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Happy Sunday.
I started to nibble this week on names that have shown resilience throughout this market pullback. The Nasdaq-100 also rejected its 200-day moving average, which means more volatility is around the corner.
Let’s dig into this week’s biggest takeaways.
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Portfolio Updates (YTD Performance):
The Nasdaq-100 rejected its 200-day moving average this week, pushing the index down -3.8% to end the week. The S&P 500 made a similar move, pushing back up to the 200-day moving average on Tuesday before rejecting it this week — trading down -3.0% to end the week.
I’ve shared the idea of “selling the rip” over the last few weeks in anticipation for an “oversold bounce” in the indices — and I’m pretty confident we experienced that opportunity over the last two weeks as we tried to close above the 200-day moving average. We very well could try to reclaim the moving average again in the coming weeks — it wouldn’t surprise me. But, again, I’ll be looking at that market strength as an opportunity to sell the rip.
Let me be clear, “sell the rip” in this instance means taking profits on specific high-octane growth names in my portfolio that are up +100%, +200%, or even +300% plus — then reallocating that capital toward names that I believe are historically undervalued or help my portfolio build a defensive posture.
I’ve begun that redeployment process this week on the weakness — buying / adding to the following names:
Visa (V) — defense
Mastercard (MA) — defense
The SCHD ETF — defense
VICI Properties (VICI) — defense
PayPal (PYPL) — undervalued
Celsius Holdings (CELH) — undervalued
Coca-Cola (KO) — defense
Alibaba (BABA) — undervalued
Baidu (BIDU) — undervalued
Realty Income Corporation (O) — defense
Berkshire Hathaway (BRK.B) — defense
Sharing a few screenshots below that illustrate just how undervalued PayPal, Alibaba, and Baidu are at the moment.
PayPal is clearly trading below their long-standing average PE ratio — sitting today at only 12X — with double-digit EPS growth expected for 2026 and 2027. Alibaba is sitting disgustingly below their long-standing average PE ratio — and will in my opinion represent a sort of “catch up” opportunity as capital moves out of US equities and into international names. Baidu is in a similar situation as Alibaba.
I’ve also continued to take profits on my Bitcoin position, selling another $10K or so around $87K. I believe we’ll see one more leg down before we experience the “cycle top.” This is my humble opinion, as there are many other people online claiming the “cycle top” could already be in.
No matter the outcome, being humble enough to admit you can’t perfectly time the market top, therefore you’re taking profits along the way, is the how prudent investors separate themselves from emotional investors. This is what I’m doing, and why I’m happy to be “ringing the cash register” on my six figures of Bitcoin profits.
Unfortunately, the same can’t be said about Ethereum. I’m holding on strong to my Ethereum position, knowing the alt coin market is very different from the Bitcoin market. Alt coins, in my opinion, could experience increased momentum as the Fed loosens their monetary policy (QT) and perhaps even initiates QE later this year. We’ll have to wait and see, but I’m not ready to call this position a dud just yet.
The YTD performance of the stock portfolio is -5.5%, about -0.6% worse than the S&P 500 (as shown in the screenshot) and +2.6% better than the Nasdaq-100. This underperformance YTD has been driven primarily by the Magnificent Seven (Long Technology), with names like Google, Tesla, and Microsoft all experiencing some sizable drawdowns.
On the flip side, my “Long Risky” and “Dividend Growth Stocks” sections of my portfolio are both outperforming the S&P 500 by a few percentage points, and the Nasdaq-100 by several percentage points. My $12K position in Berkshire Hathaway is really helping as well!
I guess what’s important to understand about all of this is that 1) The Magnificent Seven will likely continue to further contract this year, offering investors like myself an incredible opportunity to buy shares of growing, profitable companies well below their 200-day moving averages and 2) The reason these companies are experiencing drawdowns of this magnitude is NOT because of a fundamental flaw within their business, but instead macro-economic headwinds.
Below are the EPS and Operating Cash Flow charts for Google and Amazon, respectively. What do you see? You see that Google’s stock price (black line) for the last decade has been trading in tandem with their EPS (blue line), and you see the same story with Amazon and their operating cash flow.
