We’ve been waiting seemingly forever for the market to show some true power, and we recently saw it. With the Model Portfolio overloaded with cash, we’re now going to add an old favorite: Celsius Holdings (CELH), advises Mike Cintolo, editor of Cabot Growth Investor.
Following Nvidia’s (NVDA) earnings not long ago, a batch of AI-related stocks (mostly technology infrastructure, like chips and networking) went to the moon. The post-Nvidia action was the first time we’ve seen growth-y stocks in any sector let loose on the upside in such a big way since early 2021 and certainly it’s a mark on the bullish side of the ledger when it comes to the overall evidence.
The problem, so to speak, was that outside of that handful of names, the rest of the market didn’t go along for the ride, and the other bugaboos that are out there are still in place. In particular, the narrowness of the market is getting more extreme. The latest “wow” stat was that the S&P 500 eked out a small gain in May even though 75% of stocks in the index were down. And nearly 60% of the S&P components were recently trading below their 200-day lines!
And yet, we do think things have taken a step or two in the right direction, and not just because of the AI move. It’s far from a buying stampede, and given our indicators, we’re not going to hugely change our stance. But we’ve been watching CELH since last summer and believe it’s finally ready for a real run.
Celsius Holdings (CELH)
Most of the time, such a huge winner from the prior cycle doesn’t have the juice to have another big run. But (a) so far in this nascent rally attempt, a fair number of “old” leaders are acting well, and (b) Celsius’ distribution deal with PepsiCo (PEP) last year certainly has the potential to drive business significantly higher (and into more channels) than was possible before.
After being rejected by the 120 area many times over many months, CELH leapt to new highs after the Q1 report started to show the power of the Pepsi deal (sales up 95%, earnings more than quadrupled). The stock did rest for the next three weeks, but recent big-volume buying tells us that, at the very least, there are buyers under here, and ideally, that shares are ready to run.
Recommended Action: Buy CELH.