The Great Roundtrip…and Broken IPO’s

Good morning everyone.

I have a name for a particular stock growth era from May 2020 until January 2022 ‘The Great Roundtrip

Poster stocks and charts of this era are Robinhood , Penn, DraftKings, Zoom, Zillow, Docusign, Peloton, Gamestop.

I made a visual of this great roundtrip versus the induces on Koyfin:

The real story is just beginning…

While these companies/stocks have round tripped in valuations (or nearly) the user growth has been sticky and mostly real, the companies are big and for most a certain moat is now massive. The hit to these companies valuations is public and taken.

What we do not see in the charts of ‘The Great Roundtrip’ are the 100’s of still private companies launched during this period as copycats or clones, whose valuations while private are silly and whose cap tables likely irreparable.

Now is the time for fundamentals to make a difference and there is an opportunity for amazing winners to be picked in this rubble. I will keep an eye on this list and add to it to see which companies left behind can turn a corner.

I wrote last week about ‘broken IPO’s’ and the prices have only gone lower. Keep an eye on both these lists now.

Finally…I added Tesla and Crude Oil to ‘The Great Roundtrip‘ visuals which is super interesting/humbling and a perfect reminder why picking stocks is hard and asset allocation and ETF’s are best for 99 percent of people

You can play with the chart if you have a FREE Koyfin account using this link.

Use Your Head…Don’t Blame The Fed

Repeat after me…

Talking about stocks will make you look stupid.

I write about my ideas – stocks and private investments – to focus on making better investments. I still feel stupid but I make better decisions having a timeline that holds me accountable.

No matter who you are, at many points during your investing life owning stocks will make you feel stupid.

Lately, I have felt stupid for owning ‘any’ growth stocks.

I have no idea when the market will stop making me feel stupid, but in the meantime I am doing less public market ‘growth’ investing.

It is easy to go back to 2020 on my blog and find a stock I was buying with ‘digital tailwinds’ and tripling my money.

The two best examples were Zoom and Peloton.

I made Zoom an 8-80 company in April 2020 when it was below $115. The market and the ‘Fed’ and my momentum strategy made me look like a genius as the stock eventually flew past $500. I remember selling some at $160, $200, $300, $400 on the way up and hearing the ‘but you just bought it’ and ‘but taxes’. I still do own some in this nasty drawdown, but Zoom is now in a nasty bear market with most cloud and software stocks. Microsoft and Google may kill them off, but I am not so sure. I am teetering.

I added Peloton to my ‘Fashology’ index in June 2020 when the stock crossed above $30. I thought it would close the gap on $LULU valuation and it did…extremely quick. The stock shot to $150. I sold some on the way up in the 50′, 80’s, and 100’s and rode the rest down to the $60’s before giving up. I got the same ‘you just bought it’, and ‘but taxes’ on my Peloton sells but in hindsight with the stock at $30 again this morning, I did the right thing.

In hindsight 2020 made us all growth investors.

The market may just be started beating the growth investor out of us.

I am not going to blame the FED.

I will adjust my plans.

Momentum Monday – Growth Stocks Have COVID and Ivanhoff Lived

Happy ‘markets closed’ Monday as we pay respects to Martin Luther King Jr.

Last week Ivanhoff had COVID, but the young scrappy man beat it.

We cannot say the same things about growth stocks which continue to struggle from the financial cocktail aftermath of it.

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

Here is this week’s episode of Momentum Monday. You can watch/listen right here or I have embedded it on my blog below:

Here a Ivanhoff’s quick thoughts:

The main theme remains fear of tapering and rising interest rates which is pressuring richly-valued stocks – software, Internet retail, biotech. Many are already down 30-50% in the past 2-3 months alone. Can they go down further? Absolutely. It’s normal for momentum stocks to give back 50% to 90% of their gains. Many never recover from such drawdowns. The likes of AMZN, AAPL, NVDA, TSLA, GOOGL that keep climbing higher for many years are the exception; not the rule.

In the meantime, anything commodity-related is showing relative strength. Many oil & gas stocks are up 20%+ in the past couple of weeks. The metals and miners ETF – XME, is hovering near all-time highs.

Outside of the basic material space, semiconductors, and carmakers have held the best. The biggest chip producer in the world, TSM broke out to new all-time highs lifting the entire semiconductor equipment space with it – AMAT, LRCX, ICHR, KLAC, ASML, etc.

The S&P 500 and the Nasdaq 100 are below their 50-day moving average while the small-cap Russell 2k is below its 200-day moving average and close to breaking down from a very long range. The choppiness level in the indexes has increased significantly. We are seeing bigger and more frequent gaps that often get faded and much wider daily ranges. It’s a challenging tape for swing trades but an excellent one for nimble, intraday ideas on both the long and short side.

Here is Charlie’s 7 Chart Sunday.

Here is this weeks Stocktwits Momentum 25 lists. The lists are filled with large and small energy names and banks. Like I have been saying X’s ($XLE $XLF) over Q’s.

Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures, click here

Sunday Reads….Having an Office, Catching Up On Crypto for 2022, The Supply Chain, and The Year In SPAC’s

Good Sunday morning…

I am off for a long ride right after I post this.

As we started 2022, Social Leverage has an office. It is really fun to be in our own space where Tom, Knut, Jono and I can spend some time together. Gary joined us this week from San Diego and it felt great to have a home base. After a few years of mostly Zoom’s, I already find us way more productive.

Onwards…

I have been catching up on all the crypto reports and I thought I would share a few of my favorite reads and listens.

First this long report from Messari on their crypto thesis for 2022.

Coinbases’s CEO Brian Armstrong was on Guy Raz’s ‘How I Built This’ and I learned a lot.

Here is a long reserarch report on Coinbase the company.

Nore on crypto…

Here is Albert Wenger on the subject of Web 3…he’s been a leading and early to crypto investor and thought leader.

Ben Thompson has a great essay on Opensea, Web 3 and Aggregation Theory.

For those not ready or into crypto, you might have missed some money making opportunities, but you also missed a mess of ‘rug pulls’/scams which were up to 37 percent of all scams. Indeed this is the wild west and I have little interest in being a true pioneer.

Everyone should read this Ryan Peterson interview on the subject of the supply chain issues around the world. Ryan is the founder of Flexport.

With respect to the stock markets….while interest rates shoot higher and beat up my favorite growth stocks, we might keep an ye on Russia for the Global Macro tip off to a larger market problem. I like CRaig’s markets newsletter.

Finally, since I have a SPAC ($SLAC), I wanted to share this 2021 SPAC Monitor.

Have a great Sunday.

Tiny Bubbles, Tiny Bear Markets and Tiny Crashes

Yesterday I covered the crash in fintech stocks.

Not that many people care and as far as the stock market goes, should probably not care. The old financials – the $XLF – are having a party.

The cloud stocks – I use the $CLOU ETF – have also been in crash mode and now in a bear market themselves.

The IPO sector – I use the $IPO ETF – have also been in. crash mode and also in a bear market.

The biotech sector – I use the $XBI – have also been in a nasty bear market for the last year. The drug companies though are in party mode.

The S&P and Nasdaq 100 have shaken these sectors crashes and bear markets off for now. Big tech, drug companies, energy and large financials have offset the tiny bear markets and crashes.

I have created 1 year and 3 year charts of the indexes and the ETF’s mentioned above for you:

THREE year:

The Fintech crash looks contained and as I wrote in April of last year, this weird cocktail of technology and money has created this era of tiny bubbles, tiny bear markets and tiny crashes.

The Fintech Crash…

At beginning of 2020 a16z declared ‘Every Company Would Be A Fintech Company‘. Have a read.

The essay is great, the thesis on point, but for fintech PUBLIC companies the top was near.

‘Modern’ (web 2.0) fintech stocks (Coinbase, Robinhood, Square, Marqueta, Paypal, SOFI, ARKF, Lemonade) have been in a nasty bear market/pullback/correction the last THREE months. During that time the old fintech companies (banks, brokerages and credit card companies) we all had agreed we hated are doing very well (of course this comes on the heels of a legendary run in private and public markets for all of these same companies the last FIVE years).

Let me share a few graphs you can click on to enlarge to give you some context (I use Koyfin a portfolio company).

First the 1 year graphs:

Here are the three year graphs:

If every company is indeed a fintech company it makes sense that margins for this last batch of fintech companies are suffering.

The key is what happens next and I will dive into that over the weekend and next week.

Jeff Richards of GGV Capital on the Cloud, Digital Health, E-Commerce, and the Digitization of Everything

We’re off to a bit of a rocky start to the new year in software and cloud stocks.

Here is the chart of the software ETF $IGV -in an 18 percent pullback, the worst since March 2020.

That is why I called up my friend Jeff Richards to help make sense of it all. This episode marks Jeff’s fourth visit on Panic with Friends since we started in March of 2020. I asked Jeff to help me frame the selloff, fundamentals versus valuations and the big picture as we come 70, 80, 90 percent, whatever it is, out of COVID for better or worse.

You can listen to the podcast here on Spotify or Apple podcast and now all the episodes are on my YouTube channel as well.

You can also listen right here on the blog:

Below are more details about Jeff and the podcast, as well as links to his previous podcasts. Many of the stocks he has discussed in past appearances have been incredible performers so it is worth going back and listening to these as well.

Guest: Jeff Richards

Profile: Managing Partner at GGV Capital

Where to Find Him: LinkedInTwitter

What’s Jeff Panicked About?: Health.

