Weekly Portfolio Update 08/20/2021

Dear Fellow Investor,

The markets remain in a sideways trend as investors try to make sense of the final days of August ahead. This is one of the strangest markets that we’ve witnessed in history. 

For evidence, note that we haven’t had a 5% pullback from recent S&P 500 highs in 200 consecutive trading sessions. A lack of selling fuels that support. And that streak has only happened eight times in market history dating back to the 1950s. 

What’s remarkable about this small sample size is that it has set up a relatively bullish long-term thesis. After the streak breaks, the average one-year return is 6.5%, while the two-year post-streak average return is 27.4%. Stretch this out to a five-year price trend, and you’re looking at an average post-streak return of 64%. 

Now, again, this is a small sample size. And past performance does not guarantee future returns, according to every pitch deck you’ve ever seen as an investor. But it’s a reminder that despite all the worries about stretched valuations, the markets can always defy odds. 

And with a long-term bias to the upside and a significant amount of cash on the sidelines, there’s certainly a case to be made that more money will chase higher returns. However, the key point out in my weekly video is that investors aren’t chasing higher small-cap stocks.

Watch it here:

The small-cap space as a whole – and other categories – all had bad weeks. The Russell 2000 has been range-bound since February. And we’re looking for some semblance of rotation out of the extensive stocks and into the smaller-cap ones. That might take time, and with momentum still negative in the market – especially at the lower ends – we have to continue to play defense while taking structured shots at the higher upside. 

Again, we maintain strong trailing stops on our positions to protect gains and principal. 

Portfolio Update

We’re keeping a tight portfolio right now in this market. On Wednesday, the S&P 500 momentum went negative after the Federal Reserve released preliminary plans to taper its balance sheet. 


With that said, let’s allow Zynga to run. The company is coming off a sharp post-earnings selloff, and it was clearly in oversold territory, as I pointed out with the recommendation.

This week, we’re looking for a nice run on our most recent trade in Zynga Inc. (ZNGA). I previously recommended that traders purchase the Zynga September $8 call for $0.50 or less. 

Based on that price, the contract is up more than 50% so far, and we’re looking for a bigger gain in the weeks ahead. Zynga stock has very little volume support between $8.50 and $9.60, signaling that a big gap is possible in the week ahead. We will let this trade run a little bit and hope to secure a 100% gain. 

I still recommend the stock as a Buy so long as you set a trailing stop of 7% as a trade. 

Co-Diagnostics (NASDAQ:CODX

I had noted rival Quest Diagnostics as a proxy for what we’re seeing with the much smaller Co-Diagnostics, a producer of COVID-19 saliva tests. This has been a trader’s stock over the last few months. Shares climbed as high as $20.69 back during February when markets topped out in the smaller-cap arena. With that said, this company’s valuation remains low, and it continues to swing between ranges of $9.50 and $11.50. 

I’m looking for this to bounce back to where it was recently after the 20-day moving average crossed back over the 50-day moving average. This stock is up 3.6% today, and it will look to climb higher again a strong price-trend stock.  

Continue to HOLD shares of CODX. 

We’ll be looking at some new trades early next week if we see weaker earnings of some best-in-class stocks. We’ll also be eyeing vaccine stocks heading into the fall. This will be a wild market in the weeks ahead, and I look forward to shooting for the moon with you.

Enjoy your weekend,

Garrett Baldwin

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