The Best Trade We Made This Week Was the Seat We Didn't Buy

Morning Watchlist: Saturday Edition             

The Week in Review A quick note from Behind the Markets

It's Saturday morning, and if you only read headlines this week, you have whiplash. A week ago Friday, the market had its worst session since June. Monday it bounced. Tuesday the country voted. Wednesday the Dow rose 1,569 points — up 3% — because the market did the math on a Democratic Congress and a veto pen and landed on its favorite word: gridlock. And Thursday the crowd remembered what it was afraid of before anybody voted, and sold the AI trade so hard the Nasdaq spent midday down roughly 5%, flirting with correction territory — ten percent below its record — with one tally putting Thursday's damage in tech at $1.7 trillion.

Our standing press note: we go to press Thursday midday, so Thursday's close and all of Friday — the October jobs report above all — belong to you, not to us. They lead your Monday checklist below.

Nineteen calls this week. Four stops on the tour.

Let's get into it.

1) The Basement Inspection and the Baker

Two of our oldest open Buys took their exams this week, in public.

The short seller said Jackson Financial's basement was flooded. Tuesday night, management opened the door with everyone watching: adjusted operating earnings of $7.55 a share against the $7.23 expected, retail annuity sales at a record $6.5 billion — up 22% — and, asked directly about the reinsurance subsidiary the short reports keep circling, management called it well capitalized and said the structure isn't changing. The stock, which had climbed to $140.65 into the report, slipped about 4% on the print to roughly $136 — within a dollar of where we reaffirmed it Sunday, and about 3% above our August flag. The quarter the short sellers keep saying can't happen keeps happening, line by line. Still Buy.

And the baker spoke. Monday night Apple reported a record September quarter — $114.5 billion in revenue, iPhone up 17% — and the feared 15-to-20-million-unit cut was nowhere in it. Wednesday night Cirrus Logic answered with its own beat: revenue of $559.5 million against the $540 million expected, earnings of $2.70 against $2.42, and another $500 million added to the buyback. By Thursday the stock was back near $116, above its 50-day average — about 6% over our September 2nd flag, with October's $105.10 panic low looking like fear's high-water mark. The December guide was cautious, and chips had a dreadful Thursday. But a stock priced for a problem just watched the problem fail to show up twice in one week. Still Buy.

2) The Country Voted Once. The Market Voted Twice. 

Wednesday morning, the gridlock trade paid our newest names first. Hospitals and Medicaid insurers repriced before breakfast — Centene up 8%, Molina 6%, and the hospital group, Universal Health Services included, up 6 to 8% — as Bernstein wrote that the planned Medicaid cuts "could be delayed and ultimately avoided." That's the exact uncertainty our Thursday Buy was priced for: UHS flagged at about $172 and roughly 7 times trailing earnings, the restaurant the law requires to seat every table. One strong Wednesday doesn't close the year's hole, and a veto can still stall the subsidy fix — but the wind changed sides, on schedule. Still Buy.

Solar got the dartboard version of the same trade — First Solar up 9%, Sunrun 10% — and our point Thursday stands: Nextpower's $6 billion backlog was signed before the polls opened. Flagged at about $91; no fresh print we could verify by press time, so Monday's tape grades it. Still Buy.

Then Thursday, the market read the other half of the ballot: a Congress that can hold hearings just met a trade priced for applause.

3) Thursday, the Tuition Came Due

The chip aisle took the worst of it. The Philadelphia Semiconductor Index fell about 7% in early trading; Qualcomm dropped double digits on a soft outlook, with handset revenue down 26%.

Start with the seat we refused to buy. On Monday we put AMD on Watch at about $551 and 50 times forward earnings — scalper prices, we said. Tuesday night AMD aced the exam: record revenue of $13.4 billion, up 45%, and a roughly $17 billion fourth-quarter guide. The stock popped nearly 6% Wednesday morning. Then Thursday, on no company news at all, the crowd marked it down 13%, to about $425 — politics, not products. From our refusal price, that's a 23% markdown we never paid. Our named entrance was the market confusing AMD's two rooms; what's printing instead is a Washington panic across the whole building, and knives still falling aren't invitations. Still Watch.

