(AMZN) Archives - Page 54 of 101 - Mad Hedge Fund Trader

Trading the Blue Wave Stock Market

At this point, it is possible that the president may lose the November election.

He is 14 points behind Democratic candidate Joe Biden in the polls. The odds at the London betting polls have him losing by a similar amount. My old employer The Economist magazine in London gives him a 10% chance of winning using a mix of economic and polling data.

And this assumes the election is held today. The fact is that the president is digging himself into a deeper hole every day, taking the wrong side of every issue confronting the country today. He seems to be refighting the Civil War….and taking the Confederate side when even the State of Mississippi is taking its symbol off its flag.

So, what will the post-Trump world look like? Will taxes go through the roof? Will the market crash? Is it time to go 100% cash, change our names, and move to a country with no US extradition treaty?

I don’t think so. In fact, with stocks soaring to meteoric new highs every day, the market expects that a Biden administration will be great news for stocks, perhaps the best ever.

Taxes will certainly go up. Favorable tax treatment of the energy, real estate, and private equity funds will get axed. Carried interest will finally become history. Marginal tax rate on net income over $1 billion could get hiked to the Roosevelt levels of 80-90%.

Biden has already announced an increase in the corporate tax rate from 21% to 28%. That will cut earnings for the S&P 500 by $9 a share. But the stock market is not the economy, with S&P earnings only accounting for 10% of US GDP.

And the $9 companies lose in taxes they will make back and more from new government spending, which isn’t slowing down any time soon. Some 14,000 American bridges need to be rebuilt. The Interstate Highway System is a shambles. High-speed broadband needs to go rural. The electrification of the US needs to accelerate to accommodate the millions of electric cars headed our way.

I believe that eventually, 51 million Americans will lose their jobs as a result of the pandemic. Perhaps a third of those are never coming back because the future has been so accelerated. That will leave the broader U-6 Unemployment rate stuck in double digits for years, maybe for decades.

So, we’re going to need some kind of Roosevelt style programs like the Works Progress Administration (WPA) and the Civilian Conservation Corps (CCC) who built much of the monolithic infrastructure that we all enjoy today.

At least 300,000 educated workers could immediately be put to work in contact tracing. Millions more could be employed in national infrastructure programs. One thing is certain. A new administration won’t stop massive government spending, it will simply redirect it.

And let's face it. A Biden win would bring a big expansion of Obamacare. With the best healthcare technology in the world, private industry has done the world’s worst job controlling the pandemic.

Countries with well-run national healthcare systems like Australia, New Zealand, Japan, and Singapore have almost wiped out the disease. This is why I am avoiding the healthcare sector for the foreseeable future.

Who are the big winners of all this? Big tech (FB), (AAPL), (MSFT), (AMZN), medium tech (ADBE), fintech (SQ), (PYPL), the cloud (CRM), and biotech (SGEN), (REGN), and (ILMN).

Cybersecurity will always be in demand (FEYE), (PANW). The global chip shortage will continue to worsen (AMD), (MU), (NVDA).

And Tesla (TSLA)? What can I say? It is already up nearly 100-fold from my initial $16.50 recommendation in 2010, and I’ve bought three Tesla’s (two S’s and an X).

Followers of the Mad Hedge Trade Alert service know that I am already long these names up the wazoo, and is why I am up 26% in 2020. It’s simply a matter of all pre-pandemic trends hyper-accelerating, which we were already tapped into.

If you have to add a purely domestic sector, a gigantic Millennial tailwind will keep homebuilders bubbling for years like (LEN), (PHM), and (KBH).

And while you won’t find me as a player here, retail will recover. The sector has not prospered during the current administration, thanks to a trade war with China and the pandemic.

And the losers? There is a classification of “Trump” stocks you don’t want to be anywhere near. Energy will do terribly (XOM), (CVX), (XOM), with Texas tea possibly revisiting negative numbers. If you take away the tax breaks, energy hasn’t really made money in decades.

