by Travis Johnson, Stock Gumshoe | June 21, 2024 4:15 pm
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Interesting note. Thanks for sharing the pitches.
On FIVE, it is interesting that he pitched it before it blew up again on earnings.
Given their stores offer discounted prices on goods, this one was “supposed” to benefit from trade down and tougher consumer spending times.
Guess what. . . . . It doesn’t.
-5% comps on tougher consumer spend.
Sounds like a thesis killer to me.
At the same time, they seem to be opening up new locations quicker than Starbucks!
Curious where you shake out on this one.
Travis
I am glad someone else is concerned about the levels that NVDA has achieved! Like you, I started looking at defensive strategies when the stock zoomed above the $1200 level ($12o price post split). My decision was: “Since I sold part of my position before it hit $1200 ($120), I decided to sell covered calls on the rest.
I got a nice premium out to September and October.”
Well, we know what happened next. The stock kept going up, close to my 145 and 150 strike prices. I have not done anything, and the price has dropped back down, hitting a low on Friday of $124.30, before rebounding – Now, in after-hours, NVDA is $127.
So, what do we do from here? First of All, it is important to clarify what type of account we are holding NVDA. For me, I thought about buying NVDA in an IRA account, but I didn’t because there is no way to write off a loss if the stock goes against the investor. For many European investors, I am told they do not have the “luxury” of the trading rules in the US where a loss can be taken against gains in a regular account.
What kind of account do you have your NVDA Stock that you are putting in a STOP GAIN? (I wanted to clarify that for your readers, because I am guessing you have a nice gain in NVDA, so the order you place to sell the stock @$127 for a GAIN not a LOSS. Very important distinction – we want your readers to realize that you are making money on this transaction!).
The YieldMax NVDY has done well, trading at what appears to be an all time high of $29.90 in after-hours trading. The Fund is up over 118% in one year, claiming to have a 52.2% yield (presumably from “hedging activity). CFRA gives them a 5 Star rating, probably because of the underlying stock and the fact that their principal holdings are US Treasuries and options on NVDA. Check it out, it is a fascinating product.
(Full disclosure, I do not own NVDY, although it looks like it was a great pick a year ago!).
So where does this leave us, besides wanting to go out and buy a nice bottle of Crown Royal? We need to see what the “Experts” are saying: CNBC has a video showing “experts” saying “It might be a good time to be taking profits on winning stocks,” while Louie Navellier came out in his report suggesting that NVDA could be a $4 Trillion dollar company, so he is holding on for the ride!
Like you, I will have part of my holdings called away at a higher level. I did not put in a STOP Gain because I had sold calls, so seeing the stock go down allows you to calculate where you might cover your Calls and go Long to be able to Sell (if you think there is substantial downside). One of the Option gurus on CNBC last week suggested that NVDA could fall back to the 118 level, which is some kind of support. She indicated that at 118 she would consider buying more stock!
Hope this strategy session is helpful. For folks who cannot afford to lose their gains, it is alway wise to set a target and take some money off the table – especially if the stock is up as much as NVDA is this year!
LGE = Advantedges
TRAVIS – Please weigh in on the NVDY Question: How the H are they reporting on the financial sites that NVDY has a yield of 52.2%? Doe that explain why the fund has not kept up with the equity returns of NVDA?
They sell put options on NVDA and buy calls, then sell covered calls. That generates a lot of capital gains when the stock is rising, though not as much as the stock itself climbs. Like the other YieldMax single stock options income ETFs, they have capped exposure to NVDA’s upside and full exposure to NVDA’s downside, and that cap on the upside is what generates most of the monthly income. It also smoothes out the total return in the short term, which can feel like downside protection… but we don’t know how they’ll do in a real collapse.
On a total return basis, most of the YieldMax ETFs do much worse than the underlying stock… but they can turn a position into dividend income and erode your equity slowly if you’re essentially looking for a way to sell gradually, or if income is a much higher priority than total return.
I tried to make my comment longer than yours, Travis. lol
HSY. Thanks for your analysis. Mine is similar and I established a position earlier this year @ $195. In the world of NVDA, ANET, ASML, etc., it is really boring:
PAGR: 11.9% – only doubles every 6 years, 🙂
DAGR (which you mentioned): 19%
It is currently 15% below its 20 year long term mean price ($210).
Combine a reversion to mean with the PAGR and DAGR and I get:
3y ROI: 21%
5Y: 21%
7y: 23%
10y: 28%
Usually stocks that revert to mean (R2M) experience strong short term ROI boost which trails off as the reversion is amortized over more years. But HSY is somewhat unique in that the strong dividend growth actually picks up where the R2M begins to wain.
I’ll confess that nothing is guaranteed except the real ROI will not be what I posted here. But I run this analysis to help see if I have tailwinds or head winds. I agree with you that the sugar/cocoa inflation will eventually come to equilibrium.
The other noneconomic, but critical factor is management. I am coming to like (seek) more and more mgt that acts like owners. While family and foundation run companies can be slow and stodgy, they do not have to be. Companies like Heico have grown for 40 years at 20-22% PAGR. Whether they grow fast or moderate they are focused on the long term. Something that I finally appreciate. Ferrari is opening a new production line that can interchangeably produce ICE, Hybrids, or a new EV without retooling. No other car company in the world can do that. And they make an average of $126,000 profit on each unit sold and a 27 PAGR and ridiculous 24% DAGR.
The other characteristic that is becoming more important to me is when customers seek the product without a strong or any sales pitch. Luxury brands, companies like MCO, SPGI, CDNS, SNPS who save their customers money or enable them, for minuscule incremental cost, to achieve huge efficiency and performance gains. Sorry – no more rambling. I agree that this is biuying opportunity for HSY.
Off topic. Have you considered or tried the AI writing assist tools that are being offered? Not that I think that your writing needs improving, but as a productivity and editing gain for you. Perhaps we will be reading TrAvIs in the future. 😉
Travis, have you analyzed HCA or STE businesses? The financials look interesting, but it is much harder to find info on mgt, customer love/hate, long term moat if any.
Thanks.
Nope, don’t think I’ve ever looked at those two.
Are you looking for more info than you get on the company website for the leadership team category?
HCA HCA Healthcare – Governance – Executive Management
STE https://sterisplc.gcs-web.com/corporate-governance/committee-composition/
I couldn’t find the leadership category on Steris (STE)
https://investor.hcahealthcare.com/governance/executive-management/
Hi devropr
I just ran your two stocks thru the BestStocksNow App from Bill Gunderson. There are several services like this out there, but I have followed Bill for some time and find his supercomputer is pretty accurate short term, (always subject to change): His system rates HCA a HOLD and STE a SELL, with a rating change this past week.
Thanks as always, Travis, for all your usual thoroughness, transparency, and insights. Enjoyed the conference notes. Hope the bike ride goes/went well!