| | | Market Thoughts: 8/19/24 - Before giving a quick update, I'll be heading out on a two week get-away for R&R. Kind of nice having a standard go-to location that doesn't take a lot of planning like international travel does. I'll still have good service and will be around.
Generally speaking, I bought the last dip we encountered. My biggest purchase were the 12/24 $105 NVDA calls as NVDA traded between $97-$105. Like my position trades, I like to scale into trades like that and not make a 100% full weight purchase because we can't predict the future with any level of certainty. The remaining position is up 81% but I have been scaling it down as the price increased. Taking longer dated calls was my way of reducing risk by capturing two quarters of EPS numbers. Worked well but you know me by now, my "keep greed in check" mantra means that I'll be out early as I make sure good profits don't turn to losses. It's 50/50 as to whether I keep the remaining 1/3 position. I'm still overweight long shares.
Generally speaking, I'm having a hard time adding to positions right now either due to valuation or reluctance by the bounce off the recent mini correction. Historically speaking, when we correct like that, we revisit the lows. In this case, it seems the primary catalyst was fear of recession but it was short lived due to numbers that bolstered the soft landing narrative last week.
I forayed into what I defined as long term trades with ULTA, LULU and BROS on dismal performance and what I thought had a good chance of being lows. So far up 16.6%, 7% and 14.3% respectively. Sometimes luck can be a strategy. While I picked my spots relatively well in my eyes, the Buffett news on ULTA rocketed the name higher and pulled LULU with it. BROS came off of bad earnings but analyst support after selling off about 30%. I had been looking for an entry. All three remain long term holds for me but the ULTA spike has made me consider a quick sale to capture the gain.
This brings up a point about timing bottoms, catching falling daggers, etc. In our investing activities, we all have blind spots and aspects of entry that we may be weak at. Sometimes it's even in our valuation analysis while holding ... holding too long or even selling too early. It's VERY important to understand YOUR weakness points and try to improve them, even if only marginally. For me it has always been bottom fishing, or timing entry for the falling dagger stock.
Historically, stocks making new highs perform better going forward than those making new lows. It makes sense. BUT, that doesn't mean that stocks making new lows aren't good opportunities. That is where fundamental analysis and valuation techniques into the point-in-time of the market/economic environment can pay dividends. But, as we all know ... the latter techniques can play out over a long period of time while the stock price can whipsaw in the short term. My weakness has always been impatience or impulsiveness when targeting long term opportunities facing short term weakness/pressure.
As I told a friend recently, "Even in knowing that I'm usually early and taking that into account, being more patient and waiting before my first entry, I'm still early." Take a look at my recent entries on this thread and it still plays out. I often think many of you that read my trades think "Wow, he's really bad at entries" and it's somewhat deserved. At the same time, since I am such a strong believer of scaling into trades, and averaging into positions, it gives me the opportunity to establish positions over a long period of time, average the price lower if needed, and addresses my weakness of entering too early.
I was actually proud of myself recently while waiting, waiting and waiting on certain issues like LULU, ULTA, DELL, MU, TNA and even NVDA as they fell. But in many of the cases, even as I waited for what I felt was too long, my first entries were still too early. But as I was/am very comfortable with the long term narratives and valuations of those issues I'm targeting, I can even find myself excited when getting another opportunity to average down.
Pro Tip: You just have to be careful about not averaging down too aggressively such that you find yourself at a 100% position with the stock going lower still, forcing you to reconsider your weighting and additional entries.
Whether long term investing or position trading, stop trying to catch the very bottom. It's impossible to predict. This is where discipline and tactical entries can be your friends. Keep entries smaller and wait for your spots. Remember that you can always add later either lower or higher. It always feel good to catch a bottom but like my Buffet catalyst in ULTA, you just don't know.
Recession risk now has been pegged at about 20% depending on which numbers you look at. I think it might be a bit higher but it is seeming to me that the Fed may have orchestrated a soft landing but it's still too soon to call it. They were late on raising rates which ushered in inflation and I think they are late in lowering which could usher in recession. That said, I think any recession or recessionary trends we do so see will be mild and that's a win.
