Yo Pit Crazies,

VIX is circling 18 as traders divine the news for a new direction. There is a lot of talk about the Trump/Xi/Putin summit but it has not happened yet.

I swear we could wake up and be $10 different SPY any day.

These ideas below are outside of that.

Look below.

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 Might be the Right Drug

This stock has been on my Sibyl list for quite some time. One of the biggest growth areas for drugs was the animal market.

Pet owners want the best for their pets and will go to the vet. Also, the growth of natural foods is increasing demand for livestock and poultry. All of these should be growth businesses going into the future.

That brings me to Zoetis Inc (ZTS). This year has not been kind to dividend paying stocks and ZTS is no exception. Also, competition has been tough in the pet and animal husbandry drug biz.

1-Year ZTS chart

ZTS is in the top 15 for stocks bouncing off of the 52 week lows. The interest rate screw is turning the other way and dividend paying stocks should start to find capital at market highs.

ZTS does have some option accumulation but still not a ton and very little long term. Mostly the big dividend stocks attract pension funds. I would like to see some option buying in the long term. ZTS was $148 1 year ago.

Tough to make a home in this one

I think the best call of the last month in Option Pit was Mark on interest rates. Bonds found a floor when bond traders decided to charge Uncle Sam $100 billion per year to finance new debt.

An unreal number. The USGov is borrowing $2 Trillion a year for fraud and grift more than they did just 6 years ago in 2019 pre-COVID. They are incapable of turning off the faucet. These higher rates are pinching the home building industry and we have a 52 week low casualty below. I will say this here. Rates are not going down. They plateaued but they will not go meaningfully lower until demand for capital decreases. There are two big buyers now, Uncle Sam and AI.

That leaves capital intensive industries like homebuilding and DH Horton (DHI) with increasing costs and less buyers. DHI is circling the 52 week low and shows no signs of moving back up any time soon.

If I overlaid the chart below, DHI is moving the opposite of rates. It is getting a small reprieve now but it won’t last long.

1-Year DHI

Rates could tick down after the midterms if the new Congress, or the old one, finds a way to cut spending. I don’t see that happening before Nov 3rd. Any DHI rally can be sold until then.

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