Testing: Six Twenty 2020

Among what may be learned in two fundamentally different philosophies, capitalism, and socialism. Clearly, the question rests in asking- which is more, value economy or a welfare of people? While scholars may debate the moral aspects of these points of view. How these ideas are expressed outside a theoretical construct may be seen right here and now. Tomorrow Tulsa Oklahoma has lifted its curfew amid the COVID-19 pandemic as the courts reject the view of having the rally as a public health issue due to anticipated predictions relating to exposures to the SARS-CoV-2 virus, the virus responsible for COVID-19 disease. How might these events translate in terms of value economy, because we understand the welfare of people in terms of rise in positive COVID cases against the number of people tested.

It is no surprise that there is a controversy surrounding having the rally because coronavirus taskforce officials have advised against large indoor gatherings during this time (as Oklahoma’s COVID positive numbers rise). The concern is that having such events during a time when the COVID positive test numbers are high and that many out of towners will be in attendance suggests the risk of a super-spreader event for the virus. “White House press secretary Kayleigh McEnany told reporters during a briefing on Friday afternoon that precautions would be taken, including conducting temperature checks upon entry and providing rally attendees with hand sanitizer and masks. She emphasized, however, that wearing the masks would not be required. "I won't be wearing a mask," she said. "It's a personal decision. I'm tested regularly. I feel that it's safe for me to not be wearing a mask, and I'm in compliance with CDC guidelines, which are recommended but not required" [1].

““I wish we could postpone this to a time when the virus isn’t as large a concern as it is today,” Tulsa health director Bruce Dart told Tulsa World newspaper last week. “It’s an honor for Tulsa to have a sitting president want to come and visit our community, but not during a pandemic.” America’s top infectious disease expert, Dr Anthony Fauci, meanwhile, said he would not attend an in-person rally, like Tulsa, at this point in the pandemic.

“Personally, I would not,” he told the Daily Beast. In terms of spreading Covid-19, Fauci said this week, “Outside is better than inside, no crowd is better than crowd …crowd is better than big crowd”” [2].

But the country, it has been stated, is open for business and will not shut down again. So, what does this mean? We can infer that the rally acts as a litmus test for future gatherings, and platform of success shared with the media which may impact, by implication, stock market outcomes. Therefore, one may ask why is such a test experiment as the rally so important? Naturally, the shorter view is the political one, however, that aside… what can be understood and applied through this exercise.

In looking at actuary tables regarding case fatality rates (CFR) it can be learned that, “To paint a very broad picture, if we assume a CFR in the 0.5% to 1.0% range (in line with the ‘outside Hubei’ COVID-19 figures to date, and the 1957/68 pandemics), this could lead to, as a plausible order-of-magnitude conjecture, a doubling of mortality in a country such as the U.K. – that is, an overall doubling of population mortality, not a doubling of mortality for infected cases. This would be a bad outcome (and is not a ‘best estimate’ prediction), but it is plausible.

Moreover, the above broad-brush perspective deliberately overlooks various likely and material indirect impacts. The likely surge in patient volumes at healthcare facilities related to a sustained COVID-19 outbreak in any country could mean a corresponding squeeze on access to care (and hence, increased mortality) for patients already suffering from other serious conditions in secondary care. There will be an equivalent but less severe effect at the primary care level. Quarantine and self-isolation will also have a detrimental effect on those suffering from chronic conditions at home. The healthcare workforce will itself be depleted by absences. Furthermore, supplies of medicine taken for granted will potentially be adversely affected by production supply chain issues” [3]. The Oklahoma City Daily COVID-19 Data Report’ shows a “Case Fatality Rate” of 5.33% citywide (https://www.okc.gov/home/showdocument?id=17258) [4].

Okay, so the outcome of having a rally is to share the success of it with the world. This translates internationally in support of one of the two ideologies described herein; capitalism- ergo, the economy will respond to this news.

