The Wrap – What Most Investors Won't Admit
Also, updates on Shake Shack, Super Group, and G-III. Bonus round - three companies with off-the-charts earnings call evasion.
▶“It’s wild, who wins and loses each day.”
That was a friend commenting on something I texted him regarding drone maker AeroVironment AVAV 0.00%↑, one of my long-ago red-flagged names that can’t get out of its own way. Not that it’s the only drone-maker that can’t, but in the early days of Ukraine, it was the only drone-maker that could, as the pure-play on military drones... with an amazingly hot stock to match. Now, even with Iran, AeroVironment’s stock couldn’t be weaker, while the drone narrative couldn’t be stronger. Or as CEO Wahid Nawabi puts it, “This is like our moment, if you ask me.”
But as I pointed out in my mini-case study on AeroVironment, after its most recent clash with gravity, with the stock half its highs, sometimes it’s about more than being in the right place at the right time. And after years of being run by promotional management, the market doesn’t really care what Nawabi & Co. say or promise. The proof, as my technical analyst friends would likely say, is that AeroVironment is a weak stock in an otherwise hot group.
Special thanks to Tenzing MEMO, Fiscal.ai, and ManagementTrack, which were used as part of this research.
But back to my friend… In all likelihood, when he saw my text, I’m assuming he was glancing over at a screen full of the dozens of stocks he’s long and short… while at the same time trying not to overthink the day’s action, which stopped making sense long ago.
Still, in what we’re told is an exceedingly efficient market, there are pockets of inefficiencies – long and short… prediction markets, pod shops, and passive investing, notwithstanding.
From a red flags perspective, these are the stocks everybody isn’t talking about, that aren’t in the headlines… and are generally viewed as set-it-and-forget-it by investors because, beyond being viewed as too boring in an exciting market like this, they’ve always worked.
Like SiteOne SITE 0.00%↑, which I red-flagged last June. It went on to rise 35%, which was nonsensical. It’s now down 1%. Or Ingersoll-Rand IR 0.00%↑, which at one point was up 29% since after my red-flagging in December, it’s now down around 9%. Or Clorox CLX 0.00%↑ , initially up 16% after my red flag; now down 23%.
Of course, there are others, which I like to call the “we’ll show him” stocks – notably AXT AXTI 0.00%↑ , which is roughly double where it was when I red-flagged it a mere five weeks ago… and is up nearly 600% since January. And 7,500% over the past year. Then again, half the gain since my first salvo coincided with the launch of the leveraged Tradr 2X Long AXTI Daily ETF Investment Managers Series Trust II AXTX 0.00%↑, which is a shadow stock only gamblers could love. Or as I explained when I first mentioned it, “It confirms just how detached AXT’s stock is from reality – making it perfect for the casino.”
Last I looked, the betting window was still open, which brings us to the moral of today’s story, courtesy of my pal: the notable and always quotable Bob Howard of the Positive Patterns newsletter from “down in the Ozarks.” After decades of stock picking, if he’s learned nothing else – year in, year out, cycle in, cycle out – it’s this…
The market doesn’t care what you believed last month.
New data comes in. Most people ignore it – because changing your mind feels like losing. So they hold. They cope. They call it conviction.
It’s not. It’s ego.
The best investors I’ve studied weren’t always right. They were just fast to admit when they were wrong.
That’s the edge. Not intelligence. Flexibility.
Common sense in an uncommon time.
P.S.: It’s more nuanced than that, of course. And truth be told, when it comes to mixing ego and investing: Guilty as charged!
▶Unrelated: A personal trainer I know says this is the slowest he has seen it this time of year in 30 years.
▶Meanwhile, from the “Golden Age of Grift” dept., via my friend Ed Borgato: Who needs the predictions markets when you have ETFs that benefit from predicting the outcome of elections? Some brokers are saying… enough!…
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▶From the most recent crop of earnings, quick updates on Shake Shack SHAK 0.00%↑, Super Group SGHC 0.00%↑, and G-III Apparel GIII 0.00%↑. Plus, three companies whose evasion on their latest earnings calls was so off-the-baseline that they warranted warnings from my pals at Paragon Intel’s ManagementTrack, which has proven to be a not-to-be-ignored predictor of underperformance.
▶Shaken to the core: Since red-flagging Shake Shack in January, its stock has tumbled by roughly 35%….
