🗞️The Wrap: Nikola

Airlines are looking for loose change between seats, be careful who you trust and Tesla has a new rival who happens to be the same man. Plus, rest easy Aussies as we prepare you for tax time.

5 Stocks Reaching 52 Week Highs

  • Akebia Therapeutics (AKBA) +48.6%
  • Chegg Inc (CHGG) +40.8%
  • ServiceNow (NOW) +25.2%
  • Bandwidth (BAND) +24.2%
  • Coupa Software (COUP) +17.9%

Pick a Side

We’ve all had that little dopamine hit when we see an analyst has put an attractive price target on a stock we own. Let’s dig a little deeper and see who is coming up with these ratings.

Analysts can be split into two groups: buy side and sell side. In short, buy side ratings are a bit more meaningful (if ratings and targets matter at all).

Sell side analysts research stocks and send their findings to the firm’s clients. There’s a bit of a moral hazard here; the more attractive the report, the more likely clients are to buy from the firm and the higher those sweet commissions.

Buy side analysts have a bit of skin in the game, advising their own firms on what to buy. The performance of the stock matters a lot more to these analysts.

As we always ask, does it even matter? This research out of the States suggests investors can outperform the market slightly if they trade based on ratings changes in the period of time they tested. Of course, past performance does not…you know the rest.

Loose Change

The Berkshire Hathaway AGM was held virtually over the weekend and the real miracle is that an octogenarian was able to operate a computer camera! I kid. Buffett is sharp as a whip.

You’re aware by now that BRK has shed all its holdings in airlines. Razor sharp margins in a high cost industry don’t react too well to industry shocks. While definitely a different model to the big four US airlines, RyanAir’s air traffic is down 99%. No more bucks weekends in Budapest or Ibiza keeping the Irish carrier profitable. And so carriers have been forced to innovate.

Passengers on Frontier Air can purchase the seat next to them for US$39 and guarantee their personal space. Every dollar counts in the industry. American Airlines reported that removing just one olive per salad in each passenger’s meal would reduce expenses by US$40k annually.

Tax Time

The end of the Financial Year is approaching for our Australian traders. Understandably, we’d all like to file as quickly as possible to get that sweet little return back.

Rest assured, we will be providing a CSV file come July with all your transactions. This can be uploaded to Sharesight who make tax time a breeze through efficient reporting. Read about their offering here.

Top 5 Gainers

  • Portola Pharma (PTLA) +152.1% in the last week
  • Chegg (CHGG) +40.8%
  • Wayfair (W) +34.1%
  • NGL Energy (NGL) +30.7%
  • 2U Inc (TWOU) +26.3%

Top 5 Fallers

  • Fresh Del Monte Produce (FDP) -29.8% in the last week
  • Olin Corp (OLN) -24.0%
  • WestRock (WRK) -23.8%
  • Inovio Pharma (INO) -22.6%
  • Frontline (FRO) -22.2%

The Name’s Nikola

Last week we touched on reverse mergers acting as an effective way to access the market. DraftKings snuck onto the market and has broken into highs since doing so.

Looking for another sleeper stock? Enter, VectoIQ Acquisition Corp (VTIQ), soon to become Nikola Motors.

A tongue in cheek jab at Tesla, Nikola Motor specialises in hydrogen-powered electric trucks. Looking at a valuation north of US$3b after the merger, the company is accepting pre-orders on semis and utes, promising a range of 750miles. At some stage in the coming months the reverse merger will be completed.

Whether hydrogen power is viable is another question. That being said, hydrogen power stocks have been flying over the past few years. Ballad Power (BLDP) is up 203% in the last year and Plug Power (PLUG) is up 66%.

What We’re Reading | Trade Like A Champion by Mark Minervini

I’ve recommended Minervini’s first book before, a cracking guide to swing trading. His second book is more applicable to a wider range of traders; it’s all about the mental side.

While tying in his overall concept, Mark does his best Tony Robbins impression as he breaks down how to have a winning mindset in trading. Just like golf, it’s mostly mental once you’ve got over the initial difficulties: controlling your emotions and focussing on the intangibles. Appropriate position sizing can be done by anyone and is what separates the successful traders from the bankrupt.

The mental side of trading is an area I will continue to look into and feature. Especially in a particularly tumultuous period for our portfolios.

Trader Teaser

1, 11, 21, 1211, 111221, 312211… What’s next?

Best Buy | Chegg +54%

Buying at the first fake out and holding until the legitimate breakout, this trader did well on Chegg. A database for college notes, past papers and tutorial answers (read: cheating 😉 ), the stock has understandably been flying.

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