What Happened in the Market (and the World) This Week?
S&P 500 return this week: -0.71%
S&P 500 return YTD: 4.23%
This was a pretty volatile week. Tech stocks got hit pretty hard early in the week but finished on a good note. Wednesday was a total bloodbath, red everywhere.
The economic data that came in was mostly better than expected, such as January retail sales were up 5.3% vs. 1.2% expected and the flash PMI hit a 71-month high at 57.7. The flash PMI is important since it tells you how purchasing managers are feeling about economic conditions. A PMI greater than 50 means improving and expanding economic conditions while less than 50 means a contraction. So 57.7 is considered very good. Finally, jobless claims increased week over week though, so the labor market is still not doing so hot. The improving economic conditions are a good thing and leads me to believe that the market still has legs to keep going up. The only thing that could be of concern are if interest rates rise too quickly given the improving economic condition and concerns of inflation. For now, it seems this young bull market will continue given all the economic data.
A whole bunch of earnings came out this week and I think Shopify and Fastly definitely hurt the tech growth momentum. Shopify actually had a really solid earnings report but I think their commentary on moderating growth in the back half of the year spooked some investors. Fastly continued to shit the bed like they have been for the past 3 quarters. I think Shopify and Fastly’s earnings results caused a lot of tech stocks to plummet Wednesday and Thursday.
Bitcoin hit $50k for the first time this week and as of this writing is hovering around $57k. Ethereum also crested $2k for the first time this week, so it was a big week for cryptocurrencies.
Portfolio Update & Trades
I had a pretty meh week in the market, down a few points due to the tech bloodbath. I made a deposit into my account earlier in the week and that always throws the YTD numbers off, so by my estimates, I should be up around 35-38% YTD. I’ll find out the official number in early March. Yes, this is one of Fidelity’s most annoying features, or rather lack thereof. It seems silly that I can’t get an accurate YTD figure until a few days after the month closes.
I made a few trades this week based on how earnings played out for a handful of companies in my portfolio. Specifically, I sold out of my entire stock position of Fastly ($FSLY) after their abysmal earnings report. Yes, it was that bad in my opinion and I was glad I got out immediately after the report with an average cost basis of around $93 since the stock plummeted to the low $80s the following day.
I was so incredibly impressed with Fiverr’s ($FVRR) earnings that I decided to double down on my initial position. I’ll probably write a recap on Fiverr’s Q4 performance since it was just that good. I also added to Peloton ($PTON) since they continued to get smashed after their earnings report but I am still a believer. I am stubbornly holding on because I think the market isn’t rewarding Peloton with the appropriate multiple. I’m trying to be patient since I’m getting flashbacks of a similar situation with Roku ($ROKU) where I got increasingly frustrated with the stock since they were crushing earnings but the market kept holding them down for months and months. I finally decided to sell a good chunk of my stake back when it was in the low $200’s last summer and of course now it’s trading in the $400s, wah wah. I think Peloton will eventually bounce back, but I think it’s going to need to prove it can deliver on their continued shipping problems.
I also added a small bit to Twilio ($TWLO), I haven’t fully reviewed their earnings, but from what I looked at, I was pretty impressed. I added for the first time in a long time to Shopify ($SHOP) since I thought their earnings report was pretty solid despite the sell-off and finally, I added a decent chunk to Roku ($ROKU) since they also had a phenomenal quarter but the stock price didn’t move much.
I also initiated a very speculative position in Argo Blockchain ($ARBKF) since I think this Bitcoin mining company is totally undervalued vs. its peers (Riot Blockchain ($RIOT) and Marathon Parent Group $MARA). After doing a ton of fundamental analysis and reviewing all of their recent news releases, I’m of the opinion that Argo Blockchain is likely one of the world’s largest and most efficient bitcoin mining companies and they should see some tremendous growth in 2021 given Bitcoin’s continued rise. Of course, if Bitcoin were to tank, then I’m sure Argo will tank. Hence why it’s pretty speculative (not to mention it’s an “over-the-counter” (OTC) stock which means that they don’t trade on a major exchange like the NYSE or NASDAQ).
Next Week’s Plan
Earnings season continues next week. Here are the companies I’m going to be paying attention to:
Tuesday: Square ($SQ), Upwork (UPWK), Home Depot ($HD)
Wednesday: Jumia ($JMIA), Magnite ($MGNI), Redfin ($RDFN), Teladoc ($TDOC)
Thursday: Salesforce ($CRM), Etsy ($ETSY)
Friday: DraftKings ($DKNG)
On Tuesday, Square, Upwork and Home Depot are the three earnings that I’ll be reviewing. I also initiated a position in Square last week given their Cash app’s influx of new users due to the Robinhood Exodus. I don’t have a position in Upwork, but they do have an impact on Fiverr, so it will be interesting how Wall Street views their earnings. Finally, Home Depot is more of a “how is the economy doing” type of stock, so curious to see what they report.
On Wednesday, I only own a position in Teladoc of these 4 companies that are reporting earnings. I am curious to see how Jumia reports primarily because I think they are one of the most overrated companies. They are clearly undergoing a huge transformation of their business model and since their IPO, they have mostly failed to execute. I am skeptical and I am tempted to buy Put options prior to their earnings release. I will also be very curious about how Magnite reports because this is another company that I don’t fully understand. They are growing more slowly than people think they are (They merged Rubicon Project and Telaria and their combined revenues look very good, but pro-forma, it’s only up in the low teens) and I just don’t think they have a lot to be excited about. I have a tiny position in Pubmatic which I think is a much better run company. Finally, I’m also very curious about Redfin, since it seems real estate stocks are all the craze these days and they’ve seen some massive gains in recent weeks.
On Thursday, Salesforce will be reporting earnings and they are the OG in SaaS. They are also a big company, so a strong report could help SaaS and tech stocks rebound from this week’s bloodbath. Finally, one of my favorite stocks, Etsy, is releasing their earnings next Thursday and I am incredibly excited to see what they have to say. I personally think they crushed it and while I’m sure they will guide similarly to what Shopify guided, I still think Etsy is still in the early innings of a massive growth streak.
Friday, I have a small position in DraftKings and it will be interesting to see what they have to say given all the Super Bowl betting and what not. Also, they are one of the most successful SPACs, so curious to see if they can continue to execute since SPACs don’t have a great reputation despite the huge surge in interest in 2020 and the start of 2021.
Also, just to be clear, I don’t fully analyze every earnings report, I usually just read the Seeking Alpha highlights or CNBC/WSJ highlights for most stocks I’m interested in but don’t have a vested interest in. It’s only my bigger position stocks that I do in-depth analysis on, since I figure that’s the least I should do if I have a chunk of change invested in them.