🗞 RSVP For a Winning Trade

WHILE YOU POUR THE JOE… ☕️
Another One Bites the Dust

First it was Google, then AMD, now Amazon…

You must be seeing the trend by now right? It’s the exact same one that we’ve been warning you about this whole time, the one that deals with a rotation in the NASDAQ 100 and S&P 500 out of big tech and into manufacturing / industrials.

If you missed it, here’s a post to go over it in a simpler way.

As always, the PMI data is out, and since both PMIs are responsible for 85% of our trade ideas 💡, we’re going to give you the creme de la creme.

But, before we get there..

Here’s a link to your free Excel & PDF guide containing December’s PMI, we will be sending you a complimentary copy of January’s next week if you’re signed up, so enjoy!

Speaking of trade ideas, let’s get on with today’s email 📧…

BACK TO WORK
Rinse & Repeat

Good old tariff man is back isn’t he?

While most are scrambling on Twitter (X) and everywhere else to figure out what the effect of these tariffs might be on the economy, we’re focused on what traders should be focused on.

And that is coming up with ideas to make money with. 🧠 

However, that’s easier said than done, so instead of saying it, let’s get doing it:

This is the services PMI index, which softened below expectations as we’ve been expecting. 📉 

In a nutshell, the entire United States GDP has been driven by two things:

1. Services inflation

2. Consumer spending

Now, Trump wants a lower dollar and lower interest rates, which is one of the reasons we’re buying bonds through $TLT. There are a dozen others, but that’s something you can recap on in this previous post right here.

Back to the PMI.

We expected a softening due to the dollar decline, and since most of inflation was coming from IT and Finance services within this sector. Now that the Fed is tackling inflation more seriously, it’s obvious where the excess will be cut first.

However, that’s not quite what we’re betting on.

Out of all the segments in the PMI, we chose to focus on employment for this month’s services index.

Why? 👀 

Because the sector had been making BS jobs for over 28 months, again in spaces like IT and Finance. These are either outsourced to another country or highly cyclical like temp positions or tax season / code bug fixers.

This time though, it looks like a real industry came up with reasons to hire more people, that’s construction. 🏗️ 

Leading the way in employment, which was the segment that expanded the most in the index (apart from prices), we decided to dig deeper into construction.

Look.

You know we’re bearish on residential construction and some commercial as well. We’ve even told you that home prices might see a 30% haircut from here. 📉 

But that concern was swept away when we dug deeper into the construction sector’s data, here’s what the industry respondents had to say:

This expansion is not in any type of construction; it will most likely focus on energy infrastructure. ⚡️ 

Which makes sense, as the US had become dependent on foreign oil under Biden’s “leadership”, Trump wants to bring production back onshore.

This is why we’re also buying oil names, especially in the drilling space through names like Patterson-UTI and Transocean.

We got to those using the same method in the PMI we’re using today, so I hope you can see how powerful it is.

Anyway, after digging through the players exposed to this construction breakout, here’s what we found. ⬇️ 

TRADE OF THE WEEK
Join the Party

If you’ve been following us for a while, then you know this comp spread looks a bit messy, with no clear outliers to choose from.

However, it is not an outlier we’re looking for this time, but rather a turnaround play. Since the metals industry has contracted for over 28 months, we’re looking for discounted names that might pop and catch up soon. 📈 

With this we bring you Ternium stock, a Brazilian steelmaker positioned to serve the United States’ needs in energy infrastructure building.

But get this.

Even if tariffs or Lula’s unfriendly nature to the US gets in the way, Ternium is also a supplier to China 🌏️, a nation who is also looking to expand on infrastructure building right now.

Instead of picking sides, you can stick with Ternium for max safety.

Now this is what the market / volume profile looks like for Ternium, notice two things:

1. There was barely any volume for the current range in 2024 and very little so far into 2025.

2. We can reclaim the $35 VPOC as an initial target, then shoot for $40 as secondary exit.

More than that, I want you to take the discount home, because other peers just don’t offer it. 👎️ 

In the comps table, you’ll see that Martin Marrietta and Vulcan trade at forward P/E premiums, which we love.

But.

They also offer very little EPS growth for 2026, so their PEG ratios look very expensive. In other words, they’ve most likely priced in any and all growth already.

Ternium on the other hand hasn’t, hence its more attractive PEG ratios and double the EPS growth! 👍️ 

As always, it looks like our napkin analysis is in line with what Wall Street analysts think this stock is worth.

And on that note, that’s today’s play with 80%+ upside and one kickass thesis behind it. 🫰 

GO AND MAKE IT HAPPEN
No Reading this Weekend

If you’re new here, which I know 22 of you are, this is where I usually include a book recommendation related to the newsletter’s topic or lesson.

But.

In the spirit of the PMI, which no book that I know of covers in the way it’s supposed to be read, I’ve decided to send you over to our YouTube channel 🎥.

Enjoy it with a nice cold one and with pen and paper because it’s part one of our PMI breakdown. By the way, part 2 is coming very soon (and much improved).

To your success,

G. 🥃