In a significant development for investors, TradeSmith has launched a new tool called Trade Cycles, designed to identify optimal buying times based on seasonal market trends. This innovative strategy, introduced by Keith Kaplan, TradeSmith’s CEO, has already shown impressive results, flagging three stocks that have experienced notable gains since its inception in January.
Trade Cycles leverages over 70 years of market data to pinpoint when seasonal factors exert the greatest influence on stock performance. This analytical approach has proven especially effective, allowing investors to not only determine which stocks to buy but also the best times to do so. Kaplan describes this tool as the company’s most significant advancement since the launch of TradeStops two decades ago.
Strong Performers from Trade Cycles
Among the stocks highlighted by Trade Cycles are Cloudflare Inc. (NET), DraftKings Inc. (DKNG), and Cheniere Energy Inc. (LNG). These companies have seen substantial initial boosts attributed to seasonal trends, with their performance illustrating the tool’s capabilities. The chart demonstrating these recommendations indicates an initial surge before longer-term market trends took hold.
Kaplan is optimistic about the upcoming market conditions, forecasting that July 22, 2023, will mark a pivotal moment for investors. He will host a free broadcast detailing the significance of this date and how to utilize Trade Cycles for maximizing investment opportunities. Interested individuals can register for the event to learn more about the upcoming market landscape.
Seasonal Recommendations for Q3
As the summer progresses, attention turns to the back-to-school retail season, traditionally a lucrative time for retailers. Companies like Carter’s Inc. (CRI) and Target Corp. (TGT) typically experience sales boosts during this period. However, both firms face challenges due to ongoing tariff issues, which have impacted their stock attractiveness. Carter’s, for example, trades at just 9 times forward earnings as analysts project a 45% decline in profits this year.
Despite the seasonal potential for these companies, both Kaplan and Trade Cycles have refrained from recommending them for investment. Instead, they highlight Hanesbrands Inc. (HBI) as a more compelling option. Historically, HBI shares have appreciated by an average of 5% during the summer months. This trend is expected to continue, especially with stable cotton prices this year. In 2024, HBI shares surged by 60% between July and November, demonstrating its potential as a strong back-to-school player.
Hanesbrands benefits from a robust competitive position due to its vertical integration and production facilities located in tariff-friendly regions such as El Salvador and the Dominican Republic. These locations fall under the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), allowing Hanesbrands to avoid the hefty import taxes faced by competitors importing from East Asia.
Currently priced below $4, HBI represents an attractive buying opportunity, particularly as it approaches a historically favorable period for recovery.
Market Dynamics and Future Potential
Trade Cycles also provides insights into the solar energy sector, particularly regarding Enphase Energy Inc. (ENPH). The tool has revealed distinct patterns in the company’s stock performance, correlating with political changes and economic conditions. During the first term of former President Donald Trump, ENPH shares rose significantly during the summer months due to heightened demand for solar energy. Conversely, the stock struggled during President Joe Biden’s term as investor expectations did not align with actual performance.
Today, ENPH shares are trading at a more attractive valuation of 16 times forward earnings, compared to an average of 45 times during the previous administration. As solar demand continues to rise, fueled by record electricity prices and the impending expiration of a federal tax credit, Enphase is well-positioned to benefit from this uptick in interest.
Trade Cycles’ ability to filter out anomalous years, such as those affected by the Covid-19 pandemic, enhances its predictive power. For instance, it can disregard outlier years to better assess seasonal trends, ultimately guiding investors toward more informed decisions.
As the investment landscape evolves, tools like Trade Cycles can prove invaluable. For example, Vail Resorts Inc. (MTN) offers a case study in seasonal strategy. While stock prices typically rise in March before winter earnings announcements, the best time to invest is actually in September, when the company sells its season passes at peak prices.
Investors interested in leveraging Trade Cycles for their portfolios are encouraged to participate in Kaplan’s upcoming broadcast. This event promises to provide valuable insights into market dynamics and specific strategies for identifying promising investment opportunities.
For those eager to explore the capabilities of Trade Cycles firsthand, signing up for the event will also grant access to a free version of TradeSmith’s seasonality tool, offering a chance to analyze stock performance trends independently.
In summary, as we approach the mid-summer mark, the insights provided by Trade Cycles can guide investors in making informed decisions, especially in a market characterized by seasonal fluctuations and evolving economic conditions.