While there have been “bridges” to support the economy in the form of stimulus packages (and another likely on the horizon), the sharp economic decline has largely been artificially induced; the economy was strong until the pandemic. Therefore, the stock equity market stability [and volatility] becomes largely hinged on confidence-based conclusions. “To be blunt, the performance of the overall index is misleading. It masks weakness at the individual stock level. The S&P 500 may be only 15% from its all-time high, but the median stock is still down 25% from its respective 52-week high. The technology sector is up ~1.5%, but the energy sector is down 38%. The software industry is up almost 15%, but airlines are down 63%. Investors have split what they think are “winners” (mainly technology and healthcare) from the “losers” (including financials, travel and energy). Concentration at the top is also indicative of broader weakness as investors flock to the safety of the largest companies with the clearest growth prospects. The top-five stocks in the S&P 500 haven’t made up this large a share of the overall index in over 40 years. The index may suggest that stock investors are optimistic, but a look under the surface tells a very different story. The S&P 500 may be only 15% from its all-time high, but the median stock is still down 25% from its respective 52-week high. The technology sector is up ~15%, but the energy sector is down 38%. The software industry is up almost 15%, but airlines are down 63%. Investors have split what they think are “winners” (mainly technology and healthcare) from the “losers” (including financials, travel and energy)” [5].

Thinking about tech stocks; in terms of software, “Microsoft (MSFT), Adobe Systems (ADBE), ServiceNow (NOW) and Atlassian (TEAM) are on the IBD Leaderboard.

Microsoft has pivoted to cloud computing and software-as-a-service. It was recently was featured as an IBD Stock of the Day, giving readers a close look at its technical and fundamental performance.

ServiceNow's self-service tech portal enables company employees to access administrative and workflow tools. Also, Atlassian sells collaboration tools for software developers and tech departments.

Software Stocks With Solid Relative Strength Ratings

Microsoft, ServiceNow, and Adobe belong to the IBD 50 roster of fast-growing companies. Veeva Systems (VEEV), Zoom Video Communications (ZM) and Workday (WDAY) also are members of the IBD 50.

According to IBD Stock Checkup, several software growth stocks own Composite Ratings of 99 out of a possible 99. IBD's Composite Rating looks at technical and fundamental factors. They include relative price performance, earnings growth and return on equity.

Software stocks with Composite ratings of 99 include ServiceNow, RingCentral (RNG), Coupa Software (COUP), DocuSign (DOCU) and Zoom Video. DocuSign software digitizes contract paperwork. With business travel restricted, more companies are closing deals using electronic signatures.

Shares in ServiceNow, DocuSign, Coupa and Dynatrace (DT) hit 52-week highs on May 20.

Work-at-home directives during the coronavirus emergency have boosted Zoom Video and RingCentral. RingCentral recently added a videoconferencing service to its workplace collaboration tools.

Coupa, which has pushed into artificial intelligence tools, was featured in IBD's New America section.

Some software growth stocks popped on first quarter earnings results or guidance. They included ServiceNow, Datadog (DDOG), Twilio (TWLO).

Twilio's tools enable app developers to embed voice, text messaging and video into their products. Datadog operates a monitoring and analytics platform for software developers and information-technology departments” [6].

So, what kinds of stocks have been avoided under coronavirus positive case acceleration concerns? “Richard Blum, sold shares of the biotech company Allogene Therapeutics on Jan. 31 that were worth between $500,000 and $1 million” [7]. “Bright Horizons is the nation’s largest provider of employer-sponsored child care.

The Jan. 27 sale involved sales of stock in five companies: Paypal, Intuit, Danaher, Brookfield Assets Management, and Apple.

Paypal, Intuit and Apple are all tech companies. Danaher is a conglomerate involved in, among other things, medical research and cellular biology. Brookfield Assets Management is a multinational invested in real estate and renewable power.

Inhofe also sold Brookfield stocks valued at $50,000-$100,000 on Feb. 20, when the Dow Jones Industrial Average hit its all-time high” [8].

