kennethkohwk
- Mar 20, 2020

Stocks I am looking at. NOV. Planet Fitness. DK. STWD.

Hi all, do not let your heart be troubled.

I apologize for being so silent. Life has taken lots of changes and I am committed to writing a book about discovering transcendent truths in and around the Bible that caused great restoration baffling doctors and peers. God took my darkest moment when everyone thought I would die in obscurity, and powered a comeback so wild that I still think I am dreaming. This has been taking most of my time besides that I am also recently married!

So, I only want to pop out my head when it counts. So here I am.

I don't have to time to do a write up except to say that I am nibbling into the market and some companies have crashed so much that an intermediate bottom might be in the process. By intermediate bottom, I mean that the market may eventually go lower, depending on the acceleration the virus versus government or health measures to safeguard the public health and financial markets; but some stocks are so beat up that insiders have started buying their own stocks. There is a chance that the selling momentum may not be a freefall for a few weeks.

I suspect that at this present moment, the fear is worse that reality (for now). I can be proven wrong in the future. What you read below are is when my short term bottom radar goes wild.

Qualcomm reports that demand in China is back and the cash flow they estimate is enough to carry them forward in this environment.

https://seekingalpha.com/news/3553479-qualcomm-says-china-demand-returned

Tells me that at least for this quarter, the world is still working, but earnings may be lower; more importantly, it seems the China engine is still working, it's not seized up, at least for now.

I am looking at NOV, Planet Fitness, STWD (Reit), DK and ON semiconductor amongst others. I'll throw in IHRT radio as well.

Although the Dow and S&P500 "only" dropped about 30+% (GFC they dropped 50+%), most of the stocks mentioned have "capitulated" into panic selling and crashed more than 60% from highs. Planet Fitness dropped 75%, for instance. These stocks blow have recent insider buying at these crashed prices and all MACDs look like they are about the cross. Can stocks like Planet Fitness drop further? Sure. But are they so low that you'd probably breakeven in a year and a half? At these levels, most likely, so long as it doesn't go into bankruptcy.

The naysayers will tell me how much worse the pandemic will be. Businesses will close down, banks will seize up. I understand, I've been through the GFC. However, understand that if this was not "obvious", those stocks will not be priced for bankruptcy.

Look at the VIX.

The levels have hit the same levels as the first intermediate bottom of the GFC.

Here's a closer look.

You can see that in Oct 2008, this marked the first "bottom", where the markets consolidated for a month or two with swings between 850 and 1000, before eventually getting taken down to 666. Going between 850 and 1000 are swings of +/- 15-20%. If we are going to have 4-6 weeks of such consolidated swings, even though the broad markets aren't going anywhere, the super bombed out stocks will still gain value in this regime. I won't be surprised if some bombed out stocks rise 20-30% from it's lows.

So it means that the unrelenting freefall may be temporarily stopped by the first move of brave insider buying, triggering funds to nibble back into the market. In our case today, whether it consolidates and is the "actual" bottom is hard to say and a part of me thinks it unlikely, since there is still room for bad news. So, we might want to look for stocks that are already at rock bottom. As I said, the Dow is down 30%, but some stocks are already priced for a great recession, and these, if not the bottom, are closer to the bottom than others.

At this time, I feel this fears are a tad too overblown with the information we have at the moment. I expect a big slow down, maybe a year or two. Some companies may have earnings cut in half, or even more than that. So find stocks that have enough liquidity to survive at least more than a year, and have a competitive advantage or niche.

This could be a short term move up, or a head fake, but the risk-reward seems good in the short and long term, not so in the medium term if the pandemic gets too much worse; and I am tempted to take speculative positions.

If you are skittish, and want to feel secure and only invest when the coast is clear, you might have to pass and wait for more clarity in the markets and the virus. I'd stay out if you cannot stomach the volatility.

But, if you want to play the short term odds, it might be good to take a look at these stocks again. The graphs below as taken just before market opened today.

I would keep an eye on them for more insider buying, and especially when the MACD starts to cut upward.