Defense stocks (RTN), (NOC), (LMT) will take a big hit from budget cutbacks and fewer wars. Coal (KOL) will finally get shut down for good, probably sold to China in bankruptcy proceedings. Industrials will continue to lag (X), (GE), with no more free handouts from the government and no technology advantage.

So if Biden wins, you don’t need to slit your wrists, hang yourself from the showerhead, or cease investing completely. Just take your stock market winnings and go out and get drunk instead.

July 1, 2020

Tech Letter

Mad Hedge Technology Letter
July 1, 2020
Fiat Lux

Featured Trade:

(HOW THE “SPLINTERNET” IS TAKING OVER)
(TIKTOK), (FB), (GOOGL), (TWTR), (AMZN)

How the “Splinternet” is Taking Over

Tech Letter

The balkanization of the internet is spiking in the short-term, knocking off the value of multiple Fortune 500 companies in one fell swoop.

In technology terms, this is frequently referred to as “splinternet.”

A quick explanation for the novices can be summed up by saying the splinternet is the fragmenting of the Internet, causing it to divide due to powerful forces such as technology, commerce, politics, nationalism, religion, and interests.

What investors are seeing now is a hard fork of the global tech game into a multi-pronged world of conflicting tech assets sparring for their own digital territory.

The epicenter of balkanization is now heart and center in West Asia polarizing the Indian and Chinese tech economy after a skirmish along the shared border.

This is fast becoming a winner-take-all affair.

India had to do something after 20 dead Indian soldiers felled by the Chinese Army stoked a wave of national outcry against regional rival China.

The backlash was swift with the Indian government banning 59 premium apps developed by China citing “national security and defense.”

The ban includes the short-form video platform TikTok, which counts India as its biggest overseas market.

TikTok was projected to easily breeze past 300 million Indian users by the end of 2020 and was clearly hardest hit out of all the apps.

India is the second biggest base of global internet users with nearly half of its 1.3 billion population online.

The government rolled out the typical national security playbook saying that the stockpiling of local Indian data in Chinese servers undermines national security.

The ruling will impact roughly one in three smartphone users in India. TikTok, Club Factory, and UC Browser and other apps in aggregate tally more than 500 million monthly active users in May 2020.

Highlighting the magnitude of this purge - 27 of these 59 apps were among the top 1,000 Android apps in India last month.

China dove headfirst into the Indian market with their smartphones, apps, and an array of hardware equipment. Now, that is all on hold and looks like a terrible mistake.

Chinese smartphone makers command more than 80% of the smartphone market in India, which is the world’s second largest.

One of the reasons Apple (AAPL) could never make any headway in China is because they were constantly undercut by predatory Chinese phone makers with stolen technology.

TikTok is also being eyed-up for bans in Europe and the United States recently as it constantly curries to Beijing’s every whim by banning content unfavorable to the Chinese communist party and rerouting data back to servers in China.

I am surprised it hasn’t happened yet with an abundant phalanx of Chinese hawks in the conservative administration.

To be fair, China has rolled out the same playbook before when the state spews out nationalist narratives triggering local furor that resulted in bashing Japanese-made cars or shuttering Korean supermarket.

Chinese tech is clearly the main loser for their government’s “distract its own people at all costs” campaign to shield themselves from the epic contagion of the lingering pandemic.

What does this mean for American tech?

For one, India will strengthen ties with the U.S., being the biggest democracy in Asia, meaning a massive foreign policy loss and loss of face for the Chinese communist regime.

The resulting losses for Chinese tech will usher in a new generation of local Indian tech with Silicon Valley being the next in line playing the role of a wingman.

Even though the U.S. avoided the carnage from this round of balkanization, the situation in Europe is tenuous, to say the least.

Fault lines will compound the problem of a multinational tech revenue machine and the relationship with France is on the verge of becoming fractious.

I believe if the relationship worsens with the Europeans - France, Germany, and Britain could ban big tech companies like Facebook (FB), Twitter (TWTR), Google (GOOGL).

This would be a massive blow to not only revenue streams but also global prestige for American tech.

