More Losers Than Winners In The Market

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Posted: Nov 08, 2019 11:33 AM
More Losers Than Winners In The Market

Source: AP Photo/Richard Drew

The stock of the morning is Disney (DIS), which once again underscores it is good to have a business model with different inputs that all source to the consumer. That’s the great news for the Mouse House.  Of course, it helps to have products and services consumers want. That has been the case this year with the studio business at Disney.

Moviegoers loved “Lion King,” “Toy Story 4,” and “Aladdin” lot more than “Incredible 2,” and “Ant Man & the Wasp.” 

Disney Empire

Revenue

Change

Income

Change

Media

$6.51 billion

+22%

$1.78 billion

-3%

Parks

$6.65 billion

+8%

$1.38 billion

+17%

Studio

$3.31 billion

+52%

$1.08  billion

+79%

DTC

$3.43

+316%

-$740.0 million

NA

Zillow Flips Out

Zillow (Z) posted strong financial results powered by its new house flipping business. 

  • Company revenue $745.2 million +117%
  • House Flipping revenue $384.6 million +3,391%

This is an amazing business adjustment where increased competition put its online housing and rental search under constant pressure. Management has taken the information, and it is applying it towards its own gains. Wow! What gains. For the first nine months, house flipping revenue is $762 million or +6,816%, management says the full year revenue will eclipse $1.25 billion.

Market Breadth

Interestingly there were more losers on the NYSE than winners yesterday but there was more volume in stocks that rallied than volume in stocks that were down. That tells you market participants are a lot more passionate about getting in and even chasing performance than they are about selling.

The pool of stocks hitting new highs is expanding but nowhere near the peak in June when the Dow Jones Industrial Average saw 323 new highs on June 20th.

NYSE

NASDAQ

Advancers 1,401

Advancers 1,682

Decliners 1,563

Decliners 1,471

New Highs 173

New Highs 214

New Lows 41

New Lows 91

Up Volume 1.60 billion

Up Volume 958.4 million

Down Volume 1.320 billion

Down Volume 805.9 million

 

Let Me Emphasize

In August I featured DexCom (DXCM) on the Hotline which was unusual because it’s a high Beta stock. Essentially a stock that trades in large and often wild swings. The clash between the risk profile of the service and the fact I thought it was severely undervalued gave me pause but not knowing when it could rally toward more justified levels meant it wasn’t a short-term trade.

That said, the stock crushed earnings and was by far the biggest winner in the entire market yesterday.  I’m writing about it this morning to remind investors that buy high Beta stocks for trades. It is for a long term, expect wild swings, and be prepared to ride them out when the underlying work suggest more upside.

If you are buying such stocks only for trades, then it takes huge discipline including the ability to accept losses.

Ultimately, it more important to understand the underlying fundamentals of high Beta names than staid old slow-moving names where business models and investment history are long and well-known.  That said, entry points are tough, especially picking bottoms.

On these names, you can actually chase. If your thesis is correct, make a lot of money.