Stock Market Plan February 28.
Stock Market Plan February 28.
Carvana & GDP.
Welcome to the market recap for Monday February 26. The plan for members is below in the paid section so let’s get started.
Reminder: Webinar Thursday Night Here.
I have a quick rant on the money management industry and Carvana down below so if the tone sounds extra annoyed, I am.
The S&P500 today acted as expected with GDP print tomorrow at 9:30am EST and with that came this action. The number tomorrow is important as we end the trading month and given that everyone seems to be bearish, we could just press. To be clear, I respect signals and came into this week somewhat skeptical but having the ability to switch the portfolio rather quickly is a benefit and I am net long for the end of the month on a few select names.
Tomorrow is a bit of a binary event and as such some trades were placed on that as well. The S&P500 needs to stick the lows we had today and last night I said
If we stay below $5100-$5105 we can roll over tomorrow morning but $5070-$5075 is a spot to watch and overall price is fairly balanced here across the deck - in my view.
Overall, just hard to see a pullback coming but we’ll see with this GDP number tomorrow.
HIMS - Absolutely a massive win for those in DeltaOne. The LEAPs were a 5-bagger meaning +500%. Fairly price here now so don’t be retail NPC and think it goes higher. Literally had this tracked since last November - congrats to those of you in it and to those of you that still think you know best; it sucks to suck.
Carvana - I have a lot of thoughts here. The first is, I can’t believe that I am saying this, but it might just print +$120 if the squeeze is on and I certainly think it is for a number of reasons. A larger hedge fund today named Kerrisdale released a second report on the stock today (they put one out last June too). They basically cited the same thing I cited back in February of 2022, but the difference is they have the AUM and presence to get people to listen; I don’t as of yet - which is why most of you reading the free version still don’t pay attention even after the amount of free insight you get here - maybe if I start doing those lame 30 second TikTok videos were I pretend to know about financial markets we can get some traction.
Last June he/his firm put out a short thesis on it and I emailed to give him my playbook on it; knowing they were bigger and carried more weight, but we never connected after a few emails and here we are today with the stock at $80. Their letter today was just stating what anyone that has followed this name knows so now it becomes an issue of two things, as I see it:
Whether or not the SEC acts
Whether or not Carvana restructures
The video below are some of the issues cited in 2022; they haven’t changed much aside from their lifeline to stay alive with the debt they took on. There are still suspect issues, outside of their accounting, that Kerrisdale could have cited but at this point who really knows if the market will care anyway - they didn’t back then when I put this out and I knew that which is why, in part I covered near $30s leaving maybe another $1M on the table.
These guys don’t lose, they’re really smart and they likely are going to have to restructure their debt/capital if they want to survive, which, they might just do and if that happens it’s +$120 pretty easily….but if the SEC gets involved it’s an issue as well.
The business model of Carvana itself is flawed, in my view, for the same reasons mentioned in that video (and more in the actual thesis I put together back then) but it doesn’t matter when you have a market that doesn’t care about fundamentals. It’s the same reason I covered most of that short in 2022 near $30s - in fear of it becoming a meme stock - which it subsequently has.
So, really, it’s the same story with this company on replay; earnings, grift and then maybe restructure. Which brings you back to how to trade it. Not going to share that here but there are some things here that can lead to an outsized move on the name.
This is a great study on why using fundamentals + common sense matters: the fundamentals are terrible, but the market wants it higher so hard to ignore that. The new era of markets doesn’t really care or seem to know why anything moves and that in itself is an edge that you have to work with (seriously). After all, some of you still reading this still think following unusual call activity is a way to generate trade ideas so if you think what I’m saying doesn’t make sense consider that you’re betting on the bets of others you have zero clue on.
The market hates hedge funds right now (which is interesting because the amount of bad options flow/trading that Citadel and all the other dealers make off retail generates is at record highs) and I think this gets squeezed to +$120 or so if we hold $70-$80s into March, based on few things - more if they announce a re-structure of that horrendous debt.
Situations like this are cool to watch but harder to trade and sometimes you have to pass them up; I’m not going to this time and plan to make a move.
Moving on….
Zoom - Zoom has been a dog for the last 9 months or so but things might have just changed a bit. They announced a $1.5 billion share buyback which is about 8% of their market cap and I was waiting for something like this as this has been on the lows for some time. They had earnings last night and the numbers were pretty solid:
Operating cash flow was $351M + 66% YoY.
Guided EPS $4.88 v $4.71
That’s really all I needed to see and with the buyback it’s ideal. Now comes the technical overlay and trade structure which I’ll cover in Issue 10 of the report this weekend so a trade can be put in my personal accounts and the $100K Swing Portfolio with the potential for a+30% upside from here provide we get a technical entry.
In The Premium Video Tonight I Cover:
S&P500/Nasdaq/Oil Analysis
Why this GDP print is important and the scenario to watch for
Discussing the difference in levels from futures v. stocks and why it matters
Explaining trade structure: short-term options v. LEAPs and why
Discussing AMZN short today and thoughts