The U.S. is still licking its wounds after the EU announced a travel ban on American tourists who hoped to re-enter the Schengen Zone on its reopening on July 1st.

Not only do Silicon Valley leaders see a murky future outside its borders, but digital territories are also getting carved out as we speak domestically.

Amazon (AMZN)-owned Twitch and Twitter have clamped down on U.S. President Donald Trump’s account.

This could quickly spiral into a left-versus-right war in which there are competing apps for different political beliefs and for every subgenre of apps.

This would effectively mean a balkanization of tech assets within U.S. borders and division is the last thing Silicon Valley wants.

Silicon Valley wants products sold to the largest addressable market possible.

The balkanization of the internet is now turning into an equally high risk as the antitrust and regulatory issues.

The issues keep piling up, but nothing has been able to topple big tech yet as they lead the broader market out of the pandemic.

The key point to understand is that these are growing risks until they blow up in front of your eyes and become the next black swan like Covid-19.

Let’s hope that never happens.

SUPERCHARGING THE BALKANIZATION OF THE INTERNET

June 29, 2020

Tech Letter

Mad Hedge Technology Letter
June 29, 2020
Fiat Lux

Featured Trade:

(TIME TO DO SOME SHOPPING AT ETSY)
(ETSY), (AMZN)

Time to Do Some Shopping at Etsy

Tech Letter

The ecommerce story just keeps getting brighter and Etsy (ETSY) is one of those companies that are at the leading edge of the movement.

Out of the same vein of Amazon (AMZN), I am increasingly optimistic about Etsy’s long-term prospects aided by monstrous secular tailwinds.

Heralded for its vintage and handmade goods, I have upped my targets to $150 which is a no brainer for a company that grows revenue more than 30% and one I believe will grow 80% in 2021.

The growing pie of ecommerce tells just part of the story.

In the throes of a hysterical once-in-a-century multi-faceted crisis, consumers have gravitated towards trusted and reliable retailers.

As a result, we can expect the top 10 ecommerce retail businesses to expand at above-average rates of 21.8% in 2020.

Amazon will gain even more US ecommerce market share this year, while Walmart's accelerating ecommerce success will put it directly behind Amazon for the first time.

Even though Etsy is no Walmart or Amazon, they are a known commodity with a growing number of repeat and loyal buyers which goes a long way in today’s ecommerce climate.

They have effectively elbowed their way clearing out a niche in personalized handicrafts that cannot be copied on a large scale.

In the U.S. alone, ecommerce will account for 19% of retail by 2024, up from 11% of domestic sales last year, totaling some $1.1 trillion.

Simply put, the bronco is out of the barn, and many consumers are not inclined to return to the physical store experience.

Ecommerce has also validated themselves as models that work as good as the in-store experience or better.

Before the sushi hit the fan in March, most ecommerce outfits were projecting unspectacular ecommerce growth of 2-3% to $6 trillion in total US retail sales by the end of 2020.

After updating models, we now expect there's to be a 10.5% decline in total retail spend, with a 14.0% drop in brick-and-mortar.

Ecommerce has performed admirably and is poised to grow 18% following a 14.9% gain in 2019, further signaling the pivot towards digital.

Consumers have downloaded Etsy’s app at rapid rates further hinting that this boost in revenue has staying power.

Shares of Etsy have more than tripled from a March low and are trading at record levels. The stock is up more than 130% this year easily outperforming the broader Nasdaq index.

Etsy's quarterly revenue grew 32% year over year to $1.4 billion and when The Centers for Disease Control recommended the use of face masks to thwart the spread of the coronavirus, masks flew off the digital shelves.

CEO Josh Silverman aptly described the situation in Etsy's Q1 earnings call saying, “It was like waking up and discovering that it was Cyber Monday.”

Even excluding face masks, April sales were still up 79% from April 2019. All told, the company expects upcoming Q2 results to show an 80% to 100% year-over-year gain for gross merchandise sales. And it anticipates revenue growth of 70% to 90%.

As masks become mandated by state governments because of record coronavirus cases, Etsy is the go-to platform for personalized masks.

