Trading Diary: Still in stall mode, with IPOs on deck

As markets wallow in uncertainty, it’s best for small investors to hold as much cash as possible while acquiring targets of opportunity.

Obamacare replacement meeting in the White House with President Trump and Vice-president Pence earlier in March. Official White House photo in the public domain.

WASHINGTON, March 23, 2017 – We explain at some length in our companion article today how relentless media attacks on Donald Trump and the Republican House and Senate majorities over Obamacare replacement and Supreme Court nominee Neil Gorsuch are not yet but may well be erosive and corrosive. The media is dedicated to distracting Americans from the extremely positive things all three entities are attempting to enact to get this country back on the winning track.

That said, the work on Capitol Hill hasn’t been productive or impressive thus far, as Congress, now completely under Republican control, continues in its fatal political dithering and dysfunction, something encouraged over the past eight years by the imperious Obama Administration. It’s something that’s now hard to reverse in just a month or two.

The problem is that as Congress spins its wheels, thus encouraging more left-wing spin from an already co-opted media, fake news of failure can become a self-fulfilling prophecy.

At the same time all this is going on, the Trump Rally has hit a predictable speed bump as it tries to work off a rather badly overbought condition without taking all the post-election profits back. The current (and hopefully temporary) market malaise could be turned into a rout with a continuation of this relentless media negativity, so we remain at an inflection point in the market, which could now go one way or the other. Big time.

For this reason, we continue to avoid major commitments in our portfolios, have raised a good bit of cash over the last 3-4 weeks. Here’s what we’re doing to mark time:

Trading Diary

The only genuinely questionable position (in our minds) that we have left is a slightly too-big position in Newmont Mining (NEM), which has been buffeted lately by some predictable though mysterious manipulation in the price of precious metals on the international exchanges. Someone doesn’t want gold bullion to get too high. So when it looks like it’s about to break out and run to the upside, gold in particular tends to get hit out of the blue by massive bear raids, something that happened a couple of weeks ago.

When this happens, gold and silver mining stocks get smithereened, which is what happened to our NEM holdings, which we acquired at precisely the wrong time. Now for that eternal question: Sell or hold, waiting for a rebound. We’re still indecisive, but we’ll have to make up our minds soon or the position could get massacred if the bear gang shows up unexpectedly once again.

A clue that they’re circling: each day, regularly at around 3:45 p.m., 15 minutes before market close, our online brokerage site posts a news brief of an order imbalance on the sell side for NEM. That’s not a good sign. We continue, however, with watchful waiting, as gold can be an unpredictable creature.

A couple of potentially attractive IPOs were made available by our discount brokerage this week. (They don’t get in on every one, BTW.) This week’s offerings included one actual IPO—Alteryx (proposed symbol: AYX), a small-to-microcap data analytics tech offering—and a secondary offering of stock in Keysight Tech (KEYS). For the uninitiated, a secondary kind of looks like an IPO. But it’s actually an issue of newly minted or insider-sold shares of a company that already trades on a public exchange.

In a secondary, the price of the listed stock usually takes a pretty good hit on the trading day the issue is to be priced, which KEYS stock did. From a high of $39 and change last week, the stock dropped earlier this week close to $35 per share, which, surprise, is the price the KEYS secondary was actually offered for.

We decided to take a chance and request shares, and we got them this morning—something that doesn’t always happen for retail customers. Happily, the issue popped today, closing up a little over 2 bucks above the offering price. We’ll see how it goes from here.

Right now, we’re dithering about whether or not to take a position in AYX. It just priced this evening at $14 per share—the top of its estimated $12-14 range. In our anecdotal books, this isn’t a good sign, as we’ve tended to get the best IPO pops (significant jumps upward in the open market price) from IPOs that either price notably above the posted range, or, significantly below, although above-the-range seems to be preferable in tech stocks like this one.

Like most new techs, AYX makes zero profits, which investors tend to accept, figuring that future “growth” is what they really want. But this doesn’t always work out.

Our decision. Well, we haven’t made one, so we’ll dither a bit longer. The market tone right now is lousy, which isn’t a good environment for an unknown stock. On the other hand, Goldman is leading the offering syndicate on this one and they usually know what they’re doing. So we’ll agonize a bit longer and tell you what we did in our next column.

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