Wednesday started on a positive tone as markets jumped to session highs following the release of January CPI data. The numbers were light of expectations and failed to show signs of pricing pressure. This lack of pricing pressure was evident in numbers reported by China last night. However, the early excitement quickly gave way to some profit taking which had market participants on alert.
The selling came shortly after General Motors (GM) reported its Q4 results and reiterated issues it is seeing around the global semiconductor chip shortage. Analysts project that the shortage could cost the auto industry $61 bln in sales. This will be a key theme for the markets in Q1 and Q2 and one that we will continue to monitor. But the recent rally in autos, sparked by the electric vehicle craze, saw investors bank some profits in reaction.
A step back from leverage may have also played a factor as markets were awaiting a speech from Federal Reserve Chair Jerome Powell at the New York Economic Club. There were some concerns that Mr. Powell might utter a taper tantrum-type comment. The selling would not last long as we would see half of the losses regained by the end of the day.
Similar to today’s markets, the Advisors in Focus newsletter has taken a step back over the past week to highlight feedback from our readers and take a look back at past mentions to see how they have performed. Today, we will continue to look back at popular searches by both peers and clients. We were extremely encouraged to see the stock performance. As a reference, the S&P fourth quarter low was 3250, so we are up approximately 20% from that level. We believe there is a tremendous amount of value in the search results given the impressive returns. We will continue to do our due diligence, finding names in searches that provide the most compelling opportunities.
Here is a recap of earlier Advisors in Focus:
- October 9- We focused on the Alternative Energy space, highlighting four names that were showing up in retail investor searches. Westwater Resources (WWR) was the top search by retail. The stock saw a massive rally that week as it was picked up as a lithium/rare earth metals play after TSLA announced a deal with Piedmont Lithium the prior week. WWR was trading at $7 at the time of the writing. It would follow a common path we have seen in these names. The stock would give up some gains before finding support and settling. After a few sessions it would march higher and break through to fresh highs. We would bear in mind this price action when reviewing these names. WWR slipped back to $3.75 and, since then, has rallied to $11. The stock is up 33% since our writing and 193% off the lows if buyers utilized patience. We also highlighted Gevo, Inc (GEVO) in that newsletter which was another name that caught our attention even though it did not have the same volatility as WWR. That stock has been a big winner as it is up +1100% since mentioned. Ocean Power (OPTT) up +119% and Pioneer Power Solutions (PPSI) up +84%, were two other names discussed. Sympathy plays in searches will remain a focus for AIF.
- October 16- We highlighted the move in the iShares Emerging Market ETF (EEM) as it was a focus of retail investors. Emerging Markets were viewed as a top play for 2021 and the dollar was in a downward trend which made this an interesting topic. The EEM is up 28% since our discussion. We would circle back to EEM in the October 26 newsletter to emphasize the popularity in searches.
- October 19 & 21- We noticed an uptick in defensive/safe haven searches around this period and highlighted some of the inverse plays that witnessed increased activity. The ProShares UltraShort QQQ (SQQQ), ProShares UltraShort Russell 2000 (TWM), ProShares Ultra VIX Short-term Futures (SVXY) were all instruments highlighted in the newsletter. The S&P would drop to 3250 on October 28 which would mark the Q4 lows.
- October 23- We highlighted a post-traumatic stress disorder (PTSD) play Aptinyx (APTX) as a top search by retail. The stock had surged to $6 in response to test results earlier in the week but slipped down to the $3 area at the time of the writing. We highlighted this as a buying opportunity and discussed the SVB Leerink commentary to support our argument. The stock is up 33% since we discussed the name and the chart continues to look promising. Given the focus around stress disorders during the pandemic, we would continue to have this on the radar.
- October 28- The focus turned to the Boston Beer Company (SAM) and Crocs (CROX). SAM saw a big jump in its shares after posting solid earnings boosted by its Truly brand. The stock would see some selling pressure following our mention but it did settle at the $900 level and has now rallied back to session highs, up approximately 8% since our mention. CROX has performed better as it is up 43%. We highlighted the beautiful upward trend that was in place and noted that it was one of the few names that was green in an otherwise sea of red.
- October 30- Harley Davidson (HOG) was highlighted as it landed on our surge list following a post earnings breakout. Shares were trading at $33 at the time, breaking above a key resistance level at $30-32 following earnings. We noted a turnaround in the company as it’s ‘Rewire’ strategy was starting to show some dividends. HOG would rally to $42 in late January and we were excited to see the price action. Alas, the move higher would not last as the Q4 results for HOG would disappoint and drop the stock back to $33. It did hold this support and is filling the gap down as it moves back to $35.85.
- November 9- There was a pick up in search patterns around the gaming industry. The Global X Video Game ETF (HERO) was a top search for Financial Advisors. We highlighted the play as Microsoft (MSFT) and Sony (SNE) were both preparing to ship their new consoles out for the holiday. It was also viewed as a COVID play and fears of a second wave were starting to increase. The group has done well with HERO rallying approximately 38% since our mention. EA +21%, TTWO +29%, and ATVI +36% have been steady performers.
- November 11- The top surge in searches by All FAs was in the Convertible Bond ETF (ICVT). The ICVT has been on a steady upward trend, attempting to break out above the $85 area. The ICVT has continued its trajectory as it rallies to the $108 area, up approximately 28%. At the time we highlighted the play as a way people could take advantage of growth in stocks and still offer some downside protection with income. This has been a solid performer and has limited downside risk.
- November 13- We highlighted Rocket Mortgage (RKT) in this newsletter. Given the strength in the housing market, we felt that this mortgage originator and recent IPO would offer investors some upside. Instead, it has traded in a sideways range between $19-24. This raises a red flag for us as the stock has failed to see any interest in a strong market. The two other names we discussed in that newsletter are worth mentioning as we highlighted Sundial Growers (SNDL) which is getting caught up right now in the cannabis craze. This was trading at $0.20 at the time but continued to show up on our search lists. It was the top searched name that week by retail. Now it is being pushed as a Reddit trade and is up 1500% since the mention. The other was Greenland Tech (GTEC) which was a Chinese electric forklift play that had doubled in price that week, running from $2 to $5. It has been able to hold its gains and press higher to the $7.70 level, up approximately 40% since we highlighted the name.
We will continue our review of past mentions in the Sunday newsletter as well as getting back to providing our readers updates on the latest hot searches in the market.