So when their stock prices begins to deviate away from these long-term trends, do you think it’s because these company are failing and investors are calling it quits on Google and Amazon? Or do you believe it’s because investors are emotional creatures and overreact to everything?
I’d argue the latter.
No, I’m not selling my Magnificent Seven stocks. I don’t care if they’re experiencing a pullback — I’ll buy more over time. There’s nothing fundamentally wrong with these companies, investors are simply overreacting to policy uncertainty.
The black line (stock price) follows the blue line (EPS for Google and operating cash flow for Amazon). Buy when the black line is below the blue line — as it’s always shown to be a wonderful opportunity to increase your position while the stock price is undervalued.
I hope this longer-than-normal Portfolio Update was able to give you all a better understanding of how I’m approaching this market volatility. Take profits on the riskiest names, redeploy that capital into resilient names, repeat.
When in doubt, zoom out. These charts above do a wonderful job illustrating the importance of that phrase.
Week in Review —TLDR:
Cintas Corporation is offering stability during uncertainty, Lululemon guided to EPS -8% lower than expected, and Paychex is getting added to my watchlist.
CoreWeave’s IPO didn’t go as planned, Robinhood had a rough week despite positive Gold subscription updates, X got acquired… by xAI, the Core PCE Index came in slightly above expectations, Q4 GDP was revised higher, and U.S. Consumer Sentiment has been absolutely tanking.
Key Earnings Announcements:
Cintas Corporation is offering stability during uncertainty, Lululemon guided to EPS -8% lower than expected, and Paychex is getting added to my watchlist.
Cintas Corporation (CTAS):
Key Metrics
Revenue: $2.6 billion, an increase of +8% YoY
Operating Income: $609.9 million, an increase of +17% YoY
Profits: $463.5 million, an increase of +17% YoY
Earnings Release Callout
“Cintas delivered strong revenue growth, operating margins and cash flow generation in the third quarter. Our results are a testament to superb execution by our employee-partners and the differentiated value proposition we offer to our customers in providing for their image, safety, cleanliness and compliance needs.”
My Takeaway
I had shared Cintas Corporation as a name to add to your watchlist three months ago when they delivered their Q3 earnings results. Their stock price is up +11.6% YTD, dramatically outperforming the S&P 500 and the Nasdaq-100.
This momentum was driven by the company’s ability to offer investors a sense of stability during times of uncertainty. Remember, this company manufactures cleaning supplies and uniforms. Management’s commentary surrounding their strong retention trends despite an uncertain macro environment, with pricing remaining at historical levels and all verticals performing better-than-expected, keep this stock in the green.
Management emphasized their historical ability to grow during any economic market cycle, in multiples of GDP growth. From a cost perspective, while the impact of tariffs is still uncertain, Cintas is well-positioned with a diversified supply chain. In my opinion, this stock will continue to trend higher this year — and I’ll be nibbling at it as a way to build more “defense” in my portfolio.
With that being said, their stock price is historically overvalued at the moment (as shown above). Any buying will be during times of weakness.
Lululemon (LULU):
Key Metrics
Revenue: $3.6 billion, an increase of +12% YoY
Operating Income: $1.0 billion, an increase of +14% YoY
Profits: $748.4 million, an increase of +11% YoY
Earnings Release Callout
“Our fourth quarter results exceeded our expectations as we continued to introduce more newness and innovation into our product assortment. Our performance demonstrates the ongoing strength and resilience of lululemon and is a testament to the passion and dedication of our teams around the world. As we begin 2025, we remain focused on executing on our Power of Three ×2 growth plan and delivering an exciting pipeline of innovation and brand activations for our guests and communities.”
My Takeaway
As you all might remember, I sold my position in Lululemon earlier last year for a double-digit profit before the stock plummeted. It experienced a material bounce back over the last 6 months, but is now down -30% from its peak in January.
Shares of the stock traded -14% lower on Friday after reporting an earnings beat across the board due to strength in China and Men’s clothing, however, management guided to EPS growth below Wall Street’s expectations — causing their stock to tumble ($2.53 vs. $2.76 expected).
