What Happened in the Market (and the World) This Week?
S&P 500 return this week: 4.64%
S&P 500 return YTD: 3.61%
What an awesome week in the market. The market went up nearly 5% this week due to strong earnings, hope for President Biden’s stimulus and “improving” economic data. Last week the market finished in the red for the month of January, but it seems like February has been a much better month so far.
It seems GameStop and the short squeeze stocks all tanked and the market returned to “normal.” GameStop dropped from $325 last Friday to $63.77, much of the damage was on Tuesday where basically the bubble burst and the panic selling commenced. By the end of the day, it was complete and utter carnage to the tune of -60% for the day, closing at $90. The following days GameStop felt more pain, ultimately succumbing to a complete ass-kicking and closing down just over 80% in a single week.
Economic data seemed to be improving, the unemployment claims fell to “only” 779k last week and the Jobs Report on Friday showed a gain of 49k jobs in January which is up from the 140k lost in the December Jobs Report., however it should be noted that the 140k that was initially reported in December was actually revised down by 87k to 227k jobs lost. Yikes.
Our economy is still definitely in the shitter with over 9.9 million jobs lost since February and while the unemployment rate dropped to 6.3% from 6.7% the previous month, the labor participation rate dropped to 61.4%. So it seems there are a lot of workers that have just “given up” finding a job which is really sad and unfortunate and speaks volumes as to how poorly handled the pandemic response has been.
I’ll be honest, the meme stocks blew up in my portfolio and when I say blew up, I don’t mean in a good way. I ultimately panic sold on Tuesday and after all the damage, I can say that I had a minor loss after being up tremendously this past Friday. Fortunately, this was mitigated by the fact that the rest of the market rallied and rallied hard. Most noteworthy were $ZM, $PINS, $SNAP, and $TCS.
As I had written in my The Container Store’s Q3 earnings recap, $TCS just had a phenomenal quarter and guided very confidently. This resulted in a 6.4% increase in share price after earnings and a 15%+ gain for the week. Zoom Video Communications also had a strong week finishing up 12% and it seems their Zoom Rooms Innovation helped.
Snap and Pinterest also had solid earnings reports which resulted in some big spikes in their share prices. Snap was memorable because I read the press release, dug into the financials, and then saw the share price dropping 5%+ in after hours, but the earnings results looked solid, so I picked up a bunch of shares $53.25 for a nice 20% swing.
Peloton was frustrating because the earnings report was actually solid, but their continued shipping delays continues to cramp on their style which resulted in a negative reaction the following day. I picked up shares at $148.25 in after hours after the report since I personally thought the report was very strong, but I probably should’ve waited since the stock hit a low of $142.70 that day. I also wrote a $110 September Put option since I personally think at the current share price of $148.30 is an absolute steal for a company growing revenue at 100%+ still and with their EV/S dropping from 19 to < 15. I expect that $PTON will rebound next week or the coming weeks which historically has happened for the past 2 earnings reports.
I finished the month up 33% YTD and I continue to be astonished at how strong the market rally has been. I do not intend on trimming yet, but I do plan on allocating new monies to $SCHD since I am working on building out my dividend ETF position since I’d like to have some guaranteed income for when I choose to eventually FIRE.
My Trades and Investments for the Week
I already noted some above, where I bought some $SNAP after hours as well as $PTON after hours. I also bought $PINS on Friday when the stock went from +10% for the day to just +2% at a cost basis of just over $80.
I also bought a bunch of $TCS after their earnings report at a cost basis of $14.30 since as mentioned above, they had an insane report that was not much appreciated until the following day where they went as high as +17% before coming back to earth to around 6% or so.
I panic sold the meme stocks on Tuesday but I did re-buy $GME around $68 later in the week and intend on just writing covered calls on that position until the shares get called away or I can take advantage of the implied volatility of its options.
Next Week’s Plan
Chegg ($CHGG) announces their results Monday afternoon, so I’ll be paying attention to what they release. I personally think they will have an insane quarter given how much my business has benefited from the pandemic. Speaking of which, my company was acquired by IXL Learning.
Corsair ($CRSR) announces on Tuesday, but from my understanding somehow their earnings got leaked or they filed something that showed how they were doing which resulted in a massive spike in their share price earlier in the week. I wrote covered calls at $60, so I might be lucky if that’s the most it goes up, but who knows. Their estimated earnings were pretty impressive, I may write more about them later.
Alteryx ($AYX) announces on Tuesday afternoon also, I initiated a small position using options and I’ll be curious what they expect in 2021 since they got beat up pretty badly by COVID.
Yeti ($YETI), DataDog ($DDOG) and Cloudflare ($NET) announced on Thursday. I expect all 3 will have solid earnings and I will be very curious how much more $DDOG and $NET can increase in share price given their current EV/S multiples (I may very well trim them later this year). I have covered calls on $DDOG at $140 expiring in March and $130 covered calls Cloudflare expiring in August. You may be wondering why the strikes are so high, well, personally, I don’t like to miss on upside where many have loss aversion, I’m more of the mindset of losing upside aversion or whatever you would call it. If either hit those strike prices by the expiration, at least I’ll have long-term capital gains and a pretty big share price run-up.