The Value Of Growth-ing Pains
In the days of my youth, I was told what it means to be an investor.
Now my 401K’s fully matched, I try to do all those things the best I can.
No matter how I try … I find the market in the same old jam.
Good times? Bad times? Wall Street’s had its share. Just look at the major indexes since mid-February:
- Nasdaq — down nearly 9%.
- Dow — up roughly 1.5%.
- S&P 500 — down about 2%.
As of today, all three are in positive territory for the year — the Nasdaq bounced back positive amid an oversold rally in tech stocks.
So, what in the wild, wild world of stocks is a-goin’ on here, Mr. Great Stuff?
I’m glad you asked! What we’ve got here is failure to communicate … or rather, a failure to recognize that the market is preparing for a post-pandemic world. (Sorry, Cool Hand Luke just slipped in there…)
One year ago this week, the market “prepared” for the pandemic by selling off massively. Following that sell-off, companies with products and services that enabled life to continue despite rolling lockdowns thrived. Stocks like Zoom Video Communications, Amazon, Stitch Fix and Netflix all soared. This was their market.
But the times they are a-changing.
Sure, the work-from-home stocks will continue to grow and thrive. But that growth will be nothing like what we saw in the past year. After all, we have a great economic reopening on the horizon! People will start leaving their houses again on the regular.
Did you really think we could have that kind of seismic economic shift and not see it reflected on Wall Street? That’s cute.
As the numbers above show, we’re not going through a market crash … so, like, don’t panic and all that.
What we are going through is a market rotation away from pandemic growth stocks and into value stocks. And, I have to say, I called this rotation months ago. Back in December, I recommended three stocks based on my 2021 theme of recovery.
Then, in January, I dropped this bombshell:
In the first half of this year, value stocks may not skyrocket like 2020’s risk assets, but they will certainly be a lot more stable. And, should a correction finally arrive — as we all know it must — value stocks will weather the storm considerably better.
Did someone say: “Value stocks will outperform in a correction?” Why yes — yours truly! And if you look at the Dow right now … it seems I was right. Who’d-a thunk it?
But … but … my big growth pandemic returns! What about those?
I hear you. Value stocks are nowhere near as exciting. But I have a reality check for you. There’s a saying that goes something like: Tearing stuff down is easy; rebuilding stuff takes time.
It’s the same with the market. So, yes, value stocks will outperform … but, it won’t be an easy, paved road higher from here.
No transition goes smoothly, and this one won’t be different. There will be volatility — and plenty of it! (Like I need to tell you that after the last couple of weeks.)
So, if you’re looking for a serious profit advantage during this market transition, you need to take full command of the rising market volatility.
You need “The Perfect Trade” … the One Trade. A single trade that could deliver bigger gains in a week or less … than most investors make in a year!
Good: Roblox Reinitiates
So … what’s a Roblox? A game? A game system? One of those PokeeMans?
Roblox is a bit of everything. It’s a game you play … that lets you make other games to play and share. Thus, Roblox the platform exploded over quarantine as a virtual way for Gen Z to still chill with friends.
Roblox, the company, is going public tomorrow as RBLX— and via direct listing, no less, rather than any of that SPAC or IPO nonsense. But what’s that mean for you?
Well … it depends (anticlimactic, I know). Roblox isn’t creating any new shares, just selling its outstanding shares without any underwriting middlemen. There’s no lockup period forcing insiders to hold their shares.
Direct listings usually end up cheaper to pull off since you don’t have to pay an underwriter … but that also means you don’t benefit from the security of having an underwriter and other long-term investors — or the hyped-up valuation heading into the first day of trading.
What this actually means is more volatility for you as Wall Street and Main Street figure out where RBLX shares should trade. And the mere mention of Reddit’s fondness for Roblox (and potentially its stock) already has Bloomberg expecting full-on meme mode once the listing hits.
Whether RBLX rockets on opening day or descends into oblivion, wait for frothiness to subside before you dive in.
Better: Buttons. Buttons Are Good
I was wrong, Great Ones.
