Given how strong the earnings beat was for the last quarter and how big the increase in guidance was for the next quarter from Applied Materials (AMAT) after the market close last night (February 18) today’s stock gain of 5.19% was actually rather modest.
2021 is shaping up as an especially challenging year for investors. Much, much more challenging than 2020. I don’t think we can count on this rally running uninterrupted through the year. That would be simple, wouldn’t it? We’d all know how to profit from that scenario. And I don’t think the market is about to drop off a cliff from its current record highs. That would be traumatic. But, still, we do know how to protect a portfolio in that scenario. And even how to profit from a prolonged plunge–if we can bring ourselves to place those short and Put Options bets. Instead 2021 is likely to be one of those years with a Rally Stage and then a correction (or “something”) to be followed by a last quarter of 2021 that is, at this moment, close to completely unpredictable. That would make 2021 one of those years that gives investors a chance to be wrong several times over, to botch timing on the upside and the downside, and to let emotions power some really bad investment moves. I don’t pretend that I’ve got this year’s market stages down perfectly–although I think the outlines for the first two stages for 2021 are pretty clear. I don’t imagine that I’ve got the timing for navigating these stages clocked perfectly–although I do think I understand “generally” when the market is likely to switch gears. And that lets me lay out for you a likely pattern for 2021 and to suggest stocks and ETFs to use to navigate this year. Part of the point in getting as specific as I can at this point isn’t that I expect that I’ve got everything right, but to lay out concrete markers that will let you and me adjust portfolios as the year progresses. I’m dividing this Special Report into three parts.
Genome sequencing equipment maker and consumables supplier Illumina raised its forecast for 2021 sales growth to 17% to 20% for 2021
I’m taking advantage of today’s drop in shares of MGM Resorts International (MGM) after yesterday’s earnings report to add these shares to my new Millennial Portfolio. The stock dropped on bad pandemic performance from the company’s Las Vegas casinos and resorts and a slide in revenue from its Macao operations. But revenue from online betting soared. And that business is the future of MGM–and the reason that investors with long-time horizons would want to own this stock. (And it won’t hurt at all, when revenue picks up from Las Vegas operations once the pandemic is in the rear-view mirror.
Back on January 26 copper miner Freeport McMoRan (FCX) dropped sharply–down 6.5%–when the company lowered guidance for production in 2021. For 2021 Freeport McMoRan expects sales of 3.8 billion pounds of copper and 1.3 million ounces of gold. In October the company guided analysts to production of 3.85 billion pounds of copper and 1.4 million ounces of gold. (Freeport-McMoRan did raised its 2022 target for copper sales to 4.3 billion pounds from 4.2 billion.) But the company did report fourth quarter earnings of 39 cents a share, matching Wall Street projections. In the fourth quarter of 2019, the company earned 2 cents a share. But…
As of 3:15 p.m. today, February 2, in New York, shares of GameStop (GME)were down 56.22% to $98.50. That a big drop from the January 27 closing high of $347.51, but it’s still significantly above the $17.25 price on January 4. Other stocks that have ridden the Reddit WallStreetBets fever for short squeeze horses are down today too. AMC (AMC) is off 39.70% to $8.02. First Majestic Silver (AG), the big silver play of the last few days, has given up 24.28% to $16.75. Bed Bath & Beyond (BBBY) is off 14.64% to $25.77. American Airlines (AAL), an early short squeeze play, slipped 1.16% to $17.65. The only potential short squeeze bet (if it was, that is) that’s still climbing is vaccine pill biotech Vaxart (VXRT), which was up 34.30% at 3:15 and looks to be riding momentum into the close. (The shares were up 54.43% as of 3:40 p.m.) Vaxart does bring this question to mind: So if the money is coming out of GameStop, etc., where is it going?
Nektar (NKTR) is another one of those stocks that looks to be moving up more strongly right now than the relatively sparse news would explain. Shares of this biotech are up 18.96% in the last week and 24.37% for the last 3 months. I can see a stream of positive news that should be leading the stock gradually higher, but nothing that is especially “current.”
I looked at my Jubak Picks Portfolio with more than a tinge of seller’s remorse this morning. I sold shares of First Majestic Silver (AG) out of that portfolio on Friday, January 29, after the stock rose 21.38% on Thursday. That gave me a gain of 45.52% since I began this position on July 6, 2019.I argued in justification for this sell that the attempt by individual investors on Reddit’s WallStreetBets forum to force a short squeeze in silver, as they had in GameStop (GME), were likely to fail because there was such a big stockpile of physical silver ready to enter the market. So I took my profit. Only to have the stock climb an other 21.3% today, February 1, as of 2:30 p.m. New York time as individual investors did indeed drive up the price of silver futures. The Shares Silver Trust (SLV) was up 6.40% as of 2:30 New York time today as the intraday price of silver limbed to the highest level since 2013. And then I thought about that seller’s remorse.
Shares of First Majestic Silver (AG) climbed 21.38% yesterday, January 28, as silver futures climbed on a post on Reddit suggesting profit from a short squeeze on silver. “Any short squeeze in silver paper shorts would be EPIC,” a post on Reddit’s WallStreetBets forum said. “Why not squeeze SLV to real physical price,” the poster said referring to the iShares Silver Trust ETF (SLV). That ETF closed up 5.55% on Thursday. Now I understand the attraction of anything that can be touted as a potential for a short squeeze like that which has driven the shares of GameStop (GME) up 928% for 2021 as of the close on January 28, and 1538% in the last three months. But silver the commodity is actually very different from a stock and a short-squeeze looks very difficult to execute in silver.
Gold futures on the COMEX for February delivery closed up 1.4% today, January 20, at $1866.50 an ounce. That’s the highest finished for the most active contract on the futures market since January 7. Silver for March delivery closed up 1.8% to $25.766 an ounce. All the talk about the need for a big stimulus program, bigger even than in response to the global financial crisis and the Great Recession, has sent some traders looking for inflation plays.
