The Insider Report - November 10th, 2024

Your Exclusive Benzinga Insider Report

(DO NOT FORWARD)

By analyst Gianni Di Poce
Volume 3.46

Market Overview (Member Only)

• It was a week to remember in the stock market. Everything exploded higher following the presidential election, with the Nasdaq leading the way and closing up 5.74%. The S&P 500 SPY was up 4.66% and the Dow Jones Industrial Average DOW was up 4.61%.
  
• The Fed cut interest rates another 25-basis points and I think long-term bonds completed a bottom too.
  
• Bitcoin exploded to a new all-time high as well, and this week, we're having another look at Ethereum, which is also starting its move.
  
• Don't forget we're entering one of the most bullish times of the year now. Euphoria might not be far away.

Stocks I Like

Victoria's Secret VSCO : (29% Return Potential)

What's Happening

• Victoria’s Secret (VSCO) is a specialty retailer known for its lingerie, beauty products, and intimate apparel.
  
• The company had $7.39 billion in revenue in 2023, along with $736.4 million in earnings.
  
• VSCO has a solid valuation with a P/E ratio of 13.42, a Price-to-Sales ratio of 0.74, and an EV/EBITDA ratio of 8.53.
  
• At a technical level, VSCO just broke out from a saucer formation, which signals that upside momentum could begin to accelerate again.

Why It's Happening

• The company recently announced a partnership with Amazon, allowing it to sell its products directly on the e-commerce giant’s platform. This move expands Victoria’s Secret’s digital reach significantly, tapping into Amazon’s vast customer base and efficient distribution network, which could drive substantial sales growth.
  
• VSCO is undergoing a significant brand transformation, moving away from its outdated image to a more inclusive and diverse representation. This strategic shift is resonating with a broader customer base, potentially leading to increased market share and revenue growth in the coming quarters.
  
• Victoria’s Secret’s international expansion efforts are gaining momentum, particularly in China and India. The company’s focus on these high-growth markets positions it well for long-term revenue expansion, as rising middle classes in these countries present a lucrative opportunity for premium lingerie and beauty products.
  
• The company’s PINK brand, targeting younger consumers, has shown strong performance in recent quarters. By capturing the Gen Z market early, Victoria’s Secret is building brand loyalty that could translate into sustained revenue growth as this demographic’s purchasing power increases over time.
  
• Victoria’s Secret’s loyalty program has seen substantial growth, with membership increasing by double digits year-over-year. This expanding base of loyal customers provides a stable revenue foundation and opportunities for targeted marketing, potentially driving higher customer lifetime value.
  
• The recent appointment of industry veterans to key leadership positions, including a new CEO with a strong track record in retail transformation, signals a commitment to fresh perspectives and innovative strategies. This leadership overhaul could be the catalyst for accelerated growth and improved market performance in the coming years.

Analyst Ratings:

• Wells Fargo: Overweight
• BMO Capital: Outperform
• Barclays: Equal-Weight

My Action Plan (29% Return Potential)

• I am bullish on VSCO above $27.00-$28.00. My upside target is $45.00-$46.00.

Amer Sports AS : (29% Return Potential)

What's Happening

• Amer Sports (AS) is a sporting goods company known for its portfolio of various brands, including Salomon, Arc’teryx, Wilson, and Suunto. They specialize in outdoor sports, fitness equipment, and apparel.
  
• The company generated 3.14 billion euros in revenue in 2023, with 411.5 million euros in earnings.
  
• Amer Sports has a fair valuation with a P/E ratio of 21.7, a Price-to-Sales ratio of 1.5, and an EV/EBITDA ratio of 12.8.
  
• From a charting standpoint, AS just retested former-resistance-turned-support of a wedge pattern it broke out from recently. If this holds, it becomes very bullish.

Why It's Happening

• Amer Sports’ recent IPO has positioned it as a formidable player in the sporting goods industry. The company’s successful listing on the New York Stock Exchange in February 2024 raised $1.37 billion, providing substantial capital for future growth and expansion initiatives.
  
