Gregory Bergman
Editor-in-chief, CapitalWatch
Welcome to Groundhog Day.
"Will this be the day when investors sell off and take some profits?"
"How long can the market remain divorced from all economic reality?"
"Will Spotify become the next Apple because it now offers podcasts?"
"And speaking of Apple, I know almost all of us said it was overvalued when the stock fell in March but now will it ever fall?
So say market experts...every single day.
While companies like Spotify (I bought at the recent dip) and other
stay-at-home tech stocks will keep rising, the bulls will sell
eventually. There is a tech bubble and it will burst, or at least
deflate. To wit, Facebook (Nasdaq: FB) has barely budged despite
advertisers leaving in droves at Zuckerberg's intransigence to demands
by civil rights leaders insisting he curbs hate speech on his platform.
Whether motivated by pure arrogance or a firm commitment to the
principle of free speech on his platform, Zuckerberg's business sense
will prevail in the end.
Facebook, Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Google
(GOOGL), and often included, Microsoft (MSFT), will not see their
F.A.A.N.G.s recede anytime soon. For all Warren Buffet's mistakes this
year, Apple stock makes up more than half of his stock portfolio. I will
continue to be long on Apple until there is a vast change in consumer
behavior. Even when the world crumbles at our feet, we will take a video
said Armageddon with our iPhone 23S.
Yes, buy Shopify (NYSE: SHOP) and Spotify (SPOT) and yes, they will
go down, but if they do, just sell fast or hold long-term. Spotify's
foray into podcasting is not a joke and will help drive growth
long-term. (Stock charts of the Bergman Buy Index are updated and
included every two weeks.)
UPS? Sure, buy it. FedEx's earnings should bode well for UPS, whose
stock (UPS) should move upwards after it releases its own earnings on
July 22. And now that is confirmed that Covid-19 is a vascular, not a
respiratory, illness, we are going to continue to wake up every morning
with more boxes to open as we move back inside the house and await a
vaccine.
The Virus Is Worse Than You May Think
The virus' rampage is in its second, not seventh inning. It is, as
mentioned, a vascular, or blood vessel, disease, which means that,
unlike an influenza virus that attaches itself to receptors in the lungs
and the airway, SARS-CoV-2 gets into the body that way, but then makes
its home inside the blood vessels. "It means that it affects every organ
in the body that has lots of fine blood vessels in it, and not even
just organs," explained Donald G. McNeil Jr., a science and health
reporter in an interview on The New York Times "The Daily" podcast. The
lungs, the kidneys, the gut, the brain, and the heart are all affected,
to varying degrees. "When they do autopsies, they find like thousands of
tiny little blot clots all over the body."
The good news is that viruses eventually mutate into more
transmissible but less lethal diseases. And McNeil says we "might be
beginning" to see the first signs of that. Studies show the virus is 20
times more likely to transmit indoors than outdoors; it may be better to
stay six feet from someone outdoors without a mask than indoors with
one on. Despite rising infection rates, the market, especially tech,
keeps partying like it's 1999.
These virus findings are bad news for Trump, who threatened to defund
the schools in the fall due to what he sees as unreasonably stringent
reopening requirements pushed by the Democrats. A compromise? Maybe we
can delay opening schools but when we do, the schools can be operated by
the Trump Organization. Call it "Trump University... for kids!"
Finally, a school focused on kids learning practical skills to succeed in the American economic landscape.
Subject changes will be necessary in order to reflect the new academic mission:
Math will be changed to "How to hire and negotiate with a smart Jew accountant who is good with figures."
Physical Education will be changed to "How to make money so you can stay fat so you can still sleep with models."
Civics will be changed to "The absolute authority of the executive branch."
Arts and Crafts will be changed to "Fun wall building with paper mache."
Physical Science will be changed to "Experiments with hydroxychloroquine."
And so, after last week's nod to our sinful but splendid Independence
Day heroes, I am now directing my attention outside the U.S., as
unpatriotic as that might be, in search of companies in nations which
may come out stronger post-Covid-19.
I just cannot continually talk about this nation anymore, its
markets, or its politics, and retain what is left of my sanity. I mean,
Kanye? Yeezus H. Christ.
"V" Is for Vietnam
Vietnam is one of the nations that stand to benefit from
Sino-American trade tensions. Integral to the U.S. China containment
strategy long-term will be the deepening of economic and political ties
to regional rising players like Vietnam. The nation's government acted
decisively to stop the spread of Covid-19, although those giant pointy
hats also helped facilitate natural social distancing. Maybe make the
hats even bigger? Just an idea.
Vietnam is one of the fastest-growing economies of the world from a
GDP perspective. The rise of Saigon has led many to consider the city to
be the next Shanghai, although that is a bit buoyant.
Also, GDP and stock market performance do not always go
hand-in-hand. Over 14 years of unparalleled economic growth, the Chinese
stock market underperformed, while Taiwan, posting little to zero GDP
growth, saw stocks rise. But in the case of Vietnam, I am bullish on the
country's financial future supported by ever-increasing U.S. economic
and geopolitical ties.
The best and easiest way to play Vietnamese equities is the Vaneck
Vectors/ Vietnam ETF (VNM). I got in at a recent dip on June 2 26 at
$13.49. It trades a bit volatile, but this, along with all the following
worldwide plays, I am in them through at least until the end of
December. If you want to trade a company directly through a Vietnamese
broker, VietJet Aviation (JVC) is a buy. The airline is expecting to
resume international flights in July; the hard-hit stock is moving in
the right direction.
