Last week was literally the worst drop since 2008, with the Dow dropping over 1,000 points in a single day on several occasions.
Needless to say, it was a wild ride and there weren’t many safe havens.
I’ll give some updates in this post and also give my new recommendation, but keep in mind that just about all stocks tumbled, some as much as 20% or more. It doesn’t change their underlying value, simply says that money was fleeing the market and no one was safe.
So I won’t spend a ton of time on each stock since there are so many unknowns. But, with that being said, let’s get started.
Previous Pick: [quote symbol=”FRPT” attribute=”companyName”/] (NASDAQ: FRPT)
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Just look at that wild ride. I thought the $74 range would be close to the bottom, but I had no idea the whole market would bottom out last week. Freshpet dropped another astonishing 10% just in the last 5 days.
If there’s any good news in all this, it’s that Freshpet actually outperformed the market in this timeframe. The S&P 500 dropped 11.2% last week, whereas Freshpet (only) dropped 10.5%. OK it’s small solace, but still not bad.
So what am I doing now?
Actually I made a move on FRPT in my new Explosive Options portfolio yesterday. I won’t tell you at what strike price or expiration (since it’s for subscribers only), but I will tell you it was a bullish move.
In other words, I’m buying it while it’s cheap. I think in a month’s time or less it’ll be competing with its previous highs.
Update: [quote symbol=”LM” attribute=”companyName”/] (NYSE: LM)
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I recommended Legg Mason back on January 27 when it was just $38.86. And then on February 18, it just up and jumped up to $50, and has stuck there to this day.
What exactly happened there?
On February 18, it was announced that Franklin Resources (NYSE: BEN) was buying Legg Mason for $4.5 billion, or $50 per share. After the announcement, the stock jumped literally $10 (25%) to open at $50.28, and really hasn’t budged much since.
Since this buy-out has been confirmed and the stock is unlikely to move, I’ve sold my own shares and recommend others to do the same.
Note that if you bought when I recommended it, you will have gained 28.2% on your investment, far outperforming the market’s 9.9% drop in that same time.
I usually don’t give sell alerts for my public recommendations, but I thought I should let you know in case you were hanging on to LM.
New Pick: [quote symbol=”DDOG” attribute=”companyName”/] (NASDAQ: DDOG)
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Data as of February 28, 2020
- Company name: Datadog, Inc.
- Exchange: NASDAQ
- Last close: $45.15
- 52 week low: $27.55 (2019-10-23)
- 52 week high: $50.12 (2020-02-12)
- Employees: 1,403
- sector: Technology Services
- Industry: Packaged Software
- CEO: Olivier Pomel
- website: http://www.datadoghq.com
- Ticker: DDOG
- Market cap: 13.3B
- Avg. volume: 3.1M
- Zacks Rank: 2 (Buy)
- YTD change: 17.19%
- Beta: 0.32
- Forward P/E ratio: N/A
- P/S ratio: N/A
- PEG ratio: N/A
- Div. yield: 0.00%
- Next earnings date: 2020-05-14
Datadog, Inc. engages in the development of monitoring and analytics platform for developers, information technology operations teams and business users. Its platform integrates and automates infrastructure monitoring, application performance monitoring and log management to provide real-time observability of its customers’ entire technology stack. The company was founded by Olivier Pomel and Alexis Lê-Quôc on June 4, 2010 and is headquartered in New York, NY.
About the Company
Datadog, Inc. (NASDAQ: DDOG) is a cloud monitoring service for IT operations teams and other cloud businesses. Their platform integrates and automates infrastructure monitoring, monitoring application performance, and log management to provide real-time reports of its customers’ entire technology components.
The company was founded in 2010 by two software engineers, Olivier Pomel and Alexis Le-Quoc. They met while working at Wireless Generation until the company was acquired by NewsCorp. After the acquisition, the two engineers set out to build Datadog, Inc. They marketed their product as a cloud infrastructure monitoring service, with dashboard, alerting, and visual metrics.
As cloud infrastructure became more popular, the demand for Datadog’s services increased significantly. The company grew rapidly and began expanding its product offerings to service providers including Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform, Red Hat OpenShift, and OpenStack.
In 2015 Datadog acquired Mortar Data merging its team and its data and analytics to Datadog’s platform. That same year Datadog also opened a research and development office in Paris that further expanded their cloud capabilities.
In 2016 Datadog moved its New York City headquarters to an entire floor of the New York Times Building as their number of employees doubled over the course of the year. Datadog also announced the beta-release of Application Performance Monitoring in 2016, offering their first full-stack monitoring solution. As of 2017, the company has close to 300 employees, many of which are in the US with offices in multiple locations on East coast and Paris.
Since 2010, more companies are relying on cloud infrastructure to increase the functionality of their platforms and deliver a variety of software applications. And as a cloud monitoring service, Datadog has an increased demand as many businesses shift to automated infrastructure. The company has a versatile placement in the market as a cloud monitoring provider and IT company, which attracts investors looking for the next best stock to blow up.
Why I Like Them
First of all, I like Datadog because they’re a cloud monitoring company, which is right in my niche. I saw an analyst recommend them a few months ago, and have been watching them ever since.
Datadog has a Zacks Rank of 2 (Buy) and a price target of $51, 13% above the previous close of $45.15.
Now granted the fundamentals that we usually look at aren’t that great, but this is pretty common for a quickly-growing tech company.
But in the last 60 days, 6 analysts have upped their earnings estimates for the current quarter, and 7 have upped their estimates for the current fiscal year.
Generally when analysts up their estimates, it precedes an increase in price as institutional investors start buying in.
In the last 3 months, Datadog has risen by 18.6%, beating the S&P’s loss of 5.7% in that same time period. In the last month, Datadog has lost 1.04%, against the S&P’s loss of 9.3%.
Of course we don’t like losses, but with the panic that’s been gripping the market for the past several weeks, it’s inevitable. Datadog has a history of beating the market, which is what I like to see.
Now currently it’s trading under its 20-day SMA, which is to be expected, but the 50-day SMA has proven to be pretty strong support. It flirted with it briefly last week, but always bounced off.
As I often say, this is a bit of a risky play, but I feel positive enough about it to say it’s worth it. We haven’t seen this price since early February, so I think it’s a good buying opportunity, especially when paired with the analyst revisions.
A Quick Note
You may have wondered what happened to the “Trade on Robinhood” links I usually include in each post.
Prior to today, I was recommending Robinhood for those wanting to get started with investing. They are a no-fee brokerage that is pretty easy to use.
However, they just experienced a full day of downtime due to some glitch in their system. That means that no one was able to trade for an entire day. For a financial company to experience this kind of downtime I believe is unconscionable. People (luckily not me) lost thousands of dollars, and some probably much more, thanks to this outage.
Therefore I can no longer in good faith recommend them, and will be removing their links from my site. Instead I’d recommend TD Ameritrade, which is a well-regarded and trusted brokerage firm. There are other good ones out there, too, but TD is my personal favorite.
Freshpet (NASDAQ: FRPT) was pummeled last week along with the rest of the market. However I think this is a good buying opportunity and that it’ll go up from here.
Legg Mason (NYSE: LM) is being bought out for $50 per share. It’s enjoyed a huge increase of over 28% since I recommended it in January, but is unlikely to move from here for a while.
Datadog (NASDAQ: DDOG) hasn’t suffered nearly as much as some of these other stocks. While the fundamentals aren’t great, it seems to have high analyst confidence and it has a history of strong growth.