| Daily notes Stocks Close Out an Ugly January on a High Note It was an ugly January on Wall Street. But stocks finished out the month on an incredibly high note, with our portfolios absolutely soaring today. The catalyst for the turnaround rally? Short covering ahead of what investors think could be a big week for tech earnings. Specifically, the week ahead is the biggest week of the quarter for tech companies. Alphabet (GOOGL), PayPal (PYPL), Advanced Micro Devices (AMD), and Electronic Arts (EA) all report on Tuesday. On Wednesday, Facebook (FB), Spotify (SPOT), and Dynatrace (DT) take center stage. On Thursday, it’s Amazon’s (AMZN) turn to report quarterly numbers, alongside Activision (ATVI), Snap (SNAP), Pinterest ( PINS), and Unity Software (U). If last week’s numbers are any indication, then this slew of upcoming tech earnings reports should be pretty good. After all, Apple (AAPL) reported record numbers last week. So did Microsoft (MSFT), ServiceNow (NOW), and Atlassian (TEAM). The consistent theme is that the pace of technological transformation is quickening across enterprise America, setting the stage for all those aforementioned tech companies to also report great numbers this week. Ahead of these earnings, however, many tech stocks are being heavily shorted, especially speculative tech stocks. The short interest on stocks like Block (SQ), Opendoor (OPEN), Luminar (LAZR), Digital Ocean (DOCN), and Lucid (LCID) has risen precipitously in recent months to – in some cases – all-time highs. It appears many of those short-sellers are concerned that, given last week’s strong tech earnings, these companies will report strong earnings in the coming weeks, leading to what could be a big short squeeze in many of these names. 
Therefore, short-sellers appear to be “covering” – or buying stocks back to return shares to the broker to close out their short trade – ahead of this busy earnings week. We believe this short covering is what drove the majority of today’s rally in tech stocks. Of course, our portfolios benefitted in an enormous way. However, we continue to warn of more volatility in the coming weeks. We do believe that our companies will report stellar numbers over the next few weeks. Those stellar numbers – coupled with the recent stock price declines and heavy short interest – could produce some big post-earnings rallies. At the same time, though, we expect strong post-earnings rallies will be met with some selling pressure as investors continue to be fearful of a hawkish Fed. Long story short, we’re sticking by our call that markets will remain volatile until the issues of inflation and the Fed are resolved. We continue to expect choppiness, though we do strongly believe that February will be a better month than January – and that March will be better than February, and that indeed, every month will get better into the end of the year. Long-term, we’re super bullish. We see huge opportunities to buy the dip in our stocks at current levels. Honestly, for long-term investors, we think today’s overdone weakness in speculative tech stocks is the best investment opportunity we’ve ever seen in markets. Ever. But we also believe that the rebound – while enormous – will take time. At this point in time, patience is your greatest weapon. Use it to your advantage. On that note, let’s dive into today’s updates on our Early Stage Investor portfolios: - Matterport (MTTR) names Tom Klein as its new Chief Marketing Officer. Tom brings years of significant experience with him from his role as Global Chief Marketing Officer of leading marketing and commerce platform Mailchimp. The stock soared on the news, but we suspect this has more to do with short covering ahead of the company’s earnings report this week. Those earnings should be pretty good. But regardless of how they shake out, we’re invested in Matterport for the long-term potential, and that long-term potential remains very compelling.
- Kaleyra (KLR) partners with Italian bank Banca Sella. With Kaleyra’s help, the bank is forming a new virtual appointment-enabled wealth management platform called “Sella Global Advisory.” It’s a very interesting move that has the potential to add value.
- Berkshire Grey’s (BGRY) total orders to date hits the $200 million mark. Thanks to an additional $14 million in new orders since last November, the company was able to hit this impressive milestone. With demand for automation growing more intense every day, Berkshire will continue to accumulate new orders from customers that want to take advantage of its superior efficiency-enhancing technology. We really, really like the stock at current levels. We think this stock easily has 10X potential in a hurry.
Sincerely, |
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