Friday Four Play: The “Take It to the Limit” Edition
The third time’s the charm, right?
That’s what they say, anyway. Dow futures hit the circuit breakers once again this morning as markets took it to the limit … one more time.
Most of us are sad after Wall Street experienced its worst day since 1987’s Black Monday. The rest of us are wondering what to do with the rest of March now that March Madness is officially canceled.
Now that’s madness!
But it’s not only the NCAA tournament. The NBA suspended its season, as did the NHL, Major League Soccer and European soccer.
The MLB delayed opening day for at least two weeks and canceled spring training.
The PGA will still hold tournaments, but without spectators. Who will the announcers shush now? It’s just not the same!
It’s clearly a bad time to be a sportsball fan.
Getting back to the heart of the matter, Wall Street’s in rally mode today. Optimism is growing over a promised White House coronavirus bill … though what’s ultimately in this bill may or may not help you through the night.
Wall Street has been living life in the fast lane, with easy money driving massive bullish trading in the city.
Right now, however, we need to learn to be still. Remain calm. Don’t get lured into either the rush to sell or the rush to buy. Today’s rally may just turn out to be a sucker’s rally, so there’s no need to rush into today’s buying spree, guns blazing, like a desperado.
After all, the markets won’t have their pretty maids all in a row for some time. If you don’t plan to invest properly for the long run, you’re in for a heartache tonight … I know.
So, put me on Wall Street and show me a sign. And take it to the limit … one more time.
And now for something completely different … here’s your Friday Four Play:
No. 1: A Whole New World
I don’t know what timeline we’re stuck in, but I never thought I’d see the day when The Walt Disney Co. (NYSE: DIS) closed all its parks at once.
From Florida to Paris, Disney announced this morning that it will cease all park operations as a precaution against the spread of the coronavirus.
“In an abundance of caution and in the best interest of our guests and employees, we are proceeding with the closure of our theme parks at Walt Disney World Resort in Florida and Disneyland Paris Resort, beginning at the close of business on Sunday, March 15, through the end of the month,” Disney said in a statement.
Here at Great Stuff, we expected this announcement and anticipated that it’d lead to heavy selling pressure. However, since the closures arrived on a rally day for the markets, DIS stock is actually gaining despite the news.
We wanted to tell you that this would be a buying opportunity for DIS. But now … I think we’ll hold off until investors finally digest this historic event — especially since park revenue makes up about 26% of Disney’s total sales for the year. Ouch.
No. 2: Slackin’ Off
On the surface, Slack Technologies Inc. (NYSE: WORK) appeared to put in a solid fourth quarter. Earnings and revenue (which jumped 49%) each topped analysts’ expectations.
However, guidance for both the first quarter and the full year were on the light side. This was especially disconcerting for Wall Street, which expected big things from a company that enables working from home through the COVID-19 outbreak.
Digging deeper into the report, we find that fourth-quarter losses more than doubled year over year. What’s more, most of the new users flooding into Slack due to the coronavirus are free users. Convincing those freemium users to buy amid uncertain market conditions will be tough indeed.
As a result, Wall Street sent Slack packin’ to the tune of more than 25% today.
No. 3: The Beginning of the End?
It’s fitting, then, that Apple is now the dove carrying an olive branch of hope.
What’s that, little bird? Oh, Apple is reopening all 42 of its Chinese retail locations?! That’s great news!
But there’s more…
Wells Fargo & Co. (NYSE: WFC) analyst Aaron Rakers upgraded Apple stock from equal weight to overweight. Why? Rakers expects Apple to outperform, noting that the tech giant is “under-owned in large cap fundament funds.”
Wait … you mean to tell me that, after two weeks of the harshest selling we’ve seen in years (decades, even) … funds don’t own enough AAPL shares?
Fascinating … it’s not like everyone was dumping nearly every stock they owned recently, including Apple. Tell me more! Is water wet? Is the sky blue? Can sheep bladders really be used to prevent earthquakes?
Now, even the good news comes with a warning: “While it is still admittedly difficult (impossible) to gauge the fundamental impact Apple may realize from the COVID-19 outbreak, at current levels we think shares offer a compelling risk / reward for long-term patient investors.”
Is Rakers too soon? Too late? Either way, we’ll see what kind of financial shape Apple is in when the company reports its second-quarter earnings in a couple of months.
AAPL shares are up about 4.2% at last check. Nice.
No. 4: Occidentally on Purpose
For some, market collapses are a time to hunker down, save capital and prepare for the worst. For others, it’s time to go hunting.
The Wall Street Journal recently reported that activist investor Carl Icahn gobbled up nearly 10% of Occidental Petroleum Corp.’s (NYSE: OXY) shares during the recent market downturn. That’s right: In the middle of the Russia/Saudi Arabia pillow fight over oil prices, when oil service companies were getting beaten to death, Carl drank Occidental’s milkshake … drank it right up.
Icahn not believe it, and neither could Occidental. Today, the company’s board adopted a “poison pill” to prevent Carl from completely taking over. The pill (definitely not the little blue kind) is designed to limit shareholder rights for one year should any one shareholder acquire 15% or more of OXY shares outstanding.
Basically, Occidental just turned off the tap on Icahn’s share-siphoning program. Investors aren’t happy, however, as OXY is one of the few stocks struggling in today’s broad market rally.
Great Stuff: Happy Little Trees
Weeks like this make me want to put on Bob Ross and drift off to thoughts of happy little trees.
If this week’s whiplash was tough for you, you aren’t alone. Although … let’s not kid ourselves.
We aren’t through this yet. We have no idea how markets will react as the virus seeps deeper and deeper into the bowels of America. There will be more volatility to come — I’d almost guarantee it, but you know … irrational markets and all.
Optimism is just as contagious as the virus … and all the worry that comes with it. If you’re searching for some much-needed positivity to start the weekend, search no more.
No matter what the markets look like now, we will get through this. Business will go on. Life … uhhh … finds a way!
And you better believe that Mickey Mouse ain’t dead.
At times like this, you can count on Banyan Hill expert Paul to keep looking forward.
Paul’s “Strong Hands” approach to investing is crucial for times like this. He believes America will emerge from the coronavirus stronger than ever … no matter how long it takes. And the mega trends that he follows (such as 5G and precision medicine) won’t die to market panic.
Until next time, good trading!
Editor, Great Stuff