Yo Pit Crazies,
The Perfect Storm rolls in post-FOMC, and I've got two names lined up for it: one I want to buy and one I won't touch.
Both came off Sibyl, my idea-flow tool that flags when a name inside one of my themes hits a good price.
I keep the themes in my head and Sibyl tells me when a stock finally deserves a trade.
Most of the list still needs time, but these two showed up ready.
People Are Ready to Shop
The AI buildout and the coming Anthropic IPO have soaked up all the attention, and a lot of decent stocks got left behind. Sibyl hunts for those. It's 14 for 15 on closed trades and 100% on the clean long signal, which isn't bad for a stock picking tool.
Retailers have taken a beating lately, and that's why Gap Inc (GAP) jumped into view.
The biggest tell is a jump in long-term options (calls dated months out, where somebody pays up for a move that takes time to play out). It's early, but the flow is there.
GAP ran a crazy spike on earnings, 13% in a day on Aug. 28, then gave it all back and more after Lululemon (LULU) cut its outlook again and took the retail clothiers down with it. GAP now sits around $20, down for the year.
1-Year GAP chart
The company itself looks solid. It raised the dividend 6% this year, its 51st straight year of paying one, and it holds $2.5 billion in cash against the debt and lease obligations that come with running stores. A rising dividend is the biggest positive tell I can find, right behind call buying after a good earnings number. I like GAP for the high 20s by the end of the year.
This Stock Isn't Yummy Anymore
Taco Bell was a staple of my college existence. Heck, they even bought the place I worked at in Southern California in high school, Pup 'n' Taco. Way back then we made everything from scratch.
Fifty-pound bags of kidney beans and spices went into a 20-gallon pan of refried beans. Big rolls of ground beef became taco and burrito filling. We made the red and green sauces daily for the very tasty burritos, and we even made the chili from scratch that started my long obsession with the perfect chili cheese dog.
The quality since those halcyon days in the 1980s has gone way down. And Yum Brands Inc (YUM) sits in a three-way squeeze right now, which is why fast food stocks live in the basement:
- No teenage workforce
- Rising food costs
- Rising mandated labor costs
None of those makes a franchisor happy. Those factors have pummeled the stocks and don't look like they're ebbing anytime soon. When I was in high school, I did stuff, and staring at a phone wasn't one of them.
Then Taco Bell caught a food safety scare on top of it. The July cyclospora outbreak got traced to lettuce served at Taco Bell, foot traffic fell double digits, and the stock has slid since. The CDC called the outbreak over last week, and YUM still sits within a few bucks of its 52-week low.
My bottom-of-the-basement scanner (it looks for stocks within 2% of their 52-week lows) has been scary good lately. I was surprised to see Home Depot Inc (HD) on the list too. I've yet to see any real turnaround in fast food stocks, so YUM gets the call this week.
1 Year YUM
Right now YUM has no bottom and no bounce. I'm staying away from this name until it can engineer a recovery.
So which one does the crew pick for Monday's Ticker Highlight Show? Tap this link to join at whatever rate you want and get Monday's pick as soon as it hits.
Hopefully this was helpful,
Andrew Giovinazzi