It goes to show that a native digital strategy might be the best of the bunch in 2020 and as masks are mandated by state governments, Etsy will harvest the low-hanging fruit with its army of personalized mask sellers on its platform.

This will truly be a year Etsy will never forget tattooing them firmly in the digital realm as a legitimate ecommerce juggernaut.

June 23, 2020

Diary, Newsletter, Summary

Global Market Comments
June 23, 2020
Fiat Lux

Featured Trade:

(HERE ARE THE FOUR BEST PANDEMIC-INSPIRED TECHNOLOGY TRENDS),
(AMZN), (CHWY), (EBAY), NFLX), (SPOT), (TMUS), (ATVI), (V), (PYPL), (AAPL), (MA), (TDOC), (ISRG), (TMDI)

Here the Four Best Pandemic-Inspired Technology Trends

Diary, Newsletter, Summary

By now, we have all figured out that the pandemic has irrevocably changed the course of technology investment. Some sectors are enjoying incredible windfalls, while others are getting wiped out.

The digitization of the economy has just received a turbocharger. It has become a stock pickers market en extemus.

The good news is that we are still on the ground floor of trends that have a decade to run, like working from home, more online food purchases, and a rise in touchless payments. This means there's a huge upside for investors willing to make big bets on what’s expected to become some of the most important technologies in the years ahead.

Covid-19 is a wake-up call to accelerate trends that have been around for years and are now greatly speeding up. The pandemic seems to have triggered a new survival instinct: innovate fast or die. Let me list some of the frontrunners.

1. E-commerce

E-commerce is the No. 1 shelter-in-place beneficiary by miles, as a combination of stay-at-home orders, reduced spending on dining, and government stimulus have sent Americans in search of other ways to spend their money. Even though Covid-19 restrictions are now being eased, the e-commerce industry should still see about 25% growth across all of 2020.

The estimated $60 billion spent by consumers from their stimulus checks has also been a tailwind. While the world is now re-opening, we expect these buckets of available dollars to remain e-commerce tailwinds for the foreseeable future as we expect adjusted retail and travel spend to decline an aggregate of 18% in and for as much as half of all small retail stores to potentially close this year.

When Amazon shares were at $1,000, I wrote a report calculating that its breakup value was at least $3,000 a share. It looks like Amazon may hit that target before yearend….without the breakup.

Want to know the winners? Try Amazon (AMZN), Chewy (CHWY), and eBay (EBAY).

2. Digital Entertainment

The Covid-19 pandemic has also left more Americans in search of digital, at-home entertainment, a trend that’s delivered a huge push for companies like Activision Blizzard that develop online games. New users, time spend gaming and in-game purchases are only accelerating and spell even more lasting benefit for game developers.

Content names like video streaming site Netflix (NFLX), as well as bandwidth and connectivity companies including Comcast (CMCSA) and T-Mobile (TMUS), are names to focus on.

This increased use of high bandwidth applications is likely to continue post-COVID-19 and has the impact of similarly increasing the demand for bandwidth and connectivity. This increases the value of upstream assets in the infrastructure sectors like fiber-based wireline broadband networks and nascent 5G build-outs.

Names to play the space: Netflix (NFLX), Spotify (SPOT), T-Mobile (TMUS), Activision Blizzard (ATVI).

3. Touchless payments

Another trend the stock market still underappreciated is a generational surge in contactless payments, which has recently seen a jump higher amid Covid-19 fears and efforts to minimize physical contact. Companies like Visa (V), Mastercard (MA), and PayPal (PYPL), already integral to the payments world, should be major beneficiaries in the years ahead.

The market assumes that COVID-19 related adoption of digital payments is a near-term benefit for payment service providers, offsetting some of the consumer spending headwinds. However, digitization of payments is part of a multi-year secular growth driver, with COVID-19 as just the latest accelerator.

Names to play the space: Visa (V), PayPal (PYPL), Apple (AAPL), and Mastercard (MA).

