What We SOLD, Bought & HOLD: Our COMPLETE Portfolio Analysis
Key Points:
Institutional investors are reducing long positions as markets approach new highs, signaling caution ahead.
Seasonality patterns and statistical divergences suggest a potential summer correction in major indices and stocks like Nvidia.
The portfolio strategy involves reducing exposure to overbought stocks and doubling down on undervalued, resilient companies like LVMH and Lululemon.
Institutional Warning Signs: The Calm Before the Summer Storm?
In a detailed analysis, we rebalanced our portfolio before what we believe to be an upcoming summer correction in the stock market—rooted in both positioning data from institutional investors and clear seasonal patterns. The key signal comes from the Commitment of Traders (COT) report, where the “Asset Managers & Institutional” category—traditionally long-only and long-term oriented—have started to reduce their net long positions despite a rising S&P 500.
This divergence between price and positioning, especially notable in the last period, echoes what happened in Septeber 2024. Back then, the same institutions began reducing long positions when prices were rising. Now, once again, they are selling into rising prices—a classic “smart money” warning.
Seasonality and Divergences: A Double Red Flag
Using historical seasonality patterns from the Forecaster Terminal, the analysis reveals that the current year’s S&P 500 performance is tracking 87% correlated to last year. In 2024, markets dropped nearly 8% between mid-July and August—a statistically significant seasonal pattern that may repeat.
At the same time, stocks like Nvidia and Visa show troubling divergences. While prices have risen to new highs, the proprietary Market Mood Meter has begun to fall, creating a classic signal of impending reversal.
Take Nvidia for example:
Fair value remains >30% above the current price (based on the average of the Discounted Cash Flow, Economic Value Added, and Lynch methods).
But seasonality is hostile: from now until early August, Nvidia has shown positive returns only 52% of the time with long trades averaging +13%, while short trades returned +24%—suggesting downside skewness.
Combine that with divergence on the overbought indicator, and the case for trimming is strong.
Timing Matters, But Fundamentals Win Long-Term
The analysis doesn’t suggest panic—but prudence. While Nvidia and Microsoft remain world-class companies, statistical and seasonal indicators point to a temporary reset. Selling high and buying again on weakness is the strategy here.
Meanwhile, companies like LVMH and Lululemon offer asymmetric upside: high-quality fundamentals, strong insider support, and favorable sentiment conditions.
For those who combine timing with value, this summer could be less about surviving the drop—and more about positioning for the bounce.
Portfolio Actions: What We Sold, Bought & Held
In response to these red flags, the portfolio was reshuffled:
❌ Stocks Sold
Nvidia, Visa, Microsoft, and Meta were sold or trimmed. Despite strong fundamentals (Microsoft scored 10/10 on the qualitative scorecard), these stocks are either fairly valued or overbought statistically. The case for caution is clear—exit now and re-enter post-correction.
✅ Stocks Bought (or Doubled)
LVMH (LVMH.PA): Down from €900+ to under €500, but still fundamentally robust. The CEO is aggressively buying back shares, and Market Mood Meter divergence indicates a strong reversal opportunity.
Lululemon (LULU): A hidden gem. The stock trades at 2020 prices while profits have tripled. Divergences and sentiment indicators now scream buy, despite macro worries over tariffs and Canadian exposure.
🔒 Stocks Held
ASML: Despite overall market caution, ASML remains in the portfolio. The key difference? No overbought signals, no divergence, solid fundamentals, and a 9/10 qualitative scorecard rating.