Now the honesty column. Micron, Wednesday's Buy at about $834, closed Wednesday below $800 and was marked down roughly another 12% by Thursday midday — call it some 15% below our flag, a 25% slide in a month — with Bloomberg reporting Micron paused a $4.5 billion Taiwan plant expansion over a labor dispute. What has not changed: a record $74.33 a share just earned, 26 long-term customer agreements, roughly $32 billion of mostly cash-deposit commitments, price floors on three-quarters of that revenue. The wedding venue is still booked solid; only the price of the hall is falling. The kill we named was customers cancelling orders rather than paying up — Thursday was fear of subpoenas, not a cancelled order. We are early and underwater, and we'd rather tell you that plainly than quietly. Still Buy. Western Digital, the storage-aisle Buy from October 25th that ran 14% ahead of us, gave a chunk back in Thursday's memory rout — same answer, same reasons. Still Buy. And Amkor, Thursday's frame-shop Watch at about $39: the low-$30s washout we named as one entrance may be arriving faster than we expected; no verified print by press time. Still Watch.

4) Report Cards and the Peace Tape

Quick grades on the rest of the card. Regeneron is the week's best mover: $930.67 at Wednesday's close against our $813 flag — up about 14%. Still Buy. Zoetis beat Thursday morning ($1.75 against $1.51) and rose 2%, but the beat came from the barn, not the waiting room — U.S. pet sales fell 8% — so our entrance never printed. Still Watch. Entergy beat Monday ($1.98 against $1.53 a year ago) and narrowed its full-year guide to $4.35–$4.45, but the who-pays fight in Louisiana is still unresolved. Still Watch. Leidos beat by 57 cents with $1.20 of new work signed per dollar billed. Still Buy. Lamb Weston's test came through McDonald's: U.S. comparable sales slipped 0.2% with traffic negative but improving as the value push took hold — a value war is fry volume whoever wins, and traffic is now the formal watch item. Still Buy. Hershey gave us no fresh tape; cheap cocoa didn't get expensive. Still Buy. Reddit clawed back about 6% on Wednesday; our entrance — the $70s, or January proof the regulars are staying — never opened. Still Watch.

The war-and-peace tape moved everything else. Brent fell 8.7% Wednesday to $94.62 — its lowest settle since August, on words, not signatures — then bounced back above $96 Thursday. Carnival, Friday's unhedged Buy at about $29.20, is a day old and built for exactly this chop: the bare skin that cost it $500 million works in reverse, and the kill stays Brent back above $110. Still Buy — and Norwegian, the October 1st call, stays a Watch. Alaska Air has watched this movie with us three times; tankers still aren't moving, so the entrance stays closed. Still Watch. BorgWarner, flagged at about $52 for Friday's edition, got the loudest receipt a day-old call has ever handed us: Toyota's 17% Thursday surge in Tokyo — its best day in roughly four decades — on a forecast raised 15%. Still Buy. Signet: gold climbed back to about $4,088 Thursday from last week's $3,870 low — creeping toward the re-spike we named as the kill, though still some 9% below the record. Watching, not flinching. Still Buy. And Equifax: FICO fell another 8% Thursday morning after refusing to guide at all; our entrance stays a markdown into the $160s. Still Watch.

Before You Go

The scoreboard. Nineteen calls this week — twelve Buys, seven Watches, no Sells. Through the freshest tape we could verify: Regeneron +14% from the flag, Cirrus Logic +6%, Jackson Financial +3%, Zoetis +2%, and UHS up with Wednesday's hospital rally. The tuition column: Micron roughly 15% against us by Thursday midday, Western Digital giving back part of a 14% gain. The not-chased column is the week's quiet trophy: AMD sits about 23% below the price we refused to pay on Monday — the best trade we made this week was the seat we didn't buy — and Reddit's 6% Wednesday bounce ran without us, a price we'd decline again. Too young or too quiet to grade against a verified fresh print: Lamb Weston, Hershey, Signet, Alaska, Entergy, Leidos, Amkor, Nextpower, Carnival, Equifax, and BorgWarner — Monday's tape is their first full grade.

Your Monday checklist, in order. First, Friday's 8:30 jobs report — the Street wanted roughly 60,000 after ADP's 86,000 and a Challenger layoff count down 71% from a year ago; with December's hike priced near 80% all week, read the wage line before the headline, then check what it did to our rate-sensitive names, Jackson first. Second, Thursday's close and Friday's session in the chip aisle: did the Nasdaq hold the correction line, and did AMD, Micron, and Amkor's markdowns reach the entrances we've named — or blow through them? Third, Brookdale, the October 26th Buy, reported Friday morning; grade it against the occupancy story, and our Sunday note will too. Fourth, the barrel: ships moving through Hormuz, or more words? Carnival and Alaska grade off the invoice, not the communiqué. Fifth, next week's exams start Monday — with a new Congress drawing up its committee lists, the hearing calendar is now part of the price of everything with a GPU in it.

Have a wonderful weekend.