Yo Pit Crazies,
Oil prices are jumping as rumors of strikes in the Persian Gulf by US forces ratchet up the pressure. I expect the Trump Admin to shake the tree there and get ships through the Strait. That might put upside pressure on commodities and be bad for levered debit holders. Those are my plays below.
One of the bigger advantages of Sibyl, my idea-flow tool that flags when a name inside one of my themes hits a good price, is the daily drumbeat.
I keep the themes in my head and Sibyl tells me when a stock is finally worth acting on.
Not everything on the list is ready to go, but I like to cue them up anyway.
Insurance Takeover is Making Things Move
This trade idea has many facets. The first one of course is if the stock is bouncing or not. The next is that there is some long term accumulation. The third is if there is a story. Fourth, oh my, is there a larger theme around it.
The stock getting the call is XP Inc (XP). XP is a financial services firm based in Brazil but domiciled in the Cayman Islands. That is mostly for tax reasons, not shady reasons.
Traders are accumulating options for 2028 in XP. Generally that is a bullish signal for me. Sibyl lets me know when that happens in stocks that are bouncing from lower levels and have jumped above a 10% recovery area. Another thing I like is the momentum is holding up well.
Now the reason behind the strength is two fold:
Commodity prices are going up and that is good for Brazil and by proxy Brazilian financial services in the ETF, MSCI Brazil Index ETF (EWY).
1-Year XP chart
There was an insurance buyout in the USA, USI Group by Aon Insurance (AON). That is short term generating some heat for XP which has a large position in Brazil and is a growth company.
XP does move with EWZ and right now those are on the upswing.
XP is moving quickly up the Sibyl List. I expect it to play very soon.
A Stock I Don’t Like Hating
When I was a youth, I hiked all over the Sierra Nevada mountains, Inyo Mountains, Yosemite National Park and all over the San Bernardino Mountains outside of Los Angeles. Come summertime we were wearing a path on highway 395 North to Lone Pine and Bishop with the boy scouts. I bagged over 20 10,000+ peaks and most of the 14,000 footers in the range. It is still one of my favorite places I have ever been to. 100 nights out under the stars. It was quite glorious. What was the gear that took me there 40 years ago? North Face Sleeping Bag good to 10 below zero! Never a cold night in that bag.
Right now the North Face is in the VFCorp (VFC) conglomerate. I have traded this stock back and forth over time but right now VFC is running to the lows of the year. I think there are two reasons for this:
- Leverage, VFC has a lot of debt buying up all of the great outdoors brands
- Demographics, too many cream puffs looking at phones not climbing mountains, fishing, boating and getting out there.
Ultimately, stocks trading at 52 week lows can easily get lower. The chart for VFC looks horrible.
1 Year VFC
At one time, VFC paid $2.00 in dividends a year, grew revs but now that is down to .36 and sales keep declining. Until the couch potatoes get up and start moving again this is sadly the way. I am in a place now where I am fortunate enough to walk around in the woods every day. I got a nice pair of LL Bean boots to kick around in but not the Timberlands of old.
This long slide does not look good for VFC, my olden thoughts aside. VFC likely slides to the 12’s as it cancels its dividend which is my prediction.
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