Stock Picking Is Working as Mag 7 and Chips Battle. Here’s What I’m Trading.
I’m heavily weighted in this one sector, while adding to one name on news.
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We have chaotic market action on Thursday as investors sort out the ramifications of Micron Technology’s (MU) blowout earnings report. Micron surpassed all expectations and substantially raised earnings expectations. That is great news for Micron and other companies that sell high-demand chips with limited supply.
The problem is that the buyers of those chips are being squeezed. This isn’t a sudden overnight development but the strength of the Micron report sent the message that it has near monopoly pricing power and if companies like Alphabet (GOOGL), Apple (AAPL), and Meta Platforms (META) want to stay competitive they have no choice but to pay up. That hurts profitability and is also inflationary.
The Magnificent Seven ETF (MAGS) dropped sharply at the open, rebounded but is still down about 1.5%. On the other hand the Nasdaq 100 (QQQ) is up about 0.8% due to strength in chips and storage names that supply what the hyperscalers desperately need.
Heavy in Biotech
Once again breadth is staying positive due to strong rotational action. Biotechnology (IBB) is up another 2.5%. I’m heavily weighted in this sector with names including Revolution Medicines (RVMD), Definium Therapeutics (DFTX), Travere Therapeutics (TVTX), Cullinan Therapeutics (CGEM), Xeris Biopharma (XERS), Precigen (PGEN), Tango Therapeutics (TNGX), and ClearPoint Neuro (CLPT). It is starting to look a little short-term overbought but the momentum is strong as tech buyers are looking for another hot sector.
I’ve cut most of my technology exposure. I still have some random plays on infrastructure, power, and batteries but I have no interest in either the Mag 7 or the chips right now. They are battlegrounds and I don’t see an edge in trading them. I may consider something like Alphabet as we approach second-quarter earnings but that will depend on the technical setup.
Adding NESR Today
One name I’m adding to today is National Energy Services Reunited (NESR), which I have highlighted here recently. NESR is an oil services company in the Middle East and there is news that the Saudis are resuming oil shipments, which means that they are working on their supply lines and that benefits NESR.
Not only do I like the NESR story but I like that EPS is expected to go from $0.83 in 2025 to $1.65 in 2026, and $2.41 in 2027. That is a forward P/E of just 14.
Strategy
I’m keeping my cash levels close to 45%, trading tightly and staying selective with new buys. I’m quick to drop anything with lagging relative strength right now.
This is a market for careful stock picking in the right sectors.
Position: Long RVMD, DFTX, TVTX, CGEM, XERS, PGEN, TNGX, CLPT and NESR.
