Trade Alert: Top Names

After our successful Tesla exit, doubling down on an AI picks & shovels play.

Out Of Our Short-Term Tesla Trade

Last week, when shares of Tesla (TSLA 0.00%↑) were down about 10% following the Robotaxi event, we placed a bullish earnings trade on Tesla. Tesla beat earnings yesterday, and we exited that trade for a 196% gain today.

Hopefully the trade below will be a winner too.

A Picks And Shovels Play On AI

Back in August, we placed a bullish trade on a small cap industrial that is a picks & shovels play on AI.

As I wrote there,

As big tech companies build out more AI infrastructure, they are going to need more electricity to power them. The small cap industrial we are betting on today provides electrical systems used by electric utilities as well as oil and gas producers. When it reported earnings last month, it beat on both top and bottom lines, but it’s still undervalued, according to Chartmill data. Here’s a sampling of its ratings:

• Technical Rating: 9 (on a scale of 0-to-10, with 10 being the best).

• Fundamental Rating: 8

• Profitability Rating: 8

• Growth Rating: 8

• Valuation Rating: 8

• Piotroski F-Score Rating (on a scale from 0-to-9, with 9 being best): 8

The options market expects a move of about 18% in either direction after it releases earnings in December. Our bet here is that it climbs about 16.5% by then. If we’re right, we’ll make about 230% on this trade. The worst case scenario if we’re wrong is a loss of 100%.

Since we wrote that, the stock is up 57%, and our options trade is on track for that ~230% gain (because of the type of trade, we need to wait until closer to expiration to exit to get that gain).

Despite that the run-up in the stock, it’s still fairly cheap: it’s Valuation Rating has only ticked down to 7 from 8 (aided in part by its modest pullback since last week).

I had been thinking of placing a longer term bet on it, and then last night it appeared in Portfolio Armor’s Top Ten Names. So I decided to place that longer-term trade today.

Details below.

Our Longer-Term Bullish Trade