Editor’s Note: Last week, we revealed Teeka Tiwari’s new Wall Street contact, Jason Bodner. We call Jason the Whale Hunter. That’s because he’s figured out a way to track “whales”—billionaire investors whose buying can push stock prices higher—and follow them to profits.
Jason’s Palm Beach Trader system triggers when it finds clues of institutional buying… and he’s been getting plenty of buy signals lately. On Friday, he said that he’s seeing buy signals on consumer discretionary and information technology stocks. What’s he seeing today? Read on to find out…
Editor: Jason, you’re the newest member of our PBRG team. So most of our readers don’t know much about you yet. Before we get to what your system is saying today… can you tell us how you got your start in investing?
Jason: Believe it or not, I started out as a professional musician. But the pay just wasn’t sustainable. For instance, I composed a ballet and conducted it at Lincoln Center. I spent nearly a year working on it… and I got paid just $1,500.
So in 2001, I got a clerking job at financial services firm Cantor Fitzgerald in the North Tower of the World Trade Center. I trained there for a month. Then, six weeks before the 9/11 attacks, I got transferred to London. That move saved my life.
Editor: That must have had a profound impact on your life. What did you do after the attacks?
Jason: The September 11 attacks killed more than 650 of my colleagues. I wanted to help. So I went back to New York to help rebuild the trading desk.
But I eventually moved back to London. And when I got back there, I was tasked with setting up trades for hedge funds and other deep-pocketed investors. Some of these trades were worth hundreds of millions… even billions… of dollars.
These are the legendary whale traders.When multibillion-dollar hedge funds take a position of that size in a stock, they move its price. If a stock typically trades $50 million a day… and a large hedge fund swoops in and buys $100 million worth of shares… the price of that stock is going to pop.
But here’s the thing… Trades this big take time to put together. You and I are able to buy stocks in a few minutes. We just log into our online brokerage accounts and click a mouse.
But these multibillion-dollar trades aren’t like that. They play out over days… even weeks. You have to put together enough sellers to absorb all that demand.
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Editor: How do you track this institutional buying?
Jason: Naturally, these big buyers try to keep their trades as quiet as possible when building their positions. If the name of the stock they’re buying is leaked, thousands of copycats could pile in and push up the price before these big investors have filled their trade.
For instance, super-investor Warren Buffett owns more than $40 billionworth of Apple shares. Do you think he’s going to go on CNBC and tell the world that he’s planning on plowing tens of billions of dollars into Apple shares?
No way. He’s going to build a position first. He wants everybody to pile in and lift Apple higher after he announces it.
But here’s the thing… You can’t keep trades of this size completely secret. They leave clues—or “wakes”—that you can spot, if you know where to look.
Editor: I know you can’t reveal the full details of your system for finding these wakes. But can you help readers understand what you’re looking for?
Jason: Without getting too far into the weeds, what I’m looking for is unusual strength. Where is a stock trading in relation to the average price over a few months or a year? Is it making new highs? Is trading volume rising? Is the stock price bouncing around more than usual?
These are all parts of the wake that these whale traders leave behind.
I also look for strong fundamentals. I don’t want just any company. I want the best companies. Are their sales and earnings growing? What are their debt levels? What are their profit margins?
Editor: It sounds like this is a very data-driven process.
Jason: Absolutely. I learned the hard way to keep my opinions and my emotions out of this completely. I’ve created a set of algorithms that tracks more than 120 data points over 29 factors, including the ones I mentioned above. My computer model analyzes 15,000 different stocks—both in the U.S. and overseas—and it updates nearly three billion bits of data every day.
Editor: Can you give us an example of when a company triggered your system?
Jason: Sure. I’ll give you a recent one. Last April, I gave a presentation to a room filled with traders and investors. The company I presented on that day was SolarEdge. It makes devices that optimize solar panels.
Nobody in the room knew the company. I didn’t either. I just knew my algorithm had picked it up and that it had solid fundamentals.
SolarEdge closed at $15.90 per share that day. It peaked at $68.55 before pulling back. Today, it’s at $52.35. That’s a 229% rise in 14 months.
Editor: Those are impressive numbers. So let’s cut to the chase… What’s flashing on your system right now?
Jason: The semiconductor space is one that’s been constantly flashing on my system. These are companies that support most of the technologies we all use every day. They make the chips and circuits that go inside our electronic devices.
Whether it’s our cell phones, computers, or any other technology we enjoy on a day-to-day basis, these companies are critical to many of their functions.
Just look at the one-year chart of the VanEck Vectors Semiconductor ETF (SMH)…
I’m focused on the $113 area. A breakout above this level would indicate demand for the sector, which is very supportive of higher market prices overall. The best bull markets are led by growth and technology stocks.
The stocks powering the attributes that the smart players are looking for. Just a few select groups tend to outperform year after year, and that’s where I want to play.
So keep SMH on your radar.