I’m going to take advantage of today’s pop in Nvidia (NVDA) to sell the shares out of my very short-term Volatility Portfolio tomorrow, Tuesday, October 2. The shares closed up at the close today at $447.82, a gain of 2.95% on the day. I initiated the position in the Volatily Portfolio on Mach 25, 2023. It was up 66% as of the close today So why sell Nvidia here?
So what do you do with your portfolio for the rest of 2023? And what’s your best strategy to be prepared for 2024? In Part 1 of this Special Report I laid out the 10 developments that I thought would drive the financial markets for the rest of 223 and into 2024. Today, in Part 2, I’m going to give you the first 2 of 10 moves to take–with as much detail and as many specifics as possible–that you should be making now to position your portfolio for the uncertainties of the last quarter of 2023.
Tomorrow, Monday, morning I’ll buy CBOE S&P Volatility Index (VIX) Call Options (so the options will go up in price if volatility does) for my Volatility Portfolio. I’m buying the December 20 Call Options with a strike price of 17 (VIX231220C00017000.)
Now that Fed day is done and behind us, we return to our regularly scheduled programming. Back on September 15, I posted “A tough day for tech–Part 1” after news on Taiwan Semiconductor Manufacturing (TSM) reporting that the company was slowing orders with suppliers of chip making equipment because of sluggish demand for chips from its customers. Now onto Part 2 of bad news for tech stocks.
The CBOE Volatility Index, which measures short-term volatility in the Standard & Poor’s 500 stocks, has been stuck below its long-term average of near 17 since the regional bank crisis of March 2023. In recent months, the VIX has had a hard time breaking above 17 with the index spending most of its time down about 15. Today, at 1 p.m. New York time, the VIX was at just 14.01, down 0.71% ahead of the Federal Reserve’s interest rate decision. There’s just no fear in this market. So it will extremely interesting to see if today’s interest rate decision and the release of new Dot Plot forecasts for interest rates, inflation, economic growth, and unemployment today from the Fed has any effect of market complacency.
Tomorrow September 8, I’m selling shares of U.S Oil Fund (USO) out of my Jubak Picks ad Volatility Portfolios to take profits on the 25% really in oil since June and to raise some cash in case September volatility delivers a bargain or two.
Today’s Quick Pick is Nvidia (NVDA)–Hold Through Earnings on August 23. Nvidia reports late in this quarter’s earnings season, and this report is expected to be very good. Wall Street’s expectations range from a low of 75 cents a share to a high of $1.75 but the consensus is $1.66 a share, up from 32 cents last year. Nvidia has been reporting 30% positive surprises in recent quarters, so there’s a good chance the results may be even better than expected. My suggestion is to hold the stock through this report in August, and then think about selling. I know, I know. Sell Nvidia!? That’s crazy! Here’s the thing. At some point, Nvidia’s growth rate is going to start to slow. When it does, people will look at the stock and decide the slower growth rate may not
Today’s video is The Long Hot Summer and Natural Gas. If you’ve been following the weather, you know about the huge heat bubble in Texas where temperatures have reached 120 degrees. High temperatures combined with humidity of around 80% can cause serious health problems and even death. The National Weather Service expects this weather to continue and to spread to other parts of the United States, resulting in more and more people staying inside with the air conditioning cranked all the way up. This spike in temperatures is creating a similar spike in natural gas prices. On June 26, we hit a 16-week high for natural gas prices, and July natural gas futures (for July delivery) have been up 14 out of the last 17 sessions. This price surge has two causes ad is operating on two time frames. In the immediate term, the increased air conditioning use stresses the grid, leading to a reliance on natural gas back-ups to supply the energy needed to cover these demand peaks. This, of course, creates a lot more demand for natural gas in the short term. The second thing is a surprising change in long-term thinking about the future of natural gas. I’m seeing a new wave of 20-year supply contracts from places like China and Japan, suggesting countries are thinking that natural gas has a longer future as a transitional fuel as the world moves toward more sustainable energy sources. The two stocks I would look at here are Cheniere Energy, (LNG) and United States Natural Gas Fund, (UNG). Cheniere is up 6% in the last month and is a good way to play the long-term trend in natural gas use. UNG hit a potential bottom in June and is up 16% in the last month. The bigger gain is a result of the ETF being hammered due earlier in the year. UNG is a far more volatile buy, with much higher risk, so if you’re uncomfortable with risk, stick with the more modest but more predictable gains from Cheniere.
Heat advisories now stretch from northern Florida to southern New Mexico, and excessive-heat warnings have been issued for much of Texas and parts of New Mexico and Arizona and along the Gulf Coasts of Louisiana, Mississippi and Alabama. New Orleans is included in the zone of greatest heat risk, with actual air temperatures around 100 degrees and humidity that will push heat indexes to 115 degrees. Excessive-heat watches have been posted for the lower Mississippi Valley and include Memphis and Nashville; Huntsville and Birmingham; Jackson, Mississippi; Little Rock, Arkansas; and Poplar Bluff, Missouri. “Extreme heat and humidity will significantly increase the potential for heat-related illnesses,” cautioned the National Weather Service, “particularly for those working or participating in outdoor activities.” The heat will relent somewhat into early next week for portions of the Southeast and Mid-South, but there is no immediate end in sight for Texas, where blistering and brutal conditions look to continue as a heat doe lingers over Texas. And this is only the latest U.S. manifestation of a global problem.
Adobe’s recent earnings report and guidance leave investors, at least those of us still paying any attention at all to valuation, in a bit of a quandary. Do we sell Adobe on that lackluster forecast for earnings and revenue growth over the next two quarters (and what looks like a stretch, very stretched valuation) or do we hold on with the hope that the market continues its love affair with everything AI?
I’ve got major questions about Generac’s (GNRC) long-term growth. The company, the dominant player in the market for residential backup electric generators (with about 4 times the market share–or about 75% of the market–of its nearest competitor) faces big questions, in my opinion, about its long-term strategy and its ability to grab significant revenue in the clean energy market where it faces competition from larger companies, more established in the market, such as SolarEdge (SEDG) and Enphase (ENPH). But in the short run? Say, the next two or maybe three (at the outside) months, I say this is a stock that will ride summer storms and heat waves to gains. Especially, if as I project, the company delivers lackluster quarterly earnings when it reports on August 2, but gives very positive guidance for the next quarter or two
Artificial intelligence really is a paradigm-breaking, transformative technology. Right now, investors are so enthusiastic about the sector, especially the obvious leader Nvidia (NVDA), that we’re looking at a potential bubble that will collapse with much gnashing of teeth and I-told-you-so “wisdom” casting doubt on the reality of the entire endeavor. I think a bubble is indeed possible. Nvidia did trade at a trailing twelve-month price-to-earnings ratio of 196 on May 31, after all. But I think you do want to own the sector now–because the breaking of the bubble, if it does break is, in my opinion, two quarters or more away. And you want to own the sector for the long run–say, 10 years or more–because it is such a game changer for so much of the economy. But what to own? I’ve put together a list of the 10 stocks that I think are the best way to participate in the AI gold rush.
