If you can't beat them, join them. That's my feeling about the morning traders who insist on being active simply as a matter of force when they see or hear something positive about the "data" or the vaccine. If it's a day where we are hearing rumblings of successful testing, they buy certain stocks, same when we get some positive data about anything, but mostly airlines.
Who are these people? We often consider them to be Robinhood traders, which means a group of people who came in near the bottom of the stock market and have been coining money ever since.
Now I know this is antithetical to all the hedge funds out there and their camp followers. While Bill Ackman is quick to present his Armageddon rant as a sign of when you have to buy, a vicious circular reasoning coda, you did have nothing short of Ray Dalio, who has never been thought of as anything but brilliant, and Paul Tudor Jones, a sharp guy, all pronounce this market as stupendously dangerous.
If you play back the tape you would simply say that the geniuses failed.
But the flipside is the amateurs won. Is that really possible? It happened. If you want to know the truth, no one has been more right than David Portnoy and boy does that rankle people because his mantra is stocks always go up and he's been right.
The suits, the guys Portney makes fun of constantly, genuinely believe that it's all a coin flip of the S&P for him and that he thinks that because he has flipped ten coins and nine turn up heads, then the likelihood of the next coin flip heads is 9/10ths greater than tails.
I think what Portnoy knows is that stocks can go up when things get better. He doesn't need to look deeper and if he did he actually may feel different about the market.
Now, back to the game plan of the morning people. They have a very set routine and you can follow it if you get up at 4 a.m. and watch the crawl at the bottom of the screen.
If you know it is going to be an up day because of something related to Covid, here's what they buy: first, airlines. United (UAL) , JetBlue (JBLU) , Delta (DAL) , American (AAL) and Southwest (LUV) . This is a by rote trade. What should you do? The best, the most fundamentally sound airline is Southwest. It has already said it doesn't need the money. The worst and therefore the most speculative is American. I think it does need the government money and already has more problems than Southwest.
You want a cruise ship because even though they aren't sailing, they are synonymous with normalcy: they buy Carnival (CCL) (CUK) , Royal Caribbean (RCL) and Norwegian Cruise (NCLH) . Here the best one is Norwegian Cruise because it has the most cash per share if things come back later than we think.
Next up is shopping. Oddly these morning traders always always always grab Simon Property Group (SPG) and old Simon Property Group. This is the largest mall company, which is different from a shopping center or a strip mall neither of which is in favor with these traders. Simon has real issues as it has been trying to get out of buying Taubman (TCO) , another mall company. These traders don't care a whit about it. I don't think they know it.
Then they buy hotels, usually Hilton (HLT) but sometimes Marriott (MAR) . I think the latter is superior and has better management and a lot of Chinese exposure. I don't know what they did besides wearing masks, but it worked.
They buy Chipotle (CMG) for dine out, not many others. It makes sense. Chipotle's units are so digitized they are making as much money now per Chipotle that has a Chipotlane versus old Chipotles. But they also buy McDonald's (MCD) . The former is superior to the latter.
That's it: Southwest, Norwegian, Hilton. Simon Property and Chipotle. By the time you get to the opening it is too late. The die is cast. But if you want to anticipate, then you have your game plan.
Now, I don't want to judge these people. Who am I to side with: Ackman? Jones? Dalio? Or the amateurs. Crazily, if you just came down from Mars and looked at the two sides, you'd go with the newbies.