• The global sports and outdoor market is projected to grow at a CAGR of 6.5% from 2024 to 2030. As a leading player in this industry, Amer Sports is well-positioned to capitalize on this growth trend, potentially leading to substantial stock appreciation in the near future.
  
• The company’s diverse portfolio of premium brands, including Salomon, Arc’teryx, and Wilson, gives it a strong competitive edge. This multi-brand strategy allows Amer Sports to capture market share across various sports and outdoor categories, reducing risk and enhancing revenue stability.
  
• The Direct-to-Consumer (DTC) segment has been a key growth driver for Amer Sports. In Q4 2023, DTC sales grew by 40% year-over-year, now representing 36% of total net sales. This shift towards higher-margin DTC channels is likely to boost profitability in the coming quarters.
  
• Amer Sports’ strategic partnerships, such as the collaboration between Wilson and the NFL, provide a steady stream of revenue and enhance brand visibility. These long-term agreements offer stability and growth opportunities in key markets.
  
• Amer Sports recently reported impressive earnings results, with net sales increasing by 25% year-over-year to €1.3 billion. 

Analyst Ratings:

• Goldman Sachs: Buy
• TD Cowen: Buy
• UBS: Buy

My Action Plan (29% Return Potential)

• I am bullish on AS above $16.00-$16.50. My upside target is $25.00-$26.00.

Market-Moving Catalysts for the Week Ahead

Market Sails Through Election
Every time a big event comes along, whether it's elections, Fed meetings, earnings, economic events – anything really, I receive emails from people asking me how I'm handling the risk associated with the event.

The truth is the method I use never changes. It all comes down to risk management. From stop losses, capturing profits, and position sizing, the proper way to manage money is what allows me to trade through any event without it making or breaking me.

Stocks exploded higher after Donald Trump was elected as the 47^th president of the United States. But as I stated last week, I thought stocks looked bullish regardless of who won. Remember, the "why" comes after – the "what" is now.

A President-Central Bank Showdown?
We could be in for a fair bit of drama over the next couple of years between the Eccles Building and the White House. Last week, Fed Chair Powell stated that he would not accept instructions from President-Elect Trump to resign if told to do so.

The Federal Reserve is supposed to be an independent institution, although their charter is granted by Congress. If you want to go down a rabbit hole of monetary history in America, check out the stories behind the first and second Banks of the United States.

America's history with central banking is a turbulent one, but the Federal Reserve has now existed for 111 years. Could there be reforms in the next few years? I wouldn't rule it out entirely, especially with blockchain technology now mainstream.

Earnings and Data Galore
Earnings season is providing no shortage of fireworks right now, but next week, there are several key economic reports that could move markets again. It starts on Tuesday, with the September Consumer Price Index (CPI) will be released. I'm not expecting anything earth-shattering here, since crude oil is still bearish.

On Wednesday, the Producer Price Index (PPI) for September will offer more insights on inflationary pressures at the wholesale level. Remember, this is considered a leading indicator of CPI data.

Finally, there is retail sales data for September, on Thursday, which will provide an update on consumer spending. Consumption represents 70% of the U.S. economy, and I get the feeling that we're going to see a major uptick in spending going into the holidays.

Are You Ready for the Pre-Inflationary Boom?
If you're a frequent reader of Benzinga's Insider Report, you know that I don't like to dwell on economic data that much because it's laggard in nature. Instead, I like to use markets and cycles to help gauge where we could be going.

As I survey the financial landscape here, it's hard to see something that looks like it's about to crack. In other words, we could be heading into a market mania over the next year similar to what we experienced in 2020 and 2021.

This means that we're entering one of those cyclical portals to make life-changing money in a short period of time. Opportunities like this don't exist in perpetuity, and when they come along, it's imperative to seize the moment. We'll have some great opportunities to share here in the coming weeks.

Sector & Industry Strength (Member Only)

By now, most people have become privy to what's going on in markets. It's pretty clear at this point that we're no longer in the early-innings of this bull run, but it's far from over still. The sector leadership rankings confirm this.