“Ms Loeffler’s disclosures included $250,000 to $500,000 worth of total purchases on February 14 of stock in Oracle, the database software seller, and Citrix, which sells teleconferencing products [9].

“The record of Mr. Burr’s stock transaction shows he and his wife sold 33 different stocks on Feb. 13 that were collectively worth $628,000 to 1.7 million, according to the disclosures filed with the secretary of the Senate. Those sales include as much as $150,000 worth of stock in two hotel chains, Wyndham Hotels and Resorts and Extended Stay America. The values of both companies have declined significantly in recent weeks. He also sold as much as $65,000 worth of stock in Park Hotels & Resorts” [10].

Now that there is a precedent for what kinds of decisions a few people have made to protect profits during COVID positive case climbs. But here’s what’s being said about stocks to invest in, “Microsoft (MSFT), Epam Systems (EPAM), Dexcom (DXCM), Five9 (FIVN) and Cloudflare (NET) are looking stronger as the stock market continues to bounce back from the severe coronavirus correction. Remember, there are thousands of stocks trading on the NYSE and Nasdaq. But you want to find the very best stocks right now to generate massive gains” [11]. “Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), Alexion Pharmaceuticals (NASDAQ:ALXN), Broadcom (NASDAQ:AVGO)” are 3 top stock picks of Fool.com [12].

The companies mentioned in the previous paragraph are established, to a degree. That said, for those interested in a bit more risk- in 2014, cmswire.com put together a list of 100 of the fastest growing software companies. Why am I including software companies… because, they offer a unique platform immune to many of the problems inherent in other business models. “Deloitte's Technology Fast 500 is a listing of the 500 fastest-growing technology, media, telecommunications, life sciences and clean technology companies in North America. For the nineteenth consecutive year, the software sector has been the most visible on this list, with over 230 companies being from this space alone.

We sifted through the list to focus specifically on software companies, since we figured they are likely the most interesting to the CMSWire audience. There are a lot of familiar names among the 100 fastest growing software companies on the list, including *Rocket Fuel (https://rocketfuel.com/), Acquia (https://www.acquia.com/), Cloudera (https://www.cloudera.com/), Marketo (https://www.marketo.com/) and TubeMogel (https://www.tubemogul.com/). But 17 software vendors had even better five year growth rates than Acquia. MobileIron (https://www.mobileiron.com/en), for instance, a provider of mobile enterprise security, had an unbelievable five-year growth rate: 123,678 percent!” [13]. (* In researching and factchecking for this piece, I was unable to locate the company Rocket Fuel; perhaps the website was simply failing to load, however, the stock exchange is listed as NASDAQ, with the current symbol listed as NASDAQ:FUEL.)

In looking at MobileIron [14] (NAS:MOBL), GurusFocus.com shows the company with a 554M market cap and a gross margin of 79% [15]. Fortune.com reminds us to consider such companies as; Netflix, Paycom Software, Amazon, Facebook, Align Technology, Adobe, Salesforce, and many others with its 2019 list of “100 Fastest-Growing Companies” [16].

Consumer confidence is at the time of this writing still low. And, while true; the stock market is not the economy, “Some prominent tech companies at the top of the market (such as Microsoft, Apple and Alphabet) actually have reason to think the pandemic could shift business in their favor, with so much emphasis placed on digital shopping, communication and entertainment. And the rise of algorithm-based trading has insulated markets somewhat from the shocks that could be created by big news events, such as political developments or the protests against racial injustice currently sweeping across the country, since dispassionate algorithms don’t get worried or scared by the news the way humans do” [17].

There you have it; a number of ideas to think about regarding testing, and markets mind tethered to capitalism translated in the social. There are a number of events at odds and yet interconnecting; protests to open up, demonstrations regarding human rights, the desire to gather and conduct large-gathering rally contrast physical distancing, personal protective gear and heightened hygiene focus regarding pandemic spread and super-spreader events… capitalism contrast socialism: two fundamentally opposed philosophical positions.

