Snake Sickness Sinks Stocks; Sallie Slithers Skyward
The Wuhan Snake Virus Survival Guide
I don’t know about you, but this Wuhan coronavirus thing has me more than a little worried.
Since Great Stuff last reported on the situation, the number of infections has surged 50% to more than 600 patients. The death toll rose from 6 to 17. Cases are now popping up around the globe, from Singapore to the good ol’ U.S. of A.
Wuhan, the city in China where the outbreak started, is now quarantined. A city of more than 11 million people … quarantined. It’s unprecedented. Residents are reporting empty shelves in stores. Apparently, the Chinese government has been silent on how bad the city’s situation has become.
If that wasn’t enough, we now have images of people in China being transported in plastic tubes and metal boxes to avoid infection. The one U.S. patient is being kept in a 20-by-20 biocontainment room and is being treated by a robot.
Finally, Chinese researchers believe that the Wuhan virus jumped to people from snakes.
“Many patients were potentially exposed to wildlife animals at the Huanan seafood wholesale market, where poultry, snake, bats, and other farm animals were also sold,” researchers noted.
Freaking virus-infected snakes, people! (Where’s Samuel L. Jackson when you need him?!)
Now, I’ve watched more than my fair share of apocalyptic sci-fi movies. I even have a copy of The Zombie Survival Guide on my bedside table. (Don’t judge me. If you’re prepared for zombies, you’re prepared for anything.)
Needless to say, my imagination and emotions are running a bit wild at the moment. Apparently, I’m not alone. The Dow Jones Industrial Average plunged 200 points on the open this morning. Markets around the world finished broadly lower as news of the virus spread.
Officially, the virus is known as 2019-nCoV, but I’m calling it the Wuhan snake virus … that’d make a great movie or book title.
At times like these, it’s important to remember the bold words emblazoned on the cover of The Hitchhiker’s Guide to the Galaxy: Don’t Panic!
Panic and fear are an investor’s worst enemy. They make you do irrational things, like selling when you shouldn’t.
Are there positions in your portfolio you should consider selling to take profits on? Probably. But only you know your investment strategy and your risk tolerance.
I will guarantee you, however, that there are holdings in your portfolio that you absolutely should not sell — or at least, there should be if you read Great Stuff regularly.
I’m talking about companies with strong earnings and solid management that operate in next-gen mega trend markets. These are the companies that’ll make it through the Wuhan snake virus epidemic with flying colors.
But Mr. Great Stuff, I’m terrified beyond the capacity for rational thought! I mean, Chinese snake viruses, for heaven’s sake! What do I do?
I hear you, dear reader. What you need is someone with strong hands to help you wrangle those Chinese snake viruses…
If you’re a Paul Mampilly reader, you know where I’m going with this … but if you’re not, now’s your chance to see what the Mampilly hoopla’s about.
The eternal optimist, Paul Mampilly is the market’s “Strong Hands.” He believes in holding on to solid, profitable stocks through thick and thin … no matter what the talking heads on MarketWatch freak out about.
Paul’s approach guides you through today’s biggest investing trends … and away from lackluster, failing business trends. No matter where you think the market’s headed tomorrow, Paul’s already there with a plan to profit.
Remember … we live in a world with plague snakes now. You may not need The Zombie Survival Guide, but you could use Paul’s Strong Hands if this market volatility spreads.
I mean, just look at how strong those hands are.
I rest my case.
The Good: Sallie Did?
You know it’s one of those days in the market when a student loan company is among the best performers.
SLM Corp. (Nasdaq: SLM) — commonly known as Sallie Mae — reported better-than-expected quarterly results with earnings of $0.33 per share on revenue of $419 million. What’s more, Sallie Mae said it plans to sell $3 billion in private-education loans to fund $600 million in share buybacks.
I’m honestly quite conflicted on this one. Going by the numbers, SLM ditching $3 billion in loans for a share buyback program looks really good — though today’s 20%-plus rally probably has that priced in already.
On the other hand, I’ve been in the position of having my student loans sold to another processor before. It’s not fun, making it hard to take the “at least it’s not me” approach.
Still, if you have the moral fortitude to invest in SLM Corp., it’s certainly worth a look.
The Bad: Cord-Cutting Continues
On the surface, Comcast Corp.’s (Nasdaq: CMCSA) quarterly report looks stellar. Earnings rose 10% to beat expectations by $0.03 per share. Revenue rose 2.9% to $28.4 billion, also topping expectations. New broadband subscribers also beat expectations, rising to 442,000 in the quarter.
