language from the oil majors. They’re worried that the effects of the pandemic could last well beyond the virus. The past year saw green energy rise to the forefront in both consumer adoption and market preference.
That’s where nearly all investment capital is heading these days — hey, I just told you about those crazy EV battery plays!
While the situation is certainly ugly right now, it doesn’t mean that Shell or its competitors are dead just yet. They aren’t going on the cart anytime soon — the green energy transition will take more time. Assuming the pandemic ends in 2021, that means that stocks like RDS.A could be a solid rebound investment for the coming year.
Great Stuff: It’s a Gas!
What really gets my motor running — gas, electric or wordsmithing — is the emails you and your fellow readers sent this weekend. Thank you!
If you haven’t done your part to fill our inbox with your curious questions and curiouser rants, why not take a hot second right here, right now?
Drop me a line at GreatStuffToday@BanyanHill.com.
We’d love to hear what you think about Tesla joining the S&P 500, the vaccine rollout, the slow death of oil and gas companies — anything goes ‘round here, really. So, share your thoughts with us!
Until next time, stay Great!
Editor, Great Stuff