The Investment Story Brightens for 2 Small-Caps in My Portfolio
Here's how the narrative has become more positive for two of my holdings this week.
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Outside the continuing unrest in Los Angeles, the news has been pretty decent this week. Tariff pressures have yet to start to push up inflation levels based on the May CPI and PPI readings that have come out over the past few days. If all continues to be this benign, maybe investors might get their much-desired reduction in the Fed Funds rate by the end of summer. Especially if new trade deals can be reached, that can sideline most of the currently anticipated tariff impacts.
On that front, there was some progress between China and the U.S. this week after top-level delegations met in London. I would not call it a trade deal or even a trade agreement, but the negotiations achieved at least some level of "détente" between the two largest economies on the globe. The U.S. will continue to have access for the time being to Chinese rare earth materials as well as magnets. Chinese imports will still face high tariffs, but at least importers have some certainty around those levies.
Of course, being Friday the 13th, the week couldn’t end on a happy note. Tensions have escalated radically between Israel and Iran once again with Israeli jets hitting several sites in Iran and taking out several key Iranian leaders and nuclear scientists. Whether this is resolved quickly over the next few days or is the start of wider regional conflict is a key unknown as investors head into the weekend. Based on early trading Friday, U.S. equites look like they will weather the storm in decent shape to end the trading week. Energy stocks should spike higher as oil has shot up some 7% in response to the escalation in the Middle East.
I will have a lot more to say on some of the energy and gold stocks in my portfolio next week. However, I want to end the week on a more optimistic note by talking about two stocks I have profiled on these pages whose stories brightened this week.
Let’s start with Dave & Buster’s Entertainment PLAY, one of the very few retail stocks in my portfolio. I last highlighted this name in November and noted it was in the process of remodeling its stores and overhauling its marketing strategy.
The turnaround appears to be bearing fruit based on guidance that came out with quarterly earnings this week. The Dave & Buster’s stores that have been remodeled are showing 700 basis points of improved margins and management struck an optimistic tone going forward.
Dave & Buster’s stock has risen nearly 50% over the past few weeks, so I would not be chasing the rally. However, the company seems to be finally heading in the right direction. If the shares pulled slightly back into the high $20s, I would add to my stake in this name using covered call orders.
Nuvation Bio NUVB as a more speculative play I highlighted recently over at the Daily Diary. The stock has been hit with some "buy the rumor, sell the news" trading this week.
NUVB shares dropped about 25% after the company was granted its anticipated FDA approval for its oral antitumor agent Ibtrozi as a treatment for certain patients with non-small cell lung cancer or NSCLC. The approval even came nearly two weeks earlier than its scheduled PDUFA date. However, the stock had run up more than 50% over the past couple of months into the decision.
I added to my stake in NUVB via covered call orders as this seems like some overly done profit-taking. FDA approval also removed a key source of uncertainty for the company.
At the time of publication, Jensen was long NUVB and PLAY.
