There’s a New Stock on My Radar as We Wait for Micron
A powerful rotation continues.
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Rotational action continues on Wednesday as investors await an important earnings report from Micron Technology (MU) after the close. There is a weak bounce in technology names, with semiconductors (SMH) still struggling. Small-caps (IWM) are leading, helping push breadth to about 55% positive.
Biotech Continues to Work
Biotechnology (IBB) is again a beneficiary of the rotation action with a jump of over 2%. It is interesting to note that the group has just recently surpassed the highs it hit back in 2021. Compare that to the Technology sector (XLK), which has more than doubled from that same point. The difference in performance is substantial and suggests that biotechnology could run significantly more.
As I stated this morning, I have no interest in betting on the outcome and ramifications of the Micron report tonight. I’m avoiding anything directly related to chips and have been focused on the relative strength in biotechnology.
On Monday, I discussed Definium Therapeutics (DFTX), which jumped 50% on good news. My view was that the stock could go much higher and it is up an additional 20% Wednesday after issuing a secondary offering that was obviously well received.
In addition, Xeris Biopharma (XERS), one of my favorite low-priced biotech names, has found some strong momentum and has run up about 30% since June 3. There are several other names in the sector that look healthy.
Sunrun Joins the Distributed Power Story
A new name I added to my radar today is Sunrun (RUN), which announced Wednesday morning a joint venture with Tesla (TSLA) to deliver over 16 gigawatts of flexible energy capacity. This is a distributed power play. Distributed power aggregates existing residential solar batteries and smart thermostats into a coordinated network that acts like a power plant without requiring new grid infrastructure or the multi-year connection delays that hold up traditional power projects.
Sunrun has thousands of customers with solar systems with backup batteries. Those batteries are idle a great amount of the time. The company is networking them and feeding that power to the massive data centers.
Hyperscalers need enormous amounts of power to run AI workloads and the traditional electric grid cannot deliver that capacity fast enough. Distributed power gets data centers online in months rather than years, which is exactly the bottleneck the AI buildout is hitting right now.
The Sunrun-Tesla joint venture will create the largest virtual power plant in the country by aggregating millions of existing home solar batteries and smart thermostats. Clear Street has a Buy rating with a $24 price target on Sunrun and views the deal as a significant catalyst for the company.
This is the kind of situation where I take an initial stake before doing extensive research. The news hit Wednesday morning, the chart action looks constructive, and the story fits a structural theme worth watching. Owning a small position gets the stock on my screen and allows me to follow the technical action while I work through the valuation and the timing of follow-on catalysts.
Strategy
I continue to manage positions tightly and am keeping my cash levels over 40%. I expect the Micron report tonight to produce substantial volatility and I’ll be looking for opportunities in the morning.
At the time of publication, Rev Shark was long DFTX, XERS and RUN.
