Remember GameStop (GME)?
Before it became a meme-stock phenomenon, it had an actual business. And now, apparently, that business may include buying internet auction house eBay (EBAY).
I bring this up because today is Thursday… the day I highlight stocks that have officially crossed over into “Bullish” territory on my Green Zone Power Ratings system, meaning they now carry a rating of 60 or higher.
As it happens, eBay is one of those newly “Bullish” stocks. I’ll get to that in a moment.
But first, let’s circle back to GameStop….
I have a feeling that the GameStop saga is one of those bizarre case studies that MBA finance students will be studying for the next 50 years.
GameStop was a great retailer in its day. It had a successful business model of buying and reselling used video games and topping off that business with sales of high-margin toys and collectibles.
Then things changed. It became convenient and practical to download games rather than buy physical discs or cartridges.
GameStop’s business started to go the way of the buggy whip manufacturers a century ago.
Yes, you could make fine buggy whips at a great price… and it wouldn’t change the fact that demand evaporated because your customers switched from horse-drawn carriages to cars.
Wall Street heavily shorted the stock, expecting GameStop to go out of business.
And then it got weird. It became a meme stock… and the shares rose from $4.70 at the end of 2020 to a high of more than $120 at one point in January 2021.
GameStop might have had a failing real-world business, but management wasn’t stupid. It sold new shares to the investing masses near the peak of the mania and was able wipe away its debts and build a massive cash reserve… that it now intends to use to buy eBay.
eBay’s shares, at $107, are trading nowhere near GameStop’s offer price of $125 per share. That’s a great indication that Wall Street isn’t taking the offer seriously.
GameStop isn’t big enough to execute, and no bank is going to finance something that absurdly risky.
Why do I mention any of this?
Because it’s a sign that things are “getting weird” out there.
As Warren Buffett himself commented just a few days ago, “We’ve never had people in a more gambling mood than now.”
That’s dangerous.
It doesn’t mean we should sell everything and sit in cash. I’m certainly not doing that. But I am reevaluating my exit strategy for every stock in my portfolio, particularly those that have massively appreciated this year.
As a case in point, I recommended that my Green Zone Fortunes subscribers massively raise their stop losses in Sterling Infrastructure (STRL) yesterday.
After a monster 52% move on Tuesday, STRL shares were up over 5,000% from my original recommendation.
Importantly, I did not tell my subscribers to immediately sell their shares outright.
But I did show them how to protect themselves. Because a market this hot is a potential minefield.
I can’t tell you exactly when or how this mania will end. But I can show you how to navigate it properly by following a disciplined system.
On that note, let’s look at the newly “Bullish” stocks in the S&P 500 Index.
S&P 500 New Bulls
I ran my usual screen for S&P 500 companies that popped up as “Bullish” this week, and this is what I came up with:
I already mentioned eBay, of course. Apart from the GameStop distraction, the stock is extremely compelling. EBAY shares have been trending higher for years and are up by 150% since the beginning of 2024.
The company also rates exceptionally well on its quality and growth factors, with ratings of 88 and 70, respectively.
eBay never managed to scale like rival Amazon (AMZN). But it has a profitable niche, and it rates well on my system.
Another noteworthy addition this month is Buffett’s baby Berkshire Hathaway (BRK-B). Buffett is no longer running the company, of course. And the stock has drifted lower since he stepped down at the end of last year.
But today’s Berkshire is the product of 60 years of his managerial wisdom… and you can see his mark in its Green Zone factor ratings.
Berkshire rates a “Strong Bullish” 90 on its quality factor and sports “Bullish” ratings on its growth and value factors as well.
New Bulls Outside of the S&P 500
Let’s cast the net a little wider and look at the newly “Bullish” stocks outside of the S&P 500.
I ran a screen for the top 20 stocks with the largest score increases over the past month, and this is what popped up:
It’s an interesting collection this week…
You’ve heard me speak about the “K-shaped” economy in which richer and higher-income Americans are doing phenomenally well while middle- and working-class Americans are really struggling.
This trend is especially evident in Lindblad Expeditions Holdings (LIND), a pioneer in expedition travel and adventure tourism with a history going back over 60 years. Want to explore on a National Geographic-branded expedition ship… or roam on an African safari? Lindblad is who you call.
Looking at LIND shares, you would never know we were in the midst of a global energy crisis that is causing canceled flights. They’ve nearly doubled in price since November.
For something a little more prosaic, consider the shares of Dream Industrial Real Estate Investment Trust (DREUF).
Based in Canada, Dream owns and manages industrial properties such as warehouses, logistics buildings, distribution centers and light manufacturing facilities.
Its tenants are businesses that need space to store goods, move inventory or run production and assembly operations – including logistics companies, retailers, manufacturers and e-commerce firms.
You can think of Dream as a way to invest in the industrial underbelly of the modern e-commerce economy… and the shares pay a nice 5.1% dividend.
To good profits,
Adam O’Dell
Editor, What My System Says Today
