🍨 Daily Scoop: Streaming, 1, Robots, 0
By Thu, Oct 10, 2019
Hi Scoopers,
After a 2-day falling streak, all of us were ready for some good news. And, the stock market didn’t disappoint. A few positive reports aboout the U.S.- China trade deal brought some joy and helped all major stock market indices to reverse course. Beyond that, one company is clearly winning the streaming war, while a similarly well-managed company is losing the robotic war. It looks like streaming is winning the war over robots, at least in the stock market.
Before we let you scroll down to learn more about those stories, let us tell you one more thing. It looks like that in 2018, the 400 richest families in the United States had the lowest tax rate among all income brackets. That story is in the “Water Cooler” section. Now, go ahead and scroll down to read more.
MARKETS
- U.S. markets: In a reversal of direction, all three indices finished Wednesday in the green. Scroll to the “Overall Market” section to learn more.
- Cryptocurrency: Bitcoin didn’t have a bad day, either. Bitcoin’s price was up to $8,600 per coin at the time of writing this Scoop, celebrating the biggest single-day rise in the last five weeks.
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OVERALL MARKET
We may get a deal, at least a partial one.
What happened on Wednesday?
The Nasdaq index, boosted by the Technology sector, got the biggest one-day jump among the three major indices. Investors (read algorithms) got tired of the widespread negative sentiment. A few positive news about the state of the U.S. and China trade negotiations helped. Thus, the market had a good Wednesday.
What drove the market up?
The news came out that China is planning to buy more American agricultural products. There was also news about China’s willingness to accept a partial trade deal if the U.S. does not go ahead with the additional round of tariffs that are expected to become effective in the next few weeks and months.
P.S. Just as we wrapped up The Daily Scoop, the news came out that the Chinese media are talking about no progress in the trade deals. The positive sentiment is vaporizing in the after hours trading. We will see where this anemic sentiment train stops when the market opens.
WHAT’S UP
One winner in the streaming war.
So, what happened?
Shares of Roku (Ticker: ROKU) were up more than 9% on Wednesday. A few weeks ago, there was widespread panic about whether Roku can compete with other streaming aggregators such as Comcast, Apple TV, and Fire TV, to name a few. However, Roku seems to be winning investors’ hearts. For one thing, the company is executing on its plans extremely well. Secondly, the analysts from Macquarie predicted the number of users could double or even triple.
If you own this stock or plan to pick up some shares, don’t forget that the stock is now being traded at more than 12 times of sales. The stock is certainly in an overvalued range, based on historical figures. Make sure you are aware of that fact, before making an investment decision.
WHAT’S DOWN
Robots are losing, at least in the stock market.
So, what happened?
Shares of iRobot (Ticker: IRBT), the maker of robotic appliances such as vacuum cleaners, cannot stop but falling. The stock was down more than 3%, hovering in the mid-50s range, down from $132.20 per share sometime in the last 52 weeks. In spite of the downgrade by Raymond James, iRobot is a company with double-digit revenue growth. Also, it is profitable, generates free cash flow, and has no long-term debt.
With the price-fall in recent months, the stock is traded at 1.4 times sales. Compare that to Roku’s 12 times price to sales ratio (we talked about it in the “What Up?” section), and you can see how undervalued IRBT is. Of course, it doesn’t mean that the stock can not fall further from here. It just means that the market is worried about the future potential of robotic appliances. Also, the fact that iRobot is dependent on China for its manufacturing doesn’t help the company either.
WATER COOLER
The rich people have the lowest tax rate.
So, what happened?
Once upon a time in the 60s, the richest families in the U.S. were paying up to 70% of their income in taxes. Fast forward to 2018, the tax rate for the top 400 richest families in the U.S. was only 23%. This tax rate was the lowest among all income brackets.
Arguably, lower-income families benefit from things such as social security and health care supplements that the rich don’t have access to, and including those benefits may change the overall picture.
However, one group, in particular, is getting the short end of the stick, even if we add social security and health care benefits. The middle-income families who are neither rich nor poor are getting squeezed by taxes. They are the ones that pay the highest tax rate and do not get any social security or health care support form the government. Our economy encourages extremes, and it never pays off to be in the middle, even if you are a successful middle.
What do you think? Reply and let us know what your take is on this topic.
About the Author
The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card
