Trade War … What is It Good For?
Game of Thrones fans and investors have something in common: writers throwing out the baby with the bath water.
Chinese trade deal writers threw out months of agreed-upon concessions, sending the trade deal spiraling back into the war zone. The result is the biggest game of “I’m rubber, you’re glue” the world has ever seen:
Trump:“Here are tariffs on $200 billion in Chinese imports!”
China:“Here are tariffs on $60 billion in U.S. imports!”
Trump:“How about tariffs on another $300 billion?”
Meanwhile, Thrones writers David Benioff and D.B. Weiss (D&D) seemingly ditched seven seasons’ worth of character building with the latest episode, “The Bells.”
The episode led one fan to comment on Reddit: “This episode reminded us why you shouldn’t name your kid after a character whose arc isn’t finished.” Sage words, indeed.
For Thrones fans, there isn’t much to do other than wait for the books to finally come out. (Please finally come out! I’ve been waiting decades!) So, thoughts and prayers?
For investors, if China believes it can just walk away from negotiations to terms it doesn’t like, that spells trouble. However, it’s not too late to get defensive now with bonds, gold and bitcoin.
The Good, the Bad and the Ugly
The Good: Money, It’s a Gas!
Not everything is tanking amid the renewed U.S.-China trade war. In a flight to safety, bitcoin became the new gold standard! The popular cryptocurrency surged more than 7% on Monday and is up some 30% so far in the past week. With retailers like Whole Foods, Nordstrom and Crate & Barrel now accepting the digital currency, it’s time to take that cash and make a stash!
The Bad: Apple Gets Cored
The U.S. Supreme Court just handed Apple Inc. a smackdown. The highest court in the land just allowed a major class-action suit against Apple and its “walled garden” App Store to proceed. The suit was filed in 2011, with iPhone users alleging that Apple unlawfully monopolized the apps’ aftermarket.
Apple currently rakes in 30% of every transaction on the iPhone, even if users want to buy apps somewhere else. While fallout could be years away, this decision puts Apple’s services revenue at risk. For a company that relies increasingly on services revenue due to struggling device sales, this is bad news.
The Ugly: WhatsApp, Doc?
If you use Facebook’s messaging app WhatsApp, you need to update now! The supposedly secure encrypted messaging service announced a vulnerability that hackers can exploit.
“The attack has all the hallmarks of a private company reportedly that works with governments to deliver spyware that takes over the functions of mobile phone operating systems,” a WhatsApp spokesperson said in a statement.
There’s very little takeaway here for investors, as Facebook stock won’t even notice this as a blip on the radar. But, if you’re one of the millions who use WhatsApp and value your security, get your update ASAP!
Great Stuff Quote of the Day
“It’s falling so fast that the link says ‘200 points,’ the headline says ‘500 points’ … and the current reality is that we’re closing in on 700 points.” — Angel Suarez, Banyan Hill Copywriter
When the market plunges, the banter can get a bit tense. We’ve all been there. The key point is not to panic. And, don’t forget your towel.
A Stock With Rebound Pop!
Pop culture will never die.
From boomers to Gen Xers to millennials, pop culture drives our basest buying desires.
Do I really need that $300 Darth Vader Force FX lightsaber behind my desk?
No. But I still bought it.
It’s all about the nostalgia. If you’ve gotten any of the pop culture references above, you know exactly what I’m talking about.
And Funko Inc. (Nasdaq: FNKO) has tapped into that nostalgia in a big, and very profitable, way. The company is best known for its Pop! vinyl figurines that portray characters from your favorite TV shows, movies, video games and comics, as well as your favorite celebrities.
The company’s popularity is driven by products for everything from Fortnite, Avengers: Endgame, Game of Thrones and Captain Marvel to longstanding franchises like Harry Potter and Star Wars. There are even Pop! figurines for the British royal family and U.S. presidents.
In 2017, the stock suffered one of the worst IPOs of the past 20 years. Investors and analysts alike panned the company as a “fad stock.” While Funko’s products are definitely driven by pop culture fads, its growth is not.
In its recent first-quarter earnings report, Funko said that 45% of sales were driven by “evergreen” products. In the past five quarters, Funko has averaged year-over-year revenue growth of 31%. Gross margins are also impressive, expanding to 38.1% in the first three months of the year, up from 36.7% in the fourth quarter of 2018.
Finally, the fear-driven decline from the U.S.-China trade war has put FNKO in the discount bin. The shares are down more than 12% from their post-earnings high and are more than 23% below the average analyst price target.
That spells considerable upside potential, especially with Endgame, the final episode of Game of Thronesand Star Wars: The Rise of Skywalker all providing potentially big sales opportunities this year. So, if you’re looking for the perfect stock with pop rebound potential from the current market mire, Funko is where it’s at.
Until next time, good trading!