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Morning Commentary


By Charles Payne, CEO & Principal Analyst
11/6/2019 9:26 AM

What a ho-hum session yesterday, akin to a couple of days after winning the championship and wondering what now. On the Dow Jones Industrial Average, the winners didn’t soar too high and the losers didn’t stumble too badly. The index hit an intraday high of 27,560 with Boeing (BA) providing the biggest lift. On that score, Boeing pulled back from its session highs, but it looks more intriguing as a name that could lead a year-end rally.

The 737 Max is likely to return in the first quarter on both sides of the Atlantic. The CEO will keep his job, which should please the board and Wall Street.

The stock is in a reverse head-and-shoulders pattern, which is a very bullish formation. The next big upside technical test is $387 to $400, which represents a monumental breakout.

Consolidating Gains

More broadly, the S&P 500 saw the largest declines in safe havens, including Utilities and Real Estate, and nibbling in other areas. The action is class consolidation of recent gains.

S&P 500 Index



Communication Services (XLC)



Consumer Discretionary (XLY)



Consumer Staples (XLP)



Energy (XLE)



Financials (XLF)



Health Care (XLV)



Industrials (XLI)



Materials (XLB)



Real Estate (XLRE)



Technology (XLK)



Utilities (XLU)



Unicorns Can Become Phoenixes

However, there were two big losers of note: Uber (UBER) and Peloton (PTON).

Extending the string of disappointments for 2019 in initial public offerings (IPOs), both companies showed promise (Peloton shares were indicating up much higher early in pre-opening action) with their results. However, it was not enough to erase doubts that have haunted them since their debuts. Nonetheless, a glimmer of hope came via a major IPO loser from six years ago. 

Chegg (CHGG) was in business eight years when it went public with hopes of transitioning from textbook rentals into a type of operating system for colleges and an academic hub. The company raised $187.5 million, achieving a valuation of $1.1 billion.

The Chegg IPO was priced in a range of $9.50 to $11.50 on November 12, 2013, but opened at $12.50, perhaps riding the waves of the hot debut of Twitter (TWTR) a week earlier. Wall Street wasn’t buying the story and began selling immediately.

The stock closed at $10.56 and slumped over the years before hitting rock bottom $4.12 in March 2016.  By then, I stopped following the stock, and it only came back into my orbit last year. Interestingly, the stock’s rebound was as dramatic as its freefall.

The shares got back to $11.50 in May 2017 and took off like a rocket.  On July 30, 2017, the shares closed at $45.77, up 1000% from its all-time low. More recently, the stock was hammered again (see chart). Yesterday, it was a big winner and a reminder that even the most devastating IPOs can and often rebound, but it doesn’t happen overnight.


Portfolio Approach

We’ve taken profits in Technology and Consumer Discretionary this week and added another Industrial name. Contact our research desk or your rep for more details if you missed the alerts.

Today’s Session

Talk of Xerox (XRX) considering purchasing HP, Inc.  (HPQ) in a stock and cash deal is making the rounds.  Both companies, once behemoths, have struggled.  Could this be what brings them back to some form of their glory days? 

The earnings parade continues with beats from CVS Health (CVS), Humana (HUM), Wendy’s (WEN), which raised their guidance as well and are trading higher.

The futures are in the green, and the major indices are set to open slightly higher.


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