Eric Fry is up double-digits in his bet against Tesla … learning from his trade-management … why Luke Lango believes the pain in the tech sector is overdone

Round 1 goes to Eric Fry …

In last Tuesday’s Digest, we featured a bold, new trade by our macro specialist.

Perhaps “bold” isn’t a strong enough word. After all, this trade has wreaked havoc on the portfolios of countless, highly-intelligent money managers over the years …

What is it, exactly?

Betting against Tesla’s stock price.

It’s a compelling match-up …

In one corner, we have Eric, a veteran trader with a distinguished history of profitable short-sales; in the other corner, we have Tesla, a market-darling with a long track-record of destroying short-sellers.

Last week, we likened the match-up to the old paradox of the “unstoppable force” versus the “immovable object.”

So, where do things stand?

Eric’s trade-recommendation is longer-term in nature, and the trade has only been official for less than two weeks, so claiming that Round 1 is over is a stretch. Perhaps the better analogy is that we’ve just seen the initial flurry of punches at the start of Round 1.

Either way, Eric has landed some big shots and has Tesla stumbling (even though the stock is rallying along with the tech sector as I write Tuesday morning).

Below, we see Tesla’s stock down 15% since the official trade-launch, having fallen as low as nearly 25%.

Now, this match-up is fun to watch, but there’s something more valuable for us here. It’s something that can help make us better investors …

 

***Studying Eric’s trade-management gives us a lens into the mindset of an expert investor

As noted a moment ago, Eric’s bet against Tesla is not even two weeks old … so it might surprise you that he recommended his subscribers close-out part of their position last Friday.

Let’s add some context …

As you’ve likely felt in your portfolio, tech stocks have been under pressure in recent weeks. Last Friday morning, that pressure was continuing (though stocks reversed and headed higher later in the day).

In that morning weakness, Eric sent out what he called a “just in case” trade recommendation.

From Eric:

Just in case this morning’s selloff in Tesla suddenly develops into a more serious drop later today, I suggest entering a “Sell” order this is “above the market” on half of (your Tesla position).

Though the order wasn’t filled, this is an illustration of how a veteran trader seeks to take advantage of favorable market conditions (it’s also an illustration of why Eric is one of the most successful analysts in our industry).

In short, betting against Tesla is highly-risky. Eric acknowledged this directly when he made the recommendation, writing:

I cannot overemphasize how risky this trade is. Betting against Tesla isn’t simply a difficult proposition; it is an act of arrogance …

I acknowledge the apparent arrogance of making this trade. And yet, I am recommending it, humbly, because I believe it is very likely to succeed.

The reality is that, at any time, the tech-wreck could end, with investors flocking back to Tesla. That would damage Eric’s position.

In fact, whether this marks a new rally in tech or not, the Nasdaq is up 3.3% as I write. Tesla has climbed 9%.

Eric is well-aware of the potential for a bullish reversal — so his mindset last Friday was “why not take advantage of favorable market conditions when possible?”

This is different than the perspective of many investors. The tendency is often to leave a recently-launched trade alone since it’s so early in its life — or maybe wait for maximum gains. But why stay in a risky trade for, potentially, months to come, when it could deliver you significant returns in less than two weeks?

Had last Friday’s weakness turned into a violent selloff, Eric wanted his subscribers to benefit. So, he recommended they put in a “Sell” order on half their position that, had it been filled, would have earned them 100% returns.

He knew it was a long-shot, but why not try?

Subscribers lost nothing if it wasn’t filled, but would walk away with a double on half their trade in less than two weeks if it was filled.

Back to Eric’s trade suggestion:

The price limits I’m suggesting are so far above current levels, that they are unlikely to be reached today (last Friday).

However, in volatile markets like these, anything can happen. But if you wait for something extreme to happen before entering a trade, you might miss the opportunity to cash in.

Trade-management like this helps explain why Eric has more than 40 different 1,000%+ returning investment recommendations in his career. To learn more about his Tesla trade as a Speculator subscriber, click here.

 

***Meanwhile, Luke Lango sees tech bouncing back with a vengeance

For newer Digest readers, Luke is our hypergrowth expert. His specialty is finding small, market-leading tech innovators that are pioneering explosive trends.

While this focus has been fantastic for Luke’s readers over roughly the past year, it’s been painful for the last month.

So, what’s changed?

Here’s Luke with the answer from yesterday’s issue of Hypergrowth Investing:

The world is getting back to “normal.” Restaurants, retail stores, gyms, entertainment venues, hotels … they’re all opening back up.

At the same time, 10-year Treasury yields are rising sharply in anticipation of a strong economic rebound and recovering inflation.

This is putting outsized downward pressure on richly valued tech stocks and exacerbating the tech sector meltdown we are seeing today.

When push comes to shove, it’s that simple.

That is what is going on in the stock market today.

Luke writes that this re-opening has many investors positioning themselves in “open economy” stocks versus tech. But he strongly cautions against bailing on high-quality, cutting-edge innovation stocks.

Back to his update:

Are you still thinking about ditching the world-changing technology stocks that are backed by the most talented engineers and forward-thinking visionaries on the planet … and going all-in with dinosaurs that may catch a tailwind briefly here in 2021?

I wouldn’t.

Technology taking over the world is an inevitability. And technology stocks — which are now grossly oversold and deeply undervalued — are due for an enormous, multi-year comeback.

As one example of a short-sighted, potentially self-injuring portfolio move, Luke points toward ditching FANG stocks to buy brick-and-mortar retailer, Nordstrom.

Sure, folks are going to go back to Nordstrom … with greater frequency in 2021 than they did in 2020. That’s just what happens when a closed economy reopens …

But that alone does not change the future growth prospects of old-hat companies.

Consumers are shifting to online shopping because it offers superior convenience (you don’t have to leave your home), it’s faster (you can complete a shopping trip in minutes by browsing through apps or websites), and it offers a better selection (in store, you are limited by the inventory of that store; online, the internet offers infinite inventory).

Those advantages remain as true in 2021 as they did in 2020.

After walking through a laundry list of additional reasons why tech will dominate old-guard retailers (which include augmented reality, data analytics, machine learnings, and natural language processing technologies), Luke summarizes as follows …

Is Nordstrom and the entire physical retail sector on the cusp of making a huge comeback?

No.

The gap in the quality of the physical shopping experience, and the quality of the online shopping experience, will only widen … at an exponential rate … over the next several years, thanks to the compounding positive impact of technological progress …

In other words, this big rally in physical retail stocks and concurrent lag in e-commerce stocks is super short-sighted.

This is a good reminder that, while certain old-school stocks should enjoy some big gains this year, it doesn’t diminish tech’s longer-term supremacy.

Before we wrap up, I’ll add that at his recent Exponential Growth Summit event, Luke recently gave away — for free — the name of his favorite growth stock today. He likened it to buying a young Amazon.

You can learn its name by watching the playback of the event by clicking here. Beyond getting the ticker, you’ll get additional details on why Luke is incredibly bullish on tech today.

We’ll keep you up to speed on Eric’s Tesla-trade, the economic reopening, and Luke’s tech picks here in the Digest.

Have a good evening,

Jeff Remsburg