The LongVol Show - Ep 21
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This is the weekly article and Pod/Video Show 21. 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.
Three main topics for today’s show – as always, a life update then:
- Articles of Interest from This Week
- Broad Market Overview
- Overbought Indices & A Checkback – Some Context to an “overvalued: SPX500
- Papa Johns – A Turnaround or a Dud?
- Just TAP It In: Molson Coors
- Recap & Q&A
If you’re new – this is not investment advice, I only manage money for accredited investors and qualified institutions – if that’s not you, then you can access the AST Alerts Free for 21 Days.
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The Market at Large
The market is being led by the usual names right now – and to be fair it’s been like that for a while so this discussion that is being had now is just regurgitating the information. The market is overbought, at large, and a technical checkback has to happen but there are opportunities coming into the end of the year. My view (for those new here) is that regardless of market direction that there are opportunities for returns. Whether that’s a turnaround in Company that has been lagging, a sector inflecting or short-selling an overvalued name – there is opportunity. Where this goes at odds is with the consensus view that “the market” only lens is the way to invest. I simply reject that idea.
Two ways to look at this. One, that the leaders may continue to normalize here at these highs (slower growth). Two, that other names in the SP500 may catch up. There’s also the other view, that the market is overvalued and that this is a “sign” that this is a top – which everyone loves to discuss because fear sells.
- Some of the bottom weighted names might be worth a look, or alternatively, out of favor names not in the SP500.
- Comparing tech to the dot-com bubble we’re 50% lower on P/E, remove the top 10 stocks and we’re 3x lower. Tech always over-hires, people end up making way too much money and layoffs always ensue as the initial hockey-stick growth levels out.
I prefer to trade these names – if you want coverage on them use the LongVol Digital Membership. It’s 50% off for new members through the end of Summer.
Overbought Indices & A Checkback
We’re a week and change away from the end of Q2 – I said in The LongVol Report recently that window-dressing into end of Q2 was likely. I still believe that even with an SP500 target at $5,500 most of this should stay bid into the end of the quarter. Checkbacks are healthy, they allow for new buyers to step in because they may have missed or didn’t want to pay up for the current price and that is a likely scenario, as I see it, in a few weeks.
- The Goldman data above is a good representation of what strategic planning looks like, we do it with clients & withing The Swing Monitor sometimes you are just tracking companies/situations for a while to see out things could play out then decide which move to make, if any.
- Technical signals on the Nasdaq and SPX500 are overbought and a checkback likely comes in Q3 after “window-dressing” is done.
- Short-term short-selling opportunities in some tech leaders likely the play for me (fits into my firm model of using small percent of portfolio capital for event-driven/spec situations trades)
Papa Johns - A Turndaround or a Dud?
- Mentioned in this episode here and added to The LongVol Report that week.
- Stock down 33% YTD / CEO left in March to Shake Shack
- Four reportable segments: Company-owned restaurants, North American franchising, North American commissaries and international operations.
- International Transformation Plan – Lost $12 million and more to come, due to closures in the UK
- North American Commissary arm decreased 4.4% or $9.3 million (this is being fixed)
- International revenues increased $9.2 million or 29.4% (acquisition of UK franchises helped this number, without it was flat)
- Share buyback in place but at a slightly higher cost
- Review of revenues
- Attempting to understand why net margins are 4%
- Plan to increase operating margin from 4% to 8% into 2027
- Need to see how Commissary /distribution can be fixed. If they are reliant on that, operating at that margin in the first place was/is a problem.
- How do they fix that?
- Is the stock priced in or more to go?
- Tracking this in Swing Monitor
Just TAP It In: Molson Coors
In issue 24 of The LongVol Report $TAP made it in based one of the monitors dubbed “Boing Boing Monitor” – AKA left for dead stocks. After digging into the fundamentals a bit, it may just move into the Swing Monitor.
- -17.63% YTD – strong sell off after April Q1 earnings
- Sales jumped 10.6% from prior year
- U.S. GAAP income before income taxes of $265.4 million increased 160.5% reported.
- TAP Financials (Barrons)
Final Word.
- Q&A From Readers
- Don’t Forget – LongVol Digital is 50% for The Summer for 12 Months
- TAP/PZZA – Swing/Core ideas are only available in The AST Alerts & TLV Membership – you can get a Free 21 Day Trial at Join.TheLongVol.com or by going to TheLongVol.com for listeners.
Next Lesson
Final Quarter of 2024 Stock Market
Stock Market Stimulus
The Main Event is Here
About the Author
Daniel Bustamante is the founder, managing partner, and CIO of Bustamante Capital Management L.L.C., a multi-strategy investment management firm based in San Juan, Puerto Rico. He has over 10 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.
