We warned you…
Did you listen?
We hope so.
Of course, investing is a long game.
Getting something right over the course of a couple of weeks isn’t really much to crow about.
But in this instance, we figure the way our warning is shaping up so far, is an accurate indication of how it will play out in the months and years ahead.
So, what was our warning? And why are we following up on it today? More below. First…
Market Data
The S&P 500 closed down 0.2% to end the day at 5,051.41… the NASDAQ lost 0.1% to close at 15,865.25.
In commodities, West Texas Intermediate crude oil trades at $85.28, down 32 cents…
Gold is $2,406 per troy ounce, up $5 from yesterday…
And bitcoin is $62,712, down $778 since yesterday.
And now, back to our story…
Please, Rethink Your Decision
We refer back to our essay on April 2. The headline was ‘Have You Learned Your Meme-Stock Lesson Yet?’
We profiled three stocks: Trump Media & Technology Group Corp (DJT), Reddit (RDDT), and Rumble (RUM).
For Reddit, we’d also profiled that stock two weeks before that, on March 22.
Overall, our message was that you should stay clear of them. We wrote about Trump Media and Rumble:
Expect them to go up… expect them to go down. They’ll do a bunch of both over the next few months. But if you think you’ve got a chance of making money from either (or from Reddit), we’ll say you’ve got a better chance of picking the Powerball numbers.
Turns out we weren’t nearly as bearish as we should have been.
On April 2, Trump Media closed at $51.60. Today, it closed at $22.84.
As for Rumble, it closed at $7.32 on April 2. And, today, it closed at $6.05.
Both stocks stink.
Oh, and Reddit. It was $46 when we first wrote about it as being a bad IPO (initial public offering) stock. Naturally, being the investment genius that we are… the stock hit a high of $74.90 just two days later!
But today, it closed at $41.14. In other words, pretty much every investor who owns Reddit – except for those who bought at the IPO price – is losing money on the stock.
It stinks too.
The only saving grace we can make for it is that Reddit is likely to be a business that will still exist in 10 years. That doesn’t mean to say it’s a good business… or that investors should buy now… because they definitely shouldn’t.
But we can picture the stock falling to a level where it could become a value opportunity. We’re not there yet.
It’s a different situation than Trump Media. In fact, we’ll go one step further than we did in our April 2 essay. That stock is a downright sell.
Why? Because Mr. Trump has zero chance of winning in November. He definitely has hardcore supporters who won’t vote for anyone else. But despite the state of inflation and problems with immigration and the border policy, Mr. Trump doesn’t have the ‘floating voter’ that he had in 2016.
Those folks are gone for good. They’ve had enough of the drama.
So when the results come through, Trump Media falls to below a buck, and Truth Social dies.
We know that message may not be the message you want to hear. But there it is.
Look at the numbers. According to filings, it generated just $4.6 million in revenue over the past year. And it has made a loss of nearly $40 million over the same timeframe.
Even Rumble has bigger revenue numbers, at $81 million over the past 12 months.
Just to put these numbers in perspective, a company that most investors will never hear of is PSQ Holdings (PSQH). It has a market capitalization of $141 million. That’s just 4% the size of Trump Media.
And yet, PSQ Holdings has revenue of $5.7 million over the past 12 months. And what does PSQ do? According to its profile on Yahoo! Finance:
It operates through two segments, Marketplace and Brands segments. The PSQ platform is accessible through its mobile application and website. The company also sells diapers and wipes to mothers online under the EveryLife brand name. PSQ Holdings, Inc. is headquartered in West Palm Beach, Florida.
It sells diapers and wipes.
A diapers-and-wipes business generates more revenue than Trump Media.
Okay, we understand it may not be a 100% fair comparison. But the valuation on a price-to-sales (PS) ratio is fair.
Trump Media trades on a PS ratio of 576 times.
PSQ Holdings trades on a PS ratio of 17.5 times.
If Trump Media’s PS ratio fell in line with PSQ Holdings – and it’s definitely an if because there’s nothing to say they should trade on the same PS – Trump Media’s market cap should fall to around $80 million.
That would be a 97% drop from the current price.
If that doesn’t convince anyone that Trump Media is grossly over-valued, nothing will.
Bottom line: If you’re still holding Trump Media, Rumble, or even Reddit (for now), we would like to gently encourage you to rethink that position.
The decision, of course, is entirely yours.
More Markets
Today’s top gaining ETFs…
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Siren Nasdaq NexGen Economy ETF (BLCN) +1.4%
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Invesco Semiconductors ETF (PSI) +1.1%
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Invesco Dorsey Wright Technology Momentum ETF (PTF) +0.9%
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VanEck Semiconductor ETF (SMH) +0.8%
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iShares U.S. Healthcare Providers ETF (IHF) +0.8%
Today’s biggest losing ETFs…
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Global X Lithium & Battery Tech ETF (LIT) -2.9%
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First Trust Brazil AlphaDEX Fund (FBZ) -2.7%
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iShares MSCI Mexico ETF (EWW) -2.5%
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First Trust Latin America AlphaDEX Fund (FLN) -2.4%
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iShares MSCI Taiwan ETF (EWT) -2.3%
Cheers,
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Kris Sayce
Editor, The Daily Cut