Left for Dead

PYPL and DIS have already recovered (6-month returns now +49% and +0.7% respectively), so they no longer fit the 'deeply negative 6-month, stabilizing 1-month' fallen-angel screen -- the market has already given them credit. I'm rotating that capital into four names that better match the thesis: NKE (6m -32%, 1m flattening to -2.5%), T (6m -11%, 1m turning up +15%), UPS (6m -7.5%, hit hard after Q2 earnings but guidance was raised, Goldman just added it to its Conviction List, and the past week looks flat rather than falling), and BA (6m roughly flat but still well off its highs, with genuine turnaround evidence -- its best free cash flow and delivery numbers since 2018, plus an analyst upgrade -- driving a clear 1-month/1-week rally). About 20% is left in cash as a buffer given how volatile these turnaround stories can be between monthly decisions.

This portfolio buys four household names that have been deeply beaten down over six months but whose one-month price action suggests the worst of the selling may be over. Cash starts at 20% of the portfolio (unallocated) as a buffer. 1) NIKE (NKE, 20%): Down a brutal 30.6% over six months, but the last month is essentially flat (-0.9%), a sign the freefall has paused. Nike's most recent quarterly report actually beat expectations, and its running division has grown by double digits for five consecutive quarters, even though the larger sportswear/Jordan lifestyle business is still lagging. Management is now prioritizing margin recovery over chasing growth, and gross margin is expected to improve starting this quarter. The turnaround is clearly not finished (China sales fell double digits), but the stock has stopped making new lows and analysts increasingly describe sentiment as 'overly depressed.' 2) PayPal (PYPL, 20%): Down 21% over six months, but the last month has actually turned positive (+6.8%), one of the clearest 'stopped-getting-worse' signals in the group. Recent headlines note the stock is deeply oversold, with RSI readings in the 30s-40s even as PayPal continues to generate strong cash flow and grow Venmo. It also recently gained a boost from joining the EU Payments Council, and its most recent quarter beat estimates on revenue, earnings, and payment volume growth, including a sixth straight quarter of double-digit Venmo growth. The stock trades at a low earnings multiple relative to its own growth history, and several analysts see meaningful upside if the recovery holds. 3) Disney (DIS, 20%): Down 12% over six months, but the last month is nearly flat (-1.1%), and the 3-month return has already turned positive (+2%), suggesting the decline has bottomed and reversed. Disney is fresh off a box office win with Toy Story 5's strong opening weekend, is investing heavily in new theme park attractions, and just welcomed its one billionth Disneyland guest. Analyst sentiment remains constructive, with a 'Strong Buy' consensus and meaningful upside to price targets, even as the company navigates FCC scrutiny of its ABC network and ongoing linear TV decline. 4) AT&T (T, 15%): Down 12% over six months and still slightly negative over the past month, so its stabilization signal is the weakest of the four, which is why it gets a smaller allocation. However, the pace of decline seems to be leveling off, and the fundamentals look better than the stock price implies: the stock is trading near a 52-week low despite recent financial performance being strong, with the company posting real revenue growth. The sell-off appears tied to competitive fears around SpaceX's Starlink rather than a fundamental breakdown, and the valuation is undemanding at a price-to-earnings ratio far below the market average, with a high dividend yield. Second-quarter earnings on July 22 will be an important near-term catalyst to confirm the stabilization thesis. All four names remain within the single-position cap of 25%, the portfolio stays fully long with no leverage, and roughly 20% is left in cash as a cushion given the speculative, contrarian nature of these turnaround bets.