Defending Champions
Saturday, December 20, 1969. I woke up that morning in great anticipation. I was going to Shea Stadium. My Dad had gotten us tickets to go see my favorite football player. The New York Jets woke up that morning as defending Super Bowl champions. Yes, I am so old that I remember a Jets team that stood on top of the football world. That was also the morning of the last game that the New York Jets would ever play in the old American Football League. The Jets lost that day to the eventual Super Bowl champs, the Kansas City Chiefs. My favorite player, AFL MVP Joe Namath, would not play well that day, and oddly since merging into the NFL the very next season, neither the New York Jets, nor the Kansas City Chiefs would ever win another championship, not even at the conference level.
Over the years I would become more of a college football fan than a pro. This has nothing to do with politics, and much more to do with rooting for players that play for something more than money and fame. My Dad led me there too. This will be the 50th season that you will find me somewhere in the stands at West Point's Michie Stadium on an autumn Saturday. Most of you are pro football fans. I get that, and the sport forces an emotional response, I get that too, big time. When everyone shuts their pieholes, and stands at attention for the anthem. When those gold helmets line up outside of Michie. When those bagpipers start, and when your eyes first glimpse the sight of "Old Glory" coming out of that tunnel, it's almost more than this old dog can bear. My father is there, my grandfather (now deceased) is there, and my sons are there. We are all there together for one fleeting moment...and then the Black Knights take the field.
Football Season
I just told you about my pro football moment. Tonight, our very own Jim Cramer gets to experience something similar as his team, the Philadelphia Eagles will take the field as defending Super Bowl champions. Though pro football is in moderate decline, as are most professional sports, the game still is the hottest television ratings producer out there. Just what does this drive as far as the stock market is concerned? Who are, and what are football stocks?
Nike
I gave you Nike (NKE) as a September earnings play on Tuesday. I guess now more than ever this becomes a football stock. Fortunately, as I did follow up ( I usually do) on my own trade idea that I gave you in that morning Recon, the public reaction to the Colin Kaepernick story afforded me, as well as anyone who went along, both a discounted entry point for the equity, and greatly enhanced premiums at discounted strike prices for the put option sales. Currently, I run with a $78.30 net basis for the name, which is well below the stock's low of the week, and I have not yet priced in the sale of any call options.
Anheuser Busch InBev
I don't know about you, but when I think of football, I think of Budweiser (BUD) . You can have all your cute high-end, fancy pants type beers. Enjoy. I'm going with the mass produced, union-made, American (sort-of) brew. I also wear socks. Every day, because my name isn't Biff or Chad. By the way, the stock does tend to see a surge at some point in September or October that does appear tradable. Football season begins just in the nick of time for BUD as the stock is currently trading at it's lowest point since 2014.
PepsiCo
Soda pop business challenges? A coming October 3rd change in corporate leadership? No problem. Football. Fortunately for PepsiCo (PEP) though, the acquisition of SodaStream may or may not save the firm, the advent of football season brings with it a literal army of couch potatoes. What do couch potatoes do? They eat salty snack foods. Think Lay's. Think Tostitos. Think Doritos. These folks may not be able to run around the block without stopping, but they sure know how to chase down a plate of chips. In four of the past five years, this stock has experienced either an October or November push to the upside. Only 2016 bucked that trend.
Domino's Pizza
Pizza consumption during football games is a tradition in it's own right. Home delivery makes it all that much better. Does the recent drop in TV ratings put the whammy on Domino's (DPZ) ? Does the negative publicity directed at Papa John's (PZZA) end up putting new customers in the hands of Domino's? We'll know the answer to these questions soon enough. I would love to tell you how this stock does during football season, but a five year monthly chart for this name just looks like a straight line from the lower left hand side of the chart to the upper right hand side. These guys are crushing it, long-term... and the pizza doesn't stink either.
Sanderson Farms
Here is the sleeper pick for football season. Sanderson Farms (SAFM) is really a chicken wholesaler. Think chicken wings. Think backyard grilling. The firm has been slapped around along with Tyson Foods (TSN) as the environment provided for international trade has evolved. The antidote? Could it be football season? The firm missed badly on revenue two weeks ago. Goldman warned on this name in July. Yet, in response to last week's disappointing numbers, Stephens upgraded the stock, and put a $130 target price on the name. Football? That and perhaps a resolution to trade negotiations involving Mexico, Canada, and Europe.
