We have an expression in my business that “trees don’t grow to the sky.” With the exception of perhaps Jack’s beanstalk; that is true. What the expression means to say is that stocks can’t rise too far without getting trimmed. Equity markets have had a remarkable run since the bottom of the Powell Panic. In the interim the markets have had a few pullbacks. I believe we are about to experience another such pullback.
So perhaps after rising a quick 3% in the first three weeks of 2020, the Standard & Poor’s 500 (SPX) can use a little trimming. This does not mean that I will be engaging in some wholesale selling. For a 3 – 5% pullback, that would not make sense. Rather, I am going to sell a few underperformers and put some trailing stops in for some index overlays that we own.
You might ask, what is an index overlay? Well, in order to stay fully invested on a macro basis, I use some available cash to buy index exchange traded funds. I do this as a trade rather than investment.
So, over the long holiday weekend, I already locked and loaded some orders to remove Amazon (AMZN) and a few other holdings as well as put a trailing stop in for some ProShares Ultra Dow Jones 30 (UDOW) positions.
You might ask, why AMZN? Simply put, the stock has been a laggard over the last three years (see chart below) and I do not see any 5G related opportunities in AMZN. So off it goes. (depending on when you read this commentary, the AMZN might not yet be sold, but I guarantee you that after the market opens, it will).
AMZN in yellow SPX in red (Source: Telemet; click on chart for larger view)
As I raise cash, I will slowly put it to work in some 5G stocks that I am researching. We already own Apple (AAPL) and I began to accumulate Qualcomm (QCOM) a few trading sessions ago.
So, my advice to you is look at your portfolios, sell some laggards / losers and lighten up on non-core positions. Then in a week or two, give or take a few days, you can redeploy that capital.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AAPL, QCOM & UDOW – although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right-hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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