The insanity of this moment can be summarized in one evening: No one is paying attention to what is happening at real companies. They are too busy looking at the futures.
Yep, Wednesday night I saw some remarkable things happen. Three very important companies reported: Marvell Technology (MRVL) , Splunk (SPLK) and Zoom Video Communications (ZM) . All three were trading like wild banshees before their calls.
Not one bit of the trading had anything that was even remotely informed behind it.
Let's start with Marvell, which is a holding of our Action Alerts PLUS charitable trust. First, everyone thought Marvell would blow the quarter because there were so many moving parts and the company is involved with an insanely difficult transition from being a storage company with little to no growth and nothing proprietary to being an incredibly proprietary, almost-pure 5G play.
They pulled it off about two quarters ahead of when even the most informed people expected it to happen.
But there was no way you could tell that from the release. None.
The stock flies up almost 15% without any information.
What's that about?
That's shorts, perhaps motivated by some incredible research negativity particularly from Cowen, furiously covering their positions. They were wrong. They had no choice but to cover.
Then the call comes on and it turns out that things are much, much better, kind of unbelievably better. The transformation, which to me was something that might not be complete until 2021, is almost done and will be finished this quarter. Matt Murphy delivered beyond our wildest dreams.
The stock trades down from its after-hours gap up. Why?
Because the futures traded down and that's all that anyone seemed to care about. Not the fundamentals.
If it were the fundamentals it would have been even higher.
How about Splunk? Here's one that traded down 14 points on its release when there was nothing wrong at all. Nothing. The release read great.
But once the call started the stock started trading up furiously, first down 10 then down five then down three and then down one, then unchanged, then down three and then unchanged and then up five?
What was happening here? This was a case of the shorts trying to color the story negatively with their first burst of trading. I am not against short-selling, but I can always tell from the tape when I see shorts trying to paint negativity. This was one of those cases. They were spring-loaded on this one from the moment the release hit. Either they didn't bother to read it or they wanted to create an impression that it was weak to get people to panic out.
It didn't work.
Once the calls started you could tell that the company was really kicking butt and crushing the competition in its analytics space. You need to Splunk to understand your data. It has become clearer and clearer to me that this company wins when it wants to, and it wants to a lot. It has the superior product and the superior management team.
It can go much higher, especially now that the shorts played their hand.
Finally, there is Zoom. Here it didn't matter what the company reported; the sellers were ready because the stock had run so much.
So they blasted out of it.
You know what the problem was? The conference call gave you absolutely no encouragement. It was disjointed and confusing, at once gleeful and solemn, given that this company is truly in the best shape to take advantage of the coronavirus of any that I know. But who wants to say that? Certainly not Eric Yuan, the CEO.
Here's what I know. He has partnered with everyone who is important in the call space and the customer relations management space. He has the best fremium model out there (think Dropbox (DBX) ). And he's winning customers versus competition that simply isn't nimble enough to fight back.
But most important: Once you go video conference at home because of the virus, people are learning you don't need to go back to the office. It's more efficient at home.
That's the real win. He's landing and expanding because it's a better place to work with or without corona.
He just can't or didn't tell the story. So the stock gets hit.
My conclusion? Don't listen to the noise. They are all buys right into the teeth of the sell programs.