Overtime

Mailtime

Good morning,

I’m back answering your questions in this month’s edition of Mailtime. A special thank you to everyone who participated.

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Questions

DPZ has just broken out of at least a shorter-term base, with all-time highs still a long way to go.  This was a previous darling and hit some hard times, but I like the setup.  I’d be curious as to your professional opinion on a good entry point and price target, assuming you agree the chart is positive.

Absolutely, I agree the chart is positive! In fact, Domino’s was featured in our 2024 Base Finder report when it was trading at $421. As mentioned in that report, the base measures to $540/share and we’re well on our way after yesterday’s 5.9% jump following earnings. Certainly all-time highs ($567) would be my long-term expectation here, though, on a tactical basis, I would note that the measured target lines up well with some resistance just before there, at around $548.

As for an entry point, given the recent gap up, I would look to initiate a half-size position. That way if the stock pulls back or consolidates, you can make it a full-size position, but if it keeps on climbing, at least you are involved.

Would love your thoughts on ZROZ, both short term and longer term.

For those who aren’t familiar, ZROZ is the PIMCO 25+ Year Zero Coupon Treasury ETF. It is essentially the longest duration, non-leveraged bond ETF you can buy, and acts like the inverse of the US 30-year Treasury yield. As I discussed in Overtime: Bond Investing in 2024, I think we’ve seen the lows here. But, the longer-term trend is still down and we need to respect that. In addition, ZROZ is dangerously close to breaking down below $77/share, which is roughly equivalent to the 30-year yield moving above 4.4%. I can’t endorse buying this ETF here, though I suspect there will be a time this year where we want to extend duration and this ETF would be the most high-risk/high-reward way to do that.