Sunday Market Prep (#3)
Dear Reader,
That last week’s market prep could be tough to follow up on. I called out a couple earnings bangers as well as a 9% mean-reversion move in large cap IQV 0.00%↑.
Focusing on that latter move for a second, please consider that my trade logic consisted solely of “>10% discount to lowest street analyst target”. Was there a signal there, or was it just a coincidence? That’s for us all to investigate, together…
Last-week’s follow-ups:
GES 0.00%↑ I was pretty confident that GES 0.00%↑ would beat expectations, but I wasn’t sure by how much. I sold out of my position after they came out.
I also sold WEN 0.00%↑ and I’m kind of regretting it, but I just see a lot of really strong opportunities.
ISSC 0.00%↑ I have trimmed this down to a ~2% position.
I actually didn’t follow through on IQV 0.00%↑ or $DOCS.L $DOCMF. Gotta eat your own cooking, I guess!
I picked up a ~2% position in B 0.00%↑ at the end of the week. I think it’s one of the best large cap trades around. Barrick has essentially zero debt at this point and trades at 8.8x 2026 consensus earnings, which likely bake in a pretty conservative gold price.
Ideas for the week ahead:
AEO 0.00%↑ I picked up a ~2% position in AEO 0.00%↑ last week. The bull case is that their Aerie (activewear) segment growth will restart and that segment alone could be worth more than twice the current market cap. The bear case (at least, my biggest concern, personally) is that product quality may have broadly deteriorated (according to some anecdotes I read on reddit).
ZUMZ 0.00%↑ giga-bombed out trash skating apparel / goods mall store, yet they have a massive cash balance and are implementing buybacks at an actually reasonable valuation for the first time in company history. The skating hardware has a cyclical history, and successfully timing a bottom here could lead to huge upside. Plenty of reasons to be skeptical, though. I picked up a smaller position.
REGN 0.00%↑ Have seen some pretty sharp investors who are quite bullish here. To me the most convincing piece of information is that Regeneron stops paying $800mm/year for a licensing deal beginning in 2027. This becomes a massive windfall/buffer to their bottom line, as reflected in the 2027 street consensus multiple of 10.1x earnings. The trade rationale to go long here is basically that there has been a technical breakdown and would-be buyers are hesitant to trust street estimates because they look too rosy, but eventually this stock will trade at a higher 2027 multiple. It does sound reasonable to me, but I do wonder if the trade logic is a bit tortured.
MGPI 0.00%↑ this distillery has a growing branded segment and trades at 10.3x a 2026 earnings consensus that I suspect is beaten-up in the wake of alcohol stock damage (as analysts tend to follow the market). I picked up a smaller position last week.