Momentum Monday – Flip A Coin and More on IPO’s

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I was hoping the markets would make a decisive move last week. They did not.

The markets look poised to go higher, but leading stocks with explosive growth are not breaking out and that has Ivanhoff and I trying to be patient to see how this resolves.

Historically, this week is one of the weakest of the year so I hope we can get through it unscathed.

Here is this weeks Momentum Monday where Ivanhoff and I tour the markets for the strongest stocks and sectors.

Alibaba is trying to break out of a long period of consolidation. I am long term bullish based on conversations I have been having with friends from China. The stock has held up really well as the trade war drags on.

JP Morgan is at all-time highs. I don’t care to own it but it is impressive to see.

Apple is near all-time highs and the stores are packed with the new iPhone and iWatch launches. I plan to buy one of each. I am EXTREMELY optimistic on Apple. Tim Cook continues to play politics well with Fast Nixon to get tariff breaks for Apple. The new watch is incredible. Read Jon Gruber’s piece on the killer feature they needed years ago. The Camera is the future. The selfie generation is not a fad. The photo is the digital global language. The camera, not the phone, is the killer app. Apple is DROPPING prices on their phones which will create more lock in at a time when they are increasing services like payments, credit, banking, content (subscription) and gaming (subscription).

Netflix has been the big FAANG loser in 2019. They have lost pricing power or the perception of pricing power as the world fills up with subscription services. Reed came off sounding nervous last week…have a read. BUT…I believe in Reed Hastings and the brand of Netflix and growth will resume sometime soon. It continues to be the only 8 to 80 stock I don’t own but I plan on adding some shares if this weakness continues. I think they will eventually partner with brands like Tinder and Airbnb instead of competing with them for content attention. When nervous, I refer back to this excellent ‘Streaming Wars’ essay and remember that Netflix has the long term advantage even in a world with Disney.

Have a great week.

PS – Yesterday I shared Venture Capitalist Bill Gurley’s opinions on the broken IPO market and a lot of people chimed in calling his data poor and upset that I was picking on the banks.

If you read the full post I shared my typical snark that I have no more faith in a Venture Capitalist solving this than a banker, but I will share a note Danny (our analyst and CFA) shared with me that made the most sense re Bill’s numbers:

The framing is wrong (he seems to think 1 day of retail traders = a priced round when every day in a public co is a priced round, and the IPO price reflects the liquidity cost of in some cases selling hundreds of $m or $b in securities at the price all agree to buy at), the math is miscalculated and it defies lots of historical research (that new IPOs go down anyway)

Danny is right…pricing an IPO is just one of the current problems.

There is no simple answer to a major overhaul of the IPO system which is why it is important to keep the conversation going.