Momentum Meltdown 12/10/24
Halftime Report
Deep Dive
Why did the momentum strategy experience its worst day in months?
The momentum strategy suffered its worst day in months due to a sharp sell-off in high-growth, high-momentum stocks. This was exacerbated by the MTUM ETF and JOTI experiencing significant declines, with some stocks seeing drops of over 15%. The sell-off was attributed to stretched valuations and profit-taking after substantial gains.
What were some of the key stocks affected by the momentum meltdown?
Stocks like AppLovin, MicroStrategy, Palantir, Robinhood, and Carvana were heavily impacted. AppLovin dropped 15%, Kava fell 12%, and MicroStrategy declined 7.5%. These stocks had previously seen massive gains, with AppLovin up 900% and MicroStrategy up 525% year-to-date.
How does Joe Terranova suggest mitigating risk in momentum investing?
Joe Terranova recommends overlaying momentum with a quality screen, focusing on stocks with strong fundamentals, balance sheets, and revenue growth. He avoids stocks that lack quality and are solely driven by momentum, emphasizing the importance of diversification.
What is Stephanie Link's strategy for investing in underperforming stocks?
Stephanie Link looks for underperforming stocks, particularly those that have lagged their peers, and buys them with the expectation of a rebound. She recently bought Zscaler, Boeing, Las Vegas Sands, and Target, believing that these stocks are poised for a recovery in 2025.
Why did Josh Brown sell Toast, and how does he manage risk in his trades?
Josh Brown sold Toast after it hit his stop-loss point. He manages risk by using stops, options, or other risk management tools to protect against significant losses in high-momentum stocks. He views selling as part of the normal process of managing trades and portfolios.
What is Jim Laventhal's view on Oracle after its earnings miss?
Jim Laventhal believes Oracle's earnings miss was minor, with revenue and net income missing by less than 1%. He suggests that CEO Larry Ellison may be resetting expectations for more sustainable growth. Laventhal recommends starting to build a position in Oracle at its current valuation of 28 times earnings.
What is Stephanie Link's rationale for buying SLB (Schlumberger)?
Stephanie Link believes SLB is undervalued at 12 times earnings, despite delivering strong results for eight consecutive quarters. She sees potential for a mean reversion trade in 2025, driven by the company's strong fundamentals, digital and software franchises, and the possibility of increased oil field services demand under a potential Trump administration.
What are the key points of Jenny Harrington's bullish call on UPS?
Jenny Harrington highlights that UPS is over its pandemic distortions and labor negotiations, with a clean story and 15% to 20% earnings growth expected over the next two years. The stock is trading at 13 times earnings with a 5% dividend yield, making it an attractive investment.
What is the significance of the Walgreens-Sycamore Partners deal news?
Walgreens shares surged over 20% on news that Sycamore Partners is in talks to buy the company. This comes as Walgreens has been undergoing restructuring under its new CEO, Tim Wentworth, and has been exploring potential divestitures to focus on core operations.
- MTUM and JOTI ETFs experience their worst day in months
- Momentum strategy shows extreme leverage and higher risk in certain market areas
- Experts debate whether the meltdown is an isolated event or a sign of broader market issues
- Overlays of quality factors are suggested to mitigate risk
Shownotes Transcript