Previous Appearances:

Jeff Richards, Venture Capitalist on Panic and Opportunity (EP.4) (March 2020)

Jeff Richards of GGV Capital on the inevitability of Nasdaq @10000 (EP.76) (June 2020)

Jeff Richards, Managing Partner at GGV Capital, Joins Me on Panic with Friends to Discuss Why He’s Bullish on Fintech and the Post-COVID Rebound (EP.155) (June 2021)

The Takeaway:

There’s never been more capital, there’s never been more tools to speculate with, there’s never been more platforms to discuss speculation on, there’s never been more time. Put all these together and fundamentals just don’t matter. Until they matter. Right now we’ve got major software and cloud players down thirty to forty percent over the last six to nine months. But in the long run we are going to see a massive tailwind of revenue and cash flow and profits from these companies. And prices now don’t seem correlated with earnings, nobody’s missed big on earnings; this seems to be a re-rating of sector based multiples, which could happen with interest rates, geopolitical conditions, and possibly healthcare. It’s a good time to go nibbling on names that you love. Take a look at a few of the fallen IPOs for ideas as well.

Favorite Quote:

“It’s a great time to be a founder. It’s a great time to be a founder with an idea and be able to raise capital. The trick is to be a founder that can then execute and live up to the expectations.”

Stocks For Rising Rates

Good morning…

I have gotten a lot of questions about interest rates. Mostly from people with 30,000 square foot second homes (I kid my wealthy friends).

Some masked suit at Goldman Sachs was out mumbling the other day that The FED would be raising rates FOUR times this year.

The market has been pricing in higher rates for a few months based on the price action of high growth stocks and even crypto which have seen money come out.

This weekend I explained that.

So when Goldman came out with their FOUR interest raise drama call before the market, growth stocks actually stopped going down.

What I am watching now is the Monday low prices of those stocks – cloud stocks, software stocks and crypto. If these stocks break Monday lows, I would get even more defensive with my exposure to crypto short and medium term.

Of course, there are stocks and ETF’s that ‘tend’ to do well in rising interest rate environments and JC put together a blog post explaining it.

Here are the ETF’s…

My friend Ryan also looked back to find that the last 7 periods of rising rates was GOOD for stocks.

If you have a good financial advisor, ask them about this, and if you don’t it is another reason I always tell people to have a good financial advisor (or two).

Hope this helps.

Barry Sonnenfeld Gave Me Homework

Good morning…

I have promised some readers a deep dive on the fintech action in the private and public markets and have been working on that for my own seed strategy as 2022 begins. I hope to have it over the next few days.

Onwards…

Last weekend I listened to Barry Sonnenfeld (American filmmaker) when he was a guest on the Smartless podcast and blogged about it Sunday. I added a ‘note to self’ to get Barry on my podcast.

One of my readers who has become a friend and works at Amazon Studios emailed me that he would love to make that happen and within a few hours I was on an email thread with Barry and taking a few shots at making him laugh.

Of course, Barry was making me laugh and offered to be on the podcast ‘IF’ I read his book. Knowing my age he made it really easy and said ‘it counted’ if I listened to the audiobook version.

I feel like Costanza at this point in the ‘Breakfast at Tiffany’s‘ episode.

Luckily the book sounds hilarious…

Barry Sonnenfeld, Call Your Mother: Memoirs of a Neurotic Filmmaker.

I told Barry, that the same thing happened to me in 1979 at a Supertramp concert in Toronto at Maple Leaf Gardens. I was 14.

I’m looking forward to having Barry on my podcast someday soon.

Blogging daily has never felt like work to me and in the last year has become a tool to help me manifest some exciting media/content projects. Thanks everyone for reading and sharing it with your own networks.

Have a great day.

Momentum Monday – X’s over Q’s…Not a Fun Market For Growth Stocks (Software and Cloud)

Happy Monday.

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

As I said in the headline, the X’s over the Q’s is the market environment right now.  The energy sector ($XLE and $XOM) is breaking out as are the old financials ($XLF).

I discuss this with Ivanhoff in this week’s show.  You can watch or listen right here and I have embedded it on my blog below:

Here are Ivanhoff’s thoughts:

The first week of the new year was all about the market discounting rising inflation expectations. Interest rates spiked and with them, many financials, oil, basic materials, metals, and industrial stocks galloped higher -. In the meantime, most of the so-called new-economy sectors were under notable pressure – software, semis, biotech.

The Nasdaq 100 lost 4.5% in the first week of 2022. The small-caps Russell 2k lowest almost 3%, the better diversified large-cap S&P 500 shed 1.9%. There are obvious distribution signs on the tape. Big intraday sell-offs are followed by shallow bounces. The short-term trend is lower. The only bullish argument in this tape is the sector rotation into old-economy sectors. Rotational corrections rarely lead to big pullbacks for too long. I am not saying to blindly buy the dip here. That would be irresponsible. I am saying to have an open mind that the new earnings season that starts in less than a couple of weeks might lead to another bounce. For us, it doesn’t matter too much. We will find good risk/reward trades in any market environment. Even last week, when most of the market was under pressure, there were plenty of opportunities on the long side every single day.

Moving on…

Here is Charlie’s 7 chart Sunday. The weakest part of the ‘Q’s has been the software and cloud sectors which are correcting very fast. That seems to be how the markets do their thing.

Charlie also shared a chart of the best performing stocks of the last 30 years which is really a fantastic advertisement for indexing as nobody could have picked the stocks and held them.

Finally, for us home gamers, here are the Stocktwits 25 momentum lists.

Have a great week.

Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures, click here