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What's in a Ticker Symbol

The markets moved sideways this week as earnings announcements took center stage.  As with the first quarter, investors are more focused on management expectations and forward guidance.  For those companies that pulled sales forward into the second quarter, they did remarkably well, but will likely not see the same stellar growth this quarter.  And that’s where investors want their cake and to eat it too.  Those companies citing slower growth in the next quarter, or simply stating the heightened level of uncertainty in their businesses, are not being met favorably by investors.

One such company that had a great quarter only to see its stock price tank is Netflix. The company grew its subscriber base by 10 million new customers in the quarter attributed largely to the coronavirus pandemic and people being forced to stay at home. However, simply stating the obvious, that the growth of subscribers this quarter should slow, caused the stock to fall 12%. In a similar fashion, Microsoft announced stellar earnings but made a similar faux pas in stating the obvious. To be fair, the technology sector, and specifically these companies, have done very well this year. However, it just goes to show the unpredictable nature of investors in this environment.

One sector you probably haven’t been paying attention to, but has done particularly well in the past month, is basic materials. This sector posted gains above that of the high-flying technology sector over the last four weeks. The SPDR Select Basic Materials ETF rose 5.4% in the last week and is up 9% in the past month, compared to the S&P 500 which was up only 3.2% in that same time frame. While not particularly sexy, Linde PLC, which is the largest specialty chemical company in the world, is up almost 15% over the last four weeks and 14.5% year to date. This highlights a recent trend away from somewhat overvalued technology and momentum names.

In other news, talk of a fourth stimulus package is gaining steam just in time for the extended unemployment benefits to expire later this week. After weeks of negotiations between the White House and Senate Republicans, it appears they are ready to unveil the next aid package. What’s in the proposal? Another round of direct stimulus payments, $16B for coronavirus testing, and $105B for K-12 education, colleges, and universities. Noticeably missing is an agreement on a payroll tax cut. Senate Majority Leader Mitch McConnell wants to keep the price tag at $1T but will face tough opposition from Democrats in the House who passed a $3.4T stimulus bill in May.

In closing, I return to a company I mentioned just a few weeks ago.  It seems Robinhood is making news once again for all the wrong reasons.  This low-cost platform has attracted a new generation of young traders who are ready to make their riches day-trading the high-flyers.  This week we learned that they, in all likelihood, mistook Tiziana Life Sciences (TLSA) for Tesla (TSLA) due to the similar ticker symbol.  Once the media began reporting this story, shares of TLSA fell 14%.  Another explanation is that since Robinhood’s app is mobile only, it is possible that purchases were due to mistyping of Tesla’s stock ticker.  If you are sitting there shaking your head, you should know this isn’t the first time this has happened.  Back in March, investors on the Robinhood platform bid up Zoom Technologies (ZOOM), a Chinese modem company, instead of Zoom Video Communications (ZM) the online meeting company.  I’d like to say this is funny, but some investors lost a lot of money.  It pays to have an advisor that has your back.  Now you know.

Bruce J. Mason, MBA