Sell SharkNinja (SN) and Soleno (SLNO)
We are all trying to digest the substance of “Liberation Day” and better understand what lasting impact it will have on global trade, the market, stocks that we own and those we are considering buying.
Suffice to say, there are a lot of ways this could go. But one thing is for sure – we’re in uncharted territory. And while there was a lot of uncertainty prior to “Liberation Day” there is even more now.
It’s safe to say the announced tariffs represent the worst-case scenario. If they remain at these levels inflation could go up 1% to 1.5% and U.S. GDP could go down by 1% to 1.5%, according to Bank of America.
In other words, the big-picture concern is inflation with low growth, i.e. stagflation.
That scenario would put the Fed in a tricky spot. At the moment the market seems to think the Fed will prioritize a move to protect a flailing economy, despite upside inflation risk, by cutting rates.
There is currently a 61% chance of a June rate cut, and 66% probability that the Fed makes a total of three or four 25-bp cuts by the end of the year.
The 10-year yield has fallen sharply today. Fed rate cuts would, theoretically, continue to put downward pressure on yields. Those high-yield accounts earning 4% might only be paying 3% in early 2026.
That should make equities more attractive, theoretically. Though exactly when and at what level are unknown.
Back to the announced tariffs, they likely represent an opening bid to kick off renegotiation of trade agreements. Things will probably change significantly from Trump’s proposed tariffs to what actually gets implemented.
The $1,000,000 question is, of course, what happens between now and then and what damage is done.
Ultimately, we know that the market will eventually find firm footing and go higher.
We also know we won’t be able to time it perfectly, but if we stay in tune with what the market is telling us then we’ll be there to ramp up exposure when the time comes.
Today, the trends are clearly bearish for many, but not all, areas of the market.
We’ll take that as a sign to step aside from two positions.
One, SharkNinja (SN), is our biggest loser, down 36% from where we jumped in (though it is only a half-sized position). SN is suffering from what seem like inescapable tariffs. Management already moved much of its manufacturing out of China only to have a new wave of tariff threats hit the company. There’s just too much uncertainty to average down, and as our biggest loser it clearly has to go. SELL
The second stock we’ll sell, Soleno (SLNO), is a big success story. The company’s first drug candidate was just approved by the FDA. While we may miss out on some upside as revenues ramp there’s something to be said for selling when the story sounds great and a stock is trading at its all-time high, especially in a market when there’s so much bad news. We’ll bag a roughly 60% gain on our half-sized position in SLNO. SELL
With the market’s decline today we have three positions on the cusp of being down 20% from our entry point. These are Dutch Bros (BROS), DoorDash (DASH) and Freshworks (FRSH), which we only hold a half-sized position in. I am not recommending any action on these stocks at this time, but am watching them closely.
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