Opportunity or a sirens call?
That's the pendulum that swings around the hunter-killers in the market.
Once I say it, you'll know what I mean. Things like:
Amazon (AMZN) is entering...
Citron's (CTNI) latest report...
Muddy Waters newest short call...
This morning it was Kerndale hammering The Tattooed Chef (TTCF) . The stock had already ticked lower in the pre-market after getting no love on Mad Money last night.
While it seems some of these thesis play out well longer term, there are also those drops that present a buy of the lifetime.
Shopify (SHOP) or The Trade Desk (TTD) anyone?
Just in the past week, we've seen a hit parade on TTCF, JOYY (YY) , and GoodRx (GDRX) .
I don't think Amazon's hits have the same lasting impact they once had. Maybe they can be everything to everyone, but the niche GDRX has doesn't appear to be in jeopardy by a move into the space by Amazon. More traditional pharma retailers likely face more risk than GDRX. I think that one will recover.
JOYY is already showing a huge move higher today, getting back half of yesterday's decline as the company put out a strong rebuttal. Their reaction wasn't just words but also action. They even offered themselves up for an independent third-party verification in addition to continuing their stock buyback and dividend policy. They aren't the first name to be attacked in the space. iQIYI (IQ) has been a target on a few occasions.
In my opinion, there are plenty of names in the streaming and eGaming space, so I'd prefer to avoid the drama whenever possible. Bilibili (BILI) and Sea (SE) appear to be emerging as the clear winners overseas.
Lastly, on TTFC, expect companies going after SPACs to become more and more common. Nikola (NKLA) proved a win for the most part. With mostly retail investors on the buy side and PIPE funders are happy to exit with profits over $10, they make for easy targets when they rise into the $15-$20+ range. It's something to keep in mind. Abandoning the space is impractical. A better approach is to scale entries and exits and avoid buying something you don't understand if you plan to hold for anything more than a momentum trade.
As with anything else, there's no panacea here. Every situation will be unique but know that these hunter-killers aren't always a death knell nor are they an opportunity. Traders have to take the extra step to understand the underlying company and sector before jumping into a position for anything more than a scalp.
(Amazon is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN? Learn more now.)
