Bouncing Back: Market Insights and Portfolio Updates
November 5, 2023 Update
We finally got a bounce after several negative weeks. Looking at the Equal-weight SP500 ( RSP 0.00%↑ ) we are back within the consolidation box I have been following for some months. Let’s see if we can stay within this box or if we’ll be testing the recent lows.
What fueled the bounce last week? We finally got a strong decline in the 10-year treasury yield (see below). The FED meeting of last week reassured the markets that the current levels of interest rates might be the “top” and from here we might see rates start going down as soon as inflation moderates.
A not-negative FED meeting coupled with an oversold market created the conditions for a bounce.
Also, oil prices are not sending worrisome signals as the price of the $BRENT closed at $85 and down for the week.
So what’s next? Here is my take in a nutshell:
The macro and geopolitical environment remains challenging to read
The odds of a recession next year are still on the table
Credit markets keep getting tighter which is a negative
If the 10-year treasury stays around current levels or starts trending lower, we can see the market trending up again
Seasonality is on the side of the bulls and we might experience a market trending up till Christmas
The best course of action is to stay prepared for a trap and manage risk accordingly using tight stop losses on any new purchase
Now to my POTS (Portfolios)
It’s been a long time since the last time I touched my long-term portfolios.
Let’s check the health of my holdings.
10X LARGE-CAP LONG TERM PORTFOLIO
I look for companies that can return a high % for every dollar invested in the business (ROA), that are expanding by investing in the business (ASSET GROWTH), that are highly profitable (Earning Margins), that are growing fast (High Revenue Growth & Revenue Forward) and, finally, companies that are undervalued.
Looking at the table above, I like SQ 0.00%↑ , SNAP 0.00%↑ , and FSR 0.00%↑ here. Tomorrow I will add to each of these positions. Fisker is the riskier as is a new company introducing an electric car (The OCEAN) for the first time in its history. That’s why the numbers are all over the place as they have just started to ramp up sales and deliveries now. The company is valued at 1.6 BN and could grow significantly from here.
Now two 2 new additions to my Long Term Portfolio: I am adding PYPL 0.00%↑ (Paypal) as it is really undervalued here while it is improving in profitability at the same time.
Then I am adding SMCI 0.00%↑ (SuperMicroComputers) as is a fast-growing company supplying the hardware needed for the AI revolution. Still relatively small and undervalued.
SMALL CAP LONG TERM PORTFOLIO
In this case, I’ll be adding to MGNI 0.00%↑ and PERI 0.00%↑ from the existing names in the portfolio.
On top, I’ll be adding 3 new names to the portfolio:
DNA 0.00%↑ (Gingko Bioworks), a company getting into profitability and that is improving across the board. It could be a big winner. Yet it is a speculative name.
Then I am adding ACMR 0.00%↑ another small cap in the semiconductor industry, showing great numbers and with lots of potential growth ahead.
Last, I am adding to GENI 0.00%↑ , a company supplying technology to the sports industry, growing fast, profitable, and getting better across the board.
That’s all. I’ll review my long-term Portfolio by the end of the year again.
Now to my MOMENTUM POTS.
For my LARGE CAP MOMENTUM Portfolio where I own PDD 0.00%↑ only right now, I’ll:
create a BUY STOP order for 60 shares of DKNG 0.00%↑ at $34 and, if triggered next week, I’ll place a Stop Loss at $28.9
DraftKings is breaking out on high volume at has been overperforming the SP500 for many months now. Let’s see if it can ride more from here.
For my SMALL CAP MOMENTUM Portfolio where I own ML 0.00%↑ (+20% so far), I will double down on ML 0.00%↑ as follows:
I am entering a BUY STOP order for 85 ML 0.00%↑ shares at $24. If triggered, I’ll place the new Stop Loss for the entire position at $17.8
And that’s it for the week.
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Let’s see what the markets will bring us next week!
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Important: This is not investment advice. Consult a licensed financial advisor before making any investment decision.