|Written by Rob Goldman|
If you are watching technicals, the market is in trouble. What isn’t in trouble is this sector and this high-growth, low valuation stock.
THE OTHER SHOE IS ABOUT TO DROP
Brace yourself. If you tend to get seasick take some Dramamine and wait it out.
We have preaching about a September swoon for a few weeks now, we were alarmed at interest rate hike talk, poor labor market, valuation, slow growth, etc. That is why we also have subtly recommended keeping an eye out on the VIX and investee ETFs. Still, I never thought that stocks would crumble 2 days after hitting a new 52-week high. The VelocityShares Daily 2X VIX ST ETN (NYSE—TVIX) was up 31% in a day!
Buying has been drying up and new highs have been on less than stellar volume. We have seen it in the RSIs. And the valuation/interest rate/economic stuff finally reared their heads. Sellers were waiting to sell and buyers are re-thinking strategy.
There is a reason we follow RSI and DMA closely. RSIs of the major indices have been dropping. They could soon signal a short term bottom as all but the Russell are in the 32-39 range. Anything below 30 is an oversold signal. Meanwhile, all but the Russell are below their 50 DMA. Not good. Another 3% loss and goodbye 200 DMA. That would trigger an oversold signal and may give us a short-lived bounce.
The Stock Market Today
Would it surprise me if we bounce back on Monday? No. Would it surprise me if it had legs? Yes. The deck is just stacked against us and we need this corrective phase. Not a correction, mind you (10% drop from high), but a 6-9% decline from the high will give us fuel to charge ahead.
Looking to deploy funds that are not related to a TVIX or similar play? Step right up to financials, which enjoyed the greatest ETF sector rotation in August, according to Factset. It makes sense. A rising interest rate environment helps financials, after all. One small cap play in the financial space that could enjoy a big move higher is OnDeck Capital, Inc (NASDAQ—ONDK—$6.07). Founded in 2007, OnDeck is the leader in online small business lending. OnDeck's proprietary credit scoring system – the OnDeck Score® – leverages advanced analytics, enabling OnDeck to make real-time lending decisions and deliver capital to small businesses in as little as 24 hours. ONDK deployed over $5 billion to more than 50,000 customers in 700 different industries.
Consensus revenue forecast of 18 analysts (huge right?) calls for sales to grow 33% ($288M to $383M) from 2016 to 2017. The stock trades 1.5x 2016 sales which is very cheap considering the growth expectations which could be conservative. Rising interest rates hurt small firms’ abilities to raise money from typical sources, which plays into ONDK’s hands. The RSI is solid, as is the 50DMA. Our target is $8 and the stock could get a bounce when ONDK presents at the Deutsche Bank Tech Conference this week.
Where Were You?
Terror’s victims on this day 15 years ago were faceless. The terrorists did not know and did not care about the victims’ skin color, religion, ethnicity, or station in life. The objective that day was to strike at a symbol (or symbols) of America, symbols of our freedom and ideals.
I remember everything about that day. Where were you on 9/11/16?
I was late to work that morning because I ran into an old friend at Starbucks and we talked for a while. By the time I got to the office, both planes had hit the twin towers. As I looked at the headlines on my computer I could not believe it. I turned on the radio. The announcers swore that it was one plane they saw on TV not two incidents—they must have been running a loop.
The stock market did not open. We were allowed to go home and be with our families. As I drove to my twins’ school I could not believe what I was hearing. The World Trade Center. The Pentagon. Reports of another plane in PA. When I picked the kids’ up it was surreal. Everything was orderly but there was a major police presence. My wife (at the time) was pregnant with our 3rd child and due in a few weeks. As if on cue, she went into early labor. When we got to the hospital every pregnant woman in Baltimore that was watching the news seemed to be there in labor. The hospital was preparing a wing for the huge maternity crowd and any overflow that might come from the Pentagon, 50 miles away. Thankfully, my wife did not give birth then, but many did, early.
