Wake-up Call!
"Place your hand over your heart, can you feel it?
That is called purpose. You’re alive for a reason so don’t ever give up.”
- Unknown
The Portfolio
The portfolio is UP +29.67% YTD. (as I'm writing)
Our benchmark index, the S&P 500 is up about 3.75% YTD.
Today's market decline is a wake-up call
Investors decided to take a breather from the constant rallies in a small group of names focused mostly on technology. This morning I see that the S&P 500 leaders are Carnival Cruise Lines, PVH and COTY. A cruise line, dressier apparel and cosmetics. The talking-heads on the TV financial news are scratching their heads looking for an answer; it's simple, we continue to get good news about a vaccine and COVID-19.
Pfizer is saying they might have a vaccine out in October, the Federal government is preparing to have nationwide vaccination sites setup and ready to receive vaccines by November 1st (yeah there's no magic in that date...right). Investors are simply taking some of their big gains from "work-from-anywhere" stocks and reinvesting it in "re-openning stocks".
Tom Lee, one of the Wall Street strategists who called the market comeback following the coronavirus-induced sell-off, is becoming even more optimistic about further market gains as daily cases start declining. On August 24th, Lee illustrated that just over 36,000 additional cases were confirmed on Sunday August 23rd. The importance of that figure is that it's about 5,000 cases less than the previous Sunday. Lee used data from Johns Hopkins University to confirm that cases have remained below 50,000 since Aug. 14, when more than 60,000 new infections were confirmed. Lee's research pointed out that daily cases have been falling by 7,500 to 10,000 on a seven-day basis. If this continues, Lee said the U.S. daily infection rate will fall to under 10,000 in September.
As cases decline, the re-openning trade will become more important to traders. Watch for banks, oil, retail, consumer discretionary stocks to rally. Anything in the most beaten down sectors will be the next Robinhood trade because that's where the most value can be found in an over-valued market. Long term investors will already be in those companies and will benefit from the rally that occurs, not from revenues and earnings, but simply from the buying from traders.
I'm Looking where the puck is going
While short-term traders race to those beaten down names, that were initially beaten down for declining earnings and revenues; I'll be looking at the stocks those investors are dumping. In particular I'm watching Advanced Micro Devices (AMD). AMD is my favorite semiconductor stock outside of Nvidia (NVDA). What I like best about AMD is their ability to deliver great technology, rapidly, at low cost. Their excellent execution has enabled the company to capture nearly 20% market share in each of their primary market segments in 2 years or less. The company now has it's sights set on the data center segment. With Intel suffering from a significant manufacturing delay, AMD will deliver a lower cost solution for data center servers and steal market share from Intel. Capturing a 20% data center share should lift AMD stock above $100/share. The current decline in tech stocks is the opportunity I've been waiting for to grab a position in AMD. I've established a limit order to by 20 shares at $79. I have a $114 12-month price target on the stock.
My limit order at $79 will require some patience, but the portfolio doesn't have much cash so I need a better price. Another approach is to determine your full position size and then average into the stock at ever lower prices. If I miss the $79 price I'll either have to pay up or wait longer. Pick the strategy that's best for you.
I'm Riding To Save Lives
The Distinguished Gentleman’s Ride And Movember Are Working Together To Tackle Men’s Health Issues.
Please join me, thousands of other riders along with The Movember Foundation Partners; Red Bull, Triumph Motorcycles, Elf, Hedon, Belstaf, SKRAM, Bridgestone and Pipeburn.
"This year, tackling suicide prevention is more important than ever.
Shelter in place, lack of work and an uncertain future are a worse case scenario for those dealing with depression"