4. Telemedicine

Healthcare is one of the most inefficient industries left in the United States. I call it a 19^th century industry operating with 21^st century technology. While progress has been made, those massive stacks of paper records are finally disappearing, there still is a long way to go.

These days, even doctors don’t want to see patients in person, as they may contract the Coronavirus. Far better to see them online, which could address 90% of most patients. Teledoc (TDOC) does exactly that (click here for my full report).

So does Intuitive Surgical (ISRG), maker of DaVinci Surgical Systems, which enables remote operations for a whole host of maladies. Titan Medical (TMDI) is another name to look at here.

Names to play the space: (TDOC), (ISRG), (TMDI).

June 15, 2020

Tech Letter

Mad Hedge Technology Letter
June 15, 2020
Fiat Lux

Featured Trade:

(DON’T TAKE YOUR EYES OFF BIG TECH SHARES),
(GOOGL), (AAPL), (MSFT), (NFLX), (FB), (AMZN), (IBM), (CSCO)

Don't Take Your Eyes Off Big Tech Shares

Tech Letter

There is literally no possible scenario in a post-second-wave lockdown where the 7 tech stocks of Facebook, Google, Apple, Microsoft, Netflix, Facebook, and Amazon don’t shoot the lights out unless the world ceases to exist.

25,891 – that is the number of new coronavirus cases registered in the U.S. on June 13^th, 2020 which is about in line with the recent near-term peaks of total daily U.S. coronavirus cases.

Why is this important?

Traders are calculating whether a “second wave” will possibly rear its ugly head to crush the frothy momentum in tech stocks.

That is where we are at now in the tech market.

Tech stocks could possibly ride another magnificent ride up in share appreciation if the reopening of the economy can kick into second gear.

Skeptics are sounding the alarms that this is not even the “second wave” and we still in the latter half of the first wave.

Consensus has it that this could be just a head fake.

The jitters are real with recent dive in tech shares.

The five biggest tech companies burned more than $269 billion in value last Thursday - the worst day for U.S. stocks since March and the 25^th worst day in stock market history.

Nasdaq stocks ended the day largely 5% in the red with Microsoft shedding $80 billion in market cap in just one day.

Larger drops were led by IBM who lost 9% and Cisco who lost 8%.

It was a dreadful day at the office, to say the least.

We are teetering on a knife's edge and the tension is running high in the White House with Treasury Secretary Steven Mnuchin already announcing that the U.S. can’t afford another lockdown.

It’s not up to him in the end, it’s about how consumers will assess the confronted health risks.

Tech will undoubtedly be dragged down with the rest on the next lockdown sparing few survivors.

The housing market might actually go down as well as the initial push to the suburbs will dissipate and fresh forbearances will explode higher.

Consumers might not even have the cash to pay for their monthly Apple phone service or internet bill if the worst-case scenario manifests itself.

The health scare has already dented new software purchases by small and medium businesses (SMBs) and tech companies in industries such as travel, retail, and hospitality; online ad spending by the likes of automakers and online travel agencies; and smartphone, automotive and industrial chip purchases.

Small business has held off on reducing their tech software spending too much on the expectation that macro conditions will perform a V-shaped recovery.

Numerous tech firms have cited “demand stabilization,” but it’s not guaranteed to last if we revert to another lockdown.

If a lockdown happens again, it will be another referendum on Fed’s enormous liquidity impulses versus the drop in real earnings or flat out losses to tech business models.

Even with the media’s onslaught of vicious fearmongering campaigns, I do believe this is the time for long-term investors to scale into the best of tech such as Amazon, Apple, Google, Microsoft, Facebook, Netflix.

If you thought these 7 companies had anti-trust issues before, then look away.

We could gradually head into an economy where up to 40% of the public markets comprise of only 7 tech stocks which is at a mind-boggling 25% now.

Never waste a good crisis – tech is following through like no other sector!

Bonds don’t make money anymore and hiding out now means putting your life savings into these 7 premium tech stocks.

In the short-term, this is a good opportunity for a tactical bullish tech trade.