Apparently, Ford Motors (NYSE: F) is not the electric vehicle (EV) buffoon I thought it to be. Either that or the EV market is just so hungry for something not-Tesla (Nasdaq: TSLA) that they’re willing to buy a Ford to fill that void. Crazy ‘bout a Mercury, desperate for a Ford EV…
February auto sales rolled into the shop, and Morgan Stanley found an interesting nugget in that data. Tesla’s market share slipped to 69% in February from 81% last year. And Ford’s Mustang Mach-E was responsible for every percentage point of that loss.
In its first full month of sales, Ford sold 3,739 Mach-Es. I’m calling it the Mach-E from now on because … let’s be honest, this ain’t a Mustang. It has a crossover frame, for Henry Ford’s sake!
Head to head, the Mach-E specs more in-line with the Tesla Model X than either the Model S or the Model 3. But there’s one crucial difference in the Mach-E that I didn’t count on being popular. I’m kicking myself for it because it’s one of my big EV pet peeves: You don’t have to relearn how to drive the Mach-E.
Yes, the Mach-E has plenty of touchscreens and whatnot … which, while fun and futuristic, make Teslas a bit intimidating for us “older” drivers. But the Mach-E also incorporates a lot of traditional features … you know, tactile buttons and switches that are all but absent in Teslas.
Now, this latest info doesn’t necessarily mean that Ford has a true Tesla competitor in its stable. What it does mean, however, is that there’s a growing market of potential EV customers who want something not-Tesla.
Ford has that dialed in with the Mach-E, and it has plenty of room to grow and improve to become even more competitive. For F investors, hold onto your shares. Ford is showing signs of life again.
Best: Hammer Of The Gods
Thor Industries (NYSE: THO) dropped a booming thunderclap of an earnings report this morning.Amid the pandemic, the purveyor of RVs, trailers and motor homes saw earnings explode 358%, beating per-share expectations by a solid 48% on the quarter. Sales? They soared too, up 36% year over year.And like its Winnebago brethren before it, Thor expects the isolation-fueled wanderlust to last long past the pandemic’s close. The company currently sits on a backlog of orders worth $10.81 billion — up 280% compared to this time last year.
With everything under the sun in varying stages of reopening, hordes of home-stuck humans turned the Thor wagons west (or wherever y’all went) just to get some dang fresh air. And if you think the drive to wander the open road will die down when lockdowns lift … I have an RV to sell you.
Reopening? Sorry, can’t hear you over my eight-ton rolling home.
The only problem I see here is that THO has run up significantly with all this talk of boundless optimism and fancy-free road-roaming. The other only problem I see is a lack of guidance due to your run-of-the-mill supply chain woes.
So, what does Thor do? It bought up another camper company along with some other “supply entities” to keep its RV-making motor revving. THO rallied initially on the news before motion sickness set in and tossed up much of those gains.
What’s going on underneath the hood is just a massive rotation out of growth and tech names and into more cyclical areas of the stock market, and that is dragging the whole stock market down to an extent because tech’s 25% of the S&P 500.
— Clint Lee
Well, how’d you like that?
Clint Lee (analyst for Ted Bauman and all-around steel-witted trader) dropped some myth-busting knowledge last night over on YouTube. Ted and co. talked up the latest volatility and which types of traders are sitting out on the sidelines while the market gyrates.
It should surprise absolutely none of you that Clint and Ted also predicted this rotation back to undervalued names. Plus, we’re talking about Ted here — you know the guy’s found a handful of opportunities to play the rotational volatility action, too!
Now, here’s you’re homework:
- Watch Ted’s team work their magic right here. (Or, click on the play button below.)
- Sign up for Flashpoint Fortunes and see why Ted calls Clint “the King of Quants.”
Did you miss that Flashpoint Fortunes sign-up link? Here it is again!
So, how do you feel about this whole shift back to value? Did you get with Great Stuff Picks on our three New Year’s value plays? Or are you still hanging on to growth for dear life?
Let us know what’s on your mind! We won’t judge … well, maybe a lil’ at first (your fellow readers send us some interesting reading material, let’s say).
Write us at GreatStuffToday@BanyanHill.com. You may just see your email in this Thursday’s edition of Reader Feedback!
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Until next time, stay Great!
Editor, Great Stuff