Jobs Data Vapor Lock; Shopify Shocks; Gamers Game Amok
The Market Gods Are Crazy
Any Great Stuff readers home-schooling kids right now? It’s quite the experience, let me tell you.
New math? Pshaw … I’ve done things with fractions and limits in the past week that would turn you white.
Yes, Mr. Great Stuff, we get it. Math is hard. But what about the market? Also, aren’t you an analyst?
Hold your horses, we’ll get to the market. And yes, I am an analyst, which is why I handled the fractions and limits … and not someone else who lives in this house who shall not be named.
Anyway, I had an “Aha!” moment when reviewing science with my 14-year-old daughter on Monday. We were discussing solar flares. There was a picture of a flare that said 100 Earths could fit inside that flare. My daughter’s eyes glazed over. “Cool?” she muttered.
After talking about it for a bit, it became clear that the sheer size of the flare gave her vapor lock. 100 Earths? One Earth is hard enough to deal with, but 100? How big is that really?
In the end, she had no real way to process it other than to say “cool” and move on.
That is how I envision Wall Street right now: Vapor locked.
Automatic Data Processing Inc. just reported that 20.2 million jobs were lost in April.
That’s 20.2 million Americans out of work. That’s nearly the entire population of Florida. It’s New York State. It’s the entire population of Iowa, Mississippi, Arkansas, Kansas, Utah, Nevada and New Mexico combined. All of them, unemployed.
Economically, we’re in a “How many Earths?” situation right now. Investors, traders and economists alike have never seen anything like this before. It’s beyond everyone’s scope of reasoning.
Sure, they can predict. They can speculate. They can go on Bloomberg or MarketWatch and discuss their mathematical models about how this will all play out. But in the end, nobody really knows.
Part of the problem is that we have the same “How many Earths?” situation on the stimulus side of the equation. The U.S. government has doled out trillions to save the economy, while the Fed promised “unlimited stimulus.”
Trillions, unlimited stimulus and 20.2 million unemployed … these are all unprecedented figures. And they’re all sloshing around at once. It’s no wonder a vapor locked Wall Street initially rallied on bad news once again.
It doesn’t know what else to do.
Let’s put this another way.
Has a situation ever gotten so out of hand that you couldn’t help but laugh?
Not that the market is laughing, per se, at the enormity of the economic disaster unfolding right now. The recent market rally was hope that things will be much better when the pandemic clears and “What else can we do, really?”
If that sounds crazy, it is. I think Jimmy Buffet put it best when he sang: “If we weren’t all crazy, we would go insane.”
And that’s the real rub here. We’re never going to survive, unless we get a little crazy. (Thank you, Seal.)
Here’s where things get interesting for opportunistic investors. A heavy degree of volatility has accompanied the market’s rally off the March “bottom.” (I’m not willing to officially call it a bottom yet.)
Volatility is the market’s way of dealing with the unknown. And with Wall Street vapor locked, there’s more than a little unknown floating around right now.
Now, for buy-and-hold investors, volatility is a real pain in the butt.
But for options traders, this market is a smorgasbord of opportunity!
Remember: It’s possible to know that the market gods are crazy but still make money amid the insanity.
That’s where Banyan Hill’s own Paul Mampilly comes in. Paul has a “rebound” method to spot opportunities when markets are irrational to the gills.
So, why not let Paul Mampilly and his team do the heavy lifting and find opportunities for you?
Good: It’s a Small World After All
Reading The Walt Disney Co.’s (NYSE: DIS) quarterly report today was like being stuck on the “It’s a Small World” ride at Disney World. It’s the happiest nightmare you will ever experience, trust me. It’s been 10 years and I still have flashbacks…
Earnings plunged 63% to $0.60 per share, missing Wall Street’s expectations. Meanwhile, revenue jumped 20.6% to a stronger-than-expected $18 billion. Sales were bolstered by Disney’s strong media performance on the quarter, including 54.4 million Disney+ subscribers. That’s up by 4.5 million in less than a month!
