As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!
One way we're doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).
Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.
But the scan doesn't just end there.
We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.
[9/7: updated stop to 48. We're already #FreeRiding here, so whatever we sell the remaining portion of the position for is pure profit!]
According to "the news," Americans can't afford to buy homes and rising mortgage costs will only deepen the problem.
Cool story, bro.
Do you know what disagrees? The price of virtually every publicly traded homebuilding company. We're already long Lennar and Toll Brothers which continue to work for us.
Next up is KB Homes $KBH, which appears to be on the verge of a big breakout following a welcome response to its recent earnings report.
Check out the chart of Canadian dollar futures with the Commitment of Traders Report (COT) in the lower pane (red line for commercials, black for large speculators, and gray for small speculators):
Commercials hold their largest net-long position since early 2019. Extreme positioning such as this tends to mark key inflection points.
Why?
Because commercial hedgers represent the largest short sellers for any given market. And strong hands move markets.
You're seeing the permabears pointing to the Equally-weighted S&P500 falling down towards new 52-week lows relative to the Market-cap weighted version.
Today’s most significant insider transaction report is another Form 4 filing by Warren Buffett’s Berkshire Hathaway $BRK.A for Occidental Petroleum $OXY.
On Monday, Buffett disclosed an additional purchase of OXY shares worth roughly $216 million.
Fresh two-year highs for the Gold/SPX ratio stand out this week, as gold outperforms its alternatives. It doesn't get much more bullish than fresh absolute and relative highs.
With that as our backdrop, I had Jason Perz @JasonP138 of Against All Odds Research on the show to share his view of the precious metals space.
If you’ve tuned in to either of my “Expiring Daily” Twitter spaces talks over the past two Mondays, you’ve heard me talking about a trading strategy I’m currently in the process of iterating that involves daily expiring options in the S&P 500 options complex ($SPY and $SPX options, specifically).
A thoughtful listener sent me an email with a bunch of questions about it, and I thought my answers to him might be enlightening to some of you who may be tinkering with strategy construction, particularly with short-dated, high-gamma options.
As I told the emailer, I can answer questions as of my thinking RIGHT NOW. But please know this is a work-in-process, and I’m continually tweaking my entry/exit/adjustment parameters as I learn more.
