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Category: Revisits

Contrarian Calls, Revisited: Biden Victory and the ‘Rotation to Value’

Scott Colbert, chief economist at Commerce Trust Company, on the eve of last November’s presidential election predicted a ‘blue wave’ followed by a rotation into value stocks.

“The Democratic turnout is going to be much larger than it was, and that’s enough right there to carry most of those swing states back to the Democratic side,” Colbert said last Oct. 28. “You’re not going to have enough pro-Trump voters to offset that Democratic wave.”

This would lead to “Democrats rolling this thing” and taking back the Senate as well as the White House. The biggest change for markets would be a rotation from growth to value. “It’s the combination of the election and a vaccine,” Colbert said.

Corporate America would be punished in the terms of higher tax rates, which would affect growth companies more than any other segment of the market. This would make growth stocks less appealing to investors. Value stocks would benefit from this development.

“If you’re looking for a contrarian play, I think it’s the rotation to value,” Colbert said.

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Contrarian Calls, Revisited: Quintessential Capital’s Short of Akazoo

Gabriele Grego of Quintessential Capital Management used the inaugural Contrarian Investor Virtual Conference to announce his short of Akazoo (NASDAQ:SONG).

“We believe Akazoo is a scheme orchestrated by management to profit while egregiously deceiving investors,” Grego said during the presentation. “We see signs of very suspicious accounting manipulation,” including cash inconsistencies and “a total lack of income taxes.”

What Happened

Akazoo shares sold off immediately after publication of Grego’s report. After closing the previous session at $2.53, SONG dropped to $2.22. A series of law firms quickly lined up to launch lawsuits against the company.

A week later the stock was trading at $1.14,. The company fired its CEO and Nasdaq suspended trading in its shares. On May 21, an Akazoo special committee of independent directors announced that management and associates “participated in sophisticated multi-year fraud.”

Nasdaq delisted the shares on May 27.

Akazoo has since become a poster child for SPAC misconduct, with the Financial Times devoting an article to Grego and his report (see below).

Shameless Plug Alert: The next iteration of the Contrarian Investor Virtual Conference, our fifth, takes place Dec. 10. Get tickets here.

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Contrarian Calls, Revisited: Value Stock Geek’s Bullish Take on Certain Retail Stocks

Value Stock Geek, well known by his Twitter handle @ValueStockGeek, was bullish on shares of certain retail companies.

Speaking on the podcast in June 2019, the guest said E-Commerce had not yet destroyed old-fashioned retail commerce. “The retail sector is now a hated and beaten-up sector and it’s mainly because of Amazon and E-commerce,” he said at the time. “But I think the current narrative is overblown…right now, E-Commerce as a percentage of retail sales represents about 10% of all retail sales. That means that 90% of all retail transactions still happen in the store.”

Value Stock Geek’s favorite stocks were Dick’s Sporting Goods (NYSE: DSK) and Urban Outfitters (NASDAQ: URBN).

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