That day and the ensuing days changed this country forever. We had not been that unified since WWII. Fifteen years later, we are more fractured than ever and social justice problems run unabated. And there is plenty of blame to go around. Ironic that the terrorists respected symbols of our freedom and values so much so that they sought to destroy them and thousands of our citizens along with them. Today, some are engaging in protests against the very symbols our enemies tried to destroy and we proudly waved. It is their right, although it may not be right, and we will fight to defend it. On this day, our thoughts and prayers go out to the 9/11 victims’ families and friends, and to all U.S. citizens. It may not be perfect but the U.S. of A. is the greatest country on earth.
Great info, insights, and hard-hitting stories make up this week’s Say What? feature...
Investor’s Business Daily
An amusing diversion.
The New York Times
A good read.
The sky is falling.
AAII Sentiment Survey (figures rounded)
How often are we going to experience big down days on Fridays? It really affects these sentiment figures. Anyway, for the second straight week we have little change—but these surveys were taken before the bug Friday plunge. Two bits says Bears rise next week. The Investors Intelligence figures finally saw a fairly meaningful drop in bulls and moves to the bearish side. If we drop again Monday, pros that follow the technicals may really move to the negative side of the coin. Meanwhile, we will look to see if outflows actually rise for the first time in 5 weeks.
1498 Reisterstown Road, Suite 286 Baltimore Maryland 21208 Phone: 410.609.7100
[email protected] www.goldmanresearch.com
Launched in May 2010, The Goldman Guide is a free weekly publication of Goldman Small Cap Research and is written by Founder Rob Goldman with contributions from the GSCR contributor team. This non-sponsored investment newsletter seeks to provide investors with market, economic, political and equity-specific insights via an action-oriented, straight to the point approach. No companies mentioned in this newsletter are current sponsored research clients of the Company or its parent, unless noted, With some exceptions, all companies or investment ideas mentioned in this publication are publicly traded stocks listed either on the NYSE or the NASDAQ. Goldman Small Cap Research members and contributors’ bios, certifications, and experience can be found on our website: www.goldmanresearch.com
This newsletter was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces non-sponsored and sponsored (paid) investment research. Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
The Firm’s non-sponsored research publications category, Select Research, reflects the Firm’s internally generated stock ideas, along with economic, industry and market outlooks. In virtually all cases, stocks mentioned in Select Research offerings are listed on the NYSE or the NASDAQ. Publications in this category include the weekly newsletter The Goldman Guide, Market Monitor blogs, Special Reports, and premium products such as The 30-30 Report. Goldman Small Cap Research analysts are neither long nor short stocks mentioned in this newsletter.
Opportunity Research reports, updates and Microcap Hot Topics articles reflect sponsored (paid) research but can also include non-sponsored microcap research ideas that typically carry greater risks than those stocks covered in Select Research category. It is important to note that while we may track performance separately, we utilize many of the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in company-specific Opportunity Research reports, updates and articles.
Goldman Small Cap Research has not been compensated for any content in this issue.
All information contained in this newsletter and in our reports were provided by the companies mentioned via news releases, filings, and their websites or generated from our own due diligence. Economic, market data and charts are provided by a variety of sources and are cited upon publication. Stock performance data and information are derived from Yahoo! Finance and other websites or sources, as noted. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, other firms, or other financial news outlets. Goldman Small Cap Research relied solely upon information provided by companies through filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research report, update, article, blog, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed. This newsletter does not take into account the investment objectives, financial situation, or particular needs of any particular person. This newsletter does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with the FINRA or with any state securities regulatory authority. Statements herein may contain forward-looking statements and are subject to significant risks and uncertainties affecting results.
Separate from the factual content of our articles about the company featured in this newsletter, we may from time to time include our own opinions about the companies profiled herein, their businesses, markets and opportunities. Any opinions we may offer about the companies are solely our own, and are made in reliance upon our rights under the First Amendment to the U.S. Constitution, and are provided solely for the general opinionated discussion of our readers. Our opinions should not be considered to be complete, precise, accurate, or current investment advice. Such information and the opinions expressed are subject to change without notice.
ALL INFORMATION IN THIS REPORT IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com.