August 9, 2019 

Portfolio Allocation

Current Position Performance

Highlights from the Week

Biggest Winner: AMD (AMD)

Can AMD (AMD) do no wrong? It certainly seems like the company has become the golden child with CEO Lisa Su guiding this once-forgotten Intel (INTC) and Nvidia (NVDA) competitor to new highs with one excellent product launch after another.

AMD gained +15.93% during a week of epic sell-offs and huge volatility, easily earning the Biggest Winner title.

Biggest Loser: Revolve Group (RVLV)

Revolve Group (RVLV) demonstrated what not to do with your first earnings report after going public – report a loss! Analysts expected a gain not a loss from this retail/tech play which was supposedly profitable before it went public.

The markets rightfully punished the stock, sending it down -22.19% this week to earn Biggest Loser acclaim.

This Week’s Trades

AMD (AMD): Profit-Taking

I know what you’re thinking – “Profit-taking in the middle of a sell-off?!” Well, yes, actually. AMD (AMD) reported unexpected new clients including Alphabet/Google (GOOG) and Microsoft (MSFT) on Thursday, causing the stock to rocket 16% in a single trading day.

On Friday, AMD continued higher so I took my initial capital out of the stock when it crossed over $34.00 a share and pulled back to the $33.92 briefly.

Given the insane market volatility and potential for very bad news to push the entire market lower, I fully believe I’ll have the opportunity to rebuild my AMD position at lower levels. If not, I’ll hang on to what I have and see where we go from here.

AMD closed the week at $34.23, up +0.91% from where I sold.

Revolve Group (RVLV): Added to Position

One of my trading rules is to never add to an existing position prior to earnings, however, given the special circumstances of this week’s insane sell-off , I added to Revolve Group (RVLV) when it was testing a key support level during Monday trading before its upcoming earnings report on Thursday.

One of the special circumstances relates to how IPOs typically work: most companies set up the first quarterly report following their IPO to yield positive (if not extremely positive) results in order to assure investors that they have made a good decision investing in the brand-new company.

Combining this knowledge with the market-wide and not sector-specific, sell-off, I added to my RVLV position when the stock tested $30.80 a share, a “new low” as the stock hadn’t retreated to this level previously only shooting through it to head higher following its IPO.

Although Revolve initially bounced from where I bought on Monday, the stock lost support as the week’s sell-off continued, hitting a low of $29.81 during Wednesday’s trading as it headed into its earnings report on Thursday.

The gambit ended up not paying off.

Somehow, Revolve blew its first earnings report as a publicly trading company, reporting an unexpected loss when analysts expected a gain. The stock sold off more than -15% during extended-hours trading to a low of $25.26 (slightly above the $25.00 price where it opened in the markets) before rebounding slightly to $27.50.

The moral? Just because something typically happens (in this case, a good first quarterly report) doesn’t mean it will happen. Instead, I should have stuck to my discipline and not added more before earnings.

While I believe the longer-term thesis for this company still rings true, it’s time to exercise the tried-and-tested Three-Day Rule, waiting to see how the price action plays out over the three trading days following this bad news before making a move. That means Revolve is a no-touch until Tuesday of next week, at the earliest.

RVLV closed the week at $26.12, down -15.19% from where I added on Monday.

Questions?

As always, If you have questions about how I’m playing different positions or anything at all, really, feel free to leave a comment below!