Tag Archives: fitbit

shake shack is getting chewed up

Shake Shack, like GoPro and Fitbit, was once a high-flying, wildly valued cult stock whose shareholders loved the company’s products. Yesterday, that affair ended abruptly, with SHAK falling $5 to $37 on disappointing guidance for 2016. The former fast casual darling is now down 60 percent from its $97 peak last May. Investors who look at price, and not valuations, might think this is a good entry point.

They will likely be wrong.

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so you want to be a stock picker

After a rough start to the new year, a lot of investors might be tempted to buy into “fallen angel” companies at or near all-time lows. They’re not hard to find. In the tech sector, GoPro and Fitbit, two profitable and recently public companies, have taken major hits. GoPro is down 90 percent from its all-time high. Fitbit has lost two-thirds of its peak value. Another sector where investors might be looking to buy low is energy, where scores of service and exploration companies are down 90 percent or more. Established names like Denbury Resources, Forbes Energy, Gastar Exploration, Basic Energy, Bill Barrett, and Ultra Petroleum, among others, have all been creamed, and could seem like bargains.

All I can say is: buyer beware.

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tesla, fitbit, and what happens when wall street forgets a fad is a fad

As I highlight in the introduction of my book Dead Companies Walking, retired New York money manager David Rocker once wrote that there are three types of shorts:  fads, frauds and failures. I generally focus on the latter of the three by seeking out and shorting troubled companies that could soon go broke. Shorting fads, on the other hand, is tricky. Timing is everything, and predicting exactly when a fad fizzles out is almost impossible. Remember “Pogs,” those weird little toy discs that kids briefly went nuts for a while back? It seems unbelievable in retrospect, but two Pog-related companies came public during that mania. Both went bankrupt soon after the craze subsided, but if you’d shorted either of them beforehand, you would have needed some serious intestinal fortitude to stay in the position.

The trickiest fad businesses to short are the ones that grow so popular in such a short time, even seasoned investors become convinced they will turn evergreen. This is particularly true for products that are popular among financial workers and the broader investor class. After all, if the folks buying, selling and analyzing stocks love a company’s products, they’re more likely to overestimate its value and its longevity. As I write in my book, an analyst at a prestigious brokerage once swore to me that there would soon be ten times as many rollerbladers as bicyclists. Before I hung up the phone and shorted the stock of the second largest inline-skate maker at the time, she happily informed me that she and many of her colleagues were avid rollerbladers.

The two biggest “stealth fad” stocks in today’s market could very well be Fitbit (FIT) and Tesla (TSLA). Neither is likely to go the way of Pogs or rollerblades, at least anytime soon. But, like rollerblades, they’ve both benefited from their excessive popularity among the very people buying and analyzing their stocks.

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a twitter buyout? don’t hold your breath

We’re in the middle of a buyout frenzy for the ages. Every day brings news of another mega deal, either real or imagined. On Sunday, Cigna rebuffed Anthem’s $47 billion offer. This failure-to-merge is a rare exception. Many large and established companies have successfully gobbled up other large and established companies in recent weeks, especially in the tech space. In March, NXP Semiconductor bought Austin-based Freescale for almost $12 billion. Singapore’s Avago paid a whopping $37 billion for Broadcom a few months later, and Intel recently completed its $16.7 billion acquisition of Altera.

This merger mania is partly a product of record low interest rates around the globe. Profitable, cash rich firms can sell bonds with vanishingly low interest rates, making major acquisitions relatively easy (and cheap) to finance. Furthermore, the US tax code encourages firms to borrow money, as interest costs are treated as a deductible business expense. Add it all up and it’s little wonder that every company out there is starting to seem like a viable takeover candidate.

But let’s not get carried away.

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