The Quant Post – Newsletter

Happy Sunday!

Here is what we cover this week:

• Weekly Market Overview
• Weekly Sector Update
• TESLA vs BYD
• Option Strategy
• Chart of the Week

Weekly Market Overview

The stock market rally displayed a mixed performance last week, with Tesla, Nvidia, and a few other large-cap stocks masking broader market weakness.

In last week’s trading, the Dow Jones Industrial Average dropped 2.7%, while the S&P 500 declined by almost 1%. 

The Nasdaq composite edged up by 0.2%, but the small-cap Russell 2000 fell by 3%.

Source: Koyfin

Going Forward

Despite a mixed week for the stock market rally, many growth stocks performed well, presenting investors with opportunities to capitalize on gains while trimming lagging stocks or adjusting positions around earnings.

With an upcoming wave of earnings reports from major companies like Apple, Meta, Microsoft, Amazon, and Google — as well as other firms — the market may experience significant gains, losses, or volatility; key economic data, the Nov. 5 Election Day, and the Nov. 6-7 Fed meeting could also impact market direction.

Additionally, as recent Israeli airstrikes on Iran remind us, geopolitical events and unexpected news can arise at any time.

To stay prepared, maintain a clear strategy for your current holdings, regularly update your watchlist, and monitor emerging sector trends to identify promising setups.

Weekly Sector Update

Almost all the sector ETFs were in the red zone last week, with Health Care and Materials posting the highest decline of 3% and 3.8% respectively.

Source: Yahoo Finance

Stocks Watch of the Week

Tesla vs. BYD Key Comparison

• Sales Leadership: In 2022, BYD’s total vehicle sales surpassed Tesla’s, and BYD took the BEV lead in Q4 2023. However, Tesla regained the BEV crown in 2024.
• Q3 2024 Performance:
  • Tesla: Delivered 462,890 EVs, driven by Chinese sales and higher margins, with energy storage declining to 6.9 GWh from 9.4 GWh in Q2.
  • BYD: Sold a record 1,134,892 vehicles, up 37% from a year earlier, driven by strong PHEV sales and a growing hybrid lineup.
• Product Updates:
  • Tesla: Focus on Model Y and Model 3. Low-volume Cybertruck production is increasing; Semi truck production expected in 2026.
  • BYD: Expanding model lineup, including premium brands like Denza and new hybrid systems with extended range.
• Expansion and Manufacturing:
  • Tesla: Limited by battery production and reliance on suppliers. Working on 4680 battery advancements.
  • BYD: Strong in-house battery production (Blade battery) and expanding manufacturing in Asia, South America, and Europe.
• Earnings:
  • Tesla: Q3 earnings rose 9% YoY with revenue at $25.2 billion; gross margin improved to 19.8% and EBIT margin to 10.79%.
  • BYD: Q2 earnings grew 32% with $24.2 billion in sales. Analysts expect a 15% rise in Q3 earnings.

Source: Koyfin

• Stock Performance:
  • Tesla: Up 8.3% in 2024, with a recent one-day spike of 21.9%.
  • BYD: Up 35.8% in 2024, driven by Chinese stock rallies and stimulus measures.

Source: Koyfin

• Market Cap:
  • Tesla: $860 billion as of Oct. 25.
  • BYD: $102.5 billion as of Oct. 25.
• Strategic Differences:
  • Tesla has a limited affordable EV lineup and focuses on North American markets.
  • BYD offers a wider range of affordable models, especially in the PHEV segment, and is rapidly expanding globally.

Tesla and BYD both present strong buy opportunities with Tesla recovering above a buy point and BYD in buy range, leveraging their unique strengths in the global EV market.

Source: Koyfin

Source: Koyfin

^{Source: Seeking Alpha}

Option Strategy

Bear Put Spread – The Fun Way to Think About It!

A bear put spread is like a bet on a stock slipping down the hill — it’s all about aiming for a stock drop! This trade is a bit picky, though: you need to be right about both when and how much the stock will fall since time decay is working against you.

Here’s how it works:

• Set it up by buying one put option a little “out-of-the-money” (below the current price) and selling another put option even lower.
• Max Profit: The most you can earn is the difference between the two strike prices minus the premium you paid.
• Max Loss: Limited to the initial premium you paid upfront.

Since the market’s been feeling a bit stretched, adding a little “bearish flavor” to your trades could be a savvy move! Let’s check out a Boeing Bear Put Spread example:

Boeing Bear Put Spread Example

Source: Barchart

• Expiration: December 20, 2024
• Setup: Buy the $150 put (Leg 1 Ask)), sell the $145 put (Leg 2 Bid).
• Cost: $1.95 (or $195 total), which is also your max loss.
• Max Profit: $305 (found by subtracting the premium from the $5 gap between strikes: 5−1.95×100=3055 – 1.95 \times 100 = 3055−1.95×100=305).
• Breakeven: The stock needs to drop to $148.05 (the bought put strike minus the premium paid) for you to break even.

Chart of the Week

Mag-7 performance: Only NVDA and META are beating the market in 2024.

Source: Yahoo Finance

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