Gennady Kupershteyn sees three IPOs with strong fundamentals that could have price potential ahead, and says growth leaders Apple and Green Mountain continue to show leadership.
Kate Stalter: Today, we are speaking with trader Gennady Kupershteyn and you can follow him on Twitter @CapitalistBull. So Gennady, thanks so much for joining us today.
Gennady Kupershteyn: Thank you for having me.
Kate Stalter: Give us your take on what you see as going on in these extremely volatile market conditions. What do you believe is important for individual investors to know about right now?
Gennady Kupershteyn: If you are an individual investor, I think the best thing is to really go back, study your past trades, and come up with a new watch list to follow. You don’t want to play this market unless you are a pure day trader, because there is no way of knowing what you are going to be waking up to from day to day.
Kate Stalter: What are some areas that you see as being some pockets of strength at this moment?
Gennady Kupershteyn: Gold is obviously a pocket of strength. Again, I wouldn’t touch those stocks; a lot of them are a bit extended here, some of them are coming off the bottom. But I do believe with the price of gold going, up at some point, they may set up for big moves later in the year.
You also want to be looking at some of the leaders from the past markets that are holding up pretty well right now and that is Green Mountain (GMCR) and then Apple (AAPL). They have acted fabulously, considering how bad this market got hit, but I wouldn’t buy them right now. I would watch them and look for some tightness.
I would also keep an eye on two new IPOs, which are Fusion-io (FIO) and LinkedIn (LNKD).
Kate Stalter: Okay, tell us a little bit about those, and why you believe those might be worth watching right now.
Gennady Kupershteyn: Well, Green Mountain to me has a virtual monopoly in your kitchen; you want to buy one of their machines. You are not going to replace it if a competitor comes out with another one.
If you are a producer of coffee, tea, or hot chocolate, essentially, if you want to get into the person’s home you have to go through Green Mountain. So at this point, there is really no competitor to them.
We all know Apple. As long as they can coming out with the products they come out with, the stocks will keep going higher. I am hoping they come out with an Apple TV, a real TV, basically a supersized iPod Touch.
OK, so I like LinkedIn. I think the whole social networking, it reminds me of the late 90s with the Internet stocks. Our overall belief is that right now the market is going to set up a third leg up of the bull market that started back in 2009.
Nobody really knows outside of advertising how these stocks are going to be making money, but considering the damage that the market has taken, if you look at a stock like LinkedIn, it’s held up pretty well in this market.
Kate Stalter: You had mentioned another IPO that you thought people might take a look at?
Gennady Kupershteyn: Yes, it’s FIO. Still doing the research on it right now. Again, it’s just another stock that’s held up really well. It just popped up on my radar. It’s something I’m going to take a look at and I’m going to get a better story on it.
Kate Stalter: OK, and that’s Fusion-io, which went public back in June, I believe, is the one you’re referring to?
Gennady Kupershteyn: Yes, and I always like stocks that tend to come out with their IPOs during downtrends, because at a minimum it shows that the underwriters have enough confidence in the company to put them out during the downtrend.
|pagebreak|Kate Stalter: That’s an interesting point. Let’s talk a little bit about some of the specific areas that you see as showing weakness. You had mentioned gold, for example, a moment ago. Anything else that you believe investors should really avoid at this moment?
Gennady Kupershteyn: Well, gold is actually showing strength, but I would avoid it because of some of the moves it’s already made. That’s very important.
I definitely do not like solar stocks. If oil prices and gas prices continue to come down, the time to break even on installing solar panels starts to increase, and once that happens people are less likely to install the solar panels on their homes and on their businesses.
One of the stocks that I was shorting earlier was Jinkosolar (JKS). At this point, it’s a little extended to the downside, but I would still be watching that stock as it pulls back up.
Essentially over the next few weeks, the best bet is going to be to watch a few stocks that have broken down hard after having big runs. Stocks such as Medifast (MED), and Travelzoo (TZOO) is another one, looks like it’s formed a double top and it’s broken the neckline.
But because (MED is) extended so far to the downside, what I would be looking for is for the stock to pull back up to its 50-day, calm down, and then look to re-short it.
Kate Stalter: Any other additional observations or ideas that you have for individuals? What should they be doing, in terms of either building a watch list or just getting ready for the next market move at this point, Gennady?
Gennady Kupershteyn: Well, I would definitely recommend they take a vacation for the next two weeks. It’s honestly the best thing people can do.
One think I learned when I started off as a day trader was: If you took a day off—and I don’t mean to take a day off and watch CNBC all day—I mean take a day off, go to the zoo, go somewhere, take a vacation, don’t look at the market, kind of clear your head.
Because when you come back, you’re going to see the market from a completely different perspective. Rather than seeing everything as bearish, you’re going to be able to kind of take a look at the stock relative to the market how is performing.
Now what you want to be looking for is stocks that have really strong fundamentals. Like I said, a stock like GMCR, a stock like Apple, a stock like Jiayuan.com (DATE), which is a new Chinese IPO. These stocks are all holding up really well in this really ugly market.
I also would be looking in hot areas like the smartphone area. Data, the Internet, are exploding tremendously. A stock like EMC (EMC) could be coming back, Qualcomm (QCOM). I mean, they’re beat up at this point, but you definitely don’t want them to come off your radar.
Kate Stalter: I was just looking at EMC and noticing what you were just remarking about, the fundamentals. Those do appear to be strong on that one at this time.
Gennady Kupershteyn: Right, and we all know that fundamentals usually are strong right at the top, but these stocks really have big runs, and there’s still a play on the smartphone and cloud computing, which is again another area that’s only in its infancy. We haven’t seen anything with cloud computing yet and it’s just going to grow bigger.
Kate Stalter: Any names in that particular industry that people might want to take a look at?
Gennady Kupershteyn: You know, Apple. Every time you look at something in this market, you just circle back to Apple. Their new iCloud looked very interesting, where they’re going to let you—as soon as you purchase your music or upload your music—you’re going to be able to stream it pretty much to any device.
You have to keep an eye on VMware (VMW).
Otherwise, right now I think a lot of them had big runs and probably need to consolidate for a while, but I would be looking toward the end of the year. I would be watching to see if they’re able to come back and set up again. Essentially, right now this is the second leg down in this major correction, even though we’ve hit bear-market territory.
Because of the volatility we’ve experienced over the last probably three years since the financial crisis, I just think we have to look at this market in terms of that. Whereas before we looked at a bear market as 20%, now we really have to be looking at it as 30%. Just because of the severe movement and the increased volatility to the downside that we’ve started to experience.
To me this is a major correction inside of a bull market. Now the only way my mind changes is when we attempt a real rally, and I don’t think that’s going to happen until at least four to eight weeks from now.
When we attempt a real rally, if we really have a hard time trying to make new 52-week highs in the market—which I do believe we will make before the end of the year or sometime early next year—then we should be looking for three major legs down into a bear market.
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