Workhorse Group (WKHS): Buy the dip?

Key Points

• The stock market didn't manage to get out of the red zone for another day despite a steady upward direction throughout the day.
• Shares of Salesforce.com (CRM) are up more than 2% after an upgrade by Morgan Stanley.
• Should you buy the dip in Workhorse (WKHS) considering the legal attempts to revive the USPS contract?

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​Overall Market

The Stock Market Didn't Manage to Get Out of The Red Zone for Another Day Despite a Steady Upward Direction Throughout The Day

All three indices finished Wednesday in the red. They also started the day deeply in the red and despite a steadily upward movement throughout the day, none of them managed to pass the zero line into the green zone.

The way I see it, there are three contrary points of view circulation around:

1. Some investors believe that the Fed may ease its favorable policies now that the economy is on track and inflation is above target. 
2. Other investors worry that the Fed misses the signs and does not take the required action before inflation spreads.
3. And, the third and perhaps the most interesting point of view is that the U.S. is headed for deflation and not inflation. ARK Invest and Cathie Wood are the faces of such a deflation hypothesis. 

The third deflation possibility is a quite interesting and contrary point of view. It is undoubtedly the one I tend to agree with, the more I gather information about the reasons behind the current inflationary forces, including the panic-buying of businesses and the catch up they are playing with the demand. If the third point of view is correct, we have a unique opportunity to buy the dip in several tech stocks, among many others that are shaping the future. Time will tell who is right.

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​What's Up

Shares of Salesforce.com (CRM) Are Up More Than 2% After an Upgrade by Morgan Stanley

I explored the "watchlist ideas" page on Stock Card and noticed shares of Salesforce.com (CRM) were up by more than 2%. The company is now a rare "4-greener." A 4-greener stock on the Stock Card platform is a company with a robust market opportunity, solid operations, and history of outperforming the market that happens to be undervalued. 

Salesforce got an upgrade by Morgan Stanley today, and I won't be surprised to see the stock's upward movement continue. Cash-rich, profitable, and growing companies do not stay undervalued for quite long. 
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I own some shares and plan to hold for quite a while. 

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​What's DOwn

​Should You Buy The Dip in Workhorse (WKHS) Considering The Legal Attempts to Revive The USPS Contract?

For the loser stock of the day, there wasn't any particular company that grabbed my attention. I looked into the requests that are sent through by Stock Card users. Quite a few people were asking about Workhorse (WKHS), so let's do some digging together. 

A quick history about Workhorse is that the company was on its path to get United States Postal Service as a customer of its electric delivery trucks. The contract didn't go through, and the stock nose-dived after that. The question we need to answer is whether there is life for Workhorse without USPS.

At the first look, the company has growing sales, earnings have turned negative in the last 12 months, and despite not generating any free cash flow, it has a solid balance sheet with no cash concerns. This tells me the company can fund itself for a while before the next major customer shows up. 

Moreover, Workhorse is still among the top 25 holdings of ARK Invest autonomous ETF for its delivery trucks and Ark's space ETF for its drone product. However, ARK has sold some shares recently. 

In the end, had I owned a few shares, I would have held them. It seems the company is going after the USPS contract with some legal power. However, for me to buy, I would want to see the evidence that the company can find other customers beyond USPS to grow. Alternatively, if you have done your research and know Workhorse has a unique technological advantage over other EV truck manufacturers; that might be another reason to jump in. I just don't have such information to justify jumping in now. 

There is also a small likelihood that the legal attempts to revive the USPS contract pay off and the stock rallies. If you are betting on that, make sure you know that you are betting on an outcome the company has limited power over. It's a risky bet. It may or may not pay off. 

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