October 3, 2023

The broad market is getting whacked today after holding up relatively well in the face of rising bond yields. The reasons behind why bonds are selling off and yields are rising is beyond the scope of our discussion today. But suffice to say there are forces at work that are more complex and nuanced than a simple “Fed says higher for longer so yields are rising.” The recent spike in the 10-year yield may well have more to do with the federal deficit and supply/demand dynamics. So yeah, beyond the scope.

Sell Zillow (ZG)

Bottom line, one of the areas getting smoked is housing, building materials, etc. related stocks. Mortgage rates are shooting higher and there are many reports of would-be homebuyers backing out. This isn’t a great setup for Zillow (ZG), which is our weakest position (-19% from our entry point) and has just moved below its 200-day line today. Therefore, ZG is our sacrificial lamb. SELL

Tyler Laundon

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.