Israel Strikes Back (Kind Of)

An Almost Perfectly-Timed Post 

On Wednesday, we wrote about the Israel-Bombs-Iran Trade, and the next day Israel bombed Iran. 

The only problem is the Israeli strike we anticipated was one that would further escalate tensions between the two countries, but this one seems to have been calibrated to not do that. Rather than immediately responding with its own missile attack, Iran responded with memes downplaying the effects of Israel's strikes. 

As a consequence, it doesn't look like we're going to get a big market move down in response this time. However...

Iran And Israel Are Launching Missiles At Each Other

Read that aga. Iran and Israel are launching missiles at each other. We're so quick to downplay events today, we forget out extraordinary this is, and how extraordinarily risky it is. So far, it hasn't set off an escalatory spiral, but it's easy to see how it could. Maybe anti-aircraft fire disables a missile or a drone headed for empty desert and it hits an apartment building instead. Footage of hundreds of dead civilians forces Israel or Iran's government to fire for effect next time, and we're off to the races. So let's game plan now what to do if that happens. 

Have A Shopping List Ready 

There are two ways to approach this: you can have specific investments in mind that you plan to buy in the event of a war-related market crash, or you can have a ready-made screen or other source of ideas to identify them. If recent events are any guide, crypto will likely fall in the event of a real Israel-Iran war, so that's one possibility. Airlines are another, as in the case of United Airlines (UAL) we mentioned in your previous post. You want an airline with strong fundamentals--ideally one that just beat on earnings--so you can take advantage of a temporary war headwind knocking its share price down. In our case, we will have two sources of ideas to draw on if Israel-Iran turns into a real war: 

Our Weekly Top Names

Each week, we post the top ten names generated by the Portfolio Armor web app on our trading Substack. Those are the names our system estimates will have the highest potential returns over the next six months. 

Our core strategy is to buy equal dollar amounts of the Portfolio Armor web app’s top ten names, put trailing stops of 10%-20% on them, and replace them with names from the current week’s top ten when we get stopped out of a position. We got stopped out of two positions this week:

1. CleanSpark (CLSK 0.00%↑). Bought at $15.14 on 3/19/2024; stopped out at $13.75 on 4/16/2024. Loss: 9.2%.

2. Netflix (NFLX 0.00%↑). Bought at $230 on 2/24/2023; stopped out at $825.06 on 4/18/2024. Profit: 259%.

And we've got a list of ten we can pick from to replace them. If Mideast war fears make those ten names cheaper when we're ready to buy, all the better. 

Our Bargain Screen

The specifics of this screen are probably less important than its strictness--you want this screen to pick up solid long-term holds and rare prices. Our Chartmill bargain screen is so strict that currently no stocks show up on it. 

But if Israel or Iran strike each other for real next time, there will likely be some bargains popping up on this screen for us to buy. 

If you want 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).