"I" Is for Israel
Israel has long been known for its tech and medical expertise.
Turning their security apparatus on themselves, the Israelis were able
to stop Covid-19 in its tracks. That is until a recent surge, spurred on
by a religious faction less mask-motivated (that means you, my Orthodox
neighbor) and a raucous youth dance culture keen on deriving its
"ecstasy" more from pills than from scriptures. That aside, some of
Israel's tech and pharma companies, like U.S.-listed stocks like
generic-drug developer Teva Pharmaceuticals (TLV: TEVA), have had a good
run this year. After chopping operating expenses by $3 billion and
slicing into its net debt by almost $10 billion (yes, it had a ton of
debt), Teva might see gains even in the short term. Long term, it is a
buy, but I would rather recommend a broader play, an ETF. Of the most
popular, I like BlueStar Israel Technology ETF (ITEQ).
"R" Is for Russian Roulette
Unless you are betting against an invasion force tumbling through the
tundra in a foolish attempt to capture and secure Moscow, betting on
Russia is an unsafe bet. But Putin, having just likely secured his
position for decades to come, is not a man to bet against--or have
dinner and drinks with, for that matter. And so, if you are patient,
investment in Russia could offer significant upside.
I like Yandex (NYSE: YNDX) and Gazprom (OTCMKTS: OGZPY).
Yandex, the company's homegrown Google, has grown its market share in
the country by 20 percentage points to 58%, according to Bernstein
Research estimate since Russia's antitrust watchdog ordered Google to
let competing search engines and other apps come pre-installed on
Android phones back in 2017.
Deutsche Bank analyst Lloyd Walmsley raised the firm's price target
on Yandex to $56 from $43 and remains bullish on the stock long term.
The stock is only a few bucks from that price, but long-term investors
will see this stock rise steadily as the Russian bear, weakened by
sanctions and sanctimony--and now a virus, regains its shaky footing
after the virus subsides.
And while the oil and gas industry might not seem like a play on the
future, Gazprom boasts one of the best balance sheets of all European
energy companies. So long as Russia remains, so will Gazprom.
"U" Is for Uruguay
Forget about its stock market, there isn't much excitement going on
there. In fact, there isn't much excitement going on anywhere in
Uruguay--which is what makes it so great. Situated in tumultuous
territory, Uruguay has been a paragon of stability and transparency. It
is one of the best places to retire--just Google or Yandex a beach house
in Punta del Este. Starting in July, foreigners who live at least 60
days a year in Uruguay and buy real estate valued above around $378,000
will qualify for tax residency. Also, Uruguay has recorded the lowest
number of Covid-19 cases and deaths per capita. A real-estate boom is
taking place in the country so buy a house and trade Slack (Nasdaq:
WORK) if you must. In 10 years, that house will have proven to be the
better investment.
"S" Is for Spain
Spain has been ravaged by the coronavirus and has a long road to
recovery. Even arguably undervalued stocks like Santander Group (NYSE:
SAN) do not sit well with me just yet. The bank is scarily exposed to a
Spanish lending program, an Iberian iteration of our PPP, from which it
will take yet another hit. Trading at half its value since the
coronavirus, it may be a good long-term play, but there is no rush to
get in just yet. I do, however, like Telefonica (NYSE: TEF) as it is
immersed in markets outside its struggling home country. It posted 10
consecutive quarters of growth in Spain before its nightmarish 2020. At
this price, it is worth picking up long term; the wireless provider
boasts more customers than AT&T and Verizon combined.
And so, another week and another forced acronym. You could just
forget all the above and jump on the Chinese rollercoaster instead.
China in a Bull Shop
As one Chinese retail investor in a Bloomberg piece said this week,
"I can't lose." Well, lose they did the last time the Chinese stock
market raucously rallied in 2014, losing $5 trillion nearly overnight.
In the last couple of weeks, Chinese indexes added $1 trillion in
value spurred on by individual retail investors leveraging like crazy
after receiving encouragement from Beijing. Chinese regulators are
already panicked over the frenzy, but Goldman Sachs says the bull has
more room to run. And while there will be hills and valleys, I see a
long-term bull market in China for the next few years.
You can buy an ETF, but I would just go to back to the BAT stocks and
also add Vipshop (VIPS), Baozun (BZUN), Tencent (TCEHY), New Oriental
Education (EDU), Pinduoduo (PDD), GSX Techedu (GSX) and leverage away.
GSX is likely another lying Luckin, but who cares short term? I was late
to the party but got "in" Monday at $66, "out" at $86.
You can also ride the dragon by betting on it or against it with The
Direxion Daily FTSE China Bull (YINN) and/or its Bear (YANG). The 3X
Shares ETF seeks daily investment results, before fees and expenses, of
300%, or 300% of the inverse (or opposite), of the performance of the
FTSE China 50 Index.
Just make sure to get off before you get burned. Let me know how it goes, at Bergman@Yandex.RU.
Nevermind, I'll be in Uruguay, not Russia, so try me at Bergman@Yandex.UR.
Gregory Bergman
Editor-in-chief, CapitalWatch
(The opinions expressed in this article do not reflect the position
of CapitalWatch or its journalists. The analyst has no business
relationship with any company whose stock is mentioned in this article.
Information provided is for educational purposes only and does not
constitute financial, legal, or investment advice)
