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Halcyon Days For Tech

5/11/2017
By Charles Payne, Principal Analyst

It’s another day and another record for the NASDAQ Composite Index on Wednesday, paced by those juggernaut technologies that have become unstoppable.

These are the halcyon days for tech as doubters seem to fade into the background and everyone’s jumping on the bandwagon.

Netflix (NFLX) is one of those names that have always been under the gun facing a high degree of doubt; yesterday, it closed at an all-time record high.

Then there’s Nvidia (NVDA), which took more than 15 years to get its act together and to live up to the early hype, which included being named “Company of the Year” by Forbes Magazine, January 2008.   

The shares were changing hands at $24.00 after pulling back from $36 in September 2008.

Well, the magazine didn’t pick the bottom as the shares of Nvidia promptly crumbled to seven bucks by November 2008. 

The stock essentially traded sideways until it finally recovered to $24 in September 2015, where it broke out to new highs; it hasn’t looked back, up more than 400% since.  The fact of the matter is that no one would have held the stock throughout this entire saga except insiders, employees, maybe a few neighbors, and friends of the founder.

Heck, we recently took profits and patted ourselves on the back as the shares pulled back $15.00 in a couple of days. The main investment lesson here is that companies can come back even from the most horrific disappointments. However, it’s dumb to allow your pride and ego to crowd you into holding and hoping. 

Keep those names on your screen, even those that have lost money, and allow share price movement and occasional news to pique your interest to get you to look under the hood from time to time.

Yesterday, Nvidia shares rallied, in part due to short covering. This is a theme of 2017 that few are discussing- the massive short squeezes are sending stocks sky high. The folks who have bet on carnage have been bloodied with losses on Tesla (TSLA) alone, which is approaching $4.0 billion.

Other winners this week crushing the shorts include:

Percentage of Float Shorted

  • (CMG) Chipotle Mexican Grill: 20%
  • (RGR) Strum Ruger & Co.: 35%
  • (COTY) Coty Inc.: 333%
  • (W) Wayfair Inc.: 59%

The one thing we know is that shorts go out on their shields; they always find ways to reload but this is a tough year, and I see a lot more big-time squeezes to follow.

After the Close

It was another angst-filled session on Wednesday, but the S&P 500 eked out a slim gain, but the Dow Jones Industrial Average was held back by losses in Boeing (BA) and Disney (DIS). After the close, earnings report the following:

  • 21st Century Fox (FOX-A) revenue $7.56 billion +5% and earnings $0.54 +15%
  • Whole Foods (WFM), up slightly after reporting
  • Snap Inc. (SNAP) was getting crushed after its first report since coming public. Revenues were up 286%, but the company is hemorrhaging money

Charles Payne
Wall Street Strategies


 

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