WASHINGTON, March 3, 2017 – As we noted in this column yesterday, we were astonished to get any shares at all of this week’s eagerly awaited and seriously oversubscribed IPO of Snap, Inc. (symbol: SNAP), parent company of the rising generation’s most popular app.
Perhaps Snapchat’s fast-disappearing photos and videos are giving today’s youngsters the opportunity to avoid perpetual social shaming and eventual job-interview terror by quickly deleting those nude selfies we hear about. But whatever the case, SNAP shares continue on a tear, making money, at least for now, for investors who didn’t instantly flip their IPO shares after yesterday’s sizzling opening trade.
Today, the stock continues on its hot streak, up nearly $4.50 per share from yesterday’s close as we write this. That’s nearly a 70 percent (!) gain for those who are still holding on. But time will tell if this rally has holding power.
In the past, we experimented with buying new shares of Facebook (FB) after its disastrous IPO opened, since we couldn’t get any shares. We got clobbered as the stock quickly sank, but got out before most of the damage was done. Chalk one up to the LOSE column. (N.B.: The stock eventually righted itself and performed magnificently—and still is.)
On the other hand, we did manage to get 100 shares of Twitter (TWTR) during its IPO, holding on to those extremely hot shares for a couple of months rather than dumping them at the first opportunity. Made roughly 40+ percent on that one, then got out—a good idea considering that this one is currently drifting toward oblivion and can’t even sell itself to another buyer.
As we noted yesterday, IPOs are a crapshoot in the end. But we do play them when our evaluation shows a better-than-even chance of winning short term, which is why we fished for shares of SNAP, even though we don’t like its track record of zero earnings and its shares, which, irritatingly, do NOT come with voting rights like most shares do.
We shall see. It feels good today. But we have to hold for at least 30 days after the IPO date (broker rules) and a lot can happen between now and then, so we shall see. Sure would be nice to take that 70 percent right now, though. Sigh.
Aside from the SNAP fun and games, the stock market in general is now enduring Day 2 of recovery from Wednesday’s massive pro-Trump Speech Rally, the same pattern we saw in the two trading days prior to Wednesday. On the whole, we still think Mr. Market is trying to consolidate the YUGE gains it’s accrued since a viral irrational exuberance began to send stocks to the stratosphere on the morning of November 9, 2016.
No one foresaw the Trump Rally. No one. (Well, maybe one or two analysts that nobody read.) Likewise, most analysts and investors are already flabbergasted by the staying power of this unexpected rally and figure it will end soon. This writer/investor tends to agree, since anything that can’t go on, won’t.
But in the world of investing, there’s another adage: stocks tend to climb “a wall of worry.” In other words, as long as every analyst, every investor, every trader, every HFT supercomputer hasn’t boarded a roaring market freight train, heedless of the risk, a bull market tends to climb relentlessly higher pretty much as long as influential analysts are worrying, skeptical and plagued with self-doubt.
That means that, while we may get some kind of nasty correction here or go sideways like we have for 4 of 5 trading days this week, the Trump Rally could still actually have considerable juice left.
Currently, we’re still worrying about our positions in resources and materials, namely Marathon Oil (MRO) and Silver Wheaton (SLW), both of which have been slipping badly this week. But most of our other positions, while weakening, are still well above their moving averages, the lines we draw on charts to show us when they might get in trouble.
So we’ll pretty much sit this one out again today, unless we can snap up shares of an existing position at a good price to average the cost of the over all transaction down, better positioning ourselves for (presumably) the next leg up of the Trump Rally That Will Not Die (until it does).
Have a good weekend.