Trade Alert: Pharma And Energy
A bullish trade on one of our Top Names, plus a trade on a name from our “Really Time To Buy?” Chartmill screen.
Respecting The System
To be honest, some of the names Portfolio Armor’s Top Ten has been surfacing over the last couple of weeks haven’t exactly been thrilling. We’ve seen a lot of energy names, precious-metals names, and, last night, a large pharmaceutical company. Not exactly the kind of lineup that gets the blood pumping.
But the performance of Portfolio Armor’s Top Names speaks for itself. Since we started this Substack in late 2022, Portfolio Armor’s Top Names have averaged returns of 17.37% over the next 6 months, versus 9.77% for the market-tracking SPDR S&P 500 Trust ETF (SPY 0.00%↑). So maybe the system knows what it’s doing. Maybe it’s deliberately steering away from some of the hotter, more obvious areas of the market because they’re already overextended, and toward names where the valuations still leave room for upside.
That’s worth keeping in mind here, because one of today’s trades comes from that bucket: a stock that isn’t especially exciting at first glance, but may be exactly the kind of name the market starts appreciating more if this bull market broadens out.
A Selective Screen That Has Found Some Winners
Our other trade comes from our “Really Time To Buy?” Chartmill screen. It’s an extremely selective one: last night, only 6 names out of the thousands of U.S.-traded, optionable stocks passed all of its filters.
Like the Top Names list recently, that screen also happened to turn up an energy name last night. On the surface, that may seem a little odd given that we currently have an open bearish near-term bet on oil.
But the two views aren’t necessarily inconsistent. We still think oil is likely to come down once the Iran war ends, but there’s also a chance supply disruptions set in train by the war keep energy markets tighter for a while. And in this case, we’re not just looking at a generic oil trade anyway. We’re looking at a stock that screened well on valuation, fundamentals, and technical setup—the kind of name that may be able to do well even if oil merely settles into a more normal range rather than surging.
Maintaining Our Discipline
As always, on the options side, we’re not just buying stories. We’re pricing the structures first, estimating fair value, and then trying to enter at discounts to that fair value. We want bullish exposure here, but we still want to be disciplined about what we pay.
Today’s Top Names Trade
Pharmaceuticals / defensive growth theme
