Coronavirus update: Dec. 2, 2020
Coronavirus update: Dec. 2, 2020
Shares of GameStop and AMC Entertainment Holdings more than doubled on Wednesday, forcing hedge funds to retreat with heavy losses and sparking calls for scrutiny of social media-driven stock market trading. Short-seller Citron, a target for some of the individual participants on Reddit's "WallStreetbets" thread who have helped drive gains for several niche stocks in the past week, said in a video post it had abandoned its bet on GameStop shares falling after the video game retailer's value soared almost tenfold in a fortnight. With commentators and lawyers calling for scrutiny of the moves, Nasdaq chief Adena Friedman said exchanges and regulators needed to pay attention to the potential for "pump and dump" schemes driven by chatter on social media.
Here's an FAQ about what's going on with the market and what "Wall Street Bets" is.
The ability of members of U.S. Congress to buy and sell stocks has been controversial over the years. One of its most prominent members made some purchases in December that could benefit from the new Biden administration. What Happened: It was revealed over the weekend that Speaker of the House and California Rep. Nancy Pelosi purchased 25 call options of Tesla Inc (NASDAQ: TSLA). The purchases could have been done by Pelosi or her husband Paul, who runs a venture capital firm. The options were bought at a stake price of $500 and expiration of March 18, 2022. Pelosi paid between $500,000 and $1,000,000 for the options, according to the disclosure. Pelosi also disclosed that she bought 20,000 shares of AllianceBernstein Holdings (NYSE: AB), 100 calls of Apple Inc (NASDAQ: AAPL) and 100 calls of Walt Disney Co (NYSE: DIS). Tesla shares have risen from $640.34 at the time the calls were purchased to over $890 today. The call options were valued at $1.12 million as of Monday. Related Link: How The 2020 Presidential Election Could Impact EV, Auto Stocks Why It’s Important: The purchases by Pelosi are questionable as arguments could be made that the companies stand to benefit from new President Joe Biden’s agenda. Biden's push for electric vehicles, which could include lifting the cap on sales, would give buyers tax credits again and is advantageous for Tesla. The president has also suggested a possible cash-for-clunkers program that could incentivize customers for trading in used vehicles towards the purchase of an electric vehicle. Pelosi could now have a conflict as she works to pass clean energy initiatives from which her family could profit. Former U.S. Senator David Perdue, a Republican, was criticized for making numerous stock trades during his six years in Congress. Perdue was the most prominent stock trader from Congress, making 2,596 trades during his time served. Some of Perdue’s transactions came while he was a member of several sub-committees. The Justice Department investigated Perdue and found no wrongdoing. What’s Next: It's legal for members of Congress and their spouses to own stocks. The transactions have to be disclosed per the STOCK (Stop Trading on Congressional Knowledge) Act that was passed in 2012. U.S. Senator Jeff Merkley of Oregon is one member of Congress who has co-sponsored legislation to ban the adding of individual stocks by members of Congress. Both Merkley and Pelosi are Democrats. Pelosi’s transactions could push for more regulations concerning stock purchases by members of Congress. (Photo: Official U.S. Embassy photograph by Archibald Sackey and Courage Ahiati.) See more from BenzingaClick here for options trades from BenzingaCharging Infrastructure SPAC Plays: Is EVGo The Best Of The Bunch?Barstool Fund Nears M For Small Businesses And Is About To Get A Huge Boost From Michigan© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
(Bloomberg) -- The first sign of trouble for hedge fund wunderkind Gabe Plotkin came in late October: A poster on Reddit’s popular wallstreetbets forum was taking aim at his wildly successful investment firm.“GME Squeeze and the demise of Melvin Capital,” wrote the user, Stonksflyingup, referring to stock ticker of GameStop Corp. and Plotkin’s $12.5 billion firm. Before long, veryforestgreen weighed in: “Melvin Capital New Short Attack.” Then, greekgod1990: “Melvin vs WSB! And GME to the moon.”So it was that the tables turned on Wall Street -- and a hedge fund star suddenly found himself at the mercy of the day-trading Reddit bros who have become one of the most powerful, if improbable, forces in the stock market today. The attack on Plotkin’s six-year-old Melvin Capital shifted the balance of power in ways that would have seemed unimaginable only months ago. By Wednesday, the firm had capitulated to the amateurs and covered the GameStop short.The explosive growth in retail day-trading, powered by platforms like the Robinhood trading app and forums like wallstreetbets, has turned the old order on its head. Melvin Capital’s mistake, if it can be called that, was leaving footprints behind in the marketplace. Reddit users were able to identify stocks that Melvin was wagering against and then buy those en masse, unleashing a violent run-up in prices that turned Melvin’s winning bet into a loser.So steep were the losses -- about 30% through last week -- that Melvin on Monday turned to billionaire hedge fund founders Ken Griffin and Steve Cohen -- Plotkin’s former boss -- to shore up the firm.As of Tuesday, the fund’s losses had increased even with the portfolio repositioning, though investors wouldn’t say by exactly how much for fear of angering the money manager, which