How is one twin different from another? Trick question, they aren't
Fiverr (NYSE:FVRR) shot up 90% yesterday, and of course, CrowdStrike (NASDAQ:CRWD) raised $612 million in one of the biggest IPO offerings ever for a cybersecurity company. CRWD shot up 90% as well. We have existing public doppelganger companies, Upwork (NASDAQ:UPWK) went public in October, soared as well, and now fell back to its IPO price. CRWD arguably has more sibs, like Zscaler (NASDAQ:ZS), Proofpoint (NASDAQ:PFPT), Fortinet (NASDAQ:FTNT), CyberArk (NASDAQ:CYBR), and the list goes on. Some would flat out say that ZS is a superior business to CRWD. Perhaps the crowd's enthusiasm for the new is belying the fact that this sector deserves more attention and dollars from market participants.
I posit that perhaps UPWK deserves more love, or ZS/CYBR/PFPT are better stocks than CRWD. My approach is to test every presumption by the market, and I find these huge jumps lacking. Long-term price is truth, and short-term stock market pricing can be as irrational as an angel duster. If you want to jump on a trend scalp a few shekels on an IPO and even if you fancy yourself a fast money trader, just watch it right now. There are times for heroics and in my humble opinion; the time is not now. I would back away from FVRR and CRWD if you bought in consider yourselves lucky and take profits.
Just to make it totally confusing, I think FVRR and UPWK are interesting. I just don't want to touch either of them until I understand them. For instance, have LYFT and UBER poisoned the waters for gig economy stocks? Who knows, let's work the problem until we do.
Should I say this? Banks might be worthwhile finally
Now I am going to speculate on something that I will probably regret later. Just carrying the logic from my missive yesterday to you dear reader. If you haven't read it, go dig it up. In any case, in yesterday's note, I took the contrarian view that Powell will not be cutting rates anytime soon, not next week, July, August or September. Powell may never cut rates in 2019, and in my opinion, may have the opportunity to RAISE in 2020. So just to really lead with my chin, if that is the case, it means that the yield curve will revert. That in turn means that the financials will finally start performing. Why would I walk into this buzz-saw? When I started writing, I got into the habit of sharing my thoughts no matter where it leads me. So if we are talking about financials, I would start with KKR (NYSE:KKR) and Blackstone (NYSE:BX). Actually, I already like these names; they are great dividend payers and market leaders.
Twist my arm then and I would say JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS), and even, god help me, Goldman Sachs (NYSE:GS). If we do bend the yield curve, then the non-money center banks, so how about the merger of SunTrust (NYSE:STI) and BB&T (NYSE:BBT). They will have the unfortunate name of Truist Bank, wondering if that will hurt the price of the stock at first. In any case perhaps just buy the regional bank ETF KRE. Just to be clear, I am not recommending these names just yet. Let's wait to see how this all plays out. I just want you to start thinking about a banking list, as the yield curve heals itself. It makes sense for banks to start sharing the wealth with better dividends and buybacks.
Trim, Trim, Trim
Please trim positions (3% to 4% of each name) with the goal of generating 25% to 35% cash. This should be a habitual discipline for someone who is a disciplined speculator (the way I define it). I feel this admonition is especially timely because it is my speculation (see what I did there?) that we are going to have a downside move the latter half of this month. Once again DO NOT sell long-term investments. If you do speculate, keep those positions in a separate account. If you know how to write calls or other means of protecting your portfolio, give it some consideration.
Have a great weekend.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.