When you’re right, you’re right.
Hedgeye CEO Keith McCullough pulled no punches during his hour-long conversation on Monday with Fox Business’ Maria Bartiromo where he spelled out his current market and economic concerns, in particular, the growing bubble in social media stocks.
The timing was especially prescient given the bubblicious market spectacle that ensued including Candy Crush’s disastrous IPO, Facebook’s $2B purchase of Oculus, and Twitter getting hammered 9% this week.
As he told Bartiromo, 74% of the companies that have come public in the last six months do not make any money -- only eclipsed by the dot-com bubble in 2000 when 80% of companies that went public didn’t make any money.
“If you’re long the S&P 500, don’t worry,” he joked. “It won’t top for another couple of months.”
Take a look at the video beginning at the 4:15 mark where McCullough advised investors:
“Buy some [social media] protection. While you’re in the rental mode, go buy some protection—bombed out puts, August and September puts in social media stocks.”
“Big social media stocks, don’t forget, are tied to the advertising cycle. The advertising cycle is pro-cyclical. So if we’re at the end of an economic cycle, you’re going to wake up at some point this year—and Twitter looks like it’s already pricing this in—to some kind of a disappointment on revenues from an advertising-based social media stock. That’s what I’d be looking for. I have no idea which one it’s going to be, but you can buy puts on a pretty good basket of those.”
As he wrote in today’s Morning Newsletter:
I know no one wants to call it a bubble. There’s career risk in calling something what it is. But seriously mo bros, with Facebook (FB) -17% since March 10th (coincided with the all-time-bubble-high in US stocks) and Twitter (TWTR) -30% YTD, what’s the fuss?