General stocks
The stock market has taken a large chunk of the news recently. The inverted yield curve has captured the public's attention feeding into investors fears about an impending recession. While there is reason to fear an economic downturn at some point in the near future, there is really not much to fear on the short-term at least. First, consider this. The US macroeconomic picture is very strong - low unemployment, record company profits, and low inflation. To top it off, a low interest rate (and in a historic context, a very low interest rate at that) means investors will have few options to park their money aside from bonds. As Janet Yellen pointed out, the inverted curve is likely a false signal in this case (and it won't be the first, an inverted yield curve in the 60s did not precede a recession).
Another reason we should not panic about this --and it pains me to say it-- is Trump. Part of the way Trump has managed his presidency is creating crisis that he then proceeds to solve, crediting himself. In this case, he would likely use the tools available to him to levy the stock market: lifting the tariffs by accepting less-than-promised conditions from China. This would lift the stock market almost immediately on announcement.
The bottom line is this: if your investment strategy is ETFs or other whole-market investment vehicles, don't try to time the market. It's a fool's errand. Keep calm and invest as usual. Whatever you may buy now when the DOW is at the 25K-26K mark is a huge earning potential in the years to come.
Stocks in focus
One of the biggest movers this trading session was Harrow Health Inc. (HROW), which saw its price slashed by a whooping 23.59% during the trading session yesterday. The investor panic was triggered by a 10-Q filing, indicating the company's park facility will surrender its pharmacy license by the end of the month. Investor panic led to a large sell-off, erasing about 50 millions of the company's worth. This even prompted a law firm to launch its own investigation into whether there is cause for class action lawsuit.
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| Huge drop in HROW value |
But a more careful look at the situation reveals a less dire situation. The facility is specialized in non-ophthalmic products. Ophthalmic products, through its ImprimisRx subsidiary, are the company's main revenue driver. The facility, which was to be sold anyway, would not have a significant impact on the company's revenue. Moreover, the company has shown consistent revenue growth over the past few months, with several spinoffs focused on multiple markets (including female hygiene and ophthalmogic antibiotics). With an estimated annual revenue of approximately 50M by the end of this year, the company is certainly undervalued in terms of its current and potential earnings.
In this case of massive sell-off, the market has been irrationally reactive rather than proactive. Another instance of this happening today was GE's stock decline, but that's for another day.