David Wilson is an author holding a bachelor’s degree in anthropology, and as such is not qualified to provide investment advice. The article is based on observations gleaned through a limited research of some websites; and of those sites, they are listed herein as sources.

Happy Juneteenth! Happy Summer. And, happy "Ring of Fire" Eclipse.

Remember your power to vote.

SOURCES:

[1] ‘Tulsa Curfew Lifted, As Court Rejects Public Health Challenge To Trump Rally’ https://www.npr.org/2020/06/19/880986830/tulsa-curfew-lifted-as-court-rejects-public-health-challenge-to-trump-rally

[2] ‘Coronavirus taskforce officials advised against Trump's Tulsa rally – report’ https://www.theguardian.com/us-news/2020/jun/19/oklahoma-officials-ask-trump-written-plan-keep-rally-safe-amid-coronavirus-pandemic

[3] ‘COVID-19 (coronavirus): An actuary’s perspective How the spread and mortality rate of COVID-19 might affect insurers and healthcare’ https://www.willistowerswatson.com/en-US/Insights/2020/03/COVID-19-coronavirus-an-actuarys-perspective

[4] ‘COVID-19 Oklahoma City Daily Data Report’ OKC.gov CFR 5% citywide

[5] ‘Why stocks rally while the real economy suffers’ https://privatebank.jpmorgan.com/gl/en/insights/investing/why-stocks-rally-while-the-real-economy-suffers

[6] ‘Software Growth Stocks To Buy: Recurring Revenue A Big Plus Amid Covid-19’ https://www.investors.com/news/technology/saas-stocks-cloud-stocks/

[7] ‘Sen. Richard Burr steps down as Senate intel chair during probe of coronavirus stock sale’ https://www.cnbc.com/2020/05/14/sen-richard-burr-steps-down-as-senate-intel-chair-during-coronavirus-stock-sale-probe.html

[8] ‘U.S. Sen. Jim Inhofe responds after stock deal draws scrutiny’ https://www.tulsaworld.com/news/u-s-sen-jim-inhofe-responds-after-stock-deal-draws-scrutiny/article_0165940a-44ca-57fb-983e-7ebce0a6254b.html

[9] ‘Two US senators sold shares after receiving virus briefing’ https://www.ft.com/content/e3a82b44-6a3f-11ea-800d-da70cff6e4d3

[10] ‘Senator Richard Burr Sold a Fortune in Stocks as G.O.P. Played Down Coronavirus Threat’ https://www.nytimes.com/2020/03/19/us/politics/richard-burr-stocks-sold-coronavirus.html [NOTE: The page purporting to detail the Richard Burr transactions had technical difficulties at the time of this writing- https://www.propublica.org/article/senator-dumped-up-to-1-6-million-of-stock-after-reassuring-public-about-coronavirus-preparedness 

[11] ‘These Are The 5 Best Stocks To Buy And Watch Now’ https://www.investors.com/research/best-stocks-to-buy-now/

[12] ‘3 Top Stocks That Will Make You Richer in June (and Beyond)’ https://www.fool.com/investing/2020/06/02/3-top-stocks-that-will-make-you-richer-in-june-and.aspx

[13] ‘Who Are the 100 Fastest Growing Software Companies?’ https://www.cmswire.com/cms/customer-experience/who-are-the-100-fastest-growing-software-companies-027183.php

[14] ‘MobileIron UEM: The foundation of a secure enterprise’ https://www.mobileiron.com/en

[15] ‘MobileIron Gross Margin % : 78.12% (As of Mar. 2020)’ https://www.gurufocus.com/term/grossmargin/NAS:MOBL/Gross%252BMargin/MobileIron%2BInc

[16] ‘100 Fastest-Growing Companies’ https://fortune.com/100-fastest-growing-companies/search/?

[17] ‘The Economy Is A Mess. So Why Isn’t The Stock Market?’ https://fivethirtyeight.com/features/the-economy-is-a-mess-so-why-isnt-the-stock-market/