The Weekly Selection 10/16/22
Volume 09
INTRODUCTION:
Hey Everyone,
As we continue to show weakness in indexes and asset prices in and outside of financial markets, its crucial to take a step back and observe the picture objectively. Indexes are sold off over 25% ytd, with many ‘top’ individual stocks seeing drawdowns of upwards of 50%. Given, these stocks were experiencing quite euphoric highs, driven by Powell’s printer and gluttonous market participation. This however does not take into consideration the quality of the businesses being sold off, or their ability to continue to generate shareholder returns in the future. For this, I would like to attribute this newsletter to some stocks I believe are approaching these levels, where they are both technically and fundamentally oversold.
Last weeks performance saw indexes down 1.42%. this was after CPI/PPI volatility that swung us quite considerably towards the end of the week. The more data that is collected by these reports, the greater ability market makers have to price in future data points. While I personally hold no position to speculate on how broad markets will move forward, I think, as I did in may, that a bounce could be in order.
PAST PERFORMANCE:
Last weeks individual stock performance is posted below:
As you can see, individual stock picks got crushed. This volatility has proven to be quite a challenge, which from this list I only hold SG 0.00%↑ and AEHR 0.00%↑. I maintain my position of only taking light positions and not overexposing to the current downtrend that we are seeing in broad markets. If you would like to keep up with my day trades and mid week swings, follow my twitter HERE.
WEEKLY QUOTE:
“The bad news is, time flies. The good news is you’re the pilot”
-Michael Altshuler
This is crucial in not only our every day lives but also the markets. Time is speeding by, opportunities too. How we navigate this inevitable continuation of is our responsibility alone and we have full control. I personally have been taking this time in a market downtrend to prepare for future instances where we might see this again. It may be 5 or 10 years from now, but knowing how to navigate this price action will be crucial to outperforming and overcoming market obstacles.
CHARTS:
This weeks charts will be more long term plays than anything. Ive spent the last couple days doing fundamental research on what I believe to be healthy companies at good multiples trading in opportune technical zones.
ADBE 0.00%↑: Operating with a pretty significant monopoly in the digital production space, I believe Adobe is entering a respectable risk reward zone. The recent announcement of its Figma acquisition as well as the market selloff has place ADBE at a P/E of 27, which isn't spectacular, but their ability to generate free cash flows and continued revenue growth is something to note, and technically they are resting around covid lows, some historic pre covid levels.
$HUBS. Hubspot Inc, operating in the software industry, specifically customer relationship management has a pretty good handle on mid market clientele. Although they are currently operating at a loss, a 72% drawdown from highs despite unbelievable revenue growths and a significant amount of cash and cash equivalents on hand makes HUBS 0.00%↑ a favorable candidate for a move to the upside in tech. In addition to this, their stock price is approaching a trend that has held since 2016, a great risk/reward opportunity.
ASML 0.00%↑: ASML has notoriously been the one stop shop for semiconductor lithography systems. Operating at a P/E of 25, and hanging out around its long term demand zone, makes ASML a strong candidate for a long term hold. Obviously we would like that P/E down a bit, but their earnings havnt been showing too many cracks in the pavement, and for this reason, it will eyed for a possible entry.
Something new this week, some tools I use to guage market participation at certain levels. As you can see from this graphic, SPY 0.00%↑ has gotten alot of inflows in the 360 and 350 strikes. From my observation, these levels traditionally act as magnets for price.
Index flow appears quite bearish on friday, however as shown below, many of the largest divergences on net flow are in some of the big boys, seen below.
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Thank you all for reading!
-Tanner