Cathie Wood, Weed Stocks, Banks: 3 Things to Watch Into Happy Hour
I'm back!
And it's hump day.
OK, let's just get right back into it.
Weed Stocks Feelin' a High
Full disclosure here, I do hit on cannabis in my Real Money column, which will come out later this week.
So, basically, you're getting a sneak peek of my thoughts.
First of all, even the proposal of legalization--no matter how far fetched the actual passage is--is a big step in the right direction. Not only for the people being held on marijuana charges, but also for the weed stocks.
I was going to comment on how difficult stocks in the cannabis space have been to hold, but I'm seeing Tilray (TLRY) - Get Report up over 90% in the past year, Canopy Growth (CGC) - Get Report is up around 14%, Cronos (CRON) - Get Report up 9% and GrowGeneration (GRWG) - Get Report is up a whopping 468%.
But, of course, there are tons of smaller capped stocks.
What is interesting though is the action that we're seeing in cannabis stocks on Wednesday. Every stock that I just mentioned was sinking over 3% heading into the close, with GrowGeneration facing the most negative pressure.
Anyway, let's circle back because I wanted to bring up specifically Tilray because I've watched it gain some traction on r/WallStreetBets throughout the day Wednesday.
So I, as usual, headed over to Swaggy Stocks to get an idea about the sentiment behind the news that Chuck Schumer would push for legalization of marijuana.
Tilray is in the top 10 stocks being discussed on WSB, though Apple (AAPL) - Get Report is the winner of the pack right now.
The stock does have a heavy amount of positive sentiment in the 200 or so mentions it currently has on the subreddit.
So, this is a stock I'm digging into as we wait to hear more out of Washington.
Also, side note but, this quote made me chuckle, "Hopefully, the next time this unofficial holiday, 4/20, rolls around, our country will have made progress in addressing the massive over-criminalization of marijuana in a meaningful and comprehensive way," Schumer said earlier this year."
Let's Take a Look At Wells Fargo
Okay, so I have--if you keep up with any of my work--obviously been off for the last couple of days. And I swear it wasn't on purpose to avoid the bank earnings.
TST Recommends
With that, I want to take a look at the banks.
Specifically, I'm looking at Wells Fargo (WFC) - Get Report.
The bank did beat expectations on profit and its results got a bit of a boost from the $1.6 billion release of its credit loss reserves.
"Wells Fargo benefited from the continued economic recovery, strong markets that helped drive gains in our affiliated venture capital businesses, and our progress on improving efficiency, but the headwinds of low interest rates and tepid loan demand remained,” CEO Charlie Scharf said in the earnings release.
“Credit quality continued to be exceptionally strong. Our results included a $1.6 billion pre-tax reduction in the allowance for credit losses, and charge-offs continued to decline. While we expect charge-offs will increase at some point, we continue to see strong trends in all of our businesses,” Scharf continued.
But I'm not watching it because it beat on earnings, but because it's a name that my colleague, Stephen Guilfoyle, is watching on Real Money.
"You have heard or seen me mention the turnaround story at Wells Fargo (WFC) under President and CEO Charles Scharf often enough," he wrote in a column Wednesday afternoon.
"Scharf has been hampered since he took the job in September 2019 by the bank's reputation and by the Fed's imposition of a hard $1.95 trillion asset cap in the wake of the fake accounts scandal, not to mention the onset of a global pandemic. Steadily, Scharf set out to change the culture, and reduce spending. Slowly, it now becomes apparent that, perhaps, there is a light at the end of this bank's long tunnel."
"In banking, the "efficiency ratio" is the metric that measures operating expenses as a percentage of revenue generation. This is how investors gauge how "lean and mean" a bank is running. For the second quarter reported Wednesday morning, Wells Fargo ran with a 66% efficiency ratio, down from 77% a quarter earlier. That's a lot of progress in three months," he continued. "The light at the end of this tunnel may or may not be all that near, but we can see it from here. First time in a while," wrote Guilfoyle.
I also think that the banks are a good way to start mentally preparing for earnings reports. After all, we're going to get reports from Netflix (NFLX) - Get Report and Tesla (TSLA) - Get Report soon enough.
What's Cathie Wood Up To?
I personally don't care what people say about Cathie Wood or ARK invest. Overrated or not, it's hard to say that she and her team don't have a pulse on what's going to happen. Perhaps it doesn't work out in the current moment but unless you can see into a crystal ball, let's keep quiet on the opinions here.
Anyway, I wanted to take a quick glance at ARK's moves. I found the shift away from the positions in Nvidia and Shopify fascinating, especially since Coinbase is where that money is going.
My colleague M. Corey Goldman noted that ARK's exchange-traded fund sold 785 shares of Nvidia (NVDA) - Get Report, estimated to be worth about $635,850, according to Business Insider. ARK also sold 16,034 shares in e-commerce company Shopify (SHOP) - Get Report, estimated to be worth about $24.3 million.
Nvidia has been a winner in the past year--and beyond if you follow Jim Cramer and his Action Alerts PLUS portfolio. And if you're looking for a pandemic winner, then look no further than Shopify.
However, we know that ARK has been heavily adding Coinbase (COIN) to its ARKK and ARKW ETFs. On July 9, the team added 255,478 shares.
So while I could see the case that Nvidia, Shopify and Coinbase all make sense as plays in this moment as well as the future, I can also understand the reasoning of focusing in on an area that's going to be getting a lot more attention from regulators and people alike.
Let's see how this one plays out.