The kicker for many investors, however, was Disney’s dividend suspension. The company plans to save $1.6 billion by axing its semiannual dividend, alongside plans to cut capital spending by $900 million for fiscal 2020.
As a sign of hope, however, Disney said it will reopen Disney World Shanghai on May 11. The company lost $1 billion due to the Shanghai, China, closure alone. Combine Shanghai’s reopening with the amazing Disney+ subscriber growth, and investors have little to complain about following this morning’s report.
So, while the pandemic created a whole new world for Disney, investors need to let it go and realize that DIS stock remains a real beauty here in this beast of a market.
Better: Blizzard of Oz
Streaming services like Disney+ and Netflix have received quite a bit of attention as solid investments in this lockdown market. But don’t forget that there’s another crucial form of at-home entertainment: video games!
Activision Blizzard Inc. (Nasdaq: ATVI) bluntly reminded everyone of that today with its first-quarter earnings report. Earnings came in at $0.76 per share, doubling the consensus estimate. Revenue dipped to $1.79 billion, while bookings rose to $1.52 billion. Both figures trounced Wall Street’s expectations.
What’s more, Activision actually provided full-year guidance — something only a handful of companies have done amid the COVID-19 lockdowns. Projecting delivery of “a robust slate of content over the remainder of the year,” Activision expects earnings of $2.22 per share on $6.8 billion in revenue.
It’s almost like the video game market was perfectly designed for this exact moment. I mean, what other industry centers solely on customers who never leave the house?
Also, I wonder how much of those $1,200 stimulus checks went to video games…
Best: Another Great Stuff Win!
That shift played right into Shopify Inc.’s (NYSE: SHOP) waiting arms … and into Great Stuff readers’ portfolios!
This morning, Shopify reported a 210% surge in earnings and a 47% spike in revenue. In fact, the company recorded a profit of $0.19 per share, versus Wall Street’s expectations for a loss of $0.18 per share. Even gross merchandise volume (a key sales metric for the online-sales enabler) beat expectations, rising to $17.4 billion.
What’s more, in a bid to directly take on Amazon, Shopify said it plans to spend $1 billion in the next year to build out its distribution network to store and ship products for its customers.
SHOP shares rallied more than 4.5% on the news, which is music to Great Stuff readers’ portfolios.
Why? Because Great Stuff recommended buying SHOP back in our September 4 edition. Since then, SHOP has surged more than 89%!
If you hold Shopify, keep doing so. There are more gains to be had from here.
Congratulations on your win! This is truly Great Stuff!
In last week’s Great Stuff Poll, we asked for your take on the U.S. economy’s reopening. Too soon? Too late? Too dazed by the passage of time to care?
By the majority, Great Stuff readers are on the “It’s not opening soon enough!” side of things. Just over 54% of you must’ve been eagerly awaiting by the front door, ready to pounce on that brave reopened world.
This week, well, we’re still talking about the “Great Reopening.” (These things take time, don’t you know?)
When it comes to U.S. states deciding whether or not to ease quarantine tensions, it didn’t take long at all for the public health emergency to turn into a political flip storm. Ah, bipartisan outrage — it’s what we do best!
Today, Great Stuff wants to hear from you — no matter if you’re a never-voter, an armchair campaigner or even one of those “dark basement” freaks glued 24/7 to conspiracy channels. (The Lizard People aren’t hiding the COVID-19 vaccine from us in Area 51, stop that. Unless, that’s what they want us to think…)
So, do you approve of how the government is reopening the economy? Or are we watching the greatest botched job since the Falcons blew a 28-3 lead in the Super Bowl?
I don’t care which side of the political Thunderdome you’re speaking from here … nor whatever label you plan to throw at me in our inbox. So, click on the envelope below to answer our poll!
If you’ve got more to say, by all means, speak! We implore you. Feel free to reach out to the Great Stuff team (that’s me!) by sending an email to GreatStuffToday@BanyanHill.com. You have one day left to make it into this week’s edition of Reader Feedback.
Until next time, be Great!
Editor, Great Stuff