With the Nasdaq up 10 days in a row, and the S&P 500 up 16 of the last 18 sessions, one expert at TheStreet.com advises investors to be cautious this week.
“There is no question that the indexes are due for some sort of correction, but the big issue is how it will occur,” said TheStreet’s James “Rev Shark” Deporre on Real Money. “Will the entire market drop in tandem? Will there be churning and choppiness? Or will there be rotational action into stocks that have been lagging?”
“The bears would have us believe that the likelihood is that the entire market succumbs to overbought and frothy action and suddenly collapses,” he noted. “However, that is the least likely scenario to occur at this point.
Watch out for the market to stall for “no reason” Deporre added.
“The market may dip sharply, but the recent action has created a big supply of dip buyers and those that are driven by Fear of Missing Out. Strong markets tend to stay sticky to the upside,” Deporre said. “If you’re watching for a shift in the indexes, it’s most likely to occur intraday. It’s a sharp turn during the trading day on no obvious news that typically causes the indexes to correct at least a little.”
One area where traders may linger longer is with small-cap stocks and funds.
“My current market thesis is that the small-cap breakout that occurred this week is at an early stage and is likely to continue for a while,” Deporre said. “I'll change my mind if I see a shift in the level of speculative interest or if there is a notable failure of support levels, but currently my view is that it is time to be long and to keep looking for new opportunities.”
“If all the indices looked like the Russell 2000 (IWM) - Get iShares Russell 2000 ETF Report, I doubt there would be any real discussion about overbought conditions,” he added. The IWM is a little overbought short term, but it is nothing like the Nasdaq or S&P 500.”
Here are a few stocks that TheStreet’s market experts are taking a good look at.
DraftKings (DKNG) - Get DraftKings Inc Class A Report $45.40 – 5-Day Performance (-) 2.49%. This digital gambling platform was in the news for a variety of reasons in early November – most of which point to an upward trend in share price to a company that could really use some juice.
First up, The National Basketball Association on Thursday unveiled an expanded multiyear relationship with the Boston-based company, naming the online sports betting company the league's co-official sports betting partner.
DraftKings and the NBA first teamed up in 2019 when DraftKings became an authorized gaming operator for the league.
TheStreet’s Rob Lenihan has the details.
“Under the expanded arrangement, DraftKings will become the exclusive presenting sponsor of NBABet Stream,” Lenihan reports. “That's the league’s betting-focused telecast, which is distributed via NBA League Pass and the NBA TV app. During the weekly broadcast, DraftKings odds, lines, props and other forms of gambling content will be integrated into the live-game experience.”
Additionally, DraftKings will also have the right to activate on-site at tentpole NBA events including the NBA All-Star Game, Rising Stars, NBA All-Star Saturday Night and NBA Draft. On Wednesday, DraftKings and iHeartMedia IHRT unveiled a multiyear strategic relationship.
“That deal names DraftKings the official odds supplier for iHeartMedia’s broadcast, digital, podcast and social platforms,” Lenihan notes.
Uber Technologies (UBER) - Get Uber Technologies, Inc. Report $46.98 5-Day Performance 5.89%. Uber shares advanced by over 4% on Friday, November 5th, after a robust earnings report released the previous evening.
“The firm posted GAAP EPS of a loss of $1.28 per share, which fell short of consensus view of almost a full dollar per share,” said TheStreet’s Stephen Guilfoyle. “This net result also compares quite unfavorably with the GAAP EPS loss posted in the third quarter of 2020 ($-0.62). As for revenue, Uber generated sales of $4.85B over the three-month reporting period. This number beat Wall Street and was good enough for annual growth of 72.6%.”
For Uber even a significant net loss had an upbeat side.
“Adjusted EBITDA printed at a pedestrian, but positive $8M,” Guilfoyle noted. “So, why the net loss that total $2.4B? The firm states that $2B of that $2.4B came directly from a revaluation of the firm's equity investments. In short, the firm is heavily invested in DiDi Global DIDI, also known as the "Uber of China" and as we know, DiDi Global to date has laid an egg. Oh, and after having what was truthfully a very decent quarter, the guidance was cautious.”
Looking ahead, the firm guided fourth quarter gross bookings to a range spanning $25B to $26B, with adjusted EBITDA likely to fall into a wide range that starts at $25M and tops out at $75M.
“This is well light of the almost $100 million that Wall Street was looking for,” Guilfoyle added. “While I think Wall Street may have taken the DIDI investment a bit more tightly than they might have, this conservative guidance is one reason why the shares sold off overnight.”
According to Guilfoyle, Wall Street has come to see the guidance as perhaps intentionally light, the shares recovered both on Friday and on Monday, November 8th.
“Uber may have to wait until the dawn of truly autonomous driving until the firm will have the potential to truly excel in terms of profitability, but this business is truly growing,” he said. “For the first time in a long time, I am feeling better about Uber.”
With the shares trading so close to recent resistance and not that close to where Guilfoyle believes the shares might go, he won’t be buying shares at this level anytime soon.
“I am willing however to take on discounted equity risk over time and get paid to do so,” he noted. “Right now, UBER January $42 puts are still paying about $1.40 and UBER January $40 puts are paying between $0.90 and $0.95. I find writing those puts more attractive right now than I do purchasing equity at today's premium pricing.”
Best Infrastructure Stocks.
Wells Fargo is out with a short list of companies that its analysts believe are well positioned to benefit from the just-passed $1.2. trillion infrastructure bill:
Westinghouse Air Brake Technologies Corp. (WAB) - Get Westinghouse Air Brake Technologies Corporation Report $96.91 5-Day Performance 6.35%,
Enerpac Tool Group EPAC $22.72 5-Day Performance 5.97%
Westinghouse is a Pittsburgh freight and transit company, Wesco is a Pittsburgh logistics company, John Bean is a Chicago food and aerospace technology company and Enerpac is a Menomonee Falls, Wis., specialty machinery company.
“WAB is a direct beneficiary of the $39 billion transit funding,” wrote Wells analyst Allison Poliniak-Cusic. “It's not clear how funds will be allocated. However, prior [government] injections … have proven to accelerate WAB's project-related growth.”
Meanwhile, Wells is all in on Wesco, as “reports indicate 18 million to 43 million Americans lack access to broadband,” the company stated. Wesco benefits from partnering with utilities, municipalities and telecommunications companies, Poliniak-Cusic said.
John Bean is known “as the No. 1 domestic supplier of gateway passenger bridges and ground support equipment,” Poliniak-Cusic noted. “JBT is a clear beneficiary of … the $25 billion in airport infrastructure [assistance],” she added.
As for Enerpac, Wells Fargo sees it as a big beneficiary of the new infrastructure legislation. “We view EPAC as a clear winner on multiple fronts, most notably $110 billion in roads and bridges [assistance] and $66 billion in rail infrastructure [assistance],” Poliniak-Cusic said.