🗞 A Winning Quarter

WHILE YOU POUR THE JOE… ☕️
A Better Kind of Week

Don’t get me wrong. I enjoy writing these for you guys every week. The feedback and information quality go hand in hand, and they are among the best in the market.

But

I never thought that our flagship space would become a WhatsApp group, but it did, and it all happened within two weeks (not six months). 👀 

What this group offers is the experience of a trading floor (like the image above) right to your phone, every business day, with morning meetings that offer information NOBODY is offering out there. 🤷‍♂️ 

Trust me, I’ve looked.

So, if you haven’t joined the chat, why are you okay with falling behind and missing out on information that can only be learned by having real floor experience?

Here’s the link to get in, I hope to see you at this morning’s meeting in a couple of hours ⬇️ 

LEAD THE WAY
North Star Points Here

This is our proprietary Excel tracker for retail sales data. It’s one of several macro data trackers we use to generate winning trade ideas whenever there is capital to be invested. ✅ 

For the month of March, arguably the most important report came out, as the pressure of trade tariffs were justifiably expected to sway consumers in a certain direction, as the consensus view is that these tariffs are 100% going to increase costs across several products.

Which is like saying the consumer literally told you where the most worry - or pain - is centered today. 👀 

That is:

• Motor vehicles & parts dealers: 5.3% increase

• Sporting goods, hobby, musical instrument & book stores: 2.4% increase

• Food services & drinking places: 1.8% increase

So, those were the areas of most concern for the average consumer who is now worried about tariff bottlenecks and price boosts, the pain point so to speak.

Then there’s this piece of information to throw into the mix, when Trump decided to lift tariffs on automakers and parts dealers, perhaps knowing that the demand (pain) was centered there enough to make a concession.

Now it’s clear where the consumer is headed, and where the administration is looking to make the most concessions outside of the obvious, that being the semiconductor and technology areas. 💻️ 

Understanding this should lead you to have a long bias in the sector as well, expecting to see a better quarter ahead due to the high probability of better earnings and even guidance coming out of there.

Now when you go and break down the auto parts sector for outliers, it becomes clear that the choice should be in the retail and wholesale parts specifically.

Why? ⬇️ 

• It trades at the largest forward P/E premium

• It’s PEG is not the best, but it’s still in line with what we can see across the market

• Average price action is at 75.4% of its 52-week high, leaving enough upside left

• EPS growth for the next 24 months is the largest here, justifying its valuations

So if you’re thinking of stocks like Advance Auto Parts, O’Reilly Automotive, and AutoZone, then you’re on the right track to set yourself up for some gains.

By the way, this is the sort of systematic process that’s missing out of most trader checklists, which is why everyone who takes on our Sovereign Trader Program 🧑‍🎓 ends up kicking ass in their accounts.

Give it a shot, and let’s see if you qualify for the next round of cohorts below ⬇️ 

TRADE OF THE WEEK
Drilling Down

Now we take things a step further in this thesis and land on all the peers within the retail and wholesale auto parts dealers.

If you’ve been with us for a while, or have gone on a discovery call with regards to the Sovereign Trader Program, then you know exactly why we picked Valvoline as a potential long play. 📈 

• Forward P/E premium to the group

• $4.2 billion in market cap allowing for outsized returns

• Average PEG ratio allowing for extension

But the one that really caught my eye, the massive 19.4x P/S premium.

So why would the market be willing to pay up so much for Valvoline’s future sales?

Well you can’t really look at these stats over the past quarter and not think that this might not be a fluke, that Valvoline might actually be able to pull this off for the next quarter again.

Especially running on the tailwinds of a sudden jump in retail sales.

Breaking things down further, let’s compare apples to apples here, which in terms of size it looks like we’re down to Valvoline versus Advance Auto Parts. 👀 

Notice that Valvoline dominates its peer on pretty much all financial metrics, especially return on invested capital (ROIC).

Based on this, and the fact that the market is expecting to see a lot of sales growth per its P/S premium, a much better net income margin would translate into double-digit EPS growth potentially.

With this in mind, I am comfortable buying Valvoline ahead of earnings on May 7th.

In my opinion, anywhere from $32.50 to $33.60 would be a good place to start buying ahead of earnings.

Now options are not that liquid here unless you go to 2026, so I’d be careful about doing that. Even without options, you’re looking at a price target that’s closer to the high 30s and low 40s, so roughly 20% on average.

Let’s see where this takes us. 🫰 

GO AND MAKE IT HAPPEN
Short and Sweet

This is a tiny but powerful book, and it can be read within a single day.

If you know Stanley Druckenmiller, you know he’s basically the best investor of our generation (even better than Warren Buffett). However, the industry has kept him a secret because of his strategy.

Which is global macro, the stuff we focus on and what they’d train you on if you were to join a trading desk at an investment bank or hedge fund.

Today’s book recommendation 📖 gives you a snippet of his world, and some subjects to go study on your own after.

To your success,

G. 🥃