They are buying what they hated not that long ago and you have to wonder whether it is for real or simply a revulsion from the overpay crowd that loved Snowflake (SNOW) at 100x sales. Or do they just want something they know and is a little easier to understand?
I know I often talk about "they" as if there is some sort of collective out there that is making these well-thought-out decisions. But when you see all the higher multiple stocks roll over --the ones that are truly ridiculously expensive by any benchmark -- there tends to be money flowing into other areas of the market that are a lot cheaper and a lot easier to understand.
Here's a good comparison. Take a look at the charts of any of the cloud and cloud-related stocks in this market. They are almost all terrible. They hit a peak a couple weeks ago, they got body slammed and then rallied again, but not to where they were before. Take RingCentral (RNG) and Zscaler (ZS) . Both of these are terrific companies that are integral to the work-at-home economy; consider them telco and security plays.
But that's about all that most holders know of them, except that they went up all the time. But now, even though they both reported great quarters, they have stopped going up entirely.
Now I want you to take a look at the stock of Freeport-McMoRan (FCX) , which is a copper and gold company that has been flat on its butt for ages, That's one of the prettiest charts in the entire book. What matters is that this stock always does best when China, which is the biggest user of copper, is in an expansion mode.
The thing you need to know about FCX is that, unlike RingCentral or Zscaler, it's easy to understand, under-owned and not in a ton of ETFs that can create a terrible gravitational pull as we know. It's the quintessential slow grower that, when it gets a growth spurt, always draws a crowd and because of the turn in China and the newfound love for gold the stock is working.
Right now the owners of the Zscalers and the RingCentrals are frightened. They got into the stocks because they loved the concept of being involved with cyber security and video telco and both Zscaler and RingCentral have delivered. But now these have become sources of funds for the Snowflakes. And the profits in these hard-to-understand stocks are immense.
They are vulnerable.
But Freeport-McMoRan? There are no real big holders of these stocks desperate to preserve profits. Most don't have any. It has been a dog for so long no one even cares about it. The fact that it was easy to understand was obscured by a terrible balance sheet. Now, though, that's actually no longer a liability. It's an asset because debt is abundant with low rates to boot.
Put it altogether and the post-Snowflake hangover has people reaching for more than just Alka-Seltzer. They are reaching for Freeport-McMoRan, and given the circumstances of high-multiple sloppiness and difficult-to-understand M.O.'s who wouldn't own a good, cheap copper and gold company?
