Who is John Galt? Maybe Trump, maybe not. Apologies for the delayed note this week, I’ve been too busy selling stocks while we wait for more color on Trumpy’s plan. Discussions with my contacts over the last two weeks have had almost no mention of the possibility of a market correction. Actually, it’s been quite the contrary with fiscally minded folk getting giddy that their dream of a utopia with low taxes and less regulation is just around the river bend. The world Ayn Rand dreamed up in her novels is finally here! The only problem is that many stocks have made large moves in the past 10 days with little certainty the catalysts making everyone excited will ever materialize (not to mention whether Trump is actually a Republican). Just take a look at these charts: $SYRG, $CXW, $GS, $LUV, $ARIA. The easy money has been made and its time to wait for the market to come back for another buying opportunity. So I ask you, have you been raising cash since the last time we spoke? If not, you should probably consider taking some gains. For those worried about taxes, this is to how do it. 1) Sell stocks you’ve lost money in to harvest tax losses (you can buy them back after 30 days and still write the loss off on your taxes). 2) Use those losses to sell stocks with gains you believe have limited upside. 3) Wait for the next pullback and redeploy some of the capital. You never lose money taking a profit and you probably won’t make money assuming the next president is an economic prophet.
Guiliani for AG, New York’s former mayor? A Trump DOJ is good news for Bayer. I’m actually going to talk about Monsanto ($MON) but it was too hard to figure out a rhyme. Full disclosure, I own Monsanto stock and it’s one of the few stocks I continue to buy in this market. Now before all you SJWsget upin arms, I’d like to emphasize that Monsanto does a lot of good for the world despite the bad. I’m all bulled up on Monsanto because it has a $128 per share all-cash buyout offer from Bayer yet currently trades at ~$102. Why? The Department of Justice during the Obama administration has not been friendly to mega-mergers and there are low expectations that Bayer and Monsanto becoming GMbrOs can actually get approved. When it comes to a Trump Justice Department however, I do think this is one of the places we see laxer government oversight and that Monsanto’s current share price is an interesting opportunity for investors as we move into 2017. Admittedly, the current share price isn’t exactly cheap meaning the stock has downside should the deal get shot down. However, Monsanto stands to receive a $2 billion breakup fee (roughly 4% of the company’s current value) in the event the deal falls through and is also outspoken about transitioning their business to become a “Big Data” player in the agriculture industry which makes me believe there are many ways that the stock can eventually work. Take my insight with a grain of salt but this has been the one of the more surprising laggards I’ve seen and added to during the post-election rally. Let me know if you disagree.
OMG! The new Madden has micro-expressions for the players! They’re so innovative! Can we please acknowledge that video game developers Activision Blizzard ($ATVI), Electronic Arts ($EA), and Take Two Interactive ($TTWO) have been recycling the same games for the past 5 years? Take Two’s rockstar subsidiary, Rockstar, hasn’t even put out an original title in three years and instead upsells us with their DLCs. C’mon. Why do we still pay $60 a pop for the same game every year? NBA2K16 having 12 new clapping patterns for the crowd in the background or Call of Duty building a new storyline where you shoot Nazis in space (and I bet you they actually end up doing that) is not creativity. It’s putting in bare (or should I say bear) minimum effort because they know you will buy their product. Take a look at this chart – if all the gamers out there had invested the money they were planning to spend on video games into the developer’s stocks, you would have more than tripled your money and probably have been on your way to starting your own video game company. Let’s stop bailing these “innovative” companies out. They’ve clearly run out of good ideas. Either put out new and original content or I refuse to give you my patronage.
It’s time for another Half-Assed Due Diligence Stock Pick of the Week!
Which lucky soul will you be sending higher this week, Jeff? Boston Beer Company ($SAM)
Sam Adams? Don’t be such a Boston Boy. What’s your thesis? Depression and Taxes.
OK, cryptic as always. Please explain. Remember last week I mentioned stocks with businesses primarily in the US would highly benefit from tax breaks? Well, these suckers actually pay taxes LOLOLOL. ~36% to be exact. That means reducing the corporate tax rate down to 15% would boost Sam Adams earnings by over 30% overnight and make the stock start to look very reasonably priced. Sam Adams has been slipping as of late after once being a stock market darling. Much of this is due to the fact that there are more than two craft breweries started each day (sounds a lot like a bubble, huh?). Not to mention, hipsters no longer drink Sam Adams because its become too mainstream. Simply put, Sam Adams is a victim of its own success but will remain a top brand in the space and highly benefit if corporate tax breaks become a reality. It also is a prime buyout candidate for some of the larger players in the industry.
What does your thesis have to do with depression? Oh yeah, Sam Adams disproportionately sells into the Northeast (the most liberal part of the country). There are A LOT of libs out there drinking away their sorrows these past few weeks. My guess is Sam Adams is going sell a lot of beer and beat the next quarter. I’m only joking but seriously, think about it J
IMPORTANT NOTE: This is not investing advice. This is pontification about the markets that we thought you might enjoy. If you would like a hot take on an issue or stock, email firstname.lastname@example.org. Please invest responsibly!