(12/22/20) John Person's End of Year Commentary

I write to you as last market update for 2020. This year, I have been blessed with a solid track record and another profitable year. However, it was a year to remember, or for some, to forget, states John Person of PersonsPlanet.com.

There have been naughty and there have been nice acts, which I have not been appointed as one to Judge. I can only measure my performance and actions by my account P&L statements, my managed accounts through J. Person Asset performance, and my advisory service newsletter track record. But more importantly by the number of friends and family that are in my life. My clients are included in this category. Many of you have been with me for years and I consider you all as friends and family.

As we conclude 2020, I wish you leave you with these observations. Last week the markets rocked to the upside after a brief decline early last week, the idea I had was to look for a “dip” or pullback and get in a Russell 2K call spread and I quote… “If we have a 'dip' I want to enter a Bull Call Spread in the Russell (IWM) but at lower levels. Therefore, I have added this trade in the table below and have looked at a 'theoretical' value of this strategy based on prices pulling back near weekly Pivot support (186.18).”

This was a novel and noble idea; however, the Russell never did see a dip, only the S&P 500 and the Dow Jones. By Friday’s close all the major averages staged a strong rally resulting in what I estimate was a massive, short squeeze as Quarterly Option Expiration forced shorts to cover positions. This resulted in historic yearly percentage changes for the QQQ’s (+46.61%) and new highs for the year in the SPY and the IWM.

The question now begs, will we see the official “Santa Claus” rally? First let’s give credit where credit is due. This phrase was coined by Yale Hirsch, the creator of The Stock Traders Almanac. The official rules, based on his observations of this phenomenon, is that the rally begins on Christmas Eve and runs through the first two trading days of the new Year. Please note some years Santa either came early or did not show up at all. Recent history showed back in Dec. 2015 and Dec. 2018, not only did Santa not show up, but we encountered nasty declines. Based on historic performance, seasonality favors end-of-year rallies, but never in history have we had a year like this. My take is we could see follow through strength on news of a potential stimulus bill this week, but with the potential risk of political fallout from the Georgia run-off elections, where the winners could determine either a full Democratic sweep control of Congress, the Senate, and the White House, this would be a hard pill to swallow for investors facing potential new tax laws on capital gains from wealthy investors.

I see the “one in the hand, versus two in the bush” an applicable phrase for this situation. Meaning it is advisable to sell higher valued stocks now before the years out and pay the current year’s tax rates versus the unknown in 2021. If more investors feel the same, then we could see a replay of 2015. That year we sold off AFTER Christmas and the selling lasted into the end of January. Looking at the technical picture, we have undergone a very weak volume rally and the Advance/Decline ration lines are looking more like a divergence pattern, a negative one at that. I have a cycle timing event for a peak, due on the week ending Dec. 31st, then from a fundament event situation there’s adequate cause for concerns due to potential tax changes coming from the incoming administration.

However, I wanted to give you my list of “Dogs” that stand a strong chance for a rebound in the first quarter of 2021. These stocks are near their respected annual lows (near is defined by within 20% of their annual weekly closing lows at Decembers Option Expiration) which may have been sold more for tax loss credits, all have fallen in recent weeks on light volume and enter a seasonal strong period in the January – March time frame. These names present a high probability of a rebound in the New Year.

Dogs of the Market List:
Healthcare: Baxter Int. (BAX), Gilead (GILD), Perrigo (PRGO), Biogen (BIIB), Blue Bird Bio (BLUE), Esperion (ESPR)
Consumer Staples: Tootsie Roll (TR), Campbell Soup (CPB), Kimberly Clark (KMB), Walgreens (WBA), Kroger (KR).
Utilities: NiSource (NI), Consolidated Edison (ED), American Electric (AEP)
Aerospace/Defense: Northrop Grumman (NOC),
Communications/Technology: AT&T (T), Luminex (LMNX), Momo (MOMO), Echo Star (SATS), Intel (INTC)

After the new year, I will give more commentaries on market direction but here are my longer-term concerns A.) continued Dollar weakness, B.) commodity inflationary boom, and C.) raising taxes to pay down the Covid-19 debt and how that will affect equity market valuations.

Finally, based on current oil prices and dollar weakness I am in a few energy stocks as I find great value in this sector. For the record here are my current stock positions:

Long full position in Junior Gold Miners (GDXJ) $41.46 using Feb. 19th Exp. 45 Put option in lieu of stop.
Long full position in Walgreens (WBA) $39.22 using Jan. 15th Exp. $32.50 Put option in lieu of stop.
Long 50% position in Marathon Pet. Corp. (MPC) $36.58, stops at 37.19.
Long 50% position in Schlumberger (SLB) at $19.80, stops at $20.34.
long 50% Raytheon Tech. (RTX) at $70.77, working orders to add at $69.15, stops at $66.45.
Long full position in Prudential Ins. (PRU) at $78.97, stops at 72.67.
Long 50% Dupont (DD) at $65.59, stops raised to at 67.41.
Long full position in Phillips (PSXP) at $27.88, stops at $26.05.