The Nasdaq has been the leader out of the March 23rd low and that won't stop anytime soon. Expect the stock market to continue to climb the media's wall of worry as most advances do. This is simply how markets operate. The recent consolidation is nothing more than a profit-taking event into the end of the quarter. Much of the media likes to attach a headline to every little market move, capitalizing on sensationalism and boosting ratings.
As more of the positive facts continue to come out regarding Covid-19, the markets will accelerate higher. The CDC as of June 2 issued a Covid death rate of .26%, less than the common flu. Yes, for certain high risk people with underlying conditions, the death rate is higher than the common flu and that small population sample needs to take extra precaution. This group is who we are protecting through lockdowns and restrictions. The coronavirus is a highly contagious bug which has infected many more people than previously thought. But many have experienced just a sniffle or even remained asymptomatic. As this data becomes more clear the economic capacity will continue to increase. The current administration has stated quite clearly there will be no more lockdowns. Don’t allow a political soft civil war to cloud your judgement when it comes to the markets. They are going higher with us or without us. We speak to people at many significant financial institutions and none of them plan to sit in cash the rest of the year or go short the market. You will see claims from CNBC about a record amount of short puts being purchased by large players. These are hedges against positions. 99% of financial firms are long a set of stocks and virtually all of them are hedged 100% of the time with a 10% SPX put position. This is how big players operate.
The picture in gold will become clearer in the coming days but our expectation is for a period of consolidation to start next week into mid-month. Silver may have a blow-off move up to $18.75 early next week.
People have asked why we are not buying other big name restaurant stocks. We like most of the sector. Some large names like Darden and Cheesecake have not been hit as hard. They have slightly better balance sheets. However, certain other qualities are now becoming more important than ever. Predominantly, we look at the Covid footprint for these names. Some restaurants are in large cities or have larger square foot eateries and are associated with large gatherings. People will avoid many of these venues. When we look at BLMN, they are adding another entire virus-friendly restaurant chain to their portfolio. They launched the Aussie Grill, a fast quick serve eatery, during the heart of the crisis in April. It will be a global brand. This model will also serve alcohol to go, very rare. They will compete directly with Chick- Fil-A and Wendy's. They will grow revenue potentially by hundreds of millions of dollars. There is huge upside here. Bloomin' Brands and Denny's also have most of their locations outside of major urban areas impacted by the virus.
Who is buying stock here in these names? We doubt it is the average investor with the media screaming "2nd wave shut down economy for the world is ending."
Below are two trade ideas we are waiting to trigger:
All opinions, information and illustrations expressed are solely for information and educational purposes and do not constitute investment or trading advice. We bear no responsibility for any actions taken or not taken by third parties after reading the blog. This email content has no regard to your own investment objectives, financial situation or particular needs. We may have an interest and may make purchases, sales or short sales in the securities referred to in the financial educational platform blog. Please ask for our consent before re-publishing blog content.
Investing in the financial markets can involve considerable risk, including loss of principal. Past performance is not necessarily an indication of future performance. Actual clients may achieve results materially different from the results portrayed. All material is for informational and educational purposes only and is not investment advice and is not meant to suggest that any securities are suitable investments for any particular investor. All information reflects our own actions, beliefs, and processes for purely informational purposes. Hedge Fund Z LLC is a financial blog for the sole purpose of information. HFZ does not represent themselves as acting in the position of an investment advisor or investment manager for funds that are not under their direct control and fiduciary responsibility. Third party quotes and information may not be representative of the experience of HFZ customers and do not represent a guarantee of future performance or success. Many of the results displayed on our website were achieved using leverage, such as 2x or 3x leveraged ETF's or equity options. The information included at HFZ and HFZ writing, research, and updates is prepared for educational purposes and is not a solicitation, or an offer to buy or sell any security or use any particular system. Information is based on historical research using data believed to be reliable, but there is no guarantee as to its accuracy. HFZ does not represent themselves as acting in the position of an investment adviser, bank or investment manager for funds that are not under their direct control and fiduciary responsibility. HFZ will not provide you with personally tailored advice concerning the nature, potential, value or suitability of any particular security, portfolio or securities, transaction, investment strategy or other matter. No information, nor any opinion expressed on the Site or in the Services, shall constitute a solicitation or an offer to buy or sell any securities mentioned therein. The information presented on the Site and in the Services has been prepared without regard to any particular investor's investment objectives, financial situation, needs, capacity, and trading ability or experience. Accordingly, you should not act on any information on the Site or in the Services without obtaining specific advice from your financial advisors and should not rely on information herein as the basis for your trading and/or investment decisions. HFZ cannot claim or represent that any of our Services are suitable for you. By your use of the Site and Services, you're agreeing that you bear responsibility for your own investment research, trades, and investment decisions. Only you can decide whether or not a trade is right for you and you agree to be liable for any trades you initiate at your brokerage using research and/or tools that we provide. If you ignore our advice to do independent research and choose instead to trade solely on information, analysis, alerts or opinions found in our Service or website, you have made a conscious, willing, free, and personal decision to do so. You also agree that HFZ, its directors, its employees, subsidiaries, affiliates, and its agents will not be liable for any investment decision, trade made or action taken by you and others based on news, information, opinion, or any other material published through our Site and Services.