Guest Host Tonight and Tomorrow

This is Brian Bolan filling in for the Ultimate Editor Jim Giaquinto for today and tomorrow. I like being the go to guy for Jim for a night or two, but not three.  I will be here tomorrow as well, but then David Bartosiak will provide the write up on Friday.

So let’s get right to some of the ideas that are driving the broader market.

Back and Forth We Go

This Huawei stuff really shows you how the Administration does not want the negative news flow to hurt stocks.  After cutting off the 5^th largest buyer of chips, the market dumped in fears of further weakness throughout the space.  The next day, a 90 day extension was granted and we came back a good bit in the market.

Let’s think about what this really means and who is in the worse position.  Sure the Chinese will have an inferior product down the road, but will that kill them off?  Doubtful, they will replace the American tech with other suppliers and the relationships could be gone for a very long time.  The fast reversal shows that the Chinese are less sensitive to the impacts of the trade war.

I have said from the start that they have little to nothing to gain from a deal.  It would not be surprising to see them get as close as possible to a deal, then pull out.  I mean I just don’t see their motivation to give in.  Tariffs are going to raise prices and hurt consumers, but that should also help domestic spending which will help businesses and earnings.  The question becomes are the consumers going to be able to withstand higher prices.

In the end, Trump wants another victory like the tax cut for his reelection campaign that is really not that far away.  His attempt at healthcare was not something he wants to bring up and the Wall isn’t being funded by Mexico.  Trump needs a splash and cannot afford a summer melt down in stocks if China doesn’t make a deal happen.

Fed Minutes

I am not a big fan of the minutes and what they can tell us.  The data is stale and we are really in the business of looking forward not backward.  That said, there can be some hidden gems in the release so you always have to look over it.

The thinking has been that a rate hike this year is more less off the table.  This idea was somewhat echoed in the minutes as the Fed is going to maintain its patient stance.  No news is good news as the market rallied following the release.

IPO Calendar

I see an interesting name coming to market and I wanted to share it with the group. Bicycle Therapeutics (BCYC) is a biotech play that focuses on medicine for diseases that are underserved by existing therapeutics. That alone tells me there is something good here, but then I looked at the deal itself.

I see 4.3M shares offered with an initial range of $14 - $16.  That low number of shares ensures an oversubscribed scenario which is what you want to see.  The double digit share price is also an important part of the mix.  Finally, they have Goldman Sachs leading the deal with Jefferies and Piper Jaffray – which is also generally a good thing.

As is the case with any IPO, you should take the time to read the S-1 and have a good understanding of what it is they do and when or if they will make money.  What I see tells me the structure is one that follows the playbook of successful deals.  Low float, double digits, and a strong lead banker and team.

Portfolios

There wasn’t that much action across the portfolios that are managed here at Zacks Investment Research.  That said, there were two new additions and one sale.  Let’s take at look at the action:

Surprise Trader: David Bartosiak looks for stocks with a solid Zacks Rank and high earnings ESP for this service and he cashed in one play and added another.  Sunpower (SPWR) proved to be a success, and I saw it up more than 10% early in the session, but it could have closed a little lower than that.

With moving that stock out of the way, David added Dorian LPG (LPG) as that stock looks to report before the market opens tomorrow.  Be sure to check the Surprise Trader email or home page to see what David sees in this Zacks Rank #2 (Buy) stock.

Home Run Investor: as the editor of Home Run Investor I look for small cap growth stocks and I think I found a really good one today.  The Joint Corp (JYNT) is not a marijuana play as some may think, its more of a medical play.  Think of Massage Envy, but for Chiropratic Clinics and you have a recipe for success.  In the full write up I take Home Run subscribers through the earnings history, estimate revisions and valuation.  There is also a chart that shows some impressive revenue growth over the last several quarters.

That is all for me tonight, I will be back again tomorrow!

Brian

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