they expect can still fight its way back.A representative for the firm declined to comment on performance, other than saying the portfolio had been repositioned in the past few days and “the social media posts about Melvin Capital going bankrupt are categorically false. Melvin Capital is focused on generating high-quality, risk-adjusted returns for our investors, and we are appreciative of their support.”The risk of going long is intuitive: Buy $50 of shares, and if the price drops you lose that amount. But losses on bearish bets can be more severe and swift. A classic $50 short can lose multiples that amount if the stock soars. And while using options may limit losses, investors can get wiped out quickly if the stock rises.The shorts that were listed in Melvin’s regulatory filing from the third quarter all rocketed in recent weeks. Names include Bed Bath & Beyond Inc., iRobot Corp. and GSX Techedu Inc. GameStop, the stock that seemed to set off the short squeeze, soared 634% in the month through Tuesday. That night Elon Musk tweeted a link to the Reddit thread with the caption “Gamestonk!!” And by mid-Wednesday in New York, the stock more than doubled again.Investors caught in a short squeeze can close out bets and eat their losses, or try to ride out the price surge -- typically requiring they put up more money.Melvin’s cash infusion was almost unheard of in hedge fund land. Griffin, his partners and the hedge funds he runs at Citadel threw in $2 billion and Cohen’s Point72 Capital Management, which already had about $1 billion invested in Melvin, ponied up another $750 million.Cohen, one might argue, was bailing out his own investment. For Griffin, it was a rare opportunity to invest in a talented manager on the cheap. Both firms got a minority revenue share from the firm for stepping in.Late Tuesday, Cohen broke his usual habit of only tweeting about his New York Mets. “Hey stock jockeys keep bringing it,” he wrote on the social media platform.Until this year, Plotkin, 42, had one of the best track records among hedge fund stock pickers. He’d worked for Cohen for eight years and had been one of his biggest money makers before leaving to form Melvin -- named after his grandfather -- in December 2014.So good was Plotkin’s reputation that the firm closed to additional investors before word had even spread that he was setting out on his own. Despite a loss in 2018, he’s posted an annualized return of 30% since opening, ending last year up more than 50%, according to an investor.Then came January, when Melvin first became aware that a Reddit crowd had put a target on the firm’s positions, ramping up an attack on GameStop and other shorts.Exposing PositionsWhy they singled out Melvin remains a mystery. As far as hedge fund managers go, Plotkin is considered low key. He doesn’t show up at many conferences or hobnob at society balls. Former colleagues and current investors say he’s a nice, quiet guy -- not the type to make enemies.The most obvious explanation is that his positions were in some sense knowable. Hedge funds generally go to great lengths to guard their short positions. If they use put options, for example, they buy them over the counter, which means they don’t have to list them in regulatory filings. Plotkin’s filing in the third quarter showed put options on 17 companies, many of them highly shorted names.“There’s no targeting going on - WSB is far less organized than all the articles are making it out to be,” said Lucas Severyn, a member of wallstreetbets. “From time to time, WSB gets obsessed with some stock, now it’s GME, and for the first time ever this stock just keeps giving.”Melvin’s losses mounted in January, and after they passed 15% last week, it had conversations with investors and got commitments of about $1 billion for Feb. 1. By the end of last week, losses had mounted to about 30%.On Monday morning, Plotkin reached a deal with Point72 and Citadel to provide him with more liquidity to help put Melvin back on the offensive. That Cohen would step in made sense, given his longstanding relationship with Plotkin -- and an initial investment of about $200 million in the firm that had grown to about $1 billion.Griffin, who started Citadel in 1990, has a history of swooping in when others are in distress. He’s hired teams or took on assets from hedge funds such as Sowood Capital Management, Visium Asset Management and Amaranth Advisors after they imploded. He may also have welcomed the chance to invest in Plotkin’s fund. Melvin generally manages money for charitable organizations like endowments and foundations.New RiskInvestors have been expressing faith that Plotkin will climb out of this hole.Griffin said Monday that he and his partners “have great confidence in Gabe and his team.” Cohen called him “an exceptional investor and leader.”A person familiar with the thinking inside Plotkin’s firm said one lesson is clear: Don’t leave a trace and only buy put options over the counter.“This phenomenon of retail investors jumping on a bandwagon to dominate trading activity is a new kind of portfolio risk,” said Jay Raffaldini, global head of sales and distribution at UBS O’Connor. “It’s going to cause a lot of hedge funds to rethink how they approach their long and short investment strategies.”(Updates with shares in ninth paragraph. An earlier version of this story corrected a title in 19th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Highly shorted stocks are being targeted by some investors trying to force people who have bet the prices will fall into covering. Watch Dillard’s and AMC Entertainment.