The company incorporated tariffs into their guidance, calling for a -0.2% hit to their gross profit margins due to current actions on China and Mexico imports. Their revenue was also guided to be lower-than-expected based on weaker US traffic. The silver lining is that LULU’s globalization story should remain intact, as the company’s China revenue grew +46% during the quarter. Additionally, share buybacks should continue to be a driver of EPS growth, with $1.3B worth of buyback authorization still up for grabs.
I’m not touching this stock. Too much competition (Vuori, Alo, etc.) uncertainty, and their upside potential is driven primarily by International growth.
PayChex (PAYX):
Key Metrics
Revenue: $1.5 billion, an increase of +5% YoY
Operating Income: $691.8 million, an increase of +6% YoY
Profits: $519.3 million, an increase of +4% YoY
Earnings Release Callout
“The third quarter of this fiscal year has been a transformational time at Paychex. As we position ourselves for the digitally and AI driven future of human capital management, we believe the combination of our continued positive momentum and the pending acquisition of Paycor positions Paychex for continued growth.
Our investments in automation and technology are also boosting efficiency across the organization resulting in operating margins of 45.8% and adjusted operating margins of 46.9%, an increase of 180 basis points compared to the prior year period."
My Takeaway
I’m definitely adding this name to my watchlist! Not only does the company have a knack for delivering consistent EPS growth (as shown in blue above), but their stock price also seems to be within spitting distance of “fair value.”
The company reported total revenue of $1.5B, up +5% YoY — slightly topping Wall Street’s expectations. There were some macro puts and takes across their business (moderating job growth vs. improving client retention) and PAYX noted that clients are simultaneously optimistic and uncertain in the current environment.
Positives Include:
Management Solutions revenue grew by +5% catalyzed by continued client adds and higher revenue per client as PAYX realized price increases and further product penetration. Retention remains a bright spot as management noted broader client retention continues to improve.
Risks to Monitor:
PEO & Insurance Solutions grew only 6%, below expectations. This was caused by lower enrollment in specialty Florida at-risk medical plans and employees choosing lower-cost health plans. Additionally, while the company’s 401(k) business continues to post strong performance with double-digit growth, 401(k) balances were negatively impacted by the recent market volatility.
All in all, this company is operating a business that will always be needed — especially as more small-to-mid-sized businesses expand their operations over the coming years due to promised deregulations and lower corporate tax rates. Again, this name is getting added to my watchlist!
Investor Events / Global Affairs:
CoreWeave’s IPO didn’t go as planned, Robinhood had a rough week despite positive Gold subscription updates, and X got acquired… by xAI.
CoreWeave IPO
Source: Michael Nagle / Bloomberg News
CoreWeave’s IPO debuted below expectations, pricing its shares at $40 instead of the targeted $47 to $55 range — resulting in a valuation of $23 billion instead of the desired $32 billion. The stock ended its first trading day flat, signaling waning investor enthusiasm for AI startups and a difficult IPO market in the U.S.
Investors remain concerned about CoreWeave’s high costs, debt, and reliance on Nvidia and Microsoft. There’s also been recent rumors about contract cancellations from Microsoft that have made investors feel uneasy. The company generated $1.9 billion in revenue last year but reported an -$863 million loss due to high operating expenses. There’s also $8 billion worth of debt sitting on their balance sheet.
With GPU shortages easing and rental prices dropping significantly, CoreWeave faces challenges in sustaining its growth. The disappointing IPO performance may impact other private companies considering public listings, including Klarna, StubHub, and Chime Financial.
“The broader adoption, use, and commercialization of AI technology, and the continued rapid pace of developments in the AI field, are inherently uncertain.”
Robinhood’s (HOOD) New Updates
Stephanie Guild, Head of Investment Strategy at Robinhood
Robinhood CEO Vlad Tenev is expanding the company’s $5-per-month subscription service, Robinhood Gold, by adding wealth management, tax advice, and private banking features. He envisions the service becoming an Amazon Prime-like membership for financial services — where loyalty drives repeated engagement. The new offerings include curated ETF portfolios, estate planning tools, luxury perks, and even cash delivery to customers’ homes (which is insane).
Tenev believes financial services require strong customer loyalty, as it directly translates to market share and revenue growth. Robinhood’s Gold subscriber base has more than doubled in a year, reaching 3.2 million and generating at least $100 million in annual revenue. HOOD shares have risen +6.5% in 2025, following a strong 2024 driven by surging crypto prices.
