Buying When There's Blood In The Streets

Buying When There’s Blood In The Streets

In last night’s Top Names post, I mentioned a game plan for this market:

We’ve had some market headwinds this week, which seem to be partly due to economic weakness, and partly due to concerns about the election. A game plan for dealing with the uncertainty:

1. If you’re concerned about downside risk for positions you already own, consider hedging. As a reminder, you can download our iPhone hedging app here, or by aiming your iPhone camera at the QR code below.

   

2. We’ll use up days to add short positions, and down days to add long positions, when we surface compelling ideas.

3. We had a couple of successful exits of options trades today, including one on one of Portfolio Armor’s top names, Carvana (CVNA -5.14%↓),

   — Out of our $META trade today for a 103% gain.
   
   — Out of our $CVNA trade today for a 220% gain. pic.twitter.com/fQbGqVyDWi

   — Portfolio Armor (@PortfolioArmor) August 1, 2024

    

   But I’m going to be cautious about using our top names for options trades until we get a better sense of market direction. I will still use them for our core strategy though.

Today I got stopped out of one of the ten names I was holding as part of our core strategy, so I am going to add one of last night’s top names today, a stock which happens to be down about 10% now (Our core strategy is to buy equal dollar amounts of the Portfolio Armor web app’s top ten names, put trailing stops of 15%-20% on them, and replace them with names from the current week’s top ten when we get stopped out of a position).

I’m also going to place a bullish options trade on it, along with another stock that’s down about 10% today too. Both of these names meet the criteria I mentioned in this post earlier this week: Next year PEG ratios below 1 (indicating that they’re inexpensive taking into account their earnings growth estimates) and RSI below 30 (suggesting that they are oversold).

A Note Of Caution

If current market conditions continue for the duration of next week, we’re probably going to lose money on both of these trades. I think both stocks make sense as longer term bets, and thought of placing longer term bets today, but I prefer more immediate gratification if I’m right about them bouncing after earnings next week. And if I’m wrong, I can always make longer term bets then, if I’m still bullish about both stocks.

Read the rest here.

In Case You Missed It

In our previous post (Putin's Trader), we looked at the role foreign spy agencies may play in hedge fund profits. 

If you'd like to stay in touch

You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on X here, or become a free subscriber to our trading Substack using the link below (we're using that for our occasional emails now).