HOMEPAGE / PORTFOLIO / SPECIAL REPORTS

A Nice October Surprise with More Highs

Last week’s choppiness was probably not the end of October volatility. We are in an election year after all.

But the major indexes are again at or near record highs. The S&P 500 made its latest all-time high yesterday. The Dow hit an intraday record yesterday. And Nasdaq is within about 2% of its peak set back in July.

Our stocks are also rolling, up 2.1% on average just since our TradeSmith Investment Report issue last week. More than 80% of our current stocks are in the green, with the overall average return a stellar 26.8%.

And that’s after we locked in big-time profits in Monolithic Power Systems (MPWR) of 86%! That was a big win in a great company that we might go back to someday. For now, we wanted to bank those juicy profits ahead of potential volatility. It also helped that we still have strong exposure to semiconductors.

We might make a few more moves before the end-of-year rally hits full speed. I’m watching all of our stocks and keeping an eye on trading data.

In election years, we also have the possibility of an “October Surprise” – those pre-election shocks that seem to come along regularly caused by out-of-the-blue events. Even with those surprises, stocks almost always rally into the end of the year anyway.

Quarterly earnings are starting to hit, and they can cause choppiness as well. A couple of the big banks release their results tomorrow morning – JPMorgan Chase (JPM) and Wells Fargo (WFC) – then the pace ramps up next week.

Analysts at FactSet project S&P 500 earnings will grow 4.2%, marking the fifth straight quarter of increases. That’s healthy, and our companies should easily exceed that because we only invest in high-growth companies to begin with.

For example, our first company scheduled to report is Intuitive Surgical (ISRG), which will release its results next Thursday. Analysts forecast 11.6% earnings growth. Five more companies set to report the following week.

We’ll stay on our toes the next few weeks, but the data looks great, and our stocks are moving. My Big Money Index shows the biggest investors on the planet continue to buy stocks. It stands at 72.6 currently, which means I’m seeing nearly three Big Money buy signals for every one sell signal.

Since we pay such close attention to the Big Money because of its outsized influence on prices, our stocks should continue cranking out the profits.

News and Notes

Arista Networks (ANET) is now a massive winner for us. It’s now up 150%, and continues to make new all-time highs. Its Quantum Score is stellar at 91.4, and my system picked up two more Big Money buy signals Tuesday and Wednesday.

Canadian Natural Resources (CNQ) was our biggest mover this past week, gaining 7.8% amid higher oil prices. Both CNQ and oil prices have popped over the past month.

CNQ is buying some of Chevron’s oil-sands and shale assets, increasing the company’s stake in the Athabasca Oil Sands Projects to 90% and adding about 62,500 barrels per day to its production.

Shares are nearing the $40 level, which is where they turned back in August. Punching through that resistance could signal a bigger breakout to the upside.

The Trade Desk (TTD), our newest stock, also hit all-time highs this week. As I mentioned in the monthly issue, I’m not afraid of buying stocks in strength as long as they continue to exhibit the fundamentals, technicals, and Big Money inflows that mean higher prices are likely.

TTD is currently just above our buy limit, but it has traded below it every day except today. I also would not be surprised to see it dip back under, so TTD remains a buy under $115.13 if you don’t own it.

Talk soon,

Jason Bodner
Editor, TradeSmith Investment Report