ReOpening Stocks are on the move…AGAIN

The ReOpening trade peaked in mid-March and has been consolidating with lackluster performance, until recently.  Over the past two trading sessions, it looks like momentum might have returned.

Note the below chart, which uses the Small Cap RUSSELL 2000 Index as a proxy for ReOpening stocks.  The Small Caps are starting to outperform the S&P 500.  After a brief pause, I think the green shoots of a post-COVID recovery are starting to sprout.

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PLURALSIGHT acquired by Vista

This week COVID90 portfolio stock PLURALSIGHT (PS) was officially acquired and taken private by Vista Equity Partners.  The sale price was $22.50/share.  This is the first of the COVID90 stocks I’ve parted with, and if given the choice, I wouldn’t have sold. I think PS could easily have gone to $30.

As to my overall market outlook.  Many of you keep asking why I’m not selling to take profits.  So, at the risk of being redundantly redundant.  I want to reiterate, what I’ve already iterated.  I currently have NO plans to sell my core positions.  The market and economic indicators that I track are all projecting continued growth.  That’s not to say there won’t be a 5-10% correction tomorrow.  The S&P 500 has been dipping that amount on a monthly basis all year.  I regard those pullbacks as BUYING opportunities, not times to panic.

History is rhyming with the economic aftermath of the 1918 Spanish Flu…we’re experiencing the Roaring Twenties.  Hopefully this time without Prohibition.

Will inflation be a problem?  It will be for people that don’t invest in appreciating assets.  Ancient Wuhan proverb says, “Don’t be one of those people.”

Wealthsteading Podcast Episode 324 still hasn’t been recorded, but here’s an eight minute video were I highlight 4 stocks that epitomize the continuation of the ReOpening rally:  https://youtu.be/GBpKChOIYlY

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Sold Utility Stocks

Today I sold the 12 Utility stocks that were purchased as a hedge on January 19, ahead of the Inauguration.  The hedge worked.  The “bottom of the barrel” COVID recovery stocks have since stagnated or consolidated while the Utilities have delivered a double digit return.

In the wake of the 4th COVID wave, I think the Reopening trade should rebound.  So I’ll plow the proceeds from my Utility stocks into core holdings that have pulled back over the previous few weeks.

If you’re looking for a buy point to take advantage of the Reopening, but don’t want to own individual stocks or if you’re stuck in a limited choice 401k, then I’d suggest shopping for a Small Cap fund (RUSSELL 2000 index).  IWM is an exchange traded fund in that category.  IWM appears to be rebounding from a brief correction.  It’s sitting exactly on the intersection of its 50dma & short term exponential moving average, possibly setting up for a breakout to a new high.

As always, invest with  C A U T I O N  !

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Buying the non-Volatility

The Market’s been choppy…but not volatile. 

Although there’s been recent selling pressure, volatility as measured by the VIX has been in decline.  In fact, despite the current selloff, the VIX is at its lowest level since pre-COVID February 2020.  That’s an extremely positive market indicator.

This drawdown is also characteristic of a 2021 pattern: end-of-month selloff, followed by a record high.  I think this pattern is likely to hold up, especially as institutional investors rebalance their portfolios for 2nd Quarter.

Other reasons the Market has been moody include:

  • Prices have gotten ahead of themselves…as they always do on the way to another high
  • $1.9T Stimulus “sell the news” event
  • NASDAQ is hitting 50dma resistance, because of rotation out of Tech & stay-at-home stocks
  • Rising interest rates, although the 10 Year Treasury is now back below 1.7%
  • COVID is spiking again…I’m sure Yogi Berra has a quote for that
  • Concern about vaccine side effects and efficacy

 My level of apprehension about the above items is slightly higher than my interest in Prince Harry and Meghan.

As such, today I added to 59 of my existing core positions.  I think the overall economic outlook remains strong and this is an opportunity for a secondary entry point. 

Do you want to know SPECIFICALLY what to buy?  It doesn’t matter.  Opportunity abounds.  Throw darts at the COVID90 portfolio…it works for me !

Watch for Episode 324 of the Wealthsteading Podcast where I’ll cover these matters in more detail.

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February Tech Unwind- buying the dip

The Tech Unwind and the Rotation out of Stay-at-Home stocks accelerated this week with the NASDAQ declining 4% and dropping below its 50dma; while the S&P 500 absorbed some of the buyers, thus faring better, down only 2.5% and holding at its 50dma.

Because of the underlying economic data, and recent stock market price action, I remain optimistic and see market drawdowns as a buying opportunity.  Thus, on Friday I not only added to some existing holdings, I also bought the following three new stocks:

  • PLTR  Palantir Tech
  • SWI   SolarWinds
  • XM    Qualtrics

 FYI- to the uninformed, SolarWinds has nothing to do with solar panels nor wind turbines.

For a summary of why I remain optimistic and where I see this market headed, please listen to the latest episode of the Wealthsteading Podcast:   https://www.wealthsteading.com/323

Spoiler Alert:   The current media fabricated crisis du jour of rising interest rates requires a willful suspension of disbelief.  (see attached chart)

Also, for those of you that have asked about my COVID Puppy, he’s now all grown up and made a serendipitous cameo appearance in a recent video:   https://youtu.be/ufZX7Tw_9So

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