Trade Alert: A New Position (Plus Market Commentary)
Would it shock anyone if the markets put in some sort of a top on the day that the company most singlehandedly responsible for getting millions of people into the markets and into cryptos for the first times in their lives came public? I’m not saying that’s what’s happening today, but wasn’t it Elon Musk who recently noted how the universe loves irony when musing about Dogecoin a few months ago? With Robin Hood’s stock today struggling to get back to its $38 IPO price, who knows.
As exemplified by my stepping in and buying the crash in Chinese stocks earlier this week, I am ready to act when I see the opportunities to do the kind of trades like this that I think are actually quite low risk with high potential rewards, especially in our JD (re)purchases on Monday at its 52-week lows.
At $63, which is where it was trading when I sent out the Trade Alert about it and the other Chinese stocks on Monday, we were buying JD at 25x this year’s earnings estimates. The stock is growing 20-30% topline per year and earnings are expanding. The fact that it’s based in a communist country has always been a problem but it’s just about as big of a problem today as it was last week, last year and last decade. Clearly there are risks in owning China-based stocks but by waiting for a panicky crash before buying Ten Cent and adding to our JD, we make sure some of those risks are quite priced in finally.
As it sits now, and this could change tomorrow of course, Chinese stocks have so far bounced big after we got to sneak in and buy some earlier this week in what has turned out to be at least short-term bottom in many of those names. Point is, I think we might see more opportunities like this in US-based stocks in coming weeks and months and I’ll be ready to make some moves if/when that happens.
In the meantime, I do have a new name I’m starting to build a position in today and since it’s a large cap stock that’s well covered, I’ll go ahead and mention it now before I’ve finished writing up all the analysis on it — the stock is AirBnB ABNB. I’d like to see it drop another 10-20% before getting too aggressive in building up this position. But I did start buying some today and will send out the full report on it later next week.
I keep warning that the frauds in the market are rampant right now after the SPAC bubble and IPO bubble of the last year. In fact, for the last year or so, I’ve often specifically mentioned Nikola Motor Company as a poster child of my warnings about the potential fraud in the markets. I warned several times that Nikola was going to drop 90% or more from its own heady all-time highs of above $90 a share back when it was the original SPAC to bubble and crash.
I present to you today’s headlines:
Grand jury indicts Trevor Milton, founder of electric carmaker Nikola, on three counts of fraud
It sure seems like the new SEC sheriff in town under Biden, Gary Gensler, is making a marked effort to start cracking down on some of the frauds out there. I am continuing to look for other names that could be the regulators’ cross hairs.
We’ll do this week’s Live Q&A Chat over Zoom tomorrow (Friday) morning at 9am ET. Here are the details for the Zoom call:
https://us02web.zoom.us/j/89076435567?pwd=c1VEelN1dDhra2pKc3Z0T2NCaitjZz09
Meeting ID: 890 7643 5567
Passcode: 449982
One tap mobile
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