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🫠 Stuck in the Mud

🫠 Stuck in the Mud

Plus, is Tesla ready for a turnaround?

March 24, 2024

Happy Sunday to everyone on The Street.

2023 was a quiet year for initial public offerings, and EquityZen founder Phil Haslett says 2024 hasn’t gotten off to a great start either for the IPO market. He cites BrightSpring’s recent IPO that priced below its estimated range and closed down 15%.

But on Thursday, Reddit’s IPO bucked that trend in a big way, closing its first day of trading up 48%!

Social media platforms are known to struggle with two things: making money and moderating speech. Disciplined Reddit investors aren’t ignorant of those problems. Rather, they believe Reddit uniquely solves for them:

Making Money: Reddit’s forum-based platform lets advertisers deliver targeted ads without the data harvesting seen from dominant platforms. With over 3 million subreddits covering any niche you can think of, advertisers can simply market to the subreddits most likely to have their target audience. Plus, many investors see the stock as an AI play, believing that its forums can be used to train language models.
Moderating Speech: Facebook has spent over $13 billion on safety and security efforts and still gets hauled in front of Congress for lack of moderated content. On the other hand, Reddit has some of the best content moderation and doesn’t pay a dime for it. Subreddits promote their most active and reputable users to moderator status, allowing them to police themselves.

That’s not to say Reddit is some perfect stock pick — it generated $804 million in revenue last year with a net loss of $90 million. That lack of profitability has left many questioning the strength of its advertising business and recent $9.5B market capitalization.

🐂 Are you bullish or bearish on Reddit post-IPO? 🐻

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6 Weird Ways To Help Pay Rent This Month (Without Donating Plasma)

When rent is due on the first of the month, it can be a stressful moment for millions of Americans. Things aren't getting any easier either with soaring inflation, a pending recession, and stratospheric interest rates all happening at the same time.

If you’re struggling financially, you’re not alone. Here are 6 weird (but totally normal) things you can do right now that could help with paying your rent on time.

Review

The Federal Reserve kept rates unchanged at its March meeting, but new forecasts confirmed plans for three 25-basis-point rate cuts this year, boosting Wall Street optimism.

Fed Chair Jerome Powell hinted that rate cuts will occur if the economy evolves as expected. He downplayed the unexpected inflation surges in January and February, pushing the market to anticipate a 72% chance of a rate cut by June.

The S&P 500, Nasdaq 100, and Dow Jones reached new all-time highs this week, with the S&P 500 and Dow experiencing their best week since the year’s start, and NVIDIA Corp. marking its 11th consecutive week of gains

ARK Investment's Predictions

Cathie Wood-led ARK Investment Management forecasts that five disruptive technologies — artificial intelligence, energy storage, robotics, multiomics, and public blockchains — will collectively be worth $220 trillion by 2030. This valuation marks a significant surge from the current $19 trillion, underpinning an era of accelerated economic growth and productivity.

Reddit’s IPO Surge

Reddit shares skyrocketed by 62% on their trading debut, with the initial public offering pushing the company’s market cap to $10 billion. This significant rise reflects strong investor interest, including both institutional and retail investors, aiming to democratize the IPO process.

NVIDIA’s Expansive Vision

NVIDIA CEO Jensen Huang clarifies that NVIDIA transcends traditional chipmaking, focusing instead on accelerated computing to revolutionize technology. By offloading inefficient computing tasks, NVIDIA’s approach aims to transform a $100-trillion industry through AI with the introduction of the groundbreaking Blackwell chip.

AMD’s Potential Upswing

Advanced Micro Devices stock could see a 27% return if it reaches its recent peak prices once again, amidst a significant tech rally and AI advancements. Despite a recent 23.5% drop from its all-time high, analysts view the decline as a buying opportunity, citing AMD’s strong AI narrative and innovative product launches as key growth drivers.

Apple’s Legal Battle

Apple criticizes a Department of Justice lawsuit as a threat to its core identity and innovation, asserting it jeopardizes their product essence and market competition. The lawsuit accuses Apple of antitrust violations by limiting competitor access to iPhone features, marking the third such case in 14 years.

Musk Advocates Ketamine

Elon Musk defended his ketamine use for depression in an interview, arguing it boosts investor returns by enhancing his productivity. The discussion also touched on the impact of his drug use on Tesla and SpaceX‘s operations.