Rotation
The Nasdaq Composite ran 1.2% lower on Wednesday despite the move slightly higher that equity markets witnessed for the blue chip Dow Jones Industrial Average. What gives? Rotation. Something along the lines of a flash rotation out of Technology, and into industry groups that usually run into trouble over trade took place yesterday. Along with traditionally defensive sectors such as Utilities, Staples and Telecom, investment dollars also flew into Industrials and Materials.
The catalyst seemed to be the appearances made before the U.S. Congress by Twitter (TWTR) CEO Jack Dorsey, and Facebook (FB) CEO Sheryl Sandberg. Alphabet (GOOGL) did not even show up for the hearing after the Senate rejected the firm's choice representative as being too low in the firm's hierarchy to speak on behalf of GOOGL at the event. FYI, I sold my stake in GOOGL early yesterday morning precisely because the firm took that pass. Personally, I put that cash to use later in the day as the broader tech industry suffered badly. Think the undervalued Micron (MU) and the over-punished Adobe (ADBE) . The cloud is where the momentum has been. That's where the public has profits to take. Opportunity? Hope so. Baby steps. Small increments, kids.
What happens, in my opinion is that passive investment in general, and ETFs more specifically...have obviously served only to exaggerate money flows on days like yesterday. If I'm right...I hit a triple. If I'm wrong...I'm pretty good with a forklift. I'll live.
Anti-Social
I was asked by a colleague last night, what my top social media play was. Then it struck me. I really don't like any of them. Facebook, down 2.3% yesterday, in my opinion, is poorly managed. Yes, Instagram is hot, but growth is slowing for the title product, and margins are undeniably going to shrink if the firm is really going to put 20,000 employees on the task of identifying false news and fake accounts. Not to mention that when the firm badly missed on revenues last quarter, they forgot one thing...to warn their own shareholders. Wow. Is it arrogance? I don't know. The lack of concern for their own investors on behalf of this management team is enough to keep me away.
As for Twitter, down a whopping 6.1% yesterday, I liked the firm a lot more when former Army linebacker Anthony Noto was involved. Yes, I remember Anthony well as a football player. To say he was good was an understatement. He was all over the field. TWTR CEO Jack Dorsey admitted that the company was slow to spot fake news heading into the 2016 election cycle and was also too slow to act. I won't be buying TWTR today, but in my opinion, if you want to own one of these, TWTR presents a better risk/reward set-up than Facebook despite Facebook's less expensive valuation.
The Rest
As for the rest of the social media landscape, in my opinion, Snap Inc (SNAP) remains uninvestable. Yelp (YELP) appears grossly overvalued. I kind of think that Weibo (WB) , the Sina (SINA) spin-off, does present some value. As a consumer, I use that service as much as any other. Just remember that the primary language is Mandarin. There is one other social media site that might just be interesting.
Ever think about Match Group (MTCH) ? MTCH reported on August 7th, and they crushed it. The firm at that time raised revenue guidance for both the third quarter and the full year. Much of the growth for the last quarter came from the use of the Tinder app, which is growing sequentially by quarter. In response to that growth, Deutsche Bank increased their target price for MTCH from $50 to $56. While I feel fortunate that I grew up in the era where you actually had to look a woman in the face in order to meet her, is there further opportunity here, even with the surge in price that the shares experienced in August?
The fact is that the August 15th short interest data says that yes, there is. Though MTCH is valued at 29 times next year's earnings, and had just run higher... short interest in MTCH stood at $26.16M shares more than a week after those Q2 numbers were released. The Float? Just $50.34M, gang. You do the math.
Economics (All Times Eastern)
08:15 - ADP Employment Report (August): Expecting 187K, Last 219K.
08:30 - Initial Jobless Claims (Weekly): Expecting 214K, Last 213K.
08:30 - Non-Farm Productivity (Q2-rev): Flashed +2.9% q/q SAAR.
08:30 - Unit-Labor Costs (Q2-rev): Flashed -0.9% q/q SAAR.
09:45 - Markit Services PMI (August-rev): Flashed 55.2.
10:00 - ISM Non-Manufacturing Index (August): Expecting 56.9, Last 55.7.
10:00 - Fed Speaker: New York Fed Pres. John Williams.
10:30 - Natural Gas Inventories (Weekly): Last +70B cf.
11:00 - Oil Inventories (Weekly): Last -2.0566M.
11:00 - Gasoline Stocks (Weekly): Last -1.554M.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (DCI) (.58), (NAV) (.91)
After the Close: (AVGO) (4.82), (FIVE) (.38), (GME) (.07), (KFY) (.71), (MRVL) (.34), (PANW) (1.17)
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