A New Week 06/15

In our free 5-Day Onboarding Course, we cover the importance of factors and their timing.

You can track these every week, month, or quarter as you wish in order to gauge what the market is rewarding now or will reward in the future.

Today’s market is overly detached from most of its traditional driving factors, even momentum (in yellow).

Meaning,

Since 2023, the S&P has been increasingly led by concentration into one area, one trade. That trade is obviously the AI names which now make up over 40% of the entire market.

This isn’t good or bad, it’s just the nature of the market we have inherited.

But,

It also suggests there are plenty of areas to look into for future rotations, or what we like to call premium harvesting.

Notice the value factor (in red) has now fallen to its deepest underperformance this cycle, right along with the size and breadth factors.

Investing under the Offside framework will make you a contrarian by nature, but it will also land you in some of the best risk/reward opportunities available today.

You see, now that the market is being run by concentration and momentum, expectations for smaller high-quality companies are falling into some of the most pessimistic levels this decade.

And,

When expectations get this low, companies have an easier time beating them and commanding a future reprice out of the market.

Take Adobe for example, it’s now beat every quarterly expectation for the past 14 quarters consecutively.

Meanwhile, NVIDIA had a strong quarter and the stock is now down into correction territory.

13-F filings show some of the world’s best investors are buying Adobe (attached to the value and quality factor), while they also sell NVIDIA.

They are all quietly harvesting the premiums being offered in a value + quality stock like Adobe.

But that’s just one name.

We use factors to begin our hunt, and when a company passes our rigorous analysis process, then we consider adding it to our watchlist.

Currently, that list includes:

And plenty of others positioned to become multi-baggers from here.

For just $2 a day, you will have instant access to:

As you can see, I’m trying to give you more than anyone in the space, for a whole lot less.

Question is,

Will you continue to rely on basic retail-level research in social media, and overpaying for Discord channels ran by amateurs?

Click here to become an Offside Premium member now.

Let’s get into the week ahead, and where some of the best opportunities may be shaping up.

Building permits, retail sales, and FOMC this week.

Keep an eye on the first two for the following reasons:

Building Permits

Because the output in permits has fallen into a long-term balance for the industry, chances are we may begin to see reactions out of the housing and construction markets.

At the end of the day, though, these may only become materialized through a similar reaction in the mortgage markets.

Reaction or not, here’s what matters…

Building permits are a direct gauge into the consumer’s balance sheet and the health of credit markets.

Because for every permit to be approved, counties have to:

So, the fact that these have declined into this long-term balance tells you consumers are weaker than they seem, and banks are tightening their lending activity more than their stock prices may suggest.

But,

That’s not the whole picture, as housing is only one cog in the entire credit and consumer machine.

Nonetheless, a very important report to keep an eye on this week.

Retail Sales

Not much needs to be said about this one, other than certain industries may see expanding sales while others contract.

Where consumers are choosing to spend their money during financially tighter times is important.

Combined with jobs, PMI, and inflation data, we can take the retail sales report into account and start building some strong trade ideas.

Keep in mind, there’s a current K-Shaped economy trade going on. The bottom K of the market isn’t doing so well now, falling along the breadth and value factors together.

You bet we’re also looking into that area, and finding some potential players for the pipeline.

Then the big show, FOMC.

This will be the first Warsh meeting, and the guy hasn’t given markets much to chew on lately.

On one hand, he wants to keep rates lower but also shrink the Fed’s balance sheet in a new sort of hybrid inflation control measure.

This could work, since lower rates automatically boost the balance sheet value anyways (lower rates = higher credit asset prices).

But,

His view on inflation is what concerns me.

He seems to think AI is deflationary, markets are calling it inflationary.

Just the facts:

I think Warsh has a rude awakening coming his way, and lower rates could only propel the speculative AI betting bubble further.

Which isn’t great.

All told, markets are leaning on a rate hike sooner than later, so this meeting matters a lot since expectations could be contradicted.

Especially since the hike is expected more toward the end of the year and early 2027.

However,

The ECB just hiked, and Japan may do the same in the next meeting.

A warning sign for the G7 economy rate path?
We shall find out this week.

Here are some thoughts to take home on the SpaceX IPO as Ben Felix attempts to answer the question about the largest IPO in history:

Until next time,

OFFSIDE RESEARCH

Against the Tape, Ahead of the Curve.