Lyft a Bust??? Stocks Soar & Roar

Last week, we ended with the hottest and most anticipated IPO in a very long time. It was one that caused me to dust off my HOT IPO Roadmap and tell you to run for the hills. Lyft came public to all the glory and hoopla of a Ringling Brother circus. And certainly not to my surprise, it fell flat on its face after running above $88. Last I checked, it was sub $70. The pundits were chastising Uber for waiting to be number two. Who’s laughing now? I am sure Uber is learning a valuable lesson!

Regarding the stock market, the bull remain long and strong. However, it seems like a whole new group of bears have just started to notice that an epic rally has been taking place since Christmas. I saw some of the loud and proud bearish pundits who have been pounding the table all year that stocks absolutely had to revisit the Christmas lows and probably break them. These guys were singing the market’s praises as if they had been positive all year. One clown says he used to be a broker before he started blogging and became a pundit. Last time I heard him comment, he was invoking the Logan Act regarding Trump. I don’t know how pundits stay so wrong for so long and then flip a switch, revise history and claim victory. I actually do know. It’s because there’s no accountability.

Anyway, I can spend all day laughing at pundits who refuse to ever admit defeat and just revise history. It’s like those “floor traders” we see on TV who don’t really do anything but walk around the floor socializing and waiting for someone to ask their opinion. Most trading is done electronically. They don’t manage money. They aren’t fiduciaries and frankly, they’re just around for show and entertainment.

Geez, I sound salty and ornery today like my buddy Sam Jones. I’m really not. And I had a great weekend in Albany and Vermont watching basketball, skiing and catching the Mount Snow Spring Brewer’s Festival.

As most of you know, I have no problem admitting I am wrong because it happens pretty much every day as I am reminded at home. “Dad, you’re so wrong”. “Babe, you don’t know what you’re talking about.” While I absolutely can’t stand Duke, I thought there was no way they could lose before the Final Four. Wrong. I thought my UCONN women would have a very tough time on Sunday against Louisville. Wrong. For a few weeks in early January I thought stocks would see a secondary decline into March. Wrong. 30 years in business, I am still learning each and every day. Make a trading error? Fix it ASAP. Don’t wait and hope it goes my way. Cut your losses and take my lumps early and move on. Markets are usually right. Markets also don’t care what price I bought or sold anything at.

Moving on…

Stocks roared out of the gate to begin Q2 as Chinese economic data was unexpectedly robust. The S&P 500 broke out to new highs for 2019 and the highest level since October 10 as you can see below. The NASDAQ 100 looks very similar and equally as strong. Before I continue beating my chest about all-time highs, I want to add that Monday was somewhat emotional for the bulls. As such, I would not be surprised to see some pause to refresh or even a little pullback over the coming week or two. It wouldn’t be one that I would take much action on, but I would be aware. Ultimately, as I have said every week all year, stocks will resolve higher and buying any and all weakness remains the strategy until proven otherwise.

The Dow Industrials are lagging as you can see below, but no longer by a huge margin. The Boeing news has settled down and I expect the Dow to kick it up a notch as Emeril would say. The S&P 400 and Russell 2000 are the two lagging indices that need to step it up sooner than later. If the bears want to point to something concerning, there it is.

All in all, stocks continue to soar ahead as I spelled out in my 2019 Fearless Forecast. All-time highs are coming. Have patience. There will some trading ranges and pullbacks and frustrations along the way. The economy is decelerating but I don’t think recession is here just yet.

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Hot IPO, LYFT, Coming Out. Time to Buy?

“Hot” IPOs like Alibaba, Twitter and Facebook are usually very emotional, much anticipated and huge financial media events.  Investors clamor for these stocks, usually throwing caution to the wind as fundamentals are trampled by greed. The media are usually camped out at the NYSE or NASDAQ with minute by minute updates as to where the stock may open.

As I have discussed over and over, emotion in investing can have a very detrimental impact on your portfolio! That’s one of the reasons I have always had a tough time advising people to buy a hot IPO on its first day of trading. My theory has always been that if a company is as good as advertised, there will be plenty of time to buy it down the road once it stabilizes, even if that means at higher prices. Of course, that strategy is irrelevant to those who just want to trade the stock for short-term gains.
With Lyft, the new generation ride sharing company, coming public today and its brother, Uber, shortly thereafter, I am doing my usual review of similar and much anticipated, “hot” IPOs to show you what transpired over the coming few months.
The term “hot” is subjective and I tried not to cherry pick the list, however, I am sure others can argue for inclusion of more companies. This research has absolutely nothing to do with the fundamentals of Lyft, which definitely concern me, even though I am a frequent user of Uber and sometimes user of Lyft. The numbers just don’t add up and work for me, but that could also be because I am absolutely awful at gauging the future success of companies with business models that seem broken right out of the gate.

With all that said, let’s take a walk down hot, tech IPO memory lane.

Snap was the most recent hot IPO and oh what a disaster that was. Snap opened at $24, ran straight to $30 and then spent the next few months sliding and grinding to under $12. To its credit, it did bounce strongly to $20, but that was a classic bear trap before collapsing to $5.
Square came public at the end of 2015 as stocks were trying to recover from their summer swoon. After a wild first day which saw Square’s high for the next five months, the stock traded as low as $8 before doubling. Patience was rewarded, my long-term theme.
Alibaba was the largest U.S. IPO of all-time, coming public in September 2014 to huge fanfare and expectations. I don’t recall an IPO ever getting that much media attention. I surmise that the vast majority of individual investors never heard of Alibaba until the days leading up to the offering. After another wild first day, the stock pulled back 15% for a few weeks before uncharacteristically soaring to its all-time high two months later. However, as we have seen time and time again, buying strength in IPOs was not a rewarding long-term strategy as the stock was subsequently cut in half before double bottoming in September 2015.
Twitter, another hugely popular and much anticipated IPO, also bucked the trend over the past few years. While it initially dropped 20% from its $50 first day high, that set off a very powerful rally of almost 100% to $75 before seeing the customary 60% IPO collapse to $30. End result: investors were mostly better off waiting than buying right away.
 Facebook may have been the most high profile IPO since Google and had all kinds of problems right out of the gate. Talk about the epitome of what not to do! Here is one piece I did. (http://www.investfortomorrow.com/newsletter/CurrentStreet$marts20120525.pdf) As you can see, it was almost straight downhill, 60%, for four months before THE bottom was hit at $18. End result: investors were absolutely better off waiting than buying right away. Patience was rewarded.
LinkedIN is next and similar to Facebook, there was immediate and significant weakness before a good low was seen. End result: It was basically a toss up.
Just like with LinkedIN, Groupon experienced the ole buyer’s remorse right from the start with the first meaningful trough coming about a month later. End result: investors were better off waiting than buying right away.
Yelp bucked the trend somewhat with only a shallow initial pullback, but the stock didn’t escape the carnage as you can see over the first three months. End result: investors were better off waiting than buying right away. Patience was rewarded.
Zynga was just like the others with an immediate month long decline to a good trading low. End result: investors were better off buying sooner than later.
I added Google as it was before the financial crisis as well as arguably the hottest and most anticipated IPO of all-time or perhaps since Microsoft and Apple in the 1980s. This is certainly not a social media company like the others. It was also during a very different investing climate back in 2005 with vastly different results. It does not belong in the group above, but I figured I would answer the question before it was asked. End result: investors were rewarded almost immediately. The stock never returned to its first day’s or week’s range.
The moral of the story is that most of the time, investors are rewarded by having patience with hot IPOs. Personally, I would rather be late and pay up than be early and lose a lot of money.

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