And yet, CMCSA shares are down nearly 3% today. What gives?
The devil is in the details. First, Comcast shed 149,000 video subscribers (i.e., pay-TV subs) … worse than the 139,000 expected and up 400% from the 29,000 it shed last year. Analysts are spinning this surge in cord-cutting by indicating that broadband subs make up the difference.
But, as you can see, Comcast needs to add a ton of broadband subs to make up the difference. The margins are worse in broadband, and Comcast doesn’t make as much money. What’s more, part of that pay-TV revenue came from the acquisition of British pay-TV company Sky. Given the pace of cord-cutting, this is only a temporary fix.
To make up the difference, Comcast is ramping up its own streaming service: Peacock. Peacock will offer next-day access to current NBC series and Universal movies, such as Jaws, Jurassic Park and … well… Cats.
Sounds descent, right? Well, at least until you realize that NBCUniversal’s revenue fell 2.6% in the latest quarter. It’s not encouraging that the main content driver of your new streaming service is struggling to grow revenue. In fact, it’s a sign that people might not want to watch your content as much as you thought they would.
So, despite positive top-line numbers, Comcast not only struggles with cord-cutting, but also with content for its coming streaming platform. That’s not a recipe for success.
The Ugly: Pigs in Spaaaace!
Remember when we talked about feeding the pigs in the initial public offering (IPO) market? Hype drives demand for a specific type of investment, and investors then pig out on that investment until we reach bubble status.
It happened in the IPO market last year, and it’s happening again with Virgin Galactic Holdings Inc. (NYSE: SPCE).
Teased and tantalized by a steady stream of SpaceX headlines, investors are frothing at the mouth for space-related opportunities. And literally any space-related opportunity will do … even one that’s never reached orbit.
That’s right. Virgin Galactic has just barely reached the edge of space. It has two spacecraft right now, and neither has reached orbit. Right now, Virgin has a market cap of $3.67 billion, despite projected revenue of just $4.5 million for the current quarter. Analysts expect the company to lose $0.82 per share.
Despite these facts, Virgin stock has surged more than 50% so far this year as space pigs continue to gobble up SPCE shares. Investors should be very wary of SPCE right now. The stock has skyrocketed on SpaceX’s success. With no meaningful results of its own, Virgin is sure to plummet back to earth sooner or later.
You Marco. I Polo.
It’s Reader Feedback time!
You guys are unusually quiet this week. I can only assume you’re headed for your Chinese-snake-virus bunkers.
Still, two Great Stuff readers braved the outbreak to drop me a line.
First, we have Colleen, who wrote:
I’ve really been enjoying the Great Stuff newsletter. There’s always content that makes me laugh! Thank you so much for that!
In which of the newsletters did you mention ROKU? I’ve misplaced those, and I really want to review them.
I’m always happy to hear that I spark joy in Great Stuff readers. Thank you, Colleen!
As for Roku Inc. (Nasdaq: ROKU), I’ve covered the company at least 14 times in the past year. Instead of listing out all of those newsletters, how about I just hit the highlights?
- “Gonna Grab Some Cord Cutter’s Delight” — May 24, 2019; Great Stuff first recommends Roku.
- “The Bad: Surprised Roku” — September 11, 2019; Roku dives on AppleTV+ news. This was a great buying opportunity.
- “Best: Spending Money the Right Way” — November 7, 2019; How Roku spends money the right way.
- “4 Stocks to Buy Before the Ball Drops” — December 31, 2019; I reiterate my bullish stance on Roku for 2020 and predict a rally to $200 for this streaming war leader.
Next up, we have Sybil C., who wrote:
I love your up-beatness.
That’s coining a new term à la Paul Mampilly, who I also love.
Just have to say thank you for the humorous way you share your information in this era of doom and gloom. All of you at Banyan Hill are a refreshing and much-appreciated change. Hope you keep at it for many years.
I … I have been given my very own Mampilly-ism! This must be how Dobby felt when Harry Potter gave him a sock. Thank you, Sybil!
I’m so honored, I don’t know what to say. Seriously, I’m a bit verklempt over here. Talk amongst yourselves. I’ll give you a topic: WeWork is neither a “we” nor does it work. Discuss.
If you wrote in and I didn’t get to you, it might be because you cursed too $%*?@#! much. I still really appreciate the feedback, even if they won’t let me publish it.
And if you haven’t written in yet … what’s stopping you? Drop me a line at GreatStuffToday@banyanhill.com and let me know how you’re doing out there in this crazy bull market.
Until next time, good trading!
Great Stuff Managing Editor, Banyan Hill Publishing