Hey Scoopers,

The stock market started the week in the green, with the Nasdaq leading the pack by almost 1% gain.

Beyond the overall market, the delivery war is finally paying off for a food delivery stock, while the price action of one aircraft manufacturer stock is proving that it’s never a good idea to jump in and invest in a company with a corporate crisis in an attempt to buy the dip.

Oh, and by the way, get ready for a surprise. How bad of a strategy is investing in IPOs? Contrary to everything we hear about IPOs of 2019, had you invested in them all, you wouldn’t have gone bankrupt. More on that in the “Water Cooler” section.

Also, don’t forget to scroll down to the “Overall Market,” “What’s Up?” and “What’s Down?” sections to learn more.

Market Recap

    • U.S. markets: All three indices finished the first day of the week in the green with the Nasdaq getting close to almost 1% gain in one day. Scroll to the “Overall Market” section to learn more.
    • Cryptocurrency: Bitcoin’s price crossed the $7,000 mark into the high-6,000 range. Traders are saying that they are not surprised. The coin has been finishing each day lower than the finishing price of the day before, and that’s a technical indicator they knew will lead to an eventual drop below $6,000.Supporters still believe that Bitcoin will rebound as cryptocurrencies becoming more widely used and more scarce.

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For Pete’s sake, crash already.

The stock market started the week in the green zone. The media began to talk about a melt-up again. Every time the stock market moves upward, even though almost every financial press has been predicting a crash, the talk of a melt-up resurfaces. The mood in investor communities is nothing short of frustration.

What does this even mean?

We’ve discussed a melt-up in the past. In short, a melt-up is an upward movement of the stock market, typically very rapidly, just before a significant price decline. It mostly indicates how lousy everyone is in predicting the market. They call it a melt-up, because the media loves drama, and it’s hard for them to accept that they cannot predict the market. A melt-up is a passive-aggressive reaction of the so-called experts to the upward movement of the market.

The situation is getting frustrating, however. In the comment section of several financial media, you see people venting by asking the Gods of the stock market to let the stock market crash already.

Maybe the better strategy is to ignore the media and stick to your strategy. That’s what we do.

The delivery war is paying off.

So, what happened?

Shares of Uber (Ticker: UBER) were up more than 5% on Monday. Reports have it that the company is in the final stages of selling its food delivery business in India to its competitor, Zomato. This is the first time we see the delivery war is paying off for a company.

It’s a smart move on behalf of Uber because the company is too stretched across businesses and locations. With unprofitable core operations, the company needs to take care of its main car-sharing business and not worry about fighting several battles all around the world. Good job, Uber. If this is true, we are glad you are doing it.

The crisis continues.

So, what happened?

Shares of Boeing (Ticker: BA) were down more than 5% on Monday. Also, the stock is far from its 52-week high of $446. It appears that the reality of the 737 Max crisis is finally catching up with the stock price.

After the federal regulators announced the green light to resume flying 737 Max is not yet on their agenda, Boeing decided to halt its 737 Max production in January to stop burning through cash. It wouldn’t be surprising to see airlines start canceling their orders or ask for big compensation in lieu of financial damages that Boeing has caused them.

This corporate crisis is nowhere near its conclusion, proving that buy the dip is not the best strategy when it comes to corporate crises.

2019 was a miserable year for IPOs. Was it?

So what happened?

With everything we read about Uber (Ticker: UBER), Lyft (Ticker: LYFT), Smile Direct Club (Ticker: SDC), and Beyond Meat (Ticker: BYND), it sure seems that 2019 has been a dismal year for IPOs. It also didn’t help to go through the roller-coaster that was WeWork and laugh (or cry) at the absurdity of IPO valuations

But, the truth is never that straight forward. In reality, had you invested in IPOs of 2019, year-to-date, you would have outperformed the market (as of 12/16/2019). No, really. We are not kidding you.

How is that possible?

Take Renaissance IPO ETF. This fund invests at least 80% of its total assets in securities that comprise a portfolio of companies that have recently completed an initial public offering in a U.S. exchange. Had you invested in this ETF, excluding fees and taxes, you would have grown your money by more than 31%. Compared to the 27% year-to-date performance of the S&P 500 ETF (SPY), you would have been ahead of the market.

 

The moral of the story is not to go ahead and invest in all IPOs. Investing in IPOs would have meant staying true to your strategy when Smile Direct Club lost most of its value. It would have also meant riding through Beyond Meat’s spectacular rise and fall. It would have been hard for most people to do so and stayed sane through it all. The moral of the story is that the truth in investing is far from market sentiment. Never fall for the sentiment.

 

Hoda Mehr

Hoda Mehr

Brought to you by Hoda Mehr, Editor at Trade Stocks, CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 8,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism and storytelling to all aspects of her work. Subscribe for free here: Stockcard.io