Ahead of The Curve
Jump To
This is the weekly article and Pod/Video Show 32 – Ahead of The Curve
From here until the September FOMC meeting it’s all on auto-pilot for the market aside from the usual shakeouts and breakdowns in select names while the rest of the market began to inflect at the end of June. Being ahead of the curve is key, whether that’s picking stocks, timing market cycles or intraday trading. Usually the way we invest for our long/short strategy for clients is through being ahead of the curve: identifying inflections in companies and sectors ahead of time so that we’re ready when the trigger to acquire a position comes.
I’ll be in Vancouver, Canada for a small-cap conference end of September and to meet with a client – if any of you are readers/watchers from there and want to meet up let me know.
- Shorter show this week; not too many broad market movement or company updates.
- A lot of Q&A this week at the end.
New Readers Here.
If you’re new here welcome, make sure to subscribe on YouTube and/or Spotify – you can get free daily market updates on LongVolReport.com.
We publish the article of the week every Friday here on TheLongVol.com and then the podcast/videocast is on Spotify and YouTube.
Three main topics for today’s show – as always, a life update then:
- Articles of Interest from This Week
- Broad Market Discussion
- Ahead of The Curve
- Q&A for The Week
Quote of The Week
Favorite Articles This Week
Ahead of The Curve
There’s a saying that goes: “Being early is the same thing as being wrong” and that’s true across any forms of investing. But, like any saying, there are exceptions to the rules and given the end of this tightening cycle being ahead of the curve, was is and will continue to be key.
I mentioned this idea a few months ago “An Inflection Point in the Cycle”
Being ahead of the curve started a few months ago but it matters regardless of this rate cut or not. As an example, housing right now is at a key spot (in my view) so trying to read that correctly for certain positioning matters.
There are some names that are not in the weekly LongVol Report that I put into the fund (sorry we keep some of the ideas for clients) that are up over +50% from that June move already.
Then there are others that were in the report like:
- $TSN
- $WPM
- $NEM
That have all really pressed higher since that data came out at the end of June. Again, what the market calls “smart money” just means money that pays attention. If you don’t know what to look for and you do it long enough you will but until then the report is a good way to guide you to stay in tune.
- $TSN was added into the report and has been an ideal non-shiny object position for client portfolios.
Papa Johns Update
- Rumors of a take private this week got the name going and that might be a real thing given the lack of leadership the Company has had the last few years. I talked about this name 3 months ago as a potential turnaround primarily because it had brand-value and potential to be fixed provided a few key things were done.
Concluding:
- Being ahead of the curve matters especially in the cycle and patience always pays if you’re an investor. If you understand what you own and why you own it the technical shakeouts are just that; shakeouts.
- This also helps to have ideas/sectors you’re watching and research done so when he catalyst comes you can just react (if not use the report, we have coverage on +50 tickers in 4 stock monitors)
- Remember, price is what you pay, value is what you get. Key in picking the right companies coming out of this cycle and takes some work to find the bigger winners through different screens.
If you are a Professional and need multi-user access, please email.
Broad Market Analysis
So this week my views on the broad market were that we’d get a check back in price and we got it toward the end of the week. I think the idea that the Fed is going to cut has some folks thinking that risk-assets just stay bid. They don’t, things ebb and flow in markets and all sorts of events ($NVDA/GDP this week) have a cause and effect.
My views are the same as last week as we head into the September rate cut:
- They cut Rates in September (discussed above)
- The market will check back more and shake out some weaker hands
- Rotation out of Mag 7 Continues (discussed this at the start of Q3 here)
- Still not a fan of anything in the broad market (not really my style but even here into the Fed rate cut, don’t really care)
- NVDA beat but lower, who cares – goes back to rotation out of Mag 7 and money into other sectors as discussed
Rotation and short-tech is the trade (has been since Q3 start). Still not a fan of this trade but still quality names to trade actively.
Home Builders/Housing
Pending home sales dropped to the lowed on record BUT builders barely budged. My views on this sector are not changed:
- Short-term rally through September rate cut
- Many builders are flush with free cash flow making some names fundamentally attractive
- The consumer is tapped out and the idea that home prices rise because rates come down is cute in theory, however, I believe home owners are in for a rude awakening.
- An oversupply of housing on the market should suppress demand and to access the capital tied up in unrealized gains they’ll need to lower the price = problem when everyone tried to do it at once
Home pricing is like any other asset, it’s not real until you can cash it in (or borrow from it). Many people have had EXTRAORDINARY gains on their homes and they may have been #DiamondHandzing them but I believe that was a fatal mistake.
Commercial is another story, not my specialty but there will be a lot of money to be made there.
We picked up a few REITS in the portfolios for clients a month ago given the cycle so that has been the small way to play it.
Checking back In on EOG
This made it into the report last year as we began to trade into energy names and this one became one of the leaders for a few reasons. Those reasons still apply today and we’re close to a new all-time high so a quick review:
- First 6 months of 2024 spent $1.5 Billion on buybacks
- Spent another $1 Billion on dividends
- Free cash flow expected to increase +10% in 2025
- If we get a Democractic President these buybacks and dividends here likely continue so this s back on the radar as we approach October but also due to the chart
Final Word.
- Report out this weekend Issue 34
- Open Q&A for the Show this week
- Decent week, new month is close and holding pattern until Fed Cut
- For those trading part-time, learning or with less than $25,000 – active trader is open.
- If you are an investor with experience and meet requirements, apply for DeltaOne – the window is open
Opinion, not advice. Not a solicitation.
Next Lesson
Patience Pays and Stock Market Sentiment
GXO Logistics and Stock Market Sentiment
Ready for Take Off or Jet Lagged?
About the Author
Daniel Bustamante is the founder, managing partner, and CIO of Bustamante Capital Management L.L.C., a multi-strategy investment management fir. He has over 15 years of experience in the financial industry, specializing in equities, futures, and event-driven trading strategies.
He is also the founder of TheLongVol.com, a blog and newsletter that shares his insights on his investing process, travel, and other private investments. He has been featured in Bloomberg, Arizona Business Journal, Business Insider, Yahoo! Finance, Forbes, Seeking Alpha, and other publications over his career on Wall Street.
