Next Big Thing
So I’m not gonna name names.
Because, I don’t know this guy, but I watched a couple interviews and he looks like…he could probably kick my ass.
And if he could, he probably would do so because I’m about to reveal that I’m internet stalking him. Ok, not really stalking. I googled him, and I checked out three results and it took about 10 min, so I prolly don’t meet the full stalking statute anyway. Still I don’t want to even get jacked up on some misdemeanor like “inappropriate googling” so yeah, the names have been changed to protect the bearish.
That’s my whole point anyway — that the money management “powers that be” get so entrenched in a particular mindset that they cannot — will not — change anything in their minds, no matter how much new information is available.
Once a bear, always a bear…
So the quote I’m about to lay on you wasn’t directly tied to a particular stock. But given the flow of the Reuters article, it was made to seem like he was addressing Wednesday’s earnings report from C3.ai (NASDAQ: AI) — because the author put this quote directly after saying how bad C3.ai’s earnings were:
“There’s going to be a lot of companies that we look at five years from now and be like, ‘why did we think that company was going to be the next big thing?'” said Dingus McCringus, chief investment officer of private wealth at an anonymous fund in Pascagootchie, Pennsyltucky. “We’ve been staying cautious because of that.”
Ok I know, there’s a lot going on here. For starters, C3.ai’s earnings really weren’t so great. The stock got pounded on Thursday and I’ve touted the stock, so how could I screw this up so bad, which I’ll get to in a minute.
But first, a little history….
The January Effect
I know, January. A lo-o-ong time ago. Fortunately, I write three articles a week, so I can neither forget nor evade what I said 6 months ago…
It’s all there, in black and white.
And 6 months ago…huh…Whaddya know, I was bullish.
3 articles a week, I had a lot to say in January. Which isn’t unusual, I tend to have a lot on my mind and very little compunction about sharing it.
But if I had to sum January up, I spent 3 days talking about a stock market rally (here, here and here), one day saying don’t buy Intel, another day saying Elon Musk is a dick, and 3 more days saying that you should buy Rivian, Meta, and Amazon.
Ok ok! Rivian was $17-$18 when I recommended it in January. Currently $14.50, that’s like a 20% loss. Honestly I thought it would be worse, given the performance we’ve seen from every other EV maker outside of Tesla. But I do good work, I pegged Rivian as a winner, and I stand by that analysis.
Amazon, fine, 25% gain, whatever. But Meta? Holy monkey, $90 to $270, I like.
I was ready to tell you that I’m most proud of dissing Intel. Because the fact is, my method for picking momentum stocks is pretty reliable. But identifying companies that have fundamental flaws isn’t so easy – you really have to dig in. Because companies with fundamental flaws tend to know they have fundamental flaws, and they tend to put the best spin on it they possibly can.
If CEOs were like Dungeons & Dragons characters and got “plusses” to their “baffle with bullshit” attacks, well, Intel’s CEO wouldn’t get any and would roll damage with a two sided die (otherwise known as a coinflip), cuz he keeps saying the same thing — “this is the low point for the business” – maybe it is, probably it isn’t.
But then, Intel shares are basically flat from January so….never mind….
Anywho….let’s get back to Mr. McCringus.
Back on January 9. Mr. McCringus told Bloomberg that investors had to grapple with more interest rate hikes and the likelihood of a recession over the next “couple months.” Well, it’s June and recession forecasts have been pushed out to early 2024.
To the credit of McCringus, he did acknowledge that inflation had ticked down, but still dismissed the potential for more than two data points to signal a trend.
The S&P 500 closed at 3819 that day, January 9. Yes, I know the regional banking crisis that exploded in early March was a pretty big red flag. And it got me bearish too, because when banks fail, well, it’s pretty much stupid to ignore the big red flag.
But when the S&P 500 failed to take out those January lows, and we got a few more data points to confirm the inflation trend, I got back on the bull…
And in fact, March 3 was the second time I touted C3.ai as a stock worth owning. It opened at $24 that day, and closed at $28. My first recommendation of the stock came on February 13, when it was a $21 stock.
With respect to Mr. McCrinigus, I never said C3.ai was “the next big thing,” and I’m not aware that anyone else has either. What I DID say was that, given the hype for AI in general, C3.ai was worth owning. Because I’ve been doing this for 25 years and I know what an emerging trend that can make you some money looks like…
Even after yesterday’s brutal drop for the stock, there is no point at which I recommended the stock where you’re losing money on it had you bought it. (And, PRO TIP: if a stock ramps +30% on earnings day like C3.ai did, you take a little off the table.)
Where Have You Gone Mr. McCringus?
So here’s where I owe Mr. McCringus an apology. Because I fully understand that he is operating from the Marketing 101 playbook: confirm your audiences’ preconceived beliefs.
Of course, in January, on Bloomberg, representing conservative investors from Pascagootchie, Pennsyltucky – of course the safe play is to go with the bearish theme. For all I know, the persona he presented to the public is not the one that manages his own account and maybe he was buying Meta and making 205%…
I sincerely hope there are two McCringuses or McCringi or whatever and neither one of them gets mad at me, cuz they’ll both kick my ass.
The apology I owe is this. Mr. McCringus, You know your clients. If they’re conservative (which I’m assuming is the case), and they’re skeptical of new technology and don’t wanna take a chance on the “next big thing” and would rather make their 8% or 10% a year while the world goes to hell in a bucket, then you are serving them well, giving them what they want.
Just promise me that, 6 months or a year from now, when AI stocks have doubled again and Meta is trading for $350 and Rivian has doubled to $35 a share, you won’t start telling them that now’s the time to buy the most transformative technology trends the world has ever seen…
Because thats’ the dark side of Marketing 101. As a group, individual investors never want to buy particular stocks until they’ve run like scalded dogs and Reader’s Digest is printing stories of knitting clubs that have bagged the yarn to become millionaires day trading AI stocks.
One final note: don’t be surprised if there’s not a lot of upside for stocks between now and the next Fed meeting on June 14. The S&P 500 has come a long way to challenge its 52-week highs, a little breather makes sense. And if the market decides to pull back, it doesn’t mean that this rally was all BS hype. Use weakness to add quality stocks.
That’s it for me this week, take care and have a great weekend! I’ll talk to you on Monday.
Briton Ryle
Chief Investment Strategist
Pro Trader Today
brit.ryle@protradertoday.com
Facebook: https://www.facebook.com/ProTraderToday
Twitter: https://twitter.com/BritonRyle
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