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Bi-Weekly rollup | Oct 31 - Nov 13 2022

Stocks Mentioned: Innovative Industrial Properties (IIPR), Zim (ZIM), Danaos (DAC), Twilio (TWLO), Atlassian (TEAM), Global Ship Lease (GSL), Anavex Life Sciences (AVXL)

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November 01 2022

Buy Innovative Industrial Properties (IIPR)

IIPR is a cannabis focused REIT. Stock just had a band squeeze breakout, filled the gap from the July breakdown, decisively moved above the 100 DMA and has likely put in a long-term bottom. Note that REITs are best suited for US taxpayers given the tax consequences of the massive quarterly payouts.

November 02 2022

Federal Reserve issues FOMC statement

Federal Reserve issues FOMC
Download PDF • 239KB

November 08 2022

Bitcoin long position unchanged.

Let FTX and Binance battle it out. Meanwhile, buy the dip. Hard stop at $17.6k. As long as markets are recovering, bitcoin and alt coins hold up, and tech stops getting wrecked, corrections are opportunities to add. Plus, you have a lower risk on new entry now as compared to the initial band squeeze breakout price of $20.6k.

Zim (ZIM) tanked hard in Q3 because Danaos (DAC) sold 5.7 million shares at $28.25. Whoever is in charge of their corporate finance decisions deserves a medal. I'm glad we sold DAC. Cash accounts for almost 45% of market cap, but their ability to destroy value shouldn't be underestimated.

November 09 2022

Bitcoin came within a whisker of getting stopped out ($17.7k low) and then rebounded to ~$18.3k. Looks like traders gunned for stops set at/near the June low. I still think the risk/reward is skewed tremendously toward a long bitcoin position, provided you are willing to follow through on the stop loss.

That didn't take long. Sell bitcoin at ~$17,560 for a loss of 14.8%.

My suspicion is that this is a fake out and the real move is to the upside. But this is a trading platform, not a buy-and-hold investment platform, so I'm honoring the stop and booking the loss on this trade.

I'm adding Twilio (TWLO) and Atlassian (TEAM) to my tech watchlist, based on my conversations with tech professionals who have seen the adoption of their offerings in their own enterprises and in the overall industry. Again, not a recommendation, but more of a heads up as to the direction I'm heading.

I've rotated between sectors before, most recently in 2020 when I made my first foray into shipping. I know I won't get it right the first time, but there's time to learn while the sector bottoms out. Better to make some mistakes and learn, than get stuck in one sector and ride it all the way down (like the energy bulls). The reason newsletter writers have a terrible long-term track record is precisely because they fail to do this. They pigeonhole themselves by being long-only single-sector experts with no regard for the macro swings. Having worked in that industry and seen how destructive that approach is first-hand, I'm not going to take that approach.

If you know of any great tech stocks I should be looking at, I'm always open to chat.

Global Ship Lease (GSL) is now above the 100 DMA, weekly RSI (20) at 48 is just shy of 50, and it looks like this week might be it for a weekly close above the 20 EMA. The company repurchased 876k shares in Sep and Oct 2022 for $15.1 million. Put another way, 16.8% of Q3 net income went into buybacks, with another 15.4% allocated to dividends. With a revenue backlog of $2.65 billion over 3.7 years (market cap: $674.7M, share price: $18.55), I expected management to use their earnings visibility to shore up the share price and reward shareholders with either bigger buybacks or at least a fatter dividend like ZIM. I'm disappointed.

I'm not a buyer today, but if we do get a weekly close above the 20 EMA this week, and the weekly RSI moves above 50, expect a buy recommendation. With value stocks, patience is absolutely key.

November 10 2022

November 11 2022

FTX filed for bankruptcy. BlockFi halted withdrawals. Galaxy Digital Holdings (TSX:GLXY) took a bath on their FTX holdings. Contagion risk is putting pressure on crypto prices. Binance CEO says other crypto companies may be next in line for bankruptcy protection.

These are scary headlines. Yet, if you think about it, what does it imply? Crypto assets held on FTX are locked up while the company makes its way through bankruptcy court. That's a couple of years at the least. Rest of the exchanges are going to gain FTX's market share. True, trade volumes may drop overall, but that's not a given. Remember, traders don't buy and hold, they trade. They don't care about the fundamentals or the tokenomics, they just run their algos and try to profit from price fluctuations. So I doubt trading volumes fall off a cliff.

Crypto that's locked up in bankruptcy proceedings needs to be replaced on investors' balance sheets. Or maybe they need to hedge. The float for bitcoin and other top cryptos just went down. That's bullish for prices - once the dust settles and buyers return. To understand this dynamic, just look at the price charts of 2021 SPAC deals and look at the change in prices before and after insiders' stakes got unlocked.

This also takes leverage out of the crypto ecosystem. That's healthy. Yesterday's sharp spike higher was a reaction to a benign inflation print, today's sharp spike lower was a result of the FTX news. Tech stocks are still racking up gains on top of yesterday's. Crypto would have been as well, if not for FTX.

More surprises could very well send cryptos lower. Not saying bottom fish. But be prepared to buy rallies, especially if tech stocks hold up, market breadth improves, and major indices remain in an uptrend.

Buy Anavex Life Sciences (AVXL)

Stock just blew through long term resistance. This is the entry point I've been waiting for.

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