While Wall Street Falls, Great Stuff Goes Alpha
Friday Four Play: The “Get a Leg up” Edition
It’s no secret … I like being right. But to reference a line from The Matrix: “Not like this. Not like this.”
So far this week, the Dow is off 3,200 points … and counting. Wall Street’s favorite barometer is down roughly 13% from its February 12 high, putting the Dow firmly in correction territory. And with COVID-19 continuing to spread around the globe — U.S. readers, please be careful … it’s here in the wild now — the end of this correction appears to still be a way off.
Yes, this correction is painful — but you are Great Stuff readers. You were prepared. You moved a sizable portion of your portfolio into gold, currencies and other safe-haven investments back in January … right?
You also had a leg up on the rest of the market with Great Stuff’s “4 Stocks to Beat the Wuhan Virus.” And my, what a fine leg that is. “It’s a major award!” (Yes, I’m making a Christmas Story reference in February … so what?)
Let’s take a look at the returns on those four recommendations, shall we?
- AbbVie Inc. (NYSE: ABBV) is up 1%.
- Inovio Pharmaceuticals Inc. (Nasdaq: INO) is up 18.7%.
- The Clorox Co. (NYSE: CLX) is up 11.3%.
- Alpha Pro Tech Ltd. (NYSE: APT) is up 327%.
How do you like them apples?
All returns are calculated as of yesterday’s close, bringing your total average return to 89.5%. It looks even better when you compare it to the S&P 500 Index’s loss of 8.3% for the same period. (Are you guys feeling a little better now?)
As of today, ABBV is in negative territory versus your potential entry point. The company’s $63 billion acquisition of Allergan PLC (NYSE: AGN) overshadows any coronavirus benefits right now, but it’ll straighten itself out eventually.
However, the rest are going gangbusters. Alpha Pro Tech, in particular, is on fire! Remember: The company makes face masks, gowns and various other infection-control items for both the medical industry and the general public. So, you know it’s doing well in corona world.
For caution’s sake, if you bought into APT following Great Stuff’s recommendation, we officially recommend that you sell today.
There’s no need to be greedy after a win like this. Be like Billy Joe and Bobbie Sue — take the money and run!
But if you’re worried about “opportunity cost” or want to keep exposure through the rest of this COVID-19 outbreak, take at least half of your position off the table. That guarantees you a win on this trade.
Either way, congratulations are in order! Good job, you!
And now for something completely different … here’s your Friday Four Play:
No. 1: Beyond Crazy
Beyond Meat Inc. (Nasdaq: BYND) investors got something to cheer about today —whether they know it or not.
The veggie burger maker reported that retail sales surged 198% and food service/restaurant revenue spiked 223%! How’s that for beyond?
But … BYND shares are plummeting today.
Why? Well, Beyond posted a surprise loss of a penny per share, versus expectations for a gain of a penny. Furthermore, guidance was well short of Wall Street’s target. Beyond expects earnings of $25.3 million, while the consensus looked for $50.2 million.
Two things to note here:
One, Beyond is conservative with guidance due to the COVID-19 outbreak. Two, the company is spending money on growth … and it needs to.
“We would be crazy not to invest in growth right now,” said CEO Ethan Brown. “There is just so much opportunity right now. We want to make sure we move as fast as we can to open up these markets.”
Sure, BYND trades at elevated valuations that, honestly, seem a bit beyond belief. However, the company is part of mega trends in sustainability and alternative foods. It needs to be proactive now. As a result of that proactive attitude, Beyond is getting punished.
If you were looking to invest in BYND but missed the initial rally, this sell-off is the opportunity you’ve been waiting for.
No. 2: I Want to Ride My Bicycle
I want to ride it where I like … not in my living room. That’s the message that Wall Street is sending Peloton Interactive Inc. (Nasdaq: PTON) this week.
Analysts have repeatedly pushed the idea that Peloton will benefit from the COVID-19 outbreak as people stay home to avoid becoming a statistic. “We believe certain U.S. consumers will be less comfortable over time going to their gym and more likely to order a Peloton bike to stay home,” said Needham analyst Laura Martin in a note to clients this week.
Additionally, Peloton announced yesterday that it reached a settlement with the National Music Publishers Association (NMPA). The company was using music with its streamed workout sessions without the proper licensing. That’s copyright infringement, and the NMPA initially sued Peloton for $300 million because of it.
But the two have since made up. Peloton even agreed to collaborate with NMPA to “further optimize” the music-licensing process.
Despite today’s sharp decline, PTON is still up more than 5% on the week. So, at least the stock isn’t spinning its wheels.
No. 3: The Mouse’s House Is Cheap
The Walt Disney Co. (NYSE: DIS) has had a rough week. (Haven’t we all?)
The stock initially dove on news that CEO Bob Iger would step down immediately. Then, as coronavirus fears accelerated, Tokyo Disneyland announced it was closing through mid-March. Analysts started questioning theme park revenue for Disney, and the shares fell further.
BMO said that DIS is “increasingly baking in more challenges already. We would use any near-term weakness related to COVID-19 virus as an opportunity to build long-term positions.”
Remember, kids: Disney isn’t going anywhere. The company dominated the silver screen last year, and it’s poised to dominate video streaming in the years to come. I have to agree with BMO. This dip is an opportunity.
No. 4: No Fair
The company sells about 14 million products online, including furniture, décor, decorative accents … etcetera. It’s basically Bed Bath & Online with a fancier name. If you remember how BBBY’s earnings turned out, you can guess how Wayfair’s doing today.
The company reported a wider-than-expected quarterly loss of $2.80 per share, missed on revenue and reported that revenue growth trended below 20% — the company’s historical norm.
Guidance was also well below expectations, with first-quarter margins in the negative 7.3% to 7.8% range. Yes … negative margins.
Remember that lesson from the dot-com bust? Just because a company operates online doesn’t mean it’s automatically better.
Great Stuff: Congratulates YOU!
Did you crack open the champagne yet? No? Well, what’s stopping you?! Congratulations are in order, I tell you.
It’s not every week that you can boast about a 300%-plus gain … especially in the same week both the Dow and S&P 500 shed over 10%.
You won’t find any “I told you so!” here … this win is all about you, dear readers. If you took Great Stuff’s advice on buying when others were fearful — and oh, how fearful they were — you should be sitting on fresh gains while the rest of the market sees red.
Be the envy of your friends and fellow investors. Hey, if you don’t brag to them, why not brag to us? We’d love to hear how you’ve fared with Great Stuff picks. Shoot us a message at GreatStuffToday@banyanhill.com and let us know what’s up!
If there’s one single thing to take away from this crazy week, it’s this…
Your gain on APT just shows that there’s no shortage of good buys in today’s market … and there are discounts just waiting for you to find them. Whether you made bank on APT or not, don’t give up on finding your next bargain.
Jeff Yastine’s research can show you how. Jeff sifts through the market with a fine-toothed comb — hey, just like Great Stuff! — to find well-run, growing businesses that trade for pennies on the dollar. These are the solid businesses that will survive this outbreak, no matter how bad the sell-off makes it seem.
Until next time, good trading!
Editor, Great Stuff