This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking markets in general with Randy Frederick, VP of trading and derivatives at Schwab, and SPACs with Chris DeMuth, founder of Rangeley Capital, and editor of Seeking Alpha Marketplace service, Sifting the World.
While Frederick believes things are looking frothy right now, he reminds that frothiness doesn’t necessarily mean a market downturn is in store, but instead that markets are vulnerable to a sizable dip. His advice for these times - scale into positions, and don’t be too quick to try and buy bottoms.
Frederick made a prescient bullish call on the financial stocks (XLF) when he last appeared on Alpha Trader in October, and he and team continue to have an outperform rating on the sector today. Alpher takes note of the vaccine, another fiscal stimulus bill and super-easy monetary policy as behind what might be a big move higher in economic growth, the yield curve, and the financial names.
DeMuth isn’t ready to call the SPAC boom any sort of bubble, instead noting that SPACs are disrupting what’s been a broken IPO process. The large numbers of companies going public (via SPAC), he says, are simply “clawing back” what’s been decades of more and more companies remaining private and not becoming publicly traded. More of the venture capital world is moving into the more transparent and more accessible world of public companies.
When DeMuth last appeared on Alpha Trader in July, he was bullish on recently gone-public Pershing Square Tontine Holdings (PSTH), and he remains so today, even after more than a 50% rise in shares despite no deal being announced. DeMuth fully expects Bill Ackman and team to announce a merger target before the end of Q1.
As for the criteria DeMuth looks for in a SPAC, they remain the same: Among them, an experienced team (SPACs that have Roman Numerals after their name are always worth a look), and large enough size to purchase well-known brands.
There’s plenty more, including the one other sector Frederick has an outperform rating on, and a few of DeMuth’s other SPAC picks.
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