Vista Partners Daily Market Recap – February 24, 2020

This was not a happy day in the markets for most, to say the least. Unless of course you were already in a nice cash position and ready to strike or you were betting against the markets in some way. The broad markets took a nosedive right out of the gates, bounced a little and then managed to close down more than 3% across the board today.

We saw further news spread across the world regarding coronavirus situation over the weekend & further concern of weakening global growth. This was coupled with the renewed fear of Bernie Sanders’s gaining control of the Democratic party which would possibly bring about “change” that possibly would not be positive for the markets and then married this with the further realization of a declining and flattening yield curve which never seems to leave investors with the warm and fuzzies. Another issue that had to come to play at some point is that the markets have been flying up and valuations had swelled once again in many of the tech or FAANG stocks that had been pulling up the markets. It was way too much to digest for many investors today and many through up their hands and sold. We might see some a bounce tomorrow, but we also might see some follow-through selling tomorrow or still this week as we are still about 6.5% away from the 200-day moving average on the S&P. If this further sell-off would occur then it would actually give us the 10% correction that many technical analysts have been predicting. 

The S&P 500 closed at 3,225.89, -3.35%. The energy sector was off -4.7%, the information technology sector was off -4.2%, and the consumer discretionary sector was off -3.5% as these sectors led the way down today. The tech-heavy Nasdaq closed at 9,221.28, -3.71% & the Dow Jones Industrial Average closed at 27,960.80, -3.56%. The Russell 2000 declined -3.01% to close at 1,628.10. The “fear gauge” Vix (TVIX) ended at $64.14/share jumping an amazing +37.05% and it traded in $55.95 – $64.62 range.

The FAANG stocks experienced a red day as well as I elueded too. Facebook (FB) closed at $200.72/share, 4.5-%, Alphabet (GOOG) closed at $1421.59/share, -4.28%, Amazon (AMZN) closed at $2,009.29/share, -4.14%, Apple (AAPL) closed at $298.18/share, -4.75% & Netflix (NFLX) closed at $380.70/share, -2.99%.

Oil prices dropped -3.9% to close at $51.25/bbl. 

The treasury yields dropped further today as there was a rush to safety instruments. The 2-yr yield is now 1.26% & the 10-yr yield is now 1,38%. They both declined equally 9 basis points today. The U.S. Dollar Index finished even on the day at 99.30 after strengthening up considerably in recent weeks.

One of the bright few spots today was Avadel Pharmaceuticals plc (AVDL) whose shares jumped again today up +13.19% closing at $10.64/share after Friday’s +32.02% gain. Their 52-wk range is $1.03 – $10.75. Avadel is a company focused on developing FT218, an investigational, once-nightly formulation of sodium oxybate for treating excessive daytime sleepiness and cataplexy in patients with narcolepsy.

Avadel’s increase in share price today and Friday is in concert with their announcement today that it entered into a definitive agreement for the sale of its American Depositary Shares (ADSs) and Series A Non-Voting Convertible Preferred Shares (Series A Preferred) in a private placement to a group of institutional accredited investors led by Vivo Capital, Avoro Capital Advisors, RTW Investments, Venrock Healthcare Capital Partners, Acuta Capital, and KVP Capital. The private placement is expected to result in gross proceeds to the Company of approximately $65 million before deducting placement agents and other offering expenses.

Pursuant to the terms of the private placement, the Company will issue 8,680,225 ADSs and 487,614 shares of Series A Preferred at a price of $7.09 per share, priced at-the-market under Nasdaq rules. Each share of non-voting Series A Preferred is convertible into one ADS, provided that conversion will be prohibited if, as a result, the holder and its affiliates would own more than 9.99% of the total number of Avadel ADSs outstanding. The closing of the private placement is subject to certain conditions and is expected to occur on February 25, 2020. Proceeds from the private placement will be used to fund continued clinical and program development of FT218, including an open-label extension study for REST-ON, a switch study to evaluate patients switching from twice-nightly sodium oxybate to once-nightly FT218, as well as for general corporate purposes.

Jefferies, Piper Sandler, and Stifel are acting as lead placement agents for the private placement. Ladenburg Thalmann and LifeSci Capital LLC are acting as co-placement agents for the private placement. Craig-Hallum Capital Group is serving as financial advisor to the Company in connection with the private placement.

The other bright spot for some was gold which continued driving higher and is peeking at $1700/oz as it closed in the $1670 range today.

Economic Reports

On Monday we did not receive any significant macroeconomic data.

Investing & Inspiration

“The riskiest thing we can do is just maintain the status quo.
I get up at 4:30 in the morning, seven days a week, no matter where I am in the world.
I think it is important for people who are given leadership roles to assume that role immediately.
What I’ve really learned over time is that optimism is a very, very important part of leadership.” Bob Iger, Ceo of Disney

“There are old traders and there are bold traders, but there are very few old, bold traders.”-Ed Seykota

“Let this scenario play out on its own, in its own fashion. As you watch it unfold, you will soon be grateful that you choose the peaceful path. Remember — those who live by the sword, die by the sword.”

“As long as you enjoy investing, you’ll be willing to do the homework and stay in the game.” -Jim Cramer

“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” -Mark Cuban

“Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.” -Bruce Kovner

“The policy of being too cautious is the greatest risk of all.” -Jawaharlal Nehru

“The only true test of whether a stock is “cheap” or “high” is not its current price in relation to some former price, no matter how accustomed we may have become to that former price, but whether the company’s fundamentals are significantly more or less favorable than the current financial-community appraisal of that stock.” -Philip Fisher

“I learned to avoid trying to catch up or double up to recoup losses. I also learned that a certain amount of loss will affect your judgment, so you have to put some time between that loss and the next trade.” -Richard Dennis

“The four most dangerous words in investing are: ‘this time it’s different.” -Sir John Templeton

“Money doesn’t make you happy. I now have $50 million but I was just as happy when I had $48 million.” -Arnold Schwarzenegger

Tomorrow

Tomorrow’s significant economic data report schedule will include the following:

• The Conference Board’s Consumer Confidence Index for February

• The FHFA Housing Price Index for February

• The S&P Case-Shiller Home Price Index for December