Yo Pit Crazies,

Interest Rates hit another multiyear high and it is dragging down some stalwart names.  Read on to see what is going on.

The first 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 that list still needs time, but this one’s getting close.

The second came off my bottom-of-the-basement scanner, and that’s a list no stock wants to make.

Let’s get into it…

This is a RARE opportunity

I am always looking for things to buy in the stock market.  Do I buy what everyone else is buying or do we buy what no one is buying?  Sometimes traders are not buying the stock but are buying the options.

Usually when drug stocks miss a FDA approval the company goes in the dustbin for an extended period of time.  UltraGenyx Inc (RARE) just did that and the stock dropped 50%.  Then something funny happened.  Traders started buying long term calls relatively fast.

See below here but traders bought 14k calls in the 2028 cycle for RARE.  That was by far the biggest increase of any stock relative to the starting open interest.

Look at the chart below. The story is sad on the drop and the stock hit a 52 week low on Sep16th but was up 10% from that low in a day and right now the OI is screaming.

1-Year RARE chart

All the call buyer right?  We shall see!

Chocolate should be worth more that this

Every consumer discretionary stock is in the basement.  All stocks that make food are trading at 52 week lows and I cannot figure out why.  Is it the change in SNAP policy?  Is it the price of oil making production expensive?  Just too many questions.

The only area getting margin expansion is tech.  If you would have told me that Hershey Chocolate Inc (HSY) was trading near a 52 week low, I would say no way.

Yet it is. HSY has growing revenue but it is not a tech stock.  That is the only thing I can point to is a massive sector rotation out of dividend paying stocks now that interest rates are rising.  I am seeing this in other sectors as well.

1 Year HSY

HSY pays 3.5% right now in dividends per year.  In a 0% interest rate environment that would be great.  With 2 year notes trading 4% or more, HSY does not look like a great income stock anymore.  As long as USGov interest rates are jumping, the big dividend payers are going to stay in the bottom of the barrel and I am staying away.

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