Blank Check: CapEx Spending

It seems like the headlines will not stop this year and each week there is some major news moving names like I’ve not seen in nearly two-decades of doing this. Whether that’s a bio-tech name running +1,400% or a mining name up +200% or this recent $AMD ( ▲ 3.83% ) move there is zero shortage of idea flow happening right now.

In this weeks PDF Report titled “Shifting into Soup Mode” I talked about my views on the broad market indices and concerns for some of the Mag-7 names which was a nice break from are usually scheduled discussions.

We’ve also had some new highs in one of our small-cap picks, Astronics, $ATRO ( ▼ 0.79% ) this week as well.

But this is the sign of the times and we can only roll with it and do what we’re all here to do: generate returns.

However, some of this is getting a bit ridiculous like this chart from Barchart below discussing the amount of call volume.

I’ve talked about this for the last five years and retail is only picking this up more and more but they’re trading them on the same names ( $TSLA ( ▼ 4.45% ), $NVDA ( ▼ 0.27% ), $PLTR ( ▲ 1.47% )) etc - all the well known names and usual shitcos, regardless if IV is +250% or not, they’re trading it.

This is worth spending some time into with weekly ETF flows from Arbor Data Science.

We like small and mid caps. As we’ve talked about here if we can find themes (like AI) in play and drill into some of the portfolio being built with small cap exposure ( like $ATRO ( ▼ 0.79% ) +55% since introduced here) then all the better.

Not the time to be running from them but it may be the time to be running from large caps but it’s going to be tough bringing them down with all of the professional options traders in the markets today using their sophisticated call buying models.

I am not really a dividend stock investor meaning I don’t build out a book chasing yield - we pick companies and build a long/short portfolio. However, given the cycle we’re in there should be more flows coming into some of these names so that helps the cause for names that have been suppressed, with dividends of note.

Names like $UPS ( ▼ 0.74% ) as an example which is in a turn-around right now with a nice dividend.

This sector is not normally something I like to get into because there is so much uncertainty with the industry and policies but it’s hard to ignore this. There are certain names like $PFE ( ▼ 0.61% ) that have my attention (also a nice dividend) and might be part of the portfolios here in Q4.

Healthcare ETFs - The $XLV ( ▲ 0.08% ) is likely the direct way to play this here but I want some single stock exposures as well given the upside potential in a few of them and our return hurdles we need to meet. Below is the weighting of the names in the ETF.

The breakout at $140 last month was nice to see and likely the start of this move. However, a check back lower is a gift and the healthcare theme for Q4 will be something for me to be involved in.

PayPal - We’re finally getting going here and the good news keeps coming in. For those out there that don’t like the name I get it but this is a free-cash-flow machine and they’re doing what it takes to get things going, including the Big 10 and 12 deal.

$70s were a key spot the last month or so and each time we traded there sellers showed up but we’ve since cleared. This should be a key spot technically at this point with earnings at the end of October.

Growing up as a kid I watched a lot of movies (not like these little twerps today who scroll on TikTok and Instagram talking about hustling and eCom scams) and one of my favorite movies was this 1994 Disney flick called “Blank Check”. An 11-year old named Preston has his bike run over, the guy hands him a blank check, he puts $1 million on it, cashes it then proceeds to buy a mansion, build a go-kart track in the back of it (still a to do of mine personally, seriously) and avoids the Feds as they try to find him because the cash he received is not his.

Long story short, the kid spends it on anything and everything because he doesn’t know the value of money, plus it’s not his so he doesn’t really care.

That’s sort of what we have right now in this AI arms race with this CapEx spending we’re seeing across the board and for the first time since April I have a short-book that represents the ridiculousness of some of what we’re seeing.

Situations like this always are repeatable in how they play out, especially when it’s not their money. With management spending like they have a blank check (because they do) in search of returns for shareholders and to keep up with demand for AI and I may be late to the boom on some of the large cap names but I don’t think I am late to the short-party, which I think is just about to get started.

And this is all a good thing. It’s the natural order of Capitalism because this spending, as wreck less as it may be, moves money around, from one pocket to the next and, if I am as good as I think I am, we’ll move some of that into the pockets of our investors this quarter as well as this starts to unravel a bit in some of these inflated names.

Some of those names like $META ( ▼ 0.36% ) have already come off the highs the last few weeks and for readers of the weekly PDF report I started talking about this name specifically two weeks ago. A bit of a contrarian call since it was on the highs but I’d rather be short ahead of the crowd small then to wait until we’re down -15% and chase.

The name made the report again this week as a “Best Ideas” name and I did cover shorts into that move off the open Monday.

Again, I don’t really like to short much anymore unless it’s a large cap or Index based short, not because there’s not money in it, but more because there are just so many long-ideas anymore that are easier and as Uncle Warren B. said “I look for 1 foot bars I can step over” and I feel the same way, I mean, why make it harder on yourself?

And in this environment of CapEx spending there are just too many potential shorts that I can’t ignore hence my notes to readers this week in the PDF Report.

Just yesterday we had this happen with $AMD ( ▲ 3.83% ) and OpenAI and it’s all a bit incestuous to put it mildly, but this only sets up $AMD ( ▲ 3.83% ) to potentially become a name I am watching to short in coming months (among others I am already short).

But the cracks are showing in some of the large cap offenders like Oracle above and we like that here because it means shorting is back and we may find ourselves in some serious shorts, provided, we get it right and I sort of expect more of these headlines like this to come this quarter.

To conclude, I do think we’re in for some headwinds in some of these AI names, some more obvious than others, but I also think the tailwinds in other names are still there and growing, especially in energy names for this sector.

On the flip, we should start to see some great shorts in some of these large-cap names in the coming weeks, even tactically - for those that read the weekly report these views are nothing new but I wanted to reiterate in this weeks stock market article

The Fall 2025 conference is officially closed but we moved our Friday happy-hour and social meetup to Empire Scottsdale. This is an event space/co-working spot in Old Town Scottsdale which is 12 minutes away from the office everyone will be at during the week. This is going to be a better location because it’s private, there’s darts, pool, a DJ booth, open bar and catered food for all that are attending.

If you are wanting to attending the Friday happy hour with us and did not purchase a ticket to the conference you can do so by using the contact form. This is going to be way better than expected and I’ll be back from Puerto Rico just in time for the weather to be perfect.

I look forward to seeing all of you there!

Dan

This is not a solicitation to buy or sell securities.
The LongVol Report is not an Investment Advisor
For full disclosures click here at:
https://longvolreport.com/terms
Futures, Options and Stock trading involves a high degree of risk and may not be suitable for everyone.