Stock Alert: nothing wrong with a comeback
21st May 2020 |
Originally published under Growth Stock Network on 21th May 2020.
I’m an avid fan of the NBA. Have been since I was a kid. I was fortunate enough that while I was born in the early 80s, I grew up in the 90s which was hands down the greatest era of NBA basketball ever.
I remember watching Inside Stuff on a Sunday which would have all the highlights from the games over the last week. The “Top 10” plays of the week was an absolutely highlight.
It was also during the mid-90s that the game’s greatest all-time player, Michael Jordan, retired, shocking the world. It would be a short time out of the game.
In 1995 Jordan came back to the Chicago Bulls in what would be one of the greatest comebacks in sport. As an Aussie, the Bulls without Jordan was still a team we all had great interest in.
Luc Longley, the 7-foot-2 Aussie giant, was the first Australian to make it in the NBA. He was also the most successful Aussie (to this day) in the NBA as well – if you go by the number of Championships won. He collected three Championships with the Bulls in a three-peat, which of course was led by the comeback king, Jordan.
All of these great memories of a kid have resurfaced since The Last Dance documentary on Netflix outlining the era(s) of Jordan and the Bulls. And it reminded me of how exciting comebacks can be and how much opportunity they can present.
Of course that’s a bit of a tenuous link to the stockmarket and investing, but the same principle applies. Just because you might exit a stock, doesn’t mean it can’t find a way back into your team and deliver championship glory.
Our little cosmetics comeback
In late February, we recommended a new stock to you, Warpaint London (LSE:W7L).
Our timing couldn’t have been worse.
A month later and the market had bottomed out following the panic and fear that had beset the world from coronavirus.
You know the story, you’re living it, we’re all living it right now still.
But we’re on the way out of it. We’re able to get out more, and soon we will be able to return to the shops, to the pubs, to the restaurants, to some resemblance of life like it was before all this mess.
Warpaint took a hit during that first plummet, and we got stopped out of the position at 58p with a 29.2% loss. Warpaint continued to trade lower, much lower to 35p. But it was hard to see which direction the stock would move as the market uncertainty was too great.
And for a company that sells fast-moving consumer goods (FMCG) it was too risky to jump straight back into.
With that said, it looks like there’s some more calmness about the return to retail shopping and the easing back into regular consumer activities. Of course things won’t be completely as buoyant as they were, not right away at least.
And that’s due to the economic impact of furloughs, layoffs and spiking unemployment. But as that starts to wind off and those workers return to full-time work, there will be a life back in the retail market, and for companies like Warpaint, we think they will climb back to where they were.
Right now, Warpaint has already started that shift back, and it’s been in a consistent upward trend for the last month off those lows. Currently trading at 55p, it’s still below out exit price when we were stopped out on 17 March.
And we think that it’s a good point to return to the stock, with the view to clawing back some of those losses and the company moving on to fulfil its potential as we first outlined in February.
It’s worth revisiting our initial recommendation which still remains relevant – you can do that in your Southbank Investment Research login, which you can find here.
Action to take: buy Warpaint London
Ticker: W7L LN
Price as of 21.05.20: 55p
Market cap: £42.21 million
52-week high/low: 106.50p/37.50p
Buy up to: 65p
Right now the US is terrifying
The United States of America is a terrifying nation at the best of times. With the world’s most devastating military might and nuclear arsenal, it could in theory wipe out almost any city or country on earth.
They’re also… how to put this delicately… a little bonkers. More so now with the king of crazy at the helm. That’s not to say I don’t think he’s any better or worse than his forebearers, but you’ve got to admit Donald Trump is definitely more “out there” than the likes of Obama or Bush or Clinton or Bush.
Nonetheless, right now it’s not the US physical force that’s terrifying. It’s its stockmarket and central bank… and its economy and its systemic financial system issues.
Right now the discrepancy between the stockmarket and the economic devastation that’s ripping through the US is incredible. And it can’t sustain. I’m expecting that the market is set to revisit its lows and rip through stocks with listings on the Nasdaq, NYSE and its smaller markets.
I think the US is in serious trouble and the Federal Reserve is just propping everything up with toothpicks. It can’t stay that way considering the economic conditions are as bad, if not worse than the Great Depression.
For that reason we’re going to offload our two remaining overseas stocks. As we’ve said before, our focus is going to be on UK-listed opportunities, so neither of these fit that vision anyway. But with what’s coming for the US, I think now is the time to get out and while we take a loss, it may get worse from here.
Also, while Canopy Growth is technically listed in Canada, it also has a US listing on the NYSE and it won’t be immune to the impact of a massive market downturn on US markets. So it’s on the chopping block too.
Action to take: sell GW Pharmaceuticals
Ticker: GWPH US
Recommended at: $162.22
Sold at: $122.88
Loss: -24.25%
Action to take: sell InterDigital Inc
Ticker: IDCC US
Recommended at: $74.95
Sold at: $55.29
Loss: -26.23%
Action to take: sell Canopy Growth
Ticker: WEED CN
Recommended at: C$55.26
Sold at: C$23.64
Loss: -57.22%
Regards,
Sam Volkering
Editor, Growth Stock Network
