Watch that first step, it's a doozy.
Coming out of the gate this morning, the first thing I thought was the dip buyers will be tested. I've discussed being cautious, keeping higher levels of cash, and trailing your trades for profits, so that set me up for decent positioning into the open. Red, but not THAT red. It provided me the opportunity to prod dip buying.
The prod became a sharp poker. Quick. Painful. And one I fled from quickly as my "not THAT red" became redder. Buying the early morning dip worked for around 10 to 15 minutes before the early lows were taken out. That offered the queue that intraday long scalping risk elevated to a new level and any buying should likely have a time frame longer than a few hours or even a few days.
It's possible we're seeing a change in psychology. The Fed, in essence, said yesterday they will do whatever it takes to help the economy which is also a read-thru to helping the market. Second-wave covid fears have sparked again as well. Whether they are valid or not has yet to be seen, but investors are willing to start dipping their toes back into those plays even in a down market. Chewy (CHWY) after strong earnings Thursday morning is finding some green along with Zoom ZM, Peloton Interactive (PTON) , and Teladoc Health (TDOC) . Expect interest to hold in Alpha Pro Tech (APT) and Lakeline Industries as well as expectations for PPE will remain high. Lakeline already showed us they have strong product demand.
This brings me back to the idea around what we saw earlier. I don't know that we'll see another run on toilet paper, but I am poking around grocers and water here. Kroger (KR) has been the go-to, but I'm leaning more toward Sprouts Farmers Market (SFM) currently. A very small, very speculative water play that I've trading in and out of over the past few months is back on my radar with a potential second wave as well.
Alkaline Water (WTER) has actually put out a string of consistent good news, although you can't tell it from the stock action. Shares are back in compliance with the Nasdaq, the company has commitments from 12,500 retailers for their flavor infused products, and they just announced KEHE and CA Fortune will carry their bottles in the majority of their warehouses. I've had the opportunity to try all their flavored infused beverages and can say I'm a fan. Also, they have the best tasting CBD infused water on the market that I've sampled. Given my past work in the cannabis industry, I've had quite a few. It's been able to expand its other CBD products as well, so I'll be interested to see how the market takes to those, but they offer some additional upside potential.
What resonates most though is the strong April sales number of $7.1 million, a year-over-year increase of 171%. This was during a time of heightened shelter-in-place and the company was able to announce record sales. Between hot summer months and the potential for a second wave of corona, the small water producer has a chance to continue its momentum for several months. All of this comes on the heels of a $6.2 million March, which was also a record. In short, you have a company trending in the direction of a price-to-sales of under 1.0 based on forward 12-month projections with sales on a strong upward trajectory. That's not easy to find in this market.
Right now it's tough to buy anything with the selloff today, but I think Alkaline Water could offer 30% to 50% upside over the next year, while Sprouts may be set up to offer 10% to 15% upside over the summer. I certainly wouldn't look at these for a trade, but if you are searching for a couple of speculative buy 'em and forget 'em for the summer, I'd put these two on your radar.