When I last left off, I wrote about three items / topics. Here is the follow-up:
1) My Gut Feeling for Boeing (BA) was that while the stock was in the penalty box, it likely bottomed out at $363.33. It is fair to say that BA has done it’s two minutes for interference (a hockey penalty, for those non-fans of the sport) and is now out of the penalty box. The stock closed yesterday at $390.75. It appears that the Lion Air crash was linked to a faulty sensor repair made by a company unrelated to BA. My take is that the BA will take a hit of $1 to $2 billion, some of which may already be reserved. You are now free to add to BA positions. I have done so indirectly via exchange traded funds.
2) My scheduled appearance on TD Ameritrade Network’s Market on Close Show. Here is a link to that show. Note the Seton Hall banner over one shoulder and the Vegas Golden Knights signed jersey on the other side. My office is in tax season disarray and getting ready for a makeover.
3) The Lyft (LYFT) IPO. In some respect the IPO was a success. In others it was a failure. My colleague Jim Cramer of CNBC had an excellent take on what happened after the deal was launched as he detailed in his Mad Money show yesterday.
I have another theory as to why LYFT stock tanked on Monday, the trading day after the IPO (which I shared with Jim). On Friday, the stock which was priced at $72 on the IPO closed at $78.29 down from the high of $88.60. The stock, as Jim explained went higher after shares were free to trade, likely due to some undisciplined retailing buying at market prices rather than at limit prices. Nevertheless, LYFT held the IPO price.
Friday evening, an unspeakable event occurred on the campus of the University of South Carolina (which has a wonderful student-run hotel where I stayed with my wife on a business trip several years ago) in Columbia, South Carolina. A young woman, a senior at USC, mistook a black car for her Uber ride. She was killed by the driver. The news broke (see video below) over the weekend and, in my opinion was directly responsible for the nine plus point sell-off in LYFT shares on Monday.
Between Friday and Monday, the business models for Lyft and Uber were shattered by the murder. It may be hard to tell a dark vehicle apart from a Lyft or Uber car, even though those ride-share cars have small signs to designate their affiliation. Clearly an old-fashioned yellow cab could not be mistaken for a phony vehicle. How many parents told their children over the weekend to avoid Uber and Lyft cars? My guess, a significant amount – enough to call into question, the future of these companies which are struggling to climb into profitability. So why own LYFT shares on Monday after Friday night’s event? There are none. So, investors hit the sell button and rightfully so. From hopeful IPO on Friday, Lyft went to a leper stock on Monday and likely took any chance that Uber would go public soon (or maybe at all) down the drain.
In the fullness of time, the LYFT IPO might be remembered as just a case of bad timing.
I was anticipating a market pullback as we entered the 2nd quarter. However, that pullback may have occurred earlier than scheduled on the recent yield-curve inversion which was not. Markets feared for a few days that the US Treasury yield curve inverted. However, only a small portion on the short-end inverted, which was more technical than fundamental. The 2s-10s and 1s-30s still remain normally sloped upward. By last Wednesday, the markets may have bottomed signaling the end of a short-lived pullback. In fact, historically, the equity market is in a seasonally positive period which should last a few weeks.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long BA although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right-hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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