|Written by Rob Goldman|
The Goldman Guide
INSIDE OUR 10 MIN PODCAST:
INDICES & CATALYSTS
Our 1Q23 Performance: Strong!
I am super excited today. Today is the first day of the second quarter of trading and I am feeling pretty confident that this week will be a favorable one for investors. If it isn’t, well, Sell in May and Go Away might come sooner. But I digress. I am proud to publish our performance ideas and guidance for 1Q23.
As our stock picks mostly focused on underfollowed small caps, we had some good moments early on, but, as the Russell 2000 performance can attest, small was not a good category. And our 5 small cap stock picks to date, well, were not the best.
However, our five trading picks and two mega cap picks were pretty good, particularly our trading picks. Moreover, we called, almost to the day, the top of the market and professed a winter was coming. We also elected to go in the other direction, also almost to the day stocks began their vast improvement. So, if you followed our podcasts, and data, you saw/heard that we did a more than fine job on accurately describing and projecting market conditions and flows.
The SOBs at OPEC decided to cut production Sunday evening. That puts a crimp on performance. Still, for the next couple of weeks, we feel that the S&P 500 Index remain good plays, while mega NASDAQ may start to lose some steam. Small caps which have had a lot of headwinds may start to break out soon and Bitcoin, which we are long, could have more upside if it can stay above $30,000. More on all of these ideas and more inside. Have a good day!
The Market Today
We are getting closer and closer to breaking above the 200 DMA for the Russell 2000. And the jump in RSI from 38 to 50 (rounded) gets us closer to Buy signal from Neutral. In fact, with a 50 DMA of 1864, the index is only about 3.5% away from the 50 DMA as well. Trading comfortably above these figures would be bullish—and still have around 10% upside to even sniff the 52-week high. Moreover, the forward P/E would not be at nosebleed levels. So, all in all, if we can get decent movement this week, I believe most of the quarter could be favorable for small caps as a rotation ensues from larger market cap NASDAQ stocks to their smaller, cheaper brethren.
AAII Sentiment Survey (figures rounded)
Getting closer each week to the right contrarian signals…
With a dearth of earnings reports for a spell, could oil price jumps and jobs reports derail upward momentum?
Are prospective bank failures “a thing”, or “a media thing”?
Will we start to see a return to a real IPO market this quarter?
What will the catalysts be to drive retail back to its old form?
Have crypto investors become non-plussed about negative news, even as the SEC seems to want to crush all but the few, top coins?
Our 1Q23 Performance
Forgive me if I go a little overboard on specificity. I find it is important, especially when espousing performance data. We divided the ten featured securities into three categories: Small Cap, Trading, and Mega Cap, and provided data on all three. First, a quick overview of what we view as the key indices and securities.
The table above shows core data performance-wise, excluding valuation information, which we try to provide via a snapshot on page 1 of The Goldman Guide. What are the key takeaways here?
First, the average quarterly return was 6.6% for equities. Although the NASDAQ Composite (and the NASDAQ 100) had their best quarterly performance since 2020, NASDAQ is on shaky ground in our view, as we mentioned earlier. Second, despite a fierce rally following the SVB and related bank debacle, most equity indices peaked 2 months ago. So, you can draw a line almost straight downward from early February through late March---a roughly six week correction. (In some cases an actual one, in others merely a big drop.) I really want to get positive on the Russell but we are not quite there yet. But you will know.
A quick note on Bitcoin and VIX. Bitcoin was, I believe, the best single performer. Be wary that it probably won’t happen again, but can enjoy fund flows to it this quarter. We were positive on VIX and its related plays such as iPath S&P 500 VIX ETN, which we recommended in late January. It dropped to a low in conjunction with the peak for the major indices (it is a pure S&P 500 Index contrarian after all). VIX also enjoyed a peak level just around SVB and the related rally.
Note: GSCR does not guarantee the accuracy of its performance data published in The Goldman Guide 1Q23 Performance Report dated April 2, 2023. as the source of the data may not be properly updated or properly calculated.
Okay, our returns kinda sucked. These five stocks did do well from the peak return perspective, especially INSE, averaging 8%. But from the feature date through the end of the quarter, being down (11.7%) is not ideal. Still, as there was no real issue with the underlying companies themselves, we believe this performance is more a function of bad timing. Most of the picks were made around the peak period for NASDAQ. Still, OMQS is the real stinker of the group and we believe this low valuation play will do well this year, as it leverages its AI approach.
This was an interesting exercise, In early February, right around the NASDAQ peak, we elected to do a deep dive on the former FAANG stocks. Following this review, we stated that if we were to buy any of them, these two had the “sharpest teeth”. Meta definitely did well while Amazon was flat, reflecting the difficult retail environment and its continued layoffs. What is interesting is that when we chose these mega caps, the Composite had just hit its year high, and as of 3/31/23, it is down less than 1% from that peak. So, while Amazon nearly matches that performance, Meta has crushed it. All in all, with both averaging a 6.8% return, it’s not too shabby. And we remain positive on both.
These three are very different from what we did with the other 7, which was essentially hey, consider buying here, etc. With these three, we leveraged our market sentiment, which we nailed regarding calling peaks, when to sell, and when to buy again.
