It's always a little hectic after a long market holiday weekend so we'll keep this News Flash short. As the trade war's shadow recedes once again, money is rotating into stocks that were previously either under pressure or simply unloved. A lot of BMR names are in that group.
Strategically speaking, the Special Opportunities portfolio is where you'll look for recommendations that were unfairly neglected when they caught our eye. Most have come a long way back from those neglected levels but quite a few have also retreated recently from their peaks. The Carlyle Group (CG: $24, up 6% this week) and Dollar Tree (DLTR: $108, up 6%) dropped about 20% last month. Universal Display (OLED: $222, up 8%) and the Financial Select Sector ETF (XLF: $27, up 2%) nudged into 10% correction territory while US Energy ETF (IYE: $32, up 2%) and MetLife (MET: $46, up 4%) were somewhere in between.
As you can see, those battered positions are rebounding fast now. While we can quibble over the details, they're not especially vulnerable to higher trade walls around China. They were simply caught in the market's crisis of confidence so they're leading the way back now.
We see something similar playing out among Technology stocks that reported solid 2Q19 numbers but were punished all the same simply because the reports hit when Wall Street was in a bad mood. CyberArk (CYBR: $116, up 3%) dropped a full 26% from its peak. Dropbox (DBX: $18.86, up 5%) was down 35%. Evidently their outlook is a lot better than people convinced themselves was the case a week ago.
Not all of our laggards have recovered their upward momentum yet but at the rate these stocks are moving we suspect it's only a matter of time before names like Zscaler (ZS: $67, down 3%), TPI Composites (TPIC: $17.45, down 1%), Splunk (SPLK: $111, down 1%) and Workday (WDAY: $176, down 1%) join the party. When you see them rallying, you'll know the knife has stopped falling . . . and if you're feeling especially brave, you might try to catch it in the air.
This is simply how the market works. The spotlight shifts from theme to theme as investors cycle through their moods. A few months ago Aggressive stocks were the hottest thing around because Wall Street was starving for growth stories. Then when investors got nervous about recession risk and yield compression, defensive dividend-paying stocks took the lead. Now money is flowing in yet another direction.
We don't mind. Our REITs gave back a little ground yesterday but are still up 2% for the week, roughly in line with the market as a whole. As long as the rotation turns from strength to weakness, our universe keeps spiraling upward. That's why we encourage you to rebalance your own portfolio when you see some positions racing ahead of the others. Take a little of those gains and distribute them among stocks that have lagged. The discipline of selling a few shares high and buying a few on the dip is incredibly rewarding.