Rumblings are that Congress is getting closer to approving spending plans that lately indicate $500 billion would be directed toward Greentech projects. That would be a great spark for our sector, but until the deal is done, the uncertainty will continue to weigh things down, as they have since late winter.
Right now, our Greentech Timer is giving us a positive signal, with the index over both the 20-day and 40-day moving averages, which themselves are trending higher. That meets out definition of the Timer telling us to be bullish. We’ll temper that by noting we may still be in a trading range Greentech stocks have be in since July or April, depending on how you define the range. In either case, we still need a 10% to 15% advancement to be resoundingly bullish and break over resistance that has formed. Still, given the positive bias of the market now, in next week’s issue of SX Greentech Advisor, we’ll add a few names to our watch list and look to add to our portfolio a strong growth name.
Today, however, Chipotle Mexican Grill (CMG) has triggered our sell-stop. The range-bound action means triggering sell-stops isn’t unusual. Despite the unpleasantness of absorbing small losses, our strategy is to avoid any large losses to preserve capital while letting our winners run. We are up more than 20% on four of our holdings right now, across both portfolios. We also have some updated recommended sell-stops. Please email me with questions, comments or suggestions at brendan@cabot.net.
Real Money Portfolio
Aemetis (AMTX)
The California ethanol, renewable natural gas and renewable jet fuel producer is consolidating in the 18 area of late. We’re up 27% on the position. We’re wary of getting stopped out too easily. But still, we’re raising our sell-stop from ‘around 14’ to ‘below 15,’ which is an area of chart support and would allow us to exit at or slightly above our buy price if the trade turns. That seems unlikely: relative strength and momentum indications still look great. BUY
Aspen Aerogels (ASPN)
The maker of EV battery insulation reports Q3 earnings tomorrow after the market closes. Street expectations are for a loss per share of 26 cents on sales of $27.6 million. More importantly, perhaps, are indications of continued advances into the EV market. The company has deals with two unnamed automakers – one in North America, another in Asia, to supply aerogels – micro-lattices that insulate batteries and help abort cascading fires. The disclosure of the name of one or two of the automakers could spark shares one way or the other, and any additional agreements would be bullish. We’re up modestly on shares right now. Our sell-stop is ‘below 39.75.’ BUY
Centrus Energy (LEU)
The uranium refiner has consolidated around 50 the past two weeks and has ticked up to a seven-year high today over 55. The company is calling in its preferred stock, a move we like in the long run because it frees up cash dedicated to paying dividends on the class for other purposes even as it costs $51 million to cash out those shareholders. Centrus has seen strong fund interest, with the number of institutions holding shares up about 30% the past three months and more than four-fold since the spring. We’re raising our sell-stop from ‘near our buy price’ (34.46) to around 38.50, below the 40-day moving average. BUY
Chipotle Mexican Grill (CMG)
Chipotle had a really good third quarter but couldn’t match expectations, especially as management decided to delay price hikes, causing some concern about margin pressure in the current quarter. This has sparked an easing off of shares that has triggered our sell-stop of ‘around 1,773’ with yesterday’s close. Momentum and relative strength indicators suggest shares could be in for a test down to gap and/or moving average support from 1,595 to 1,625. Either is too much of a drawdown for our portfolio strategy and we should sell today. We’ll take the tax loss, and revisit in 30 days, presumably after shares have reset. The long-term outlook for the organic fast food chain remains bright, but, in the near-term, great companies don’t always make for great stocks. SELL
Onsemi (ON)
The semiconductor maker is said to be exploring a sale for about $1 billion of assets it acquired in 2019 from Quantenna, which are WiFi-related technologies. The $415 million acquisition of GT technologies is still ongoing. Onsemi reports Q3 results before the market opens this coming Monday (November 1). Consensus is for earnings per share of 74 cents on sales of $1.7 billion. The company has beaten expectations for five straight quarters. The Street will also be looking for signs its shift to higher margin 300-milimeter chips is going as, or better than, planned and that recent traction with automakers is holding up. The decline to start this week has been on lower-than-average volume and likely positioning ahead of earnings by wary investors. We’re down a smidgen on shares entering the day today, with our sell-stop continuing to be ‘below 39,’ which would be a definitive break of the 200-day moving average, which is at 40.73 now. HOLD
Excelsior Portfolio
With the addition of the European Sustainable Growth SPAC to our special opportunities portfolio, we shifted with last week’s issue from basket ratings of the original six SPAC warrants we purchased to individual ratings for all seven. Not every position will have a sell-stop.
European Sustainable Growth SPAC / ADS-Tec Energy (EUSGW)
The portfolio bought the warrants of the ultra-fast EV charger play last week, as a ‘Buy under 2.00’ recommendation. The portfolio price is 1.72, the mid-point of the high and low price for Thursday. Warrants have eased off a bit to 1.66 today. This week, ADS-Tec Energy (which we’ll refer to by its future ticker, ADSE, for convenience) entered an agreement with Polar Structure to distribute products in the Nordic countries. Polar Structure is a Swedish company that invests in Greentech infrastructure. Polar is ordering a charging and commercial battery system for peak power saving from ADSE as part of the agreement. BUY
Li-Cycle (LICY.WS)
Good action in the warrants this past week. At 3.32 recently, the portfolio is up 37%. As we noted in our issue last week, the warrants became exercisable on October 23 – one year removed from the SPAC IPO. Given that the company has the option to initiate a cashless redemption if shares trade at $10 or greater for 20 of 30 days, and LICY shares have been over that mark since September 22, a notice may be coming soon. For that reason, we don’t recommend buying the warrants any longer. HOLD
Navitas Semiconductor (NVTSW)
The gallium nitride semiconductor maker began trading on the Nasdaq a week ago. The company will announce its Q3 earnings on November 9. There is no Street consensus due to lack of analyst coverage. The company has been telling investors it expects full-year 2021 revenue to more than double to $27 million. There is an early redemption clause for shares trading over 10 for 20 of 30 days, which makes the company eligible to issue a redemption notice. Our warrants are basically at break-even from our buy price today. HOLD
Origin Materials (ORGNW)
The carbon negative plastics maker remains weak, with shares in the 5 area. Warrants are basically unchanged on the week, at 1.48. Since Origin still needs to bring a chemical plant online, it’s possible only future sales deals could move shares and our warrants. No recent news. Since warrants are exercisable at 11.50, their price should be weaker than they are (or shares much stronger), and therefore while it may make sense to buy warrants here, logic dictates a rating of hold. HOLD
Ree Automotive (REEAW)
The EV chassis maker remains weak. If we reach break-even on warrants (1.1) while shares remain down at 0.72, we may recommend selling the warrant and consider a light position in the shares. The company expanded its board of directors, adding two independent members, Lilach Geva-Harel, the general counsel of publicly traded ICL Group, and Michal Brikman, a corporate finance expert who is also on the board of publicly traded Partner Communications. HOLD
ReNew Energy Global (RNWWW)
India’s largest renewable energy owner-operator has shares under 9 and warrants at 1.83, which implies shares should be over 13. We’re up 22% on the warrants now. The continuing divergence between shares and warrants may be a reason to take profits on the warrants and consider entry into shares later on. For now, hold. HOLD
Volta Inc (VLTA.WS)
The EV charger company has weak shares but warrants are holding up decently at 2.15, about 3% underwater for us. There’s been no news this week. Earnings will be announced November 10. HOLD
Thank you for being a subscriber. Our next SX Greentech Advisor issue will be published next Wednesday, November 3. Contact me anytime with questions or comments at brendan@cabot.net.