$SFIX $CHGG – Sleeper Stocks and Joe Biden’s Stimulus Plan

$SFIX – Stitch Fix Stock

Stitch Fix ($SFIX) has been an interesting stock to buy and hold. It IPO’d in late 2017 and I bought shares pretty early on because I believed in Katrina Lake and I thought the business model made a lot of sense. I mean, personalized, fashionable clothes at a reasonable price being delivered to your doorstep, what’s not to like, especially if you’re a parent? I know I never have to freaking shop again!

Anyway, the stock skyrocketed to $45 after its first earnings report only to tank shortly after. After it tanked, it has been one of those stocks that stayed range-bound for basically 2.5 years, where there were earnings reports where they killed it and others, not so much:

It was only until their FY 2021 guidance that the stock finally skyrocketed which is so utterly strange. They basically said they would grow 20-25% this year (which they have been for the most part for the past few years) and then all of a sudden Wall Street was like “omg, I must own this stock.” The stock skyrocketed from the $30s to now $75. Talk about low expectations, short squeeze and finally getting the valuation it deserved.

I’ve been a $SFIX bull for the past few years and I’ve always had shares or options, but the problem is that the periods of time where I held the most shares were the years where they just kept disappointing. At this point, I hold a small pittance of the shares I once held, but at least I have shares. It’s crazy it’s now at $75 since it bottomed at $10 back in late March 2020 during the height of COVID’s stock market panic.

There’s a few people who believe Stitch Fix will eventually become a $100 B company which I’m not sure if I can really see that given their business model and the scale they would need to get that big, but anything’s possible. Also, Stitch Fix becoming a $100 B company = $1000/share approximately.

$CHGG – Chegg Stock

Chegg finally hit $100/share yesterday and while that’s incredibly exciting, I can’t help be frustrated by my impatience (and their management’s “sandbag” of ’21 guidance in their Q3 earnings report).

I first bought Chegg going into their Q2 earnings report, thinking they would absolutely crush it, and they did, but Wall Street was expecting more and their shares eventually dropped 15-20%. They eventually rallied back to around the same price 3 months later right before their Q3 report only to crash and burn another 20% or so after what I think was an overreaction due to muted guidance for FY ’21.

I eventually sold about half of my shares at a very slight loss in November/December only to then see the stock rally 50%+ in the next 4 weeks.

I suppose shame on me for being so impatient since I should be investing in Chegg with a longer time horizon and not expecting anything extraordinary in just a few months, however it’s hard to stay the course when all your other stocks are rallying hard in November/December and you have a stock tanking. Chegg reminds me of Stitch Fix, though Stitch Fix’s rally is even more brutal since Stitch Fix is literally a 3+ bagger in just a few years.

In the News

Jerome Powell at a Q&A session at Princeton Review said:

“When the time comes to raise interest rates, we’ll certainly do that, and that time, by the way, is no time soon”

Given the low interest rate environment in order to help stimulate the economy, I would anticipate that the current stock market rally will continue. Granted, there will be blips here and there but as we saw from 2008 to 2015, low interest rates generally help fuel a stock market rally since it’s a low yield environment and stocks are the only place you’re going to get the yield you’re looking for. Right before interest rates were cut back in late December 2019, my Discover Online Savings account was yielding ~2% and I had some intermediate term bonds yielding 3.5%+, now my Discover account is yielding 0.5% and most intermediate bonds are yielding barely 2% without taking on too much credit risk.

Joe Biden released his COVID relief plan titled “The American Rescue Plan” and it’s BIG. $1.9 trillion where many American families will get $1,400 more on top of the $600 they got from the $900 B stimulus plan signed a few weeks ago.

I assume the stock market should be excited about this and will eventually rally even more once it gets closer to being passed (though there are a few points that I am skeptical that moderates would be aligned with, the overall number is just mind boggling).

Portfolio Update

Portfolio hit another ATH and is now up slightly more 19%. Portfolio increase was led by a nice comeback from $ZM. $FVRR and $TWLO also both hit 52-week highs which is exciting. $FVRR should have a ton of runway given their market cap.

And yes, $GME continues to crush it for the second day in a row.

My trades

I got some serious FOMO in $GME and bought back half my shares in early morning trading only to see $GME tank from 20% to 6% but it then rallied again to 27% by the end of the day.

I also bought a few synthetic longs on Alteryx ($AYX) after their partnership announcement with Snowflake and because I’ve been meaning to get back into this stock but had to wait due to Wash Sale rules.

I also bought some $SNAP given the huge drop it had for some reason.

  1. Great update!
    I think the pandemic helped Stitch Fix. Home delivery is probably extra attractive when retail stores have restrictions and people are staying home to stay safe.

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