“My philosophy behind it is subscriptions are about loyalty,” Tenev said. “So if you’re a subscriber to something, then that service is sort of the first in mind when you think about trying something else from that category.”
X Acquired by xAI
Elon Musk announced that his AI startup xAI has acquired his social media company X in an all-stock deal valuing xAI at $80 billion and X at $33 billion. Musk described the merger as a way to integrate AI capabilities with X’s vast reach, unlocking significant potential for both companies. The deal was structured as a stock swap since both companies are privately controlled by Musk — with X investors receiving xAI shares.
xAI, founded less than two years ago, has been competing with OpenAI and other tech giants in developing large language models and AI software. The two companies were of course already closely linked, with xAI’s Grok chatbot available on X and plans to build a massive AI supercomputer named Colossus in Memphis.
For Tesla investors — there continues to be concerns surrounding Musk’s focus. Between X, xAI, SpaceX, Neuralink, The Boring Company, AND leading DOGE… it’s definitely something to monitor. I believe he will become a lot more active again with Tesla this year as the company makes more Optimus humanoid robot announcements.
"The combined company will deliver smarter, more meaningful experiences to billions of people while staying true to our core mission of seeking truth and advancing knowledge.”
Major Economic Events:
The Core PCE Index came in slightly above expectations, Q4 GDP was revised higher, and U.S. Consumer Sentiment has been absolutely tanking.
Consumer Spending & Core PCE
Consumer spending in the U.S. barely rose in February, increasing just +0.1%, while inflation picked up. Households reduced spending on services for the first time in three years, reflecting resistance to price increases amid financial strain. The Federal Reserve’s preferred inflation gauge, the core PCE index, climbed +0.4% month-over-month and +2.8% year-over-year, remaining above the Fed’s 2% target. The stock market reacted negatively, with the S&P 500 opening lower, and traders still expecting rate cuts later in the year.
President Trump’s planned tariffs may further exacerbate inflation, increasing concerns of stagflation or even a recession. Consumer sentiment has dropped to a two-year low — with long-term inflation expectations reaching a 32-year high. Additionally, the household saving rate has risen, suggesting consumers are becoming more cautious amid rising financial stress and a slowing job market.
“We expect deteriorating consumer sentiment to weigh on spending and growth ahead. With the Fed on hold for now, they’ll likely need to cut rates in the second half of the year more quickly — and likely by more — than the latest dot plot shows they anticipate.”
Q4 GDP Revised Higher
The U.S. economy grew at an annualized rate of +2.4% in the fourth quarter of 2024, slightly higher than previously estimated — driven by strong consumer spending. However, growth slowed from the +3.1% pace seen in Q3, with business investment declining, particularly an -8.7% drop in equipment spending. President Trump’s new tariffs, including a 25% tax on foreign autos, are expected to fuel inflation and create economic uncertainty.
Consumer confidence is declining as worries about inflation and trade policies grow, leading major retailers to lower sales expectations. Economists warn that policy uncertainty, tariffs, and tightening financial conditions could further weigh on growth in early 2025.
“Most economists expect to see that GDP growth has been slower in the first three months of 2025: somewhere below 2%. Some models estimate that the economy has barely grown at all in the three months through March. Many expect the figure to land somewhere between 1% and 2%.”
U.S. Consumer Sentiment Tanked
U.S. consumer sentiment dropped sharply in March, with the University of Michigan’s index falling to 57 from 64.7 — the lowest in over two years. Long-term inflation expectations surged to +4.1% — the highest in 32 years — amid growing concerns over tariffs and rising prices.
Consumers foresee costs increasing by +5% over the next year, which could impact spending habits and overall economic growth. Despite the Michigan survey’s findings, the Federal Reserve has downplayed its significance, citing more stable inflation outlooks from other sources.
Additionally, worries about job security have grown, with two-thirds of consumers expecting unemployment to rise — the highest level since 2009. The decline in consumer sentiment was particularly sharp among high-income groups and Democrats, signaling broader economic concerns.
“Consumers continue to worry about the potential for pain amid ongoing economic policy developments… Notably, two-thirds of consumers expect unemployment to rise in the year ahead, the highest reading since 2009.”
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