A Rare Buy Signal In Tech Stocks… [DIRTY DOZEN]

Understanding and dealing correctly with the trade-off between risk and return is a fundamental, but poorly understood, challenge faced by all gamblers and investors.~ Edward Thorp

In this week’s Dirty Dozen [CHART PACK], we talk average bear markets, playing politics with national security, a rare breadth thrust in tech stocks, extreme short positioning in bonds, small caps at small valuations, and uranium names with nuclear fundamentals, plus more…

  1. @EnronChairman shared an illuminating graph last week on what it feels like to be a long only investor in this market…


  1. BofA’s latest Flow Show highlights with actual highlights by me.


  1. The overt politization of a national security asset in order to buy votes (in this case the SPR) during a time of real and rising global threats, is bad precedence and a dangerous game.


  1. An updated refresher on average bear markets with and without a recession. We’ll be tipping into a recession next year if the Fed stays on their current course, so focus on the red line (chart via BBG).


  1. The Tech sector triggered a rare MACD Buy Signal last week, where over 80% tech stocks have had a MACD buy signal within the past 10-days.

This marks only the fifth time this signal has triggered over the past 30+ years.


  1. This graph shows historical returns over the following month of trading. Tech stocks were higher every time one month later with an average return of 13% (note: this graph shows 15 instances but that’s because these buy thrusts come in multi-day clusters, which I count as single instances).

I’m not saying it’s a good idea to go and buy beaten down tech stocks now. Just including this for context and to keep us openminded to the potential for a large rally, like the one that occurred during the 00’-02’ bear market.


  1. For tech stocks to rally we’d need to see bonds put in a durable bottom. Something they’ve so far failed to do. Interestingly, positioning is getting very one-sided. The chart below shows the aggregate speculative positioning (OD green line) across all maturities (h/t Cameron Crise). I wouldn’t fade the current trend. It’s parabolic and parabolic moves last longer than most expect. But they also tend to end in violent reversals, so something to keep in mind…


  1. Smallcaps are cheap, both on a nominal and relative basis. It’s too early to be aggressive but it’s a good time to be bargain hunting and accumulating shares (h/t @MikeZaccardi for the charts).


  1. Historically, when smallcaps have traded at a forward PE of 10x, they’ve seen double-digit annualized returns over the following decade.


  1. @quakes99 shared a good thread of charts outlining the long-term bul thesis for Uranium (link here).


  1. We’re only in the early innings of what’s going to be a broadbased and secular bull market in commodities. The main driver, as is always the case, is the CAPEX Cycle.


  1. The below list shows the top 20 best performing stocks this year that trade on US exchanges with a marketcap over $2bn. Notice the industries (oil & gas, coal, biotech, copper). That’s called leadership change. What’s outperformed in the last cycle is unlikely to outperform in the next. This list is a good starting point for digging into new cyclical winners.

Thanks for reading.

Stay frosty and keep your head on a swivel.

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Brandon Beylo

Value Investor

Brandon has been a professional investor focusing on value for over 13 years, spending his time in small to micro-cap companies, spin-offs, SPACs, and deep value liquidation situations. Over time, he’s developed a deeper understanding for what deep-value investing actually means, and refined his philosophy to include any business trading at a wild discount to what he thinks its worth in 3-5 years.

Brandon has a tenacious passion for investing, broad-based learning, and business. He previously worked for several leading investment firms before joining the team at Macro Ops. He lives by the famous Munger mantra of trying to get a little smarter each day.


Investing & Personal Finance

AK is the founder of Macro Ops and the host of Fallible.

He started out in corporate economics for a Fortune 50 company before moving to a long/short equity investment firm.

With Macro Ops focused primarily on institutional clients, AK moved to servicing new investors just starting their journey. He takes the professional research and education produced at Macro Ops and breaks it down for beginners. The goal is to help clients find the best solution for their investing needs through effective education.

Tyler Kling

Volatility & Options Trader

Former trade desk manager at $100+ million family office where he oversaw multiple traders and helped develop cutting edge quantitative strategies in the derivatives market.

He worked as a consultant to the family office’s in-house fund of funds in the areas of portfolio manager evaluation and capital allocation.

Certified in Quantitative Finance from the Fitch Learning Center in London, England where he studied under famous quants such as Paul Wilmott.

Alex Barrow

Macro Trader

Founder and head macro trader at Macro Ops. Alex joined the US Marine Corps on his 18th birthday just one month after the 9/11 terrorist attacks. He subsequently spent a decade in the military. Serving in various capacities from scout sniper to interrogator and counterintelligence specialist. Following his military service, he worked as a contract intelligence professional for a number of US agencies (from the DIA to FBI) with a focus on counterintelligence and terrorist financing. He also spent time consulting for a tech company that specialized in building analytic software for finance and intelligence analysis.

After leaving the field of intelligence he went to work at a global macro hedge fund. He’s been professionally involved in markets since 2005, has consulted with a number of the leading names in the hedge fund space, and now manages his own family office while running Macro Ops. He’s published over 300 white papers on complex financial and macroeconomic topics, writes regularly about investment/market trends, and frequently speaks at conferences on trading and investing.

Macro Ops is a market research firm geared toward professional and experienced retail traders and investors. Macro Ops’ research has been featured in Forbes, Marketwatch, Business Insider, and Real Vision as well as a number of other leading publications.

You can find out more about Alex on his LinkedIn account here and also find him on Twitter where he frequently shares his market research.