The dynamic that has seemingly contributed to a short squeeze in the stock of videogame retailer GameStop Corp. also appears to be affecting shares in a host of other heavily shorted companies.
GameStop Corp.'s stock movement continued to turn efficient market theory on its head Wednesday, streaking to a record that valued the retail chain at more than $20 billion.
The Dow Jones lost ground as stocks reversed. Apple stock and Microsoft stock rose as Boeing stock dived. Big Short investor Michael Burry issued a warning.
Reddit and its r/wallstreetbets forum have become powerful, unpredictable forces in the market, sending certain stocks unexpectedly to the moon.
GameStop shares are set to rally 70% this morning when trading starts, and AMC shares opened up 300%, extending a run that has perplexed market observers, irked hedge funds, and generally made crypto's recent gains appear soft and weak. Robinhood blew up the trading fee economy, and now along with a host of similar companies -- Public.com with its social focus, Freetrade in the UK, and so forth -- has made retail investing far more accessible than it was before to more folks. It's something that was noted by none other than the founder of Reddit Alexis Ohanian who shared some thoughts on Twitter.
Shares of Nokia Corp. shot higher in very volatile and active trading Wednesday, enough for the Finland-based networking company to comment on the activity.
Stocks dipped Wednesday as investors awaited another batch of corporate earnings results and the Federal Open Market Committee’s (FOMC) January monetary policy decision.
During a Senate hearing, Yellen said she would look into tax benefits, Social Security and ways to help Americans save
What if I'm in my 40s and don't have a retirement fund? Some experts say that by age 40 you should have at least three times your salary saved for retirement. If the 401(k) was funded with pretax contributions, any amount converted will be taxable to them but converting to Roth could be a good move because at 21 and 23, they are likely in a low tax bracket. If they convert, invest prudently, and leave the funds alone, in 2030 they could get a good chunk of money tax-free at a time when they may be in a higher tax bracket.