Preview

Economic Data

Monday: New home sales, Fed Gov. Lisa Cook speaks
Tuesday: Consumer confidence, Durable-goods orders, S&P Case-Shiller home price index
Wednesday: Fed Gov. Christoper Waller speaks
Thursday: Initial jobless claims, Pending home sales, Consumer sentiment
Friday: Advanced US trade balance in goods, Advanced retail inventories, Core PCE index

Earnings

Monday: Buzzfeed, FitLife Brands
Tuesday: GameStop
Wednesday: Carnival
Thursday: HB Fuller
Friday: Gemini Therapeutics

Stuck in the Mud

Treasury Bond Disappointment

Wall Street is searching for yield as US Treasury bonds fail to bring in expected returns.

Most investors anticipated that inflation would fall by now, prompting the Federal Reserve to begin cutting interest rates.

When rates drop, bond values rise, and the Street was expecting those gains to pair nicely with a coupon over 4%.

However, inflation has been stubborn and hopes for Fed rate cuts have been pushed further out into the future.

Feeling Risky

Some strategists believe the solution for bond investors lies in riskier bonds. The iShares 20+ Year Treasury Bond ETF (TLT) has dropped about 6% this year. Meanwhile, the SPDR Bloomberg High Yield Bond ETF (JNK) is flat and boasts a higher yield.

Another potential strategy is to pursue preferred stocks or those with larger dividend payouts. The iShares Preferred & Income Securities ETF (PFF) has risen roughly 3% this year.

Getting Picky

The main advice from the Street to bond investors is to be selective.

Nancy Tengler of Laffer Tengler Investments says there’s opportunity with “intermediate credit” on longer duration bonds.

Investors holding bonds with more duration have time on their side. They can hold patiently and still benefit when the Fed eventually cuts rates, even if it happens later than expected.

How many times will the Fed cut rates in 2024?

POWERED BY FINANCE BUZZ

6 Weird Ways To Help Pay Rent This Month (Without Donating Plasma)

If you’re struggling financially, you’re not alone. Here are 6 weird (but totally normal) things you can do right now that could help with paying your rent on time.

Time for a Tesla Turnaround?

Data-Driven Expectations

It’s been a bumpy couple of weeks on Wall Street. Although we hit highs this past week, the week before last was lackluster. All three major averages declined. Tech stocks in particular dragged the market lower.

According to CNBC, this has left a lot of stocks either overbought or oversold. The publication used its CNBC Pro Stock Screener to compile a list of stocks that fit into either of those categories based on their 14-day relative strength index (RSI).

Stocks with an RSI over 70 were put into the overbought category, while those with an RSI under 30 were considered oversold.

Oversold

The list of oversold stocks includes names like Tesla (TSLA), Boeing (BA), and Southwest Airlines (LUV).

Tesla had a very strong year in 2023 but has struggled thus far in 2024, down around 30% year-to-date.

Boeing shares have plunged following quality control issues and bad press, down around 25% this year.

Southwest Airlines, which exclusively utilizes Boeing 737s, has plummeted alongside it, down around 15% in the past month.

Overbought

Some stocks that fell into the overbought category include Dupont De Nemours (DD), Targa Resources (TRGP), and Garmin (GRMN).

Dupont De Nemours shares are down over 4% this year but have risen over 8% this past month.

On the flip side, Targa Resources has had a stellar year, up over 26% year-to-date.

Meanwhile, analysts are predicting that Garmin shares, up 15% this year, will plummet around 13%.

CNBC’s RSI deep-dive could help investors find some hidden gems and avoid overbought stocks.

Which stock do you think is set for a big rebound?

Not All That Glitters Is Gold

The Chicken or the Egg

Prices of precious metals are heavily influenced by various trends and events and, therefore, fluctuate often.

For that reason, investors are drawn to buying stock in companies that mine the metals as a way to get in on the gains. But sometimes the companies can be just as volatile as the commodity.

A mining company’s success is still largely tied to the price of its products, but there are other factors to consider.

The Grass Isn’t Always Greener

Historically, mining stocks have lagged behind the price of gold. This has a lot to do with the cost of mining, which is largely affected by economic trends.

For instance, between the start of 2018 and the end of 2023, the price of gold rose more than 50%. But over the same period, the cost of revenue for mining company Newmont Corporation (NEM) rose by over 60%.

Another hurdle mining companies encounter is geographical location. Their operations are often located in areas with difficult geopolitical factors.

Capitalizing on Volatility

Michael Khouw of CNBC has offered some advice to investors regarding how to capitalize on both gold itself and the companies that mine it.

For gold itself, he recommends trading options. Particularly, buying June or later calls at a premium of around $4.85. If the price starts to decline, he recommends selling puts at a strike price of around $190.

To gain exposure to the mining companies, he recommends a call spread on the VanEck Gold Miners ETF (GDX), coupled with selling puts to finance the spread purchase.

Volatility is sometimes considered a negative factor in investing, but with a good options strategy, it could work to your advantage.