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A new Meme Stock: Wendy’s (WEN)

6/8/2021

 

​Key POints

  • A Mixed News Day Resulted in a Mixed Market 
  • Retail Traders Find Their Newest Meme Stock: Wendy’s (WEN)
  • The Recent Dip in MarketAxess' Stock (MKTX) May Be an Excellent Buying Opportunity

​Overall Market

A Mixed News Day Resulted in a Mixed Market
Picture
After a volatile day, the market closed with a mix of green and red.

A few economic news and indicators pulled the market in opposite directions today, like a yo-yo. 

For one, the Treasury Department released its U.S. Trade Deficit Data. March’s $75 billion goods and services deficit was the highest level we have seen since 1992. April narrowed the gap by about $6 billion, causing the 10-year Treasury yield to fall slightly. 

President Joe Biden has been going through the back-and-forth legislation discussions surrounding a new infrastructure bill. A White House study found critical supply chains to be very dependent on imports, and Democrats are preparing the bill tomorrow for a vote in the House. They hope to aid domestic manufacturing and production. 

​What's Up

Retail Traders’ Newest Meme Stock: Wendy’s (WEN)
As I went through the winners and losers list of stock on Stock Card, I noticed Reddit and retail investors have crowned their most recent meme stock, and it’s none other than your favorite fast food restaurant: Wendy’s (WEN). 

The birthplace of the Baconator saw a 25.85% rise in its stock price by market close. This comes unexpectedly at the hands of the infamous Wallstreetbets sub-forum. Investors piled on today, claiming that a small retail share float and a meme-savvy marketing team is the perfect firestarter.
​
Despite such technical reasoning and hype, the company's operations and fair share price calculations don't support this new price. For example, during the COVID-19 shutdowns, Wendy’s did not hold up as well compared to its competitors. Looking at the company's revenue in the last fiscal year, it seems it only grew by 1.45%. Moreover, based on the common valuation ratios such as price-to-earnings or price-to-sales ratio, the stock is overvalued. 
​
The stock may be a good addition to a dividend-paying portfolio, but even that is questionable because of its high debt-to-equity ratio. Overall, aside from betting on the meme-driven upside potential, the stock doesn't seem to be a solid pick at this point.

​What's Down

MarketAxess (MKTX): Buy The Dip?
As we exit the pandemic chapter, we see many pandemic-era stock prices are adjusting and consolidating. For example, from my 2021 Watchlist, look at MarketAxess (MKTX). The stock is down to $440 per share from its 52-week high of $660 per share. 

MarketAxess (MKTX) deals with trading fixed-income securities. Credit volatility plays a big part in its business model. Therefore, whenever it announces a decline in trading volume, investors' sentiment turns bearish. Lower volume affects its fees, commissions, and ultimately revenue.

Despite such short-term volatility impact let's not forget that securities and bonds are integral parts of the financial world, and MKTX is a leader in the field. Judging by its Stock Card, the company has solid operations, a track record of beating the market, it's profitable, and generates free cash flow.

With the recent price fall, it’s worth considering picking up some shares. This is a great opportunity to get exposure to the bond market without directly investing in them.

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