For investors seeking a strong dividend player, there are some market segments that are known for their high-yield dividends, making them logical places to start looking for reliable payers. The hydrocarbon sector, oil and gas production and mainstreaming, is one of these. The sector deals in a products that’s essential – our world runs on oil and its by-products. And while overhead for energy companies is high, they still have a market for their deliverables, leading to a ready cash flow – which can be used, among other things, to pay the dividends. All of this has investment firm Raymond James looking to the roster oil and gas midstream companies for dividend stocks with growth potential. "We anticipate the [midstream] group will add around ~1 turn to its average EV/EBITDA multiple this year. This equates to a ~20-25% move in equity value," Raymond James analyst Justin Jenkins noted. Jenkins outlined a series of points leading to a midstream recovery in 2021, which include the shift from ‘lockdown’ to ‘reopen’ policies; a general boost on the way for commodities, as the economy picks up; a political point, that some of DC’s more traditional centrists are unlikely to vote in favor of anti-oil, Green New Deal policies; and finally, with stock values relatively low, the dividend yields are high. A look into the TipRanks database reveals two midstream companies that have come to Raymond James’ attention – for all of the points noted above. These are stocks with a specific set of clear attributes: a dividend yield of 7% or higher and Buy ratings. MPLX LP (MPLX) MPLX, which spun off of Marathon Petroleum eight years ago as a separate midstream entity, acquires, owns, and operates a series of midstream assets, including pipelines, terminals, refineries, and river shipping. MPLX’s main areas of operations are in the northern Rocky Mountains, and in the Midwest and stretching south to the Gulf of Mexico coast. Revenue reports through the ‘corona year’ of 2020 show the value potential of oil and gas midstreaming. The company reported $2.18 billion at the top line in Q1, $1.99 billion in Q2, and $2.16 billion in Q3; earnings turned negative in Q1, but were positive in both subsequent quarters. The Q3 report also showed $1.2 billion in net cash generated, more than enough to cover the company’s dividend distribution. MPLX pays out 68.75 cents per common share quarterly, or $2.75 annualized, which gives the dividend a high yield of 11.9%. The company has a diversified set of midstream operations, and strong cash generation, factors leading Raymond James' Justin Jenkins to upgrade his stance on MPLX from Neutral to Outperform (i.e. Buy). His price target, at $28, implies a 22% one-year upside for the shares. (To watch Jenkins’ track record, click here) Backing his stance, Jenkins writes, “Given the number of 'boxes' that the story for MPLX can check, it's no surprise that it's been a debate stock. With exposure to inflecting G&P trends, an expected refining/refined product volume recovery, the story hits many operational boxes - while also straddling several financial debates… We also think solid 2020 financial results should give longer-term confidence…” Turning now to the rest of the Street, it appears that other analysts are generally on the same page. With 6 Buys and 2 Holds assigned in the last three months, the consensus rating comes in as a Strong Buy. In addition, the $26.71 average price target puts the upside at ~17%. (See MPLX stock analysis on TipRanks) DCP Midstream Partners (DCP) Based in Denver, Colorado, the next stock is one of the country’s largest natural gas midstream operators. DCP controls a network of gas pipelines, hubs, storage facilities, and plants stretching between the Rocky Mountain, Midcontinent, and Permian Basin production areas and the Gulf Coast of Texas and Louisiana. The company also operates in the Antrim gas region of Michigan. In the most recent reported quarter – 3Q20 – DCP gathered and processed 4.5 billion cubic feet of gas per day, along with 375 thousand barrels of natural gas liquids. The company also reported $268 million in net cash generated, of which $130 million was free cash flow. The company reduced its debt load by $156 million in the quarter, and showed a 17% reduction in operating costs year-over-year. All of this allowed DCP to maintain its dividend at 39 cents per share. Early in the corona crisis, the company had to cut back that payment – but only once. The recently declared 4Q20 dividend is the fourth in a row at 39 cents per common share. The annualized rate of $1.56 gives a respectable yield of 7.8%. This is another stock that gets an upgrade from Raymond James. Analyst James Weston bumps this stock up from Neutral to Outperform (i.e. Buy), while setting a $24 target price to imply 20% growth on the one-year time horizon. “[We] expect DCP to post yet another solid quarter on sequential improvements in NGL prices, NGL market volatility, and positive upstream trends… we are not capitalizing current propane prices and anticipate a solid, but more normalized pricing regime over the next 12-18 months. In our view, this will create a beneficial operating environment for DCP cash flows that is not currently reflected in Street estimates,” Weston noted. All in all, the Moderate Buy analyst consensus rating on DCP is based on 7 recent reviews, breaking down 4 to 3 Buy versus Hold. Shares are priced at $19.58 and the average target of $23 suggests an upside of ~15% from that level. (See DCP stock analysis on TipRanks) To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
"Nokia is not aware of any material, undisclosed corporate developments or material change in its business or affairs that has not been publicly disclosed that would account for the recent increase in the market price or trading volume of its shares," it said in a statement. Nokia's U.S.-listed shares surged to $9.79 on Wednesday, up 133% for the week, to their highest level in 10 years.
For bitcoin, the trust that it has worth has turned more valuable in the past several months; it's been on a tear. The (very bizarre) question is whether a new avenue of applying blind trust by brigading trashcan-level stocks and turning them into memes could threaten the appeal of cryptocurrencies for retail investors. Over the past several days, we've seen stocks ranging from GameStop, Blockbuster and AMC make unjustifiable gains as a result of Reddit users in the r/WallStreetBets subreddit triggering a stampede towards stocks being heavily shorted by institutional investors.
