| 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 Daily Notes on our portfolio: - Snowflake (SNOW) maintains a perfect recommendation score for the fifth year in a row. According to the 2022 Wisdom of Crowds Analytical Data Infrastructure (ADI) Market Study, 100% of surveyed customers would recommend Snowflake to others. The company also was named an Overall Leader in the Customer Experience Model and got high scores across the board in this study. Those are impressive marks. So long as Snowflake continues to please customers in this way, the company will continue to grow at lightspeed, and the stock will be a mega-winner.
- 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.
- ChargePoint (CHPT) wins recognition for the Market Leadership Award in Frost & Sullivan's new EV report. Among 18 top operators in Europe, Frost & Sullivan singled out ChargePoint as having the greatest market share due to its great marketing strategy and products. This is why we own ChargePoint stock. The company is the de facto leader in EV charging, an industry that is set to grow by hundreds of percent throughout the 2020s. This stock is a great buy on recent weakness.
- Shopify's (SHOP) CEO gets named to Coinbase Global's (COIN) board of directors. Both companies synergistically benefit from one another's success, so Coinbase's new appointment makes sense. For one, Shopify already accepts 300-plus cryptocurrencies on its platform, thanks to Coinbase and a few other companies. We love to see Shopify getting deeper into the DeFi game, as it expands and elongates the company's growth runway.
- Citigroup upgrades Spotify (SPOT) amid continued Joe Rogan controversy. The firm has given Spotify a "Buy" rating, as it believes Spotify can boost revenue via ads. As far as the Joe Rogan news goes, Spotify has announced it will add disclaimers to any podcast episodes that address Covid-19 on its platform. The move comes as an attempt to please both sides. Shares of Spotify bounced back a good deal today, and we love the stock at current levels. Rogan's apology and Spotify's rule changes appease our fears that more artists will leave the platform. We suspect that is now unlikely, and therefore, are bullish on the dip.
- Credit Suisse adores Tesla's (TSLA) long-term potential. The firm upgraded Tesla to an "Outperform" rating and gave it a $1,025 price target. Credit Suisse is particularly fond of Tesla's long-term margin potential, and it sees Tesla as existing in a realm all its own. We do believe this is true, though we continue to warn on valuation risks. We see a big rally in store toward $1,500 levels, but the best move would be to fade any such rally. In a three- to five-year window, we suspect Tesla stock will struggle to beat other EV stocks in terms of performance.
Sincerely, |
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