Stocks Fall Sharply on Virus Concerns

Catch Up Quick

• U.K. deputy chief medical officer says a vaccine could be in use after Christmas

• Trump reportedly plans to fire heads of FBI, CIA and Pentagon if re-elected

• Biden has raised more $ than Trump on all but 2 days in the past 2 months

• Dunkin' Brands ($DNKN +15%) is set to sell to Inspire Brands for a 20% premium

• Yesterday, Cenovus Energy agreed to buy Husky Energy for C$3.8 billion in stock

• Ant Group, Alibaba's financial affiliate, plans to raise ~$34.4B in largest IPO ever

• AstraZeneca says its coronavirus vaccine triggers immune response in adults

• The U.S. logged 83.7K COVID-19 infections on Saturday

Thought of the Day

• To give newer subscribers more context, back in April, we published a list of 6 stocks in a series of market analyses that appeared well positioned to thrive in the then-emerging “stay-at-home” environment

• Our #1 stock on that list, Snapchat ($SNAP), has seen constant buying action since

• However, a few days ago, the social media company reported especially remarkable Q3 2020 earnings figures

• In the past 5 days, shares have returned a remarkable 52%, doubling its value in under a week while netting its cofounders $2.2B in the same period

• Our position on Snapchat was predicated on simple fundamentals such as its ability to fully function with a remote workforce, no overseas supply chains to bear risks from COVID-19 or U.S. - China tensions, an anticipated increase in social media usage with people stuck inside, and a fair valuation at the time

• While these things likely fueled business growth in some fashion, in our current view, the main driver of the staggering 51% increase in revenue from the previous twelve months was something we hadn’t anticipated: the recent Facebook boycott

• After many advertisers were upset with Facebook’s information policies, many flocked to Snapchat’s young, growing audience as an economical alternative

• This was a huge revenue catalyst given most social media giants derive ~90%+ of top line from advertises paying them in exchange for access to their vast network of users

The Bottom Lines

• Even the most crystal clear investment theses, whether technical or fundamental, are prone to unforeseen circumstances

• While resulting volatility was on the upside in this specific case, it still reiterates the importance of diversification is all aspects of investing!

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