Research Review: Freeport Alpha By Michael Salvatore, Editor, TradeSmith Daily There are, mercifully, just two trading days left until the U.S. presidential election results come in. I think I can speak for a lot of people when I say I’m more than ready for this to be over. No matter what happens, I hope it’s a decisive victory that won’t hold our attention hostage any longer. Alas, hopes and dreams aren’t an investment strategy. There’s a strong chance this election will be contested, and the winner won’t truly be decided for days, if not weeks after the initial count. Here in TradeSmith Daily, we’ve shown you many different ways how the presidential result may have an impact on different markets, sectors, and volatility. We have decades of data at our disposal to help us answer those questions. But what’s far more rare is a contested election. We’ve only had two major contested elections in the 21st century: In 2000 between George W. Bush and Al Gore, which resulted in a Florida vote recount leading to the same result – a Republican victory. In 2020 between Donald Trump and Joe Biden, which had no official action taken, but, well, I don’t need to remind you of the unofficial actions taken. Volatility, as measured by the CBOE Volatility Index (VIX), didn’t change much in the 2000 election recount process, despite a run-up in the two months prior:
And in 2020, volatility was even more moderate, even through the events of January 6.
In both cases, volatility rose. In one, it stayed high. But there’s so little data, it’s hard to tell just what will happen. This time around, odds are strong a Trump loss will cause deeper uncertainty. But we have another fly in the ointment in the form of the most consequential Federal Reserve meeting… since the last one. On Wednesday, the Fed will decide whether it will continue to ease its interest rate policy – with the odds high it will do so despite higher inflation numbers and the likelihood of deeper government deficits no matter who wins the White House. It’s a one-two punch of volatility that we may be ramping up into right now. Take a look at the VIX readings from last week:
Stocks are going risk-off right now. You’re probably looking at a bit of blood in your brokerage account like I am. Here’s where I’m going with this… It’s hard to prepare for this kind of volatility. We really haven’t seen this kind of situation before – where we’re in a questionable falling-rate cycle amid a very testy presidential election. Our friends at The Freeport Society have been working very hard to prepare their subscribers with guidance and recommendations. And in a research presentation they released last week, they laid out their case for what will happen in the wake of the election, and the best moves to make. (If you haven’t seen it yet, check it out here.) This presentation, as is tradition in the newsletter world, offers a chance to join Freeport Alpha – their premium growth stock advisory. Being a part of TradeSmith, and our extended corporate network, I have the liberty to poke through lots of different newsletters at my will. So, I thought it might be nice to share some of what Freeport has been publishing recently and help you figure out if it’s the kind of advisory you can make use of. I’ll share some of analyst Charles Sizemore’s recent insights, as well as one of his recent model portfolio recommendations. Read on… Freeport Alpha in Review If you watched my interview with Charles last weekend, you know that he recently attended the Alternative Investment Management Summit in Dubai. There he got to hear from former House Speaker Kevin McCarthy along with former British Prime Minister Boris Johnson. Here’s Charles on what he learned: It’s McCarthy’s comments that truly struck me. For a man who made a career out of lying out of both sides of his mouth as a congressman, he was remarkably candid and straight. McCarthy laid out, plainly, the problems the next administration would have to grapple with, including the spiraling national debt. When asked to handicap the election odds, he gave Donald Trump a 60% chance of winning. As a Republican, he’s talking his book, of course. So I would take those odds with a healthy grain of salt. But it was his comments on the congressional race that I took a lot more seriously. Per McCarthy: Whoever wins will have a majority so small, they won’t be able to govern. He should know. McCarthy’s own party canned him last October after he tried and mostly failed to herd his cats for the better part of a year. His speakership was one of the least productive in history. McCarthy expects the next speaker to have it even worse… and he predicts the next two years will be chaotic as a rudderless Congress is unable or unwilling to deal with the issues we face. McCarthy told the crowd in Dubai that we should prepare for gridlock in Congress – which, as we discussed yesterday, is one of the best investment setups you can ask for. Here’s more from Charles commenting on his model portfolio: Freeport Alpha is, of course, made for an “Age of Chaos.” We launched this service to serve as an antidote to the chaos swelling around us. Rather than hazard a guess on what direction the market will move, we simply follow the money. We look for evidence of unusual trading activity that suggests “someone knows something.” And it’s working. As I write this, we’re up in every single position in our core portfolio. Let’s keep that streak going… Charles then goes on to recommend a smaller-cap financial company I personally haven’t heard of before, Raymond James Financial Inc. (RJF). This boring-looking investment bank popped up on Charles’ radar through his MoneyFlow indicator, which seeks out unusual buy volumes in the market and follows them to high-growth stocks. Charles recommended RJF as a buy up to $142, with a stop set just under $120. And since his recommendation, the company is up a nice 8% – just a bit out of buy range. Something you should also know about Freeport Alpha is that Charles also recommends opportunistic call options trades. He recently closed out a 100% gain in EQT call options, recommended actually by master trader Jonathan Rose in a collaborative special report. Most recently, however, Charles recommended seven new stocks to take advantage of election chaos. I can’t share those specific plays with you, out of respect for Charles’ subscribers. But I’m happy to share a few details so you know what kind of research Charles does. Three of them are longer-term plays, covering areas like an elderly healthcare and assisted living company, a little-known but important American industrial stock, and a power management component maker. Four more, however, are short-term holdings designed to benefit from seasonal strength specifically from November 20 through December 30. Finally, Jonathan has shared another options trade idea with Charles’ readers, designed to profit in multiply-your-money fashion between now and the end of the year. As Charles puts it, Freeport Alpha is no one-trick pony. It uses a combination of common sense fundamental analysis and macro insight and combines it with quantitative research. Once again, if that sounds like the kind of research you’d like to have access to, go here for more info. Whether you decide to join or not, the presentation contains a lot of useful insight on how to trade this coming week, and you’ll walk away from it smarter regardless. To your health and wealth, Michael Salvatore
Editor, TradeSmith Daily | 