Communications XLC continues to dominate the tape in a very good way. Financials XLF exploded after the election, solidifying their place in second. Technology XLK also had a very strong week, storming back into third place.

I also really like how consumer discretionary XLY has pulled away so strongly from consumer staples XLP. The spread continues to widen, which is bullish. Near the bottom of the pack, we have defensive sectors like healthcare XLV, energy XLE, and real estate XLRE. Let's keep them there for now.

1 week	3 Weeks	13 Weeks	26 Weeks
Consumer Discretionary	Consumer Discretionary	Consumer Discretionary	Consumer Discretionary

Editor's Note: No matter how you slice it, any market with consumer discretionary leading across all time intervals is very bullish.

Lines Blur Between Tech and Financials Sector ETF: XLK / XLF
Over the past decade or so, the fintech boom along with cryptocurrencies has led to a type of merge between the technology sector (XLK) and the financial sector (XLF). And especially over the past year, we've seen a major renaissance in the performance of financials.

If we have a look at the ratio between these two important sectors, we'll see that tech (XLK) was doing its thing against financials (XLF) until July. But it looks like an important high formed, and since then, financials have been in control.

It looks like this ratio is on the precipice of a notable breakdown from a rounding top formation. If this follows through, it could signal that XLF's outperformance against XLK is just getting started. No need to rush to come to conclusions, however, as historically, it hasn't been wise to bet against tech.

The Future of Power Sector ETF: URA / XLU
Utilities (XLU) have been another major outperformer over the course of the last year, and historically, this has been a risk-off signal. But artificial intelligence may have changed the rules a bit here. But in markets, there is always a bit of caution when it comes to saying, "This time, it's different."

There's a new ball game to consider when it comes to utilities, however, and it has to do with the nuclear sector. So, this week, we're looking at uranium (URA) over utilities (XLU), as I think we're on the precipice of another inning of strong nuclear stock performance.

This ratio has been trending higher in favor of URA over XLU over the past couple of years. There was a notable selloff in this ratio earlier this year, but it formed a higher-low with respect to the longer-term trend. Now we need to make a new high, and if it does, I wouldn't look for this nuclear story to go away anytime soon.

New President – New Inflation? Sector ETF: TIP / IEF
Now that the election is out of the way, it's time to take stock on what's been going on in bond markets. It's certainly interesting how President Trump campaigned on lowering prices, but I'm afraid the market may have other plans.

We're back to looking at the ratio between Treasury Inflation Protected Securities (TIP) and 7-10 Year Treasuries (IEF). As a quick reminder, when TIP outperforms IEF, it means that inflation expectations are rising, but when IEF outperforms TIP, it means that inflation expectations are falling.

It looks like a breakout from the descending triangle formation is underway now in this ratio. This is a continuation pattern, which implies that the bond market is pricing in more inflation. Interestingly, interest rates have surged, so time will tell whether this is a temporary anomaly or not.

Editor's Take:
While a Trump administration is still a few months away, we have to consider some of the policies that may lead to inflation. First and foremost, tax cuts in some way, shape, or form is on the table. Coupled with low interest rates, this could easily kickstart inflation.

The coalition with Elon Musk and potentially even Ron Paul, who would be looking at cutting government spending significantly could actually be disinflationary in time, but near-term, spending remains a serious problem.

Then there are tariffs. At first, the implementation of tariffs will likely be inflationary, but once companies readjust, it could actually be disinflationary, especially if corporate profits fall and stocks follow with it.

Cryptocurrency
Back to analyzing Ethereum this week, and the technical setup is looking increasingly strong for bulls. Prices are breaking out from a rounding bottom pattern, which is projecting a move to the $3,300-$3,500 conservatively.

The overall structure is reminiscent of similar setups we’ve seen in previous bull cycles, where prolonged consolidation phases eventually gave way to explosive upside moves. If bulls can complete a decisive break above the $2,900 level, it would all but confirm a breakout.

However, traders should keep a close eye on the $2,400 support level – any sustained break below this would invalidate the bullish setup. As the old trading adage goes, “The bigger the base, the higher the space,” and this reversal pattern has been building for several months now.

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