Stop the Bleeding | The Daily Peel | 5/20/22

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Market Snapshot

Happy Friday, Apes. Futures pointed towards another brutal day yesterday, with markets down more than 1% before the opening bell. When the dust settled, the Dow shed 0.75%, the Nasdaq was down 0.26%, and the S&P lost 0.58%. WTI Crude is back above 111 bucks, and the 10-yr yield closed lower at 2.851%. After a rough week, hopefully, we can stop the bleeding on this week’s last trading day.

For today’s BBT, I will mail a sweet WSO t-shirt to the first respondent with the correct answer.

Let’s get into it.

Banana Bits

Banana Brain Teaser

Macro Monkey Says

Raise the Roof(stock)

What's Ripe

Synopsys ($SNPS) — Shares of the design and automation company ripped 10.25% yesterday. Synopsys is only down about 16% for the year, which isn’t half bad, all things considered.

Their earnings call was yesterday, and the data looked good. Wall Street liked how they beat sales estimates and pumped up those revenues. They did not put out rookie numbers, and the stock climbed higher.

Live Nation Entertainment ($LYV) — Live Nation’s stock had a nice day yesterday, enjoying a nice little 5.98% pop.

The summer concert season is here, and it’s likely that Live Nation will be a strong reopening play moving forward. Analysts generally like Live Nation, and it is generally seen as a BUY by the Street.

What's Rotten

Under Armour ($UA) — Here’s another interesting one: UA’s CEO is stepping down, and the Street doesn’t like it.

Their current (previous?) CEO was supposed to right the ship but unfortunately came in a little, er, limp. Unlike Tom Brady, he’s decided to hang it up. $UA fell 15.76% on the news yesterday.

Is it time to buy our bro-ga pants on sale?

Ross Stores ($ROST) — Continuing the trend of retailers getting their a$$es kicked, $ROST is down over 25% pre-market today.

Clearly, Ross is having a tough time with freight and labor costs compared to TJX. Ross’s earnings weren’t fabulous, and just like Joey B’s administration, they’re blaming Putin for inflationary pressures and uncertainty in the marketplace.

Thought Banana

Valuation Compression — If you’re like me, your portfolio has been feeling the squeeze lately.

Lots of volatility can be great; lots of volatility during a downward trending market can eat your f*cking lunch.

There has been a massive drawback in equities valuations this year. Absolutely massive and sort of in biblical proportions for some of our favorite names.

Tech is now trading at the same levels as Consumer Staples. Read that again.

Your favorite names like $FB, $MSFT, $TSLA, $AAPL, etc. have absolutely tumbled. Thinking about this critically, it would appear that there isn’t much farther to go.

But if you’re trying to predict a bottom, where do you reach out your hand to try and catch a falling knife?

And who is to say that valuations haven’t adjusted too far to the downside and that fair value is slightly higher than these levels?

I’d argue that some valuation compression is good; this is a generational buying opportunity. Gen Z, congrats – this might be your chance to get in on stonks. I can’t say the same for housing.

Buying near all-time highs isn’t really fun. Massive moves are okay for those looking to access the market. Let’s just hope the rest of us aren’t underwater in the meantime.

Wise Investor Says