AMC stock launched more than 200% higher before being halted — the latest spike for a heavily shorted stock, following GameStop.
Efforts to close out short positions have lifted the retailer’s market capitalization to more than $23 billion from less than $300 million six months ago.
(Bloomberg) -- GameStop Corp.’s breathtaking ascent showed no sign of slowing Wednesday, with bullish day traders keeping the upper hand over short sellers who started to capitulate.The shares rose 157% to a session-high of $380 shortly after 11 a.m. in New York, leading to at least two volatility halts. The advance means the video-game retailer’s market value has risen more than 20 times this month alone to about $26 billion, making GameStop bigger than more than a third of the companies in the S&P 500 Index.The meteoric rally has left short sellers counting the cost in a battle with day traders who have taken to the Reddit social media platform to encourage others to follow their lead. Melvin Capital closed out its short position, while Citron Capital’s Andrew Left said the firm covered the majority of its short in “the $90’s at a loss of 100%.”“It does feel like rationality and fundamentals are just kind of dead,” J Capital Research co-founder Anne Stevenson-Yang said by telephone. “If you’re short you’re in a very difficult position because you have to buy the stock to get out, so you end with a heavily overvalued stock.”GameStop didn’t respond to requests for comment. Meanwhile, White House Press Secretary Jen Psaki said that Treasury Secretary Janet Yellen and others in the Biden administration are monitoring the situation. The stock’s gains were fanned late Tuesday after Tesla Inc. chief Elon Musk tweeted a link to a Reddit thread about the company. But famed fund manager Michael Burry warned that the manic rally has gotten out of hand, calling the stock’s rise “unnatural, insane, and dangerous.”Venture capitalist Chamath Palihapitiya, who pushed the gains higher Tuesday after tweeting about buying calls, said on CNBC that he closed his GameStop position. He said he will donate $500,000 from his profits and original position to the Barstool Fund for small businesses.GameStop is up about 124% as of 1:40 p.m. in New York. The day’s gain added about $1.6 billion to the holdings of Chewy Inc. co-founder Ryan Cohen, who joined the board of the video-game seller earlier this month.“It really just goes to show the classic saying that markets can stay irrational longer than you can stay solvent,” said Greg Taylor, chief investment officer at Purpose Investments. “So you can try to fight this as long as you want but at some point you just have to give in and just step to the sidelines. That feels like the phase of the market we’re in right now, where things are going a little crazy and definitely divorced from fundamentals.”Another note of caution was provided Wednesday by Bank of America Corp. analysts. While raising their price target to $10 from $1.60 to reflect the stock’s recent surge, they noted that GameStop is in “a weaker not a stronger place” and reiterated their underperform recommendation.“While it is difficult to know how much very high short interest and retail ownership could continue to put upward pressure on the shares, we think fundamentals will again factor into valuation,” analysts led by Curtis Nagle wrote in a note. “We remain skeptical on the potential for a turnaround.”Euphoria born in day-trader chat rooms has turned GameStop into the biggest story stock of the retail era, its improbable surge an emblem of the newfound power of individual investors. At the same time, it’s become a major headache for institutional investors betting it would fall.“It is unwise to try to stand on principle against an angry mob,” said Wedbush Securities Inc. analyst Michael Pachter, who had a price target of $16 for GameStop as of Jan. 11. “The shorts have to mark their investments to market value, so if they’re short at $20 thinking the stock will go to $10 and it goes to $300, they lost $280 trying to make $10. Frankly, I’m surprised they didn’t close much lower than here.”The epic short squeeze has set off a search for other companies that might be similarly vulnerable, with Express Inc., Bed Bath & Beyond Inc. and AMC Entertainment Holdings Inc. among stocks surging on Wednesday.Online brokerages including Robinhood Markets and Charles Schwab Corp. were hit again by service disruptions as the wild swings transfixed traders. TD Ameritrade told clients in a message that it has put in place several restrictions on some transactions in GameStop, AMC and other securities.“The thing about these manias is there’s always enough people who make 600% or 1,000% and tell everybody about it that everybody gets excited about it,” said Anne Stevenson-Yang. “The thing is it’s not the majority of those people and eventually a whole bunch of people lose money.”(Updates with White House reaction in the fifth paragraph and Ryan Cohen’s gains.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.