Stock Portfolio & NASDAQ Best Months Updates: On the Edge
By: Christopher Mistal
July 08, 2021
Prior to today’s weakness, NASDAQ’s Mid-Year Rally was off to a strong start. Over the last three trading days of June through yesterday’s close NASDAQ had rallied 2.1%. This compares favorably with the 12-trading day rally’s historical average gain of 2.6% since 1985. Prior to the official beginning of the Mid-Year Rally, NASDAQ began to rise just after mid-month in June. Recent strength and momentum have kept NASDAQ’s Seasonal MACD Sell signal positive. As of today’s close, it would take a one-day loss of 55.56 NASDAQ points (–0.38%) to turn its MACD indicator negative.
[NASDAQ Daily Bars and MACD Sell Indicator Chart]
When NASDAQ’s MACD Sell indicator turns negative, we will issue our NASDAQ Seasonal MACD Sell signal and begin clearing out remaining technology and/or small-cap positions held in the Almanac Investor ETF Portfolios. Until that time, all related positions are on Hold.
Stock Portfolio Updates
Over the last four weeks since last update through yesterday’s close, S&P 500 climbed 3.3% higher while Russell 2000 dipped 3.2% lower. During the same time period the entire portfolio slipped 1.6% lower excluding dividends and any fees. Declines were spread relatively evenly across the entire portfolio. Mid-cap positions were the weakest, off 3.8%. Small caps were second worst, down 1.3% while Large-cap stocks eased 0.7%.
Much of the weakness in the Mid-cap portfolio can be attributed to JetBlue Airways (JBLU) and Taylor Morrison (TMHC). Both positions were stopped out shortly after mid-June when they closed below their respective stop losses. JBLU had been on thin ice for the past few months after topping in March. Even after selling half the original position in JBLU, it still recorded a 102.2% gain since addition last year in April. TMHC is a homebuilder and that sector has cooled overall as recent price and gross margin gains across the sector have likely peaked.
Algonquin Power (AQN) has slipped into the red (when its dividend is excluded). AQN is a utility but its primary focus is on renewable energy sources. Renewables are highly likely to continue to be an increasing slice of total energy production and consumption and AQN is investing heavily. Its recent $1 billion equity offering to finance or refinance investments in renewable energy projects demonstrates this but is also likely contributing to recent weakness. AQN’s long-term prospects appear favorable and its dividend is attractive.
Stepan Co (SCL) has also dipped into the red. The specialty chemicals and products produced by SCL are used by numerous sectors of the market. Weakness in housing and autos is likely having a spillover effect on SCL. But those are not the only sectors using its products. Last quarter’s earnings beat estimates and given their limited analyst coverage; it could easily happen again later this month.
Even after recent weakness, Small-cap positions are still the standout in the portfolio, up 81.4% on average. Recent weakness in banking and in housing has caused many positions to retreat from recent highs, but all remain well above original prices. Our small-cap standout continues to be Avid Tech (AVID), now up 177.5% since last November even after selling half the original position when it first doubled. AVID appears to be losing some momentum, but its relative performance still appears solid. AVID did trade lower today, but by less than either the NASDAQ or Russell 2000. Outsized gains in a rising market and muted losses in a weak market are two characteristics seldom exhibited by a single stock.
The other standout in the Small-cap portfolio over the past four weeks is North American Construction (NOA). Crude oil trading above $70 per barrel has likely contributed to NOA’s recent strength. NOA has weakened recently but traded at a new high in late June and was up 3% over the past four weeks through yesterday’s close and up 0.55% today.
Our Large-cap positions are largely from defensive or dividend paying sectors. With S&P 500 and NASDAQ closing at new all-time highs prior to today, defensive positions were not much in favor contributing a sizable portion of the portfolio’s modest decline.
DTE Energy (DTE) completed spinning of DT Midstream (DTM) on July 1. For every two shares of DTE held, shareholders received one share of DTM. Fractional shares are to be aggregated and sold with the proceeds to be distributed in cash. As a result of this spin off, DTE’s original price and stop loss have been adjusted. New shares of DTM appear at the bottom of the Large-cap portfolio for now.
Please see table below for specific stop losses and current advice for each position in the portfolio. All positions are on Hold. The market has enjoyed a specular run from last year’s bear market lows. The historically weak Worst Four Months will officially begin when we issue NASDAQ’s Seasonal MACD Sell signal which could occur any day now.
[Almanac Investor Stock Portfolio Table]