NEW YORK (Real Money) -- Critical reversal or buying opportunity?
That's what people are asking themselves about Workday (WDAY), Splunk (SPLK) and Salesforce.com (CRM), three companies that had the misfortune to report unbelievably great quarters at the moment when Ukraine tensions turned into turmoil.
When I used to trade, I always disliked companies that opened up and reversed and reversed hard, especially if there was good news that propelled the initial move. The stocks of all of these companies did just that last week, despite reporting major growth (WDAY above 70%, SPLK above 50% and CRM above 35%) and giving guidance that required all analysts to raise numbers.
But if you are trading at a big-time institution right now -- not investing, but trading -- you are thinking to yourself, that all three just put in tops, tops that could be for the ages. I am not kidding. That's how people think.They say, for example with Salesforce.com, the fact that it fell about 10% in a single session shows that it has the worst base of shareholders, that they have one foot out the door and that the peak's been reached because it will never again report a quarter this good. Believe me, that's precisely what's being discussed. The taint from reversals is that great. I would like to look at it differently, though. Salesforce.com has phenomenal revenue growth. It is at the epicenter of the social, mobile, cloud and connectivity universe. It works with every major tech provider and it has developed a sales and marketing platform that's taking share left and right. Am I supposed to let the chart keep me out of it? Workday and Splunk are in the early innings of their human-capital cloud-based software and data-mining solutions. They have been up huge and are now coming down. There isn't anything to indicate that it's over EXCEPT for the chart and that simply isn't good enough. None of these companies has growth that will be slowed by the Russia-Ukraine tussle. In fact, they have the most robust growth out there because they are linked to the biggest themes in tech that will not be stopped, even by a shooting war. These are the stocks that should bounce back in a relief rally that might occur on Friday either because we get a weak jobs number and managers search for growth as interest rates go down or a strong number and managers are less worried about earnings. Now, I am not sneering at the notion that the intraday reversal is meaningless. I believe that the return to the top will not be accomplished overnight because now traders will be conditioned to sell these three stocks as they go toward their highs and even short them. That's in part because those moves destroyed the positive chart momentum. I am simply saying that if you want three of the best-run growth stories out there, the ones where management is superb and the total addressable market large, then it is probably time to start buying one of these three right into Ukrainian weakness, weakness that I think will be with us for some days to come.