A Sharper Choice For Friday
Overnight put assignments have left us with limited dry powder heading into Friday’s open. We want to put that capital into a high-conviction idea: a familiar name that’s fallen sharply over the past month, with a catalyst approaching that could give investors a reason to reassess it.
We’re leaning toward biotech for this trade. Scientific progress, demand for better treatments and the tools that enable research offer a different set of drivers from spending on the AI infrastructure buildout.
Less Reliance On New Data Centers
One risk facing that buildout is political. Democratic Representative Alexandria Ocasio-Cortez and independent Senator Bernie Sanders have proposed a federal data-center moratorium. Their bill would pause new AI data-center construction until Congress establishes safeguards covering workers, consumers and the environment.
Restrictions of that kind could delay orders for the equipment going into new facilities. That gives us a reason to consider businesses whose demand depends more directly on biological research and medicine. For this trade, that’s an attractive source of diversification.
A Catalyst To Test The Thesis
Today’s name combines two of our sources of alpha: Multibaggers research and Portfolio Armor’s Top Names. Our Multibaggers group follows outside analysts who’ve identified multiple stocks that doubled and complements our broader Market Watchers X list. Portfolio Armor’s algorithm estimates potential return over the next six months and ranks securities after accounting for hedging costs. This name made the top ten at Thursday’s close and was also a Top Name when we last entered it in October.
We’ve already closed three winning trades in this name this year, with gains of 103%, 104% and 132%.
The broader Top Names record adds context to this second source of alpha. Across 175 completed weekly cohorts, the average six-month unhedged return was 18.06%, versus 9.87% for SPY over the same periods. The table below shows the latest completed cohorts and the overall average.
The business has been growing and improving its gross margin. An upcoming earnings report will test whether that progress can continue. We’re making a specific exception to our usual technical entry requirements here, based on those operating prospects, the selloff and the approaching catalyst.
Below are the company, the maximum entry debit and the exit orders I plan to enter after a fill.
Today’s Multibagger’s Trade
Theme: Synthetic biology tools for research and drug discovery.
RSI: 39; Chartmill Technical Rating: 5; Setup Rating: 3; Fundamental Rating: 4.
