Investors tend to believe that whatever is currently happening in the markets will continue to occur. Stocks that are hot will stay that way, and losing stocks will continue to lose. This is sometimes referred to as the "hot hand fallacy."
Eventually, facts change, opinions change, and the trajectory of an investment can change as well. The winning streak ends, and the hot hand goes cold.
One example of this is Apple (AAPL) . The Cupertino-based tech giant, which led this market higher for most of the year, is suddenly out of favor. Nobody seems too excited about next week's special event, which should see the introduction of the iPhone 15, Apple Watch Series 9, and other updated products.
Reports that China has banned the iPhone in the workplace for government officials and state-run companies is weighing on the stock. Further reports suggest that ban is about to expanded.
As a long-term shareholder, I have no intention of selling Apple, even though its once-hot hand has cooled a bit.
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If a "hot hand" like Apple can turn cold, then the opposite is also true. An unloved, ignored, and forgotten stock can suddenly spring to life.
That appears to be the case with KNOT Offshore Partners LP (KNOP) , a shipping company that operates shuttle tankers in the North Sea and Brazil. The U.K.-based company is a master limited partnership (MLP), so investors should be aware that distributions are taxed differently from ordinary dividends.
KNOT Offshore Partners has been a "cold hand" for the past two years. A dramatic reduction in the MLP's distributions resulted in an equally dramatic decline in price. KNOT is down 35% year to date, after a 28% decline in 2022.
Despite these discouraging results, buyers have been stepping into KNOT over the past week. Suddenly, KNOT is climbing on high volume (shaded yellow). Since August 30, the MLP has gained about 22%.
KNOT is climbing toward its 200-day moving average (red). It hasn't closed above that key indicator since September of last year. KNOT is currently trading at its highest level in nearly 6 months.
Why is KNOT Offshore Partners suddenly drawing the attention of investors? The company recently reported second-quarter earnings. On the conference call, the CEO indicated that most of the concerns that led to the reduction of KNOT's dividend have now been resolved.
Investors are hoping that the shipping company's once-generous dividend distributions will soon be restored. If so, KNOT Offshore Partners could see a significant move higher.
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