DRAM, Hynix, Micron, Has the Rally Stalled?

I made the point last week that you've got maybe it was Tuesday. I don't know. The days are all blending together for me. I made the point a few days ago that you've got 200 billion dollars in leveraged ETFs. A lot of that is in single stock 2X vehicles. These have become mainstream. That 200 billion is equivalent to 500 billion notional exposure. That's half a trillion dollars. So, what that means is on any given day if there are natural normal sellers of these stocks, the momentum players may or may not exacerbate that move and make it look even crazier than it would otherwise be. This has changed market structure. We all have to get accustomed to it. The good news is no one is forcing us to actually react to it. So, I think if you're in these names and we own you know a whole bunch of these in our Porter House portfolio, the thing that you have to just understand is that what comes with the territory of being an uptrending popular great earnings growth story stock sometimes is that a lot of people buys and sells in the in the derivatives that don't really have a meaningful point of view. They're just playing for all right, it went down 7% yesterday. Maybe it'll go to up 7% today. And that's actually what's playing out right now. So, there are zero 52-week highs in the SMH today. But, it is bouncing and if you look at the average stock in the SMH, it's about 17 about 17% of those are at 50-day highs. So, a lot of stocks have been knocked away from their highs. But, what you got is a momentum reset judge to answer your initial question. The SMH RSI is now back to a very healthy and cooled off 49. The average 10-day rate of change for a stock in the SMH hit -15% during this last drawdown. That means the average stock lost 15% in that 10-day window. And if you've been on the sidelines, you haven't been in these trades, you feel like you've missed out. Well, you finally got an opportunity. Some people won't want it anymore cuz they'd rather buy a stock that's green, but that's the reality of where we sit today. >> Which is why Brin, if you like these stocks and you like this trade, your head's going to spin 10 times trying to pick the exact right moment to get in. Jim demonstrated that by doubling his position in Micron yesterday. It's like if I liked it last week or 2 weeks ago and then it's lower today, well, well, how can I not like it today? I assume that's going through your mind as you buy the DRAM ETF. So, take me through that. It was your final trade yesterday and now you follow through and actually bought it. >> Yeah, so after the show, it's my final trade. It was at $60 yesterday. Josh did a great job walking through the insanity of the levered ETFs, which is creating huge volatility, which is then in turn for sellers of calls, uh like myself and Kevin, huge call premium. And so, I bought it at 60 yesterday as my final trade and I said you can sell the September September 70 calls and collect $7. So, I have $17 of total upside in the next 2 months. If not, my $60, I got $7, my cost basis will be about 53. Um I did I do think with Micron, Micron did touch the 50 day yesterday. So, from a technical perspective, and I said this yesterday, I thought Jim's entry point, I know he uses fundamentals, really aligned with those fundamentals of bouncing off of that. And I will say as everyone is talking about earnings growth, whether it's in emerging markets or the US, Micron should be about 15 to 20% of total earnings growth in the S&P this year. That's one name. And then when you look at the EEM, SK and Samsung are also around 15%. and think about that. That includes China. That is emerging markets inclusive of China two stocks. And then finally SK Hynix is going to do their listing tomorrow. From what I've heard it's seven times over subscribed. So I just thought that was a good risk reward bait ratio. That's why it was my final trade and that's why I bought it after after the show yesterday. >> Jimmy is a is a bottom in? Who knows? Like I said at the very top, good luck trying to make that call because when you know, people have felt like okay, the space looks like it's bottomed because it has bounced. Two days later it's back down again and we're witnessing that this week again, but I made the point of what you told our viewers. How could you not if you liked it? I'm talking about you specifically. If I made the case that I liked Micron a week or two weeks ago and now it's maybe lower or about where it is because it's been bouncing about. What are you going to wait for? Like what is the signal that you're looking for? Right? You're just looking at the fundamentals and you're like I believe in the fundamentals as much today as I did then. So I'm willing to make a bet that if I don't catch the exact right place, you know, I don't know, six months from now, a year from now, is it going I don't know if you're going to hold it that long. Is it going to be higher than it is today? Well, I believe so. So I'm willing to double my position. >> Scott, I can't overemphasize the point that you're making which is that we cannot call bottoms, all right? And I don't think anybody here does that. We may say things like look like they're turning. Yesterday I thought I saw a signal in Micron and I added to it. But actually by the time we were talking this time yesterday Scott, you'll remember, I thought hey, maybe that signal was a false signal. So to be helpful here, knowing that none of us are going to tell you where the bottom is because that's not doable. The most pertinent advice I can give anybody watching is stay true to your knitting as far as what type of an investor you are. If you're a momentum investor, don't suddenly become a fundamental investor. If you're a technical investor, don't suddenly become a momentum investor. You in this rapidly rotating market. And it's actually to me it seems Scott like it's every day. >> What do you mean? Aren't you defining what you are you're you're going against what you're doing? >> No, I'm saying that fundamentally Micron is a value stock to me. Now, this is debatable. That what I just said is debatable. I've had other value investors come to me and say, "No, it's not a value stock. You shouldn't buy a stock a cyclical stock like this at low earnings near the top. That that's usually counter cyclical." However, I am adamantly saying that I think this is a fundamental buy here based not just on the valuation, but the strategic contract agreements they have, the fact that they're going to start returning capital to shareholders soon. But I don't want to get lost in me personally. What I want to say is with these rotations that are happening every day, you have to stay true to your knitting because if you think you're all of sudden going to become a momentum investor, you're likely to get the trade wrong. And it's interesting though Scott and then maybe this is what you were pointing out is that at times certain styles will intersect. So, I can be a fundamental investor, a value investor getting into Micron and yet still it is a momentum play. They're not mutually exclusive. But please don't start changing your cooking along the way because you think you know where the market is rotating next. Nobody knows. >> Marvell, Intel, AMD, they're all bouncing pretty hard today. We can cycle through those as I said there it is. Pretty good example of what we're talking about as I send it to to Jason. Yeah, how do you how do you see this trade? >> Yeah. Yeah, so I think [clears throat] that I think there's a lot to say here. I think one of the things that I've been considering as I'm kind of evaluating what's happened over the last couple weeks is is this really a rotation or is this a rebalancing because the the price action has been somewhat orderly on July 1st. You're starting to see obviously what has gotten us here pull back. We've seen obviously health care and and financial services really start to move forward. And then we're seeing a lot of this push and pull over the last few days. So, I think to to Brin's point, what she what she said earlier about Micron representing 15% of the earnings growth in the entire complex is a significant story. I think muscle memory does come back and a lot of what got us here will continue to just pull us forward. And I just think we're just in this period where we're we're trying to find from a positioning standpoint where we need to be in the second half. But, I still continue to believe in as as Jimmy is mentioning a Micron, which is obviously up a ton this year, 257%. It's trading at seven times earnings. >> You think it's a value stock? >> So, I I I think it could be both, right? I think at this point, because of their earnings picture going forward, this is a story where value investors are interested in plays like this. But, at the same time, the momentum is there as well.