Selling pressure has picked up on Tuesday morning, but it is mild and not overly broad so far. Breadth is running around 2 to 1 negative, and new lows are well contained at only 65 names.
Small-caps are exhibiting some relative strength, and biotechnology, in particular, is looking good, with the iShares Biotechnology ETF (IBB) up almost 1%. Pockets of speculative action are still narrow, but the biggest positive is that this is not a market where bids are disappearing, and there is highly correlated selling driven by indexes and ETFs.
I'm encouraged by some better stock picking and am doing a little buying. One new position I started today is Uber Technologies (UBER) , the rideshare company. Uber missed its EPS estimate by quite a bit, but revenues came in very strong, and gross bookings were up 33% over last year. Adjusted EBITDA was significantly above guidance, and, most importantly, the company is now cash flow positive and self-funding. Free cash flow during the quarter was $382 million.
Nelson Chai, the CFO, stated: "We became a free cash flow generator in Q2, as we continued to scale our asset-light platform, and we will continue to build on that momentum. This marks a new phase for Uber, self-funding future growth with disciplined capital allocation while maximizing long-term returns for shareholders."
Technically the stock broke above several downtrend lines and filled a gap on the chart that was created back in early May.
I'll be looking to build this position as the stock develops further. I expect some positive analyst comments very soon. My approach is to be an incremental buyer and to take advantage of market weakness to add to the position in the future.
The market needed consolidation and some pullbacks, and that is what we are seeing today. So far, it is very healthy action.
