Robinhood – Penn National Gaming & The Average Investor

Podcast Transcript

Hey welcome this is Jeffery Kamys with another edition of Stock Smart, the January 28th, 2021 edition and apparently the Robinhood trade of GameStop and AMC has gone away as Robinhood has now done the unthinkable which is really block their users from purchasing shares of both of those companies and you’re seeing massive declines in both stocks today because they’re not able to push that stock higher and of course anyone else who wants the hedge funds, that want to evacuate those positions are able to do so and driving thereby selling, driving the price down, buying and then driving the price down, GameStop’s down about 32% as of about 11 a.m. Pacific time and AMC’s down, 50% down to about $10 a share and so really this is, it seems like it’s constitutionally…

[00:00:57]
I mean, I guess the company has a right to refuse service on things but to limit the ability to purchase certain stocks seems not correct and that stock now has been forced down. And we know a lot of that trade in those shares of stock at AMC and GameStop was going through Robinhood so you can see the actual reply with those stocks falling dramatically is those users are not able to redirect their accounts. Obviously, they can’t set up another account with some other platform in one day and transfer their money and get it all set up so they can trade somewhere else, I wonder if that’s happening.

[00:01:34]
We’re going to be checking into that, we’re going to see if there’s a mass exodus of users from Robinhood, but I got to tell you I think this kind of action probably speaks to the fact that Robinhood’s going to suffer some short-term definitely losses of accounts and a lot of bad press for doing this and there’s questions as to whether hedge funds made those calls whether that was government entities. No one really knows at this point. There’s going to be a lot of investigative journalism going on to see how that came about but there’s definitely concern so they’re falling dramatically.

STOCK WATCH

I want to talk about a stock that I really like, and that’s Penn National Gaming. It seems like the same crowd, this retail crowd that is sitting home, maybe not working right now because of Covid, or working from home, has a little bit of extra time on their hands, and a lot of that’s gone into a lot of these casino stocks. And Penn National Gaming has certainly benefitted, things like DraftKings as well, Penn National Gaming coming into earnings next week, really interesting play, had a really strong move today, about 10%, up nearly $11 this morning, breaking out, if you look at the technical indicators, it’s got some nice support around 96, breaking out though, the break out period is right around 108. So you’d say it’s really close, if it hasn’t already, if it hasn’t already broken out, heading into a nice place, coming into their earnings on February 4^th.

One of the things going on with this gambling, Is that legislation, You know again, these are companies that are going to succeed or fail based on legislative issues. Meaning statewide who’s allowing gambling and what states and that’s going to be a key thing for these companies but legislatively because of the taxes, more and more states are going to be allowing these gaming companies to grow and really if you want to use the baseball analogy of innings, you know, this is probably an industry that’s in the first or second inning only.

So there’s a lot of growth in companies like Penn National Gaming and some of these other gambling entities like DraftKings and Barstool Sports and these different types of stocks so I’d be on the lookout for Penn and if it’s something that interests you, definitely has a technical indicator for breakout right now, sitting at 107. I would say that the resistance is right at 108. And if it breaks out, it should hit all-time high within the next couple of days heading into earnings. Probably will be bought, if it’s bought too much, you have to be careful on some of these stocks, I would say right now you if you’ve been watching the market really closely, stocks are not performing

[00:04:14]
Well after earnings, you’ll see Microsoft had a gigantic blow out quarter reporting earnings 3 days ago, stock went down, Facebook same, very strong quarter reported earnings, stock went down they did they did have some guidance that was a little bit of a concern but still overall not performing well and that gives you, that’s an indicator of an overbought market or market that’s priced a little too high. And so there’s a concern about holding some of these especially into and this is an area because people ask me all the time, what is your forecast for market outlook going forward? I would say my concern would be I don’t think that we’re going to get, usually what happens is after earnings, you get the dead period,

[00:04:55]
where a lot of companies in good years will be able to buy back their stock and that’ll keep the stock in a strong pattern but heading into this year, I think with some unknowns in terms of corporate taxes, I think there’s a concern I would say that especially first-quarter that companies probably are going to be unlikely to be putting through with heavy buyback programs, which means the stocks could suffer slightly right after earnings. So I’d be a little wary and I think that you will see a little bit of a vacancy or vacated positions after earnings and that’s kind of what we’re seeing as an indicator.

[00:05:34]
We’re seeing a lot of companies go either strong into earnings and then probably sold on the news and dropping down or flattening out and then you know, we’re going to have a low period of about four to six weeks here where there are no earnings and those stocks could be in a little bit of a free-fall if we get the correction that’s kind of expected. So that’s something to be on the lookout for so, you know, one of the things that we’re going to do in this podcast is we’re going to have a section when I was studying for my licensing exam, they always refer to this term as the average investor

THE AVERAGE INVESTOR

What the SEC, FINRA and the regulatory bodies are really doing is they’re there to protect the average investor.

[00:06:14]
So when you think about these hedge funds those are not what they’re considering the average investor. So people who are investing in hedge funds are what they call accredited investors and they have the finances or the way that the SEC or FINRA looks at those and all the other regulatory authorities, they look at those as like if they’ve made that much money those people have enough knowledge about their financial gains that they have that money to lose essentially. So those risks they take upon themselves and where we talked about the average investor we’re talking about like my mom or your mom or you know, grandma who you know has her nest egg and she’s looking forward to a nice retirement and doesn’t want to be in a portfolio that makes no sense for her.

