One real economy stock that will power the electric everything revolution and how we are playing it
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Encore Wire | $WIRE
Price at the time of this report (Sep-Oct 2023): 192 USD
Our views
Immediate-term (2-4 weeks): BEARISH
Short-term (3 months): WATCH
Mid-term (6-12 months): WATCH (Maybe Nibble around 160)
Long-term (3-5 years): BULLISH (we are buyers around 150 - 160)
Analysis
Bear case
Technical: This stock has run up a lot and appears to be consolidating before a retest of its 150 breakout level and maybe a look below 150 before rising higher in the long term.
Macro: Copper and copper stocks like $WIRE do well when the global economy is growing or demand for electricity infrastructure is booming. Global macro pundits are predicting a Q1 2024 recession. The situation in the Middle East is likely to further impact the global economy negatively. Meanwhile the Ukraine war remains unresolved. This may lead to a short term fall in copper prices which makes it difficult for us to buy around 192 USD
Bull case
Technical: On the longer term time frames this looks like a stock that is on a multi-year and decade upswing
Macro: Four major macro themes can drive up the prices of Copper which in term will drive up the price of Encore Wire ($WIRE)
Shifting to renewables or nuclear energy
Electric vehicles
Infrastructure growth
Military spending
How we are playing it
We are entering ATM Puts for Nov-Dec OpEx, expecting a test of 150 - 160 over the next few months as the global macro risks are priced in. We do expect a broad market rally before the end of Q4, so we will take profits early on this position.
Longer term, we will consider long date OTM calls once $WIRE is around 150 USD
