Economic Growth, Inflation and Portfolio Management
Economic Growth, Inflation and Portfolio Management
April 7, 2024 Update
First, the market. Looking at the NASDAQ weekly chart:
We are at the same levels we were at the end of February. The chart is still healthy from a mid-term perspective but is clearly showing signs of tiredness here, with the MACD indicator that looks ready for a bearish cross. Although volume has been below average in the last few weeks, the chart is suggesting caution.
The price of Oil popped up last week (+4.45%):
And the 10-year treasury yield also moved up with vigor:
Economic indicators are pointing to an economy that is accelerating, which is a good thing unless inflation gets out of control.
That’s what we need to keep monitoring.
Next week we’ll get the CPI number for March 2024 and again, strong deviations might move the market one way or another.
SECTORS & INDUSTRY GROUPS
Looking at the last 6 months, Energy and Industrials are the strongest sectors on top of Tech which is taking a bit of a break, and Materials. It speaks of a strong economy:
Looking under the hood, you can see the strongest industry groups, again, speaking of expectations of an economy getting stronger:
PORTFOLIOS
10X LARGE CAP MOMENTUM
The Portfolio looks good here. This week I am adding 23 shares of FSLR 0.00%↑ if it touches 163.3 USD. In this case, my first Stop Loss will be placed at 152USD.
Firstsolar is in the solar business (https://www.firstsolar.com/). Below is the weekly chart and the last earnings call as analyzed with the help of ChatGPT:
Reasons for Optimism:
Strong Financial Performance and Guidance: First Solar reported EPS of $3.25, beating expectations, and projected significant earnings growth in 2024, with EPS guidance of $13 to $14. The company's financial strength is further underscored by a robust net cash position.
Expanding Manufacturing Capacity: The company is on track to significantly expand its global manufacturing capacity to 25 gigawatts by 2026, with substantial capacity located in the U.S. This expansion supports the increasing demand for solar modules and positions First Solar to benefit from policy incentives.
Record Contracted Backlog: First Solar ended the year with a contracted backlog of 80.1 gigawatts, demonstrating strong demand for its products. The backlog includes high average selling prices (ASPs), indicating the company's strong market positioning.
Innovation and Technology Advancements: First Solar continues to invest in research and development, achieving record conversion efficiencies and launching new products like the first bifacial thin film solar panel. These innovations are expected to drive future growth and maintain the company's technological leadership.
Policy Support and Market Opportunity: The company is benefiting from favorable policy environments, such as Section 45X tax credits in the U.S., which enhance its competitiveness and profitability. First Solar's advocacy for fair trade policies also aims to protect and grow its market share.
Reasons for Pessimism:
Market Oversupply and Pricing Pressures: The solar industry faces challenges from global oversupply and pricing volatility, primarily due to Chinese competition. These conditions could affect First Solar's ability to maintain its premium ASPs over time.
Policy and Political Uncertainties: Changes in the political landscape or adjustments to renewable energy policies, both in the U.S. and globally, could impact First Solar's business environment and its ability to capitalize on incentives.
Operational Risks in Expansion: The ambitious expansion of manufacturing capacity introduces risks related to execution, ramp-up costs, and the ability to manage increased operational complexity effectively.
Final Judgment:
Optimistic. First Solar's Q4 2023 earnings call transcript presents a company that is strategically positioned for significant growth, supported by a strong financial performance, expanding manufacturing capacity, a robust contracted backlog, and ongoing innovation. The company's leadership in thin film solar technology and its proactive stance on policy advocacy further enhance its competitive edge. While challenges related to market oversupply, pricing pressures, and policy uncertainties exist, First Solar's strategic investments, technological advancements, and strong market demand for its differentiated products suggest a positive outlook. Therefore, the optimism surrounding First Solar's prospects appears well-founded, with the company poised to capitalize on the growing global demand for renewable energy.
10X SMALL CAP MOMENTUM
Here I need to come up with a better strategy. Have a look at the closed trades:
Most of them, especially in the last 10 months or so, after being kicked out by my Stop Loss… well most of them have run to the upside, a lot. See the red circles.
What are the numbers telling me?
My stock-picking system is good: I can identify small caps with big potential.
My entry strategy is not working well as possibly I am buying “too high” and/or my Stop Loss strategy is too aggressive or prudent.
So, I will try to improve my entry strategy avoiding stocks that extended and better managing my Stop Loss, allowing for more volatility.
Below is my Updated Portfolio:
I like ARIS ESPR MITK PRIM ZETA from my lists, yet they don’t provide a great entry here. So I am adding them to my watchlist.
That’s all for the week!
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Important: This is not investment advice. Consult a licensed financial advisor before making any investment decision.