[00:07:05]
So that’s kind of what the average investor is, and this section of the show is kind of going to be what we call the average investor which is going to be questions and answers which you can submit on the site to me and I’ll go over them and I’ll answer as many as I can. Will probably get I’m guessing we’re going to get a bunch because I already have a bunch and we’re going to go over those questions and then try to give you an outlook of how we see the market coming in or whatever the question may be about – stocks or certain technicalities or different opinions about what’s going on in the market, so a couple things that’s come to me is really a lot of questions that have been asked by my current clients.

[00:07:40]
They want to know what the market outlook is for the next six months and I would say, you know, I’ve looked at the CFO survey, which is a great report on the Richmond fed site. It’s done by the Duke School of Business. It’s a really tremendous report. Essentially, the outlook is mixed. I would say that You know a lot of companies a lot of, this is essentially a survey that’s done with CFOs and a lot of the CFOs are kind of mixed on you know, they’re always, if you look at the study and I’ve looked at it for the last 5 to 10 years.

[00:08:14]
They’re always more optimistic about their own company obviously, right so they know what’s going on with their own company, but they’re a little more pessimistic when you look at how they look at the market in general or the USA Economy in general and to me I do have concerns. I know that their money is cheap, but with these trillions of dollars of you know debt that we’re putting in the market.

[00:08:37]
You can see those debts will have to be paid at some point at great expense and I think a lot of people think, you know, you’re looking at when Covid clears and you have people who haven’t paid their mortgage for a year plus or people who haven’t paid their rent and you’re looking at maybe 30 35 million people who may be without homes who, you know, most cities and states have protective orders now against people who can’t afford their rents and I know a lot of mortgages are still doing forbearance.

[00:09:09]
So when those things open up again and you know, people still don’t have their jobs, you’re going to see a lot of pain and the timing of that is going to be what’s interesting and I think this is going to be a year that you’re going to really want to be probably more conservative with your investing decisions. I think, you know, there is going to be cheap money at times and we’re going to get probably another, you know, we’re going to get another package that’s going to boost the economy. But what’s going to happen after that what happens when Covid, everyone gets a vaccine we go back to work, you know all those businesses, you know that have failed, things like restaurants and mom and pop shops.

[00:09:48]
I mean those don’t come easy because those are people who scrape together $50-100,000 to put their dream together and they’re not going to be the ones who are going to have the easy time going to the bank and say hey, I need to borrow $100,000. They’re going to have a hard time getting back and if those businesses even come back. We’re not going to see a lot of those businesses. So that part of the economy where you have consumerism and is going to definitely suffer and then I think one of the trends if you’re really watching it and I don’t know, you know, there’s been a mandate for inflation the fed always talks about how we want to increase inflation lately.

[00:10:26]
There is if you watch and I’m sure maybe you do but if you follow commodities prices, you’ll see the increase in prices of corn and wheat. Those are going up and you’ll see if you pay attention to your prices at your grocery store, you’re going to see little creep ups on different things because of the the raw goods are getting more expensive. So, you know when we think about any kind of corn that goes into cows you look at the price of milk and that is increasing and so we’re going to get increases in CPI. So those are kind of the Investments that I’d be focused on, things that are inflation-adjusted like for our clients, for my clients.

[00:11:04]
I definitely believe in the treasury-inflated-affected Securities because as inflation goes up those get adjusted semi-annually and those can protect some of your definitely fixed income investor get protection from that. So as you see more inflation you maybe wouldn’t want to be as invested in something like utilities where you know, they need cheap money to survive. And as costs go up you’re going to have to see, inflation always works with interest rates. So we have interest rates at 0, but that can’t last forever. So with inflation, you generally always see a bump in interest rate increases. So you’re going to maybe be more interested in shorter-term Bonds where the coupon becomes more valuable because they’re shorter term bonds. Will have better interest rates than the bonds that were produced last year, which were 0% interest rate bonds, a lot of them.

[00:11:53]
So that’s the market outlook. I would say be very careful. It’s going to be, it’s going to be an interesting year. There are definitely a lot of values in the market. I mean, besides the fact that AMC has been on this Merry-Go-Round with the market, you know, with the Reddit trade, it is kind of an interesting stock, but it probably is an interesting stock at about $6, if you can get it in the $4-6 range. It’s been long term an $18 stock. And now that they have the billion dollars worth of funding to bandaid the time period.

[00:12:33]
Before movie theaters will open, they probably have enough time to secure their future, so that when movies do open again and I’ve talked to everybody I’ve talked to so many of my friends, you know, the things that they want to do, specially if they have younger kids, they want to go to the movies. They want to go to Disneyland. Those things are still going to happen. I think travel is going to remain strong. So there are some values still if you want to hang in there on stocks that are kind of like the anti, you know, where we had the Covid stocks which were the stay at home stocks.

[00:13:02]
There’s value still in some of those stocks for the reopening trade, you know things in the travel industry, you know, you see it kind of a bump up in a lot of the travel stocks because I do believe people are going to go back and they’re going to want to go on vacations and if they’ve saved money and did smart during Covid and going on vacations when things open up, So, that’s how we look at the market going forward. And so if you have questions, please feel free to submit them. You’ll see the contact information on the site and would love to hear from you. You can reach me at Jeffrey@JeffreyKamys.com. Would love to hear from you. Have a great day. See you next time Stock Smart.