MarketBites Daily Investment Commentary: Can Third Point Save Intel | 2020 Hot Stock “Lemonade”

Stock Market Commentary for 12/30/2020:
  • The General Theme:
    U.S. stocks pulled back from record highs, after Senate Republicans blocked an attempt by Democrats to increase Covid aid from $600 to $2,000 per citizen. After a 3 month hiatus, growth stocks are outperforming again. The S&P 500 Growth Index is beating its value counterpart by almost 2% in December. The housing sector continues to shine. Fresh data released Tuesday, showed that home-price growth accelerated in October, as strong demand pushed home sales to a 14-year high.
  • Stock Talk:
    – Small Caps Tumbled: As prospects for bigger government aid checks faded, small-caps posted their biggest decline in a month. The Russell 2000 Index dropped 1.85%.
    – Snap Surged: Snap stock increased 6.15% after Goldman Sachs upgraded the stock, and set a street high price target of $70.
  • Coronavirus tracker: Per Johns Hopkins, the U.S. reported 186,391 new cases yesterday, and current hospitalizations are at 121,235. The U.S. confirmed its first case of the new Covid strain, initially discovered in the U.K.

By Raymond Kanyo

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Top Investment Story #1: Intel Gets Hedged

What is Happening?

Intel stock surged 4.83% on Tuesday after activist hedge fund “Third Point,” proposed strategic changes to the chip-maker. Can Third Point restore Intel to its former glory, or will Intel continue to lose market share to Asian competitors?

Why does this Matter?

Even after today’s rally, Intel is down 18.8% for the year. For decades, Intel resembled America’s dominance in computer processing. In the last couple of years, Intel has fallen behind however.

Third Point noted that:

 “The loss of manufacturing leadership and other missteps have allowed several semiconductor competitors to leverage TSMC’s and Samsung’s process technology prowess, and gain significant market share at Intel’s expense. Meanwhile, AMD has eaten away at Intel’s share of its core PC and data center CPU markets.”

In an attempt to catch up to its rivals, Intel CEO Bob Swan said in July, that the company was open to outsourcing its manufacturing. Third Point fears that such a decision would mark the end of America’s chip dominance. It would then make East-Asian companies the only chip-suppliers to power everything from PCs, data centers, and critical infrastructure.

Among many considerations, Third Point urged Intel to divest failed acquisitions. This way, Intel can re-focus on making products that serve giants like Amazon, Apple, and Microsoft, who are currently developing their own chip designs and manufacturing abroad.

The Takeaway:

Historically, Intel has always found a way to climb back to the top. While Third Point’s ideas are sound, there is only so much they can say. If Intel wants to get back up, it needs to regain its leadership in chip technology.

-By Raymond Kanyo

– Published in MarketBites Daily Newsletter

Top Investment Story #2: Fresh Squeezed $LMND

What is Happening?

Since its initial public offering in July, Lemonade has risen 135.62%. Despite the impressive run, $LMND has been volatile over the last week as the firm’s lockup period expired. Let’s take a closer look at what’s going on with Lemonade.

Why does this Matter?

Lemonade’s first lockup period expired Tuesday. Lockup periods and speculation surrounding them, will likely be in the news quite a bit in 2021-given how many popular IPOs debuted in Q4 2020.
Lock-periods or lockup periods are implemented to ensure that company leadership remains intact, and that the business model holds true after an IPO. Company executives cannot liquidate their holdings during a lock-up period.

In anticipation of Lemonade’s lock-up ending, investors dumped shares of $LMND between December 24th and December 29th (-15.16%). Those who held through the week however, were pleasantly surprised when there was not a mass exodus of corporate ownership. $LMND finished up 9.91% after Tuesday’s session.

Lemonade currently operates in renter’s, homeowner’s, and pet insurances in the United States. The firm operates internationally as well, serving policies in various countries across Europe. Much of the excitement from investors has stemmed from the stock’s relatively seamless customer acquisition, and its user-friendly mobile interfaces. Lemonade’s ability to capture younger insurance clients and capitalize on the growing pet insurance sector has been a driving force behind its 2020 rally.

The Takeaway:

Keep an eye out for similar price movements with new IPOs in 2021. Airbnb, Doordash, Wish, and others will certainly experience some sort of volatility around their lockup expiration dates.

– Written By Jack Dunne

– Published in MarketBites Daily Newsletter

Meet the Authors

Raymond grew up in Budapest, Hungary, where he played tennis for the Hungarian Junior Davis Cup team. At the age of 16, he received the Davis United World College Scholarship, which was established by legendary investor Shelby Cullom Davis, allowing him to attend the Taft Boarding School in Watertown, CT. After Taft, Raymond received a Presidential Scholarship to the Robins School of Business at the University of Richmond, where he studied Quantitative Economics and Finance. Raymond is a CFA Level III Candidate. Prior to joining Taylor Hoffman, Raymond worked at various financial institutions in the insurance, asset management, and financial consulting space. Outside of the office, Raymond enjoys playing tennis at ACAC and Westwood Country Club.

Raymond Kanyo
Product Manager & Investment Analyst

Jack graduated from the Robins School of Business at the University of Richmond with concentrations in Marketing and Finance in 2019. Prior to joining Taylor Hoffman, he worked in high-growth B2B SaaS marketing; assisting Fortune 100 firms to improve their web performance experience. A Long Island New York native, Jack’s hobbies include passionately supporting the Mets and Islanders, and he enjoys skiing whenever he can.

Jack Dunne
Investor Education Specialist
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