The VXX, as noted above, is a direct way to play the VIX, and is designed for short term holdings. The VXX had a reverse split of around 1:4 so the figures here are bigger than in our podcast. Nonetheless, the peak return of VXX from our initial mention and recommendation, through the peak date of 3/15/23, was 33.6%. This period was around but not the exact date for when we suggested getting out of VXX. Still, we were off by just a matter of days, due to the weekend period, etc. If one would have held it through quarter-end it declined by less than half of a percent. Given that we are favorable toward the market for the time being, we would not play VXX for now.
Under Armour was a situation where we felt downside existed in the stock and that it was overvalued. We did not specifically recommend shorting it or buying puts, selling calls. We just identified what we felt was a risky near term situation for shareholders. Sure enough, the stock is down (-8.4%) since then and had a low return of (-24.6%) just a week earlier. We would avoid UA for now, although it still carries risk, in our view.
Chewy was a most interesting situation. On 2/27/23, we opined that the stock had downside to around the $34 level but that each time it had dropped to that area, it came back strongly. Thus, we recommended watching it for such a move and buying the stock, if it reached that point. Sure enough, it dropped from $39.56 to $32.94 a month later. While the stock is still down (-5.5%) from the original high price we identified, it reached a peak return of 16.1% from the $32.94 level on 3/24/23, to a week later, hitting the $38.25 mark.
So, we are very pleased with these three trading ideas. VXX provided a peak return of 33.6%, UA a peak drop of (24.6%) and CHWY a jump from its targeted low of 16.1% through intra-day 3/31/23. That is an average peak return of 24.8%!
Thoughts on our ideas? Shoot me an email: [email protected].
The Goldman Guide: Background:
Originally launched in May 2010, and re-introduced in January 2023 after a hiatus from 2016-2022, The Goldman Guide is a free weekly audio podcast and newsletter produced by Goldman Small Cap Research and is written by Founder Rob Goldman with contributions from the GSCR contributor team. This non-sponsored investment newsletter seeks to provide investors with market, economic, political and equity-specific insights via an action-oriented, straight to the point approach. No companies mentioned in this newsletter are current sponsored research clients of the Company or its parent, With key exceptions such as Top 50 cryptocurrencies, some of which are noted as current holdings of Founder Goldman, all companies or investment ideas mentioned in this audio podcast and companion publication are publicly traded stocks listed either on the NYSE or the NASDAQ. Goldman Small Cap Research leadership bios and experience can be found on our website: www.goldmanresearch.com .
This audio podcast and companion newsletter were prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces non-sponsored and sponsored (paid) investment research. Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
The Firm’s non-sponsored research publications category, Select Research, reflects the Firm’s market commentary and internally generated stock ideas, along with economic, industry and market outlooks. In virtually all cases, stocks mentioned in Select Research offerings are listed on the NYSE or the NASDAQ. Publications in this category include the weekly The Goldman Guide Podcast and companion Data PDF, Market Monitor blogs, Special Reports, and non-sponsored company reports. Goldman Small Cap Research analysts are neither long nor short stocks mentioned in this newsletter. Founder Rob Goldman is currently long cryptocurrencies Bitcoin, Ethereum, and Shiba Inu and may publish commentary or news regarding these securities. .We were not compensated nor do we expect to be compensated for the feature of any stocks in The Goldman Guide.
Content produced under the Opportunity Research banner include reports, updates, sector spotlights, CEO Roundtable interviews, and reflect sponsored (paid) research. It is important to note that while we may track performance separately, we utilize many of the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in company-specific Opportunity Research reports, updates and articles. Goldman Small Cap Research has not been compensated for any content in this audio podcast and publication.
All information contained in this audio podcast and companion newsletter were provided by the companies mentioned via news releases, filings, and their websites or generated from our own due diligence. Economic, market data and charts are provided by a variety of sources and are cited upon publication. Stock performance data and information are derived from Yahoo! Finance, BarChart.com and other websites or sources, as noted. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, other firms, or other financial news outlets. Goldman Small Cap Research relied solely upon information provided by companies through filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Gold- man Small Cap Research company or industry report, update, article, blog, note, audio podcast, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed. This podcast and publication do not take into account the investment objectives, financial situation, or particular needs of any particular person. This podcast and publication newsletter do not provide all information material to an investor’s decision about whether or not ). make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with the FINRA or with any state securities regulatory authority. Statements herein may contain forward-looking statements and are subject to significant risks and uncertainties affecting results.
Separate from the factual content of the content in the podcast or companion newsletter, we may from time to time include our own opinions about the companies profiled herein, their businesses, markets and opportunities. Any opinions we may offer about the companies are solely our own, and are made in reliance upon our rights under the First Amendment to the U.S. Constitution, and are provided solely for the general opinionated discussion of our readers. Our opinions should not be considered to be complete, precise, accurate, or current investment advice. Such information and the opinions expressed are subject to change without notice.
ALL INFORMATION IN THIS REPORT IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALI- TY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABIL- ITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFOR- MATION.
For more information, visit our Disclaimer: www.goldmanresearch.com .