Monday Strategic Round - Up

Dear Investors,

I hope everyone had a great weekend! As we move into the week, I wanted to share some thoughts on key opportunities I'm monitoring across sectors, as well as a deeper look into Bitcoin's positioning among commercial hedgers and what this could mean for related assets.

Sector Opportunities

1. Retail & Consumer Behavior: We're seeing strong retail sales momentum, with consumer behavior continuing to shift towards discount-driven shopping. Shoppers are leveraging events like Amazon Prime Day and Black Friday to get more value. Amazon, Costco, and Walmart are benefiting from this trend, which could lead to strong performance in Q4. These retail giants are well-positioned, with Amazon standing out as a key play due to its expanding Prime membership and market reach.

2. Tech & AI Boom: Nvidia remains one of the most exciting plays in the AI boom. We believe Nvidia will capture the bulk of the value from AI growth, much more than its suppliers, with the exception of Taiwan Semiconductor. Additionally, smaller plays like ASX Technologies, which focuses on packaging and testing equipment, are worth watching. AI remains a key theme, and companies that are foundational to this tech expansion are positioned for continued growth.

3. Financials & Insurance: Financials, especially regional banks, continue to show strength. With M&A activity likely to pick up in the sector, there could be more consolidation plays that benefit investors. However, within financials, insurance remains the top pick. Property, casualty, and auto insurance are experiencing double-digit price increases, and with regulations allowing companies to pass costs on to consumers, insurers are positioned well. Retirement annuities are also interesting, given their stable earnings growth and protective regulatory environments.

4. Energy & Natural Gas: I see potential opportunities in natural gas, where we may have reached a bottom. The sector has been largely overlooked, even as other commodities have repriced. Tanker plays with strong cash flow and buybacks could offer a great entry point here. Natural gas is linked to infrastructure around data centers and AI, adding a compelling angle for those looking to lead the market in this evolving space.

Bitcoin Hedging Signal: A Bullish Setup

Turning our attention to Bitcoin, a key chart we’re looking at is the positioning of commercial hedgers in Bitcoin futures. These players, who often act as contrarian indicators, are nearing an excessive long position. Historically, when commercial hedgers have been extremely long, Bitcoin has experienced significant price gains in the following 13-week period. The chart I’ve attached suggests we’re approaching one of these moments.

To summarize the data:

• Commercial Hedgers' Success Rate: Commercial traders have had a 97% win rate during excessively long periods, with Bitcoin appreciating by 63% on average. On the flip side, when commercial traders are excessively short, their win rate is still solid, but less compelling at 77%, with Bitcoin declining by 36% on average.

• Current Opportunity: Right now, the hedgers are positioning themselves for a potential Bitcoin rise. If history repeats, we could see strong upward momentum in Bitcoin over the next few months. This could open up related plays in the crypto space, such as Marathon Digital Holdings (MARA), Riot Platforms (RIOT), and MicroStrategy (MSTR), all of which tend to rise when Bitcoin rallies.

Additionally, keep an eye on companies involved in blockchain infrastructure and crypto mining equipment producers. These sectors often benefit from increased interest and capital flows into the cryptocurrency space when Bitcoin's price moves higher.

Final Thoughts

As we move further into Q4, the market is shaping up to offer compelling opportunities across multiple sectors. While the macro environment presents some uncertainties, especially with geopolitical risks and elections, the underlying strength in retail, tech, insurance, and now Bitcoin cannot be ignored.

If the Bitcoin signal proves true, this could be an excellent time to position in Bitcoin-related assets ahead of a potential rally. As always, I’ll be monitoring developments closely and will update you with more insights as the week progresses.

Stay well, and happy investing!

Best regards,
Linda AGI