As it pertains to stock, identifying value and opportunity, the cupboard is looking a little bare to me. I do have names on my list and I'm willing to add to some positions (as seen on the thread) but off this recent bounce, I'm not seeing much of anything that is compelling.
My position trades are as follows:
NVDA 12/24 $105 Calls - Already up big and I'm unwinding with 1/3 of the position left.
TNA - Up 13.5% and rising. I think there is a long term trend here to play and I'm holding. 50% position.
AEHR - Up 6.2%. This is a lower tier AI play at the bottom of a range but I'm holding.
CLF - My favorite iposition trader. Down 3.75% but no fear. I've never lost money on this trade.
Recent long term purchases:
BROS - Up 14.5% but looking for additional shares with no hurry. This is a long term build.
LULU - Up 7.5% but a small position as I don't have confidence in the near term narrative.
ULTA - Up 16% on the Buffett news. Pure luck but at least he saw what I saw I suppose.
DELL/MU - Up 22%/5%. Scaled in position trades made on AI weakness. Still want to add more DELL.
NKE - Up 12.3% - Entered due to historic weakness. Nice gain and I've considered selling - But holding.
QCOM - Very recent entry. Up 2.7%. Long term hold and will seek to add.
LYB - Income name. Up 3.5% and looking for maybe one more position.
Trim Candidates:
ABBV - Already trimmed once, Weight at 3.55%. Up 121% w/o div inclusion. Will probably just hold
BRK/B - 3.48% weight. Up 157%. May trim this one next but holding for now.
Positions on the ropes:
WYNN - Have already trimmed this twice. I think it makes for a good entry here but so tired of waiting.
DKNG - Growing weary of waiting on this one but long term narrative is still in play. Trimmed once.
BAC - This financial is the lowest weight of the financials and I may cut it to bolster other fin holdings
Likely next new purchases or additions:
DELL - Looking for one more position
MU - Maybe one more position but was a bit aggressive adding leading to fuller weight already
AMD - I want one more position in this name as NVDA's top rival and doing great things
CRWD - Weathered the storm well after lows. May purchase back part of my last trim but AFTER earnings
LYB - Looking for one more position in this income (5.5%) name
LULU - Looking for one more position but likely not soon. More patience needed
BROS - This is a long term build. Looking for another few legs. Letting it settle.
AMZN - This one is destined to move higher. This may actually be a long term call play for me.
UPS - Like the income, like the price and looking for entry as a long term income hold into downtrend
Names I'm watching closely with no immediate plans to purchase:
ADM - Income plus opportunity
HUBS - Expensive but in the right space and with a lot of upside, but a lot of volatility
VRT - Been watching this AI related play for a long time. Haven't pulled the trigger yet.
CDNS - Watching, waiting and no timetable for entry
ACLS - See VRT and CDNS
That's all for now as we wait for NVDA earnings. This is the quarter that I believe carries the most risk. There's the AI nervousness, potential Blackwell delay news and the risk-reward ratio is much higher. They will stumble at some point which will provide another opportunity for entry. Could this be the quarter? My heart says no but my gut isn't so sure. This may lead me to exit the Call position and carry only the long shares. If NVDA flops, down we go and that's what I'm holding out for on the AI names mentioned above.
If NVDA reports a strong quarter, into the first rate cut in Sept., the longer term trend as we exit Aug/Sept which aren't good for stocks, will be much higher. I can foresee a very powerful move higher as recession fears abate, rates move lower and the consumer gets stronger, all paving the runway for a big leg higher.
IF you believe in this potential, then TNA deserves some attention, though it has already moved well off of lows. I think we're looking at $55-$60 in this name by the end of Sept. in the right environment.
On this thread, I continue to push for objectivity, input, dialog, camaraderie and especially transparency so that all who want to participate can benefit. I've never been shy about sharing successes and failures as we can all learn from them and each other. While I wish we could generate the volume we once had back in 1998-2000, the environment is different now. Not sure there is much of a place for old-school bulletin boards like this, but they sure work well for timeline and historical reference. If you ever want to have some fun. Go back and peruse a few pages of the old posts. Oh my ...
Take care all. Hope these "market thought" missives aren't too long.
J |
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