Author: Noah Kiedrowski

Facebook Boycott: Here We Go Again

Posted on by Noah Kiedrowski

If the Cambridge Analytica fiasco, one mishandled public relations incident after another and numerous earnings calls that went down as some of the biggest blunders in history wasn’t enough, now enter an international advertising boycott. Here we go again, Facebook (FB) investors have been through a lot over the past two years. Now another challenge is confronting the company via an advertising boycott that’s growing into the hundreds of multinational companies. This challenge may weigh heavier on the company since this boycott will directly impact revenue as expenses swell. The magnitude of this boycott will inevitably influence the stock price as this movement grows in numbers and duration. If Facebook can appease advertisers in a timely fashion, then this may be a temporary challenge. However, as advertising spending is abandoned indefinitely due to this boycott and overall spend slows due to COVID-19, this culmination could cast uncertainty around its stock valuation. Thus far, over 400-plus brands have fled Facebook.

Boycott Growing In Numbers and Duration

International household names such as Adidas, Best Buy (BBY), Clorox (CLX), Ford (F), HP (HPQ), Starbucks (SBUX), Coca-Cola (KO), and Verizon (VZ) have joined the advertising boycott across Facebook and its platforms. Companies are jumping on the bandwagon daily, including a significant recent addition of Microsoft (MSFT). Total advertisers that have abandoned Facebook and its Instagram properties have now ballooned to over 400 organizations. With an undefined timeframe of how long these advertisers will stay away from Facebook may dampen revenue expectations. Another complexity that may arise is the ability to appease the collective group of advertisers in order to bring all of these companies back to the platform. Continue reading "Facebook Boycott: Here We Go Again" →

COVID-19 - Capitalizing On Opportunities

Posted on by Noah Kiedrowski

Just before the COVID-19 pandemic struck the markets, Ray Dalio was recklessly dismissive of cash positions, stating "cash is trash." Even Goldman Sachs proclaimed that the economy was recession-proof via "Great Moderation," characterized by low volatility, sustainable growth, and muted inflation. Not only were these assessments incorrect, but they were ill-advised in what was an already frothy market with stretched valuations prior to COVID-19 hitting the markets. The COVID-19 pandemic was a true back swan event that no one saw coming as far as its abruptness, scale, and impact. This COVID-19 induced sell-off was the worst since the Great Depression in terms of breadth and velocity of the sell-off.

The S&P 500, Nasdaq, and Dow Jones shed a third or more of their market capitalization through late March 2020. Some individual stocks lost over 80% of their market capitalization. Other stocks were hit due to the market-wide meltdown, and many opportunities were presented as a result. Investors were presented with a unique opportunity to start buying stocks and take long positions in high-quality companies. Throughout this market sell-off, I took long positions in individual stocks, particularly in the technology sector and broad market ETFs that mirror the S&P 500, Nasdaq, and Dow Jones. It was important to put this black swan into perspective and see through this event on a long term basis. Viewing the COVID-19 sell-off as an opportunity to buy stocks that only comes along on the scale of decades has proven to be fruitful. When using past recessions as a barometer, I started buying stocks when the sell-off reached 15% and continued buying into further weakness to improve cost basis.

Most Extreme and Rare Sell-Off Ever

Out of the 12 recessions that have occurred since May of 1937, the average sell-off for the S&P 500 was -31.6% with a range of -57% (2008 Financial Crisis) to -14% (1960-1961). The COVID-19 pandemic has crushed stocks beyond the average recession sell-off of -31.6%. The markets didn't reach the most severe sell-off levels by historical standards despite the possibility for more downside potential. Regardless, at initial recession levels of 15% declines, I began putting cash to work as that was the prudent action for any long-term minded investor. Continue reading "COVID-19 - Capitalizing On Opportunities" →

Tug-of-War: Disney Streaming vs. COVID-19

Posted on by Noah Kiedrowski

Clearly, COVID-19 has been very damaging with an unquantifiable impact across Disney’s (DIS) business segments. Disney has had to shutter all of its worldwide Parks and Resorts. ESPN has been hit with the cancellation of virtually all sports worldwide. Advertising revenue coming through its media properties has been hit as companies scale back ad spending. All of its movie studio productions have been halted, and movie releases postponed. Despite these headwinds, Disney’s streaming initiatives have been major growth catalysts for the company. Disney+ has racked up over 50 million paid subscribers in just five months, Hulu has 30 million paid subscribers, and ESPN+ has 7.9 million paid subscribers. Disney+ has been wildly successful via unleashing all of its content (Marvel, Star Wars, Disney, and Pixar) in what has become a formidable competitor in the ever-expanding streaming wars domestically and internationally. Hence the tug-of-war on Wall Street between the COVID-19 induced negative impact and the success of its streaming initiatives in terms of valuation. The stock is selling at a steep discount of ~30% from its highs of $151 per share. At these reduced COVID-19 levels, Disney is a compelling buy as its legacy business segments get back on track in conjunction with these successful streaming initiatives.

COVID-19 Perspective

As economies around the world reopen and certainty washes over the COVID-19 landscape, Disney’s business segments will regain their health. Parks will reopen as seen with Disney Shanghai, movie productions will resume, movie theaters and resorts will reopen, and sports will inevitably play-on. The resumption of all of these activities will feed into Disney’s legacy businesses. Disney continues to dominate the box office year after year with a long pipeline of blockbusters in the queue. Parks and Resorts continue to be a growth avenue with tremendous pricing power. Disney is going all-in on the streaming front and acquired full ownership of Hulu, and the company is launched its Disney branded streaming service with great success. I feel Continue reading "Tug-of-War: Disney Streaming vs. COVID-19" →

The Financial Cohort and COVID-19 Destabilizing

Posted on by Noah Kiedrowski

COVID-19 ushered in the real possibility of widespread loan defaults, liquidity issues, ballooning credit card debt, and stressed mortgages. To exacerbate these COVID-19 realizations, a delicate balance between interest rates, Federal Reserve commentary, yield curve inversion, and concerns over a potential/scale of depression in late 2020 must be attained. The financial cohort is in a difficult space as the broader economic backdrop continues to dictate whether these stocks can appreciate higher. Ironically, in 2019 banks logged record share buybacks and increased dividend payouts stemming from successful stress tests. The initial shock of the COVID-19 pandemic resulted in the market capitalizations of many large banks to be cut by ~50%. Some of the largest banking institutions such as Citigroup (C), Goldman Sachs (GS), JPMorgan (JPM), and Bank of America (BAC) were sold off in the most aggressive manner since the Financial Crisis. At these depressed levels, are the banks investable in light of the COVID-19 backdrop?

Destabilizing Effects of COVID-19

COVID-19 has materialized into the black swan event that only comes along on the scale of decades. This COVID-19 induced sell-off has been the worst since the Great Depression in terms of breadth and velocity of the sell-off. This health crisis has crushed stocks and decimated entire industries such as airlines, casinos, travel, leisure, and retail with others in the crosshairs. The S&P 500, Nasdaq, and Dow Jones have shed approximately a third of their market capitalization, with the sell-offs coming in at 33%, 29%, and 36%, respectively, in late March. Some individual stocks have lost over 80% of their market capitalization and now run the risk of filing for bankruptcy.

The longer the COVID-19 economic shut down persists, the higher the unemployment will rise. More companies will run the risk of Continue reading "The Financial Cohort and COVID-19 Destabilizing" →