Five Charts to Start the Week
Big Tech was Big News This Weekend!
Some quick reminders before we get into it since there are more of you reading this now than there were last week. First, this is my diary on the market. It is in no way shape or form investment advice. These are the conversations that I am having with myself as I take in all that is happening in the market while trying to square it with the prevailing narratives and fundamentals. I do this to give some clarity to my thoughts. If you like what you are reading, please consider passing it along to others who might like it as well.
Next, if you have an opinion, I would love to hear it, especially if you disagree with something that I am thinking. I promise you that after starting in this business as a summer intern at the New York Stock Exchange when I was 16 years old, I have extremely thick skin.
Finally, nothing I write here should be considered investment advice. It is highly likely that I have a different timeframe and risk profile than you do.
I hope everyone had a great weekend! It was a good one for the news junkies. I try to stay away from single stock ideas here other than exercising full disclosure and letting you know when I own a stock that is mentioned. But I wanted to get back to the theme of having five charts that I think are interesting as the new week begins and it just so happens that there were five big companies that were making big news over the weekend so it all works out. The five this week are Apple (APPL), Google (GOOGL, I refuse to call it Alphabet), Amazon (AMZN), Facebook (FB) and Twitter (TWTR). I think you can see where I am going with this (most of these are not “tech” companies but for the sake of simplicity, lets keep them there). But first the same caveat that I used last week, this is not and never will be a platform that I use to express a political opinion. That does not mean I don’t have one. But, I am by no means a political expert. The simple fact is that my opinion is not what matters and just because I have some attention in writing everyday, does not mean that I should use this platform for anything more than the subject in which I am fully versed, investing. In other words, I will take the advice of Mark Twain and “write what you know about.”
It all started after the event in the Capitol last week. Twitter suspended the account of a sitting President in an attempt to “cool the rhetoric” if you will. After a 12-hour timeout in which the President was asked to remove some tweets, Twitter suspended the account when said tweets were not removed. Was this a good decision on the part of Twitter? Socially? From a business standpoint? Did Twitter start of down a slippery slope where those who control a platform control the message? These were the big questions over the weekend. I don’t have a clue what the answers are. What I will say is that this is not a first amendment issue and just leave it there. What I care about is the chart of Twitter. The actual business has seen fits and starts over the years. It’s pretty shocking that such a large platform has not found a way to make money AND grow users on a consistent basis. I have owned the stock on and off over the years and have lost money every time I have bought it. The chart actually looks pretty good with a pullback toward a breakout level ( red dotted line). If that level is tested because investors think suspending the account of the President was a bad idea, it might be an interesting spot. On the flip side, if investors decide that what Twitter did was a great idea and the stock moves through some resistance at the black dotted line, it might also make sense to buy some. Other than that I really don’t care.
Facebook did the same and also kicked the President off of Instagram and What’s App. Truthfully, as an investor, I don’t care here as the stock has done nothing since late-August. It might be interesting closer to $230.
In the midst of some outrage over the removal of the President’s account from Twitter, many people made their way to Parle
r, which dubs itself Twitter but without the censorship. OK. I checked it out in November, but no one I follow was there in a meaningful way so it did not add much value for me. It seems the bigger problem stemmed from the fact that “no censorship” means it attracted the types of people who were comfortable saying and plotting less than savory ideas on the internet. This prompted Google to remove Parler from their app store. Agree? Disagree? Good for business? Again, I have no idea. But this is a good looking chart. I don’t own any but would give it some thought as long as it holds the $1,700 level.
Apple quickly followed suit and pulled Parler from the app store. I own Apple, not because it is a virtue signal. I have owned it for a long time. I actually have an interesting thesis around them making a pivot to consumer directed healthcare, but I will save that for another time. The stock is consolidating and I will likely add to my current position if it trades over $140.
Finally, there is Amazon. You may be wondering where they fit in here but I would argue that they are the most important character in the weekend’s story. Why? Amazon Web Services. This is the side of the Amazon business that may people don’t know. Let’s say you wanted to start a new social media site to cater to people who don’t like the perceived censorship on Facebook and Twitter, what do you do? You hire some coders to write the software, but what about all that hardware? It’s expensive. You don’t know how much of it you will need, it takes up a lot of space. Wouldn’t it be great if there was a place where you could rent the hardware space that you need to run your software? Bingo. Parler runs their business on hardware that they rent from Amazon Web Services. This is actually a hugely profitable business for Amazon that allows them to keep giving the rest of us great prices and fast shipping on all the stuff we buy. Well as of 12am this morning, Parler may not be welcome in the home of Bezos any longer. The stock has gone sideways since August. I own it but if it falls down out of the consolidation, I will sell some. If it moves up and out, I will likely buy more.
These are emotional times, yes. I am not downplaying that fact. But emotions have no place in investing. In every one of the stocks above, I will make a decision based on the price. These are all good businesses, except maybe Twitter. I know them well. I like them. But it is not until the completely unemotional and unbiased data point of price is where I need it to be that I will take action.