Selling 4 Names To Buy 1

A SaaS name with the cleanest setup I've seen

The market is sending clear signals.

Liquidity is exiting a few key sectors (semi, power semi, photonics, space and data center buildouts) toward new ones (healthcare, SaaS, consumers & the Mag7, on which I am positioned).

This is why the S&P 500 is still flat and close to its ATH while most portfolios have been smashed. Liquidity is rotating, not leaving, which is bullish for longer-timeframe trends, but harsh on those over-exposed to falling sectors.

The fundamentals remain strong; returns are just rotating.
And I wouldn't expect this to change soon…

Rotation usually lasts a few months. It’s hard to anticipate the timing; the last one lasted from ~Nov’25 to March’26. This one started early June, so we’re a good month in and it’s been particularly violent, with many names already down ~50% and close to their W50. If we look at key ETFs, the VanEck semiconductor one for example, it’s losing its D50 today, so I wouldn’t expect this correction to stop tomorrow.

It can always happen, with a large V-shaped recovery, but considering the latest news and the market’s reaction… I’ll put my money somewhere else, because I’m seeing signs I don’t like much.

Before starting,

I’d like to re-introduce some core concepts in investing. Fundamentals are one thing, price action is another. You only make money when price goes up, and price does not go up just on fundamentals - far from it.

The most important in the market is optimism - and context.

You don’t want to buy and hold the best fundamentals; you want to buy and hold a stock with growing optimism within a bearish or neutral context. Take photonics, which ripped for months and delivered massive returns. Those returns weren’t based on concrete earnings, but on optimism for their future potential. Great news kept coming, but most of them are down 50% over the last month while fundamentals are better today than they were six months ago.

Context.

If you bought the improving fundamentals, your portfolio got destroyed. Those don’t necessarily convert into returns - not if you buy blindly without taking context and price action into consideration.

That said, we can continue.

TSM, ASML, AEHR & IBM Earnings

Let’s start with IBM, which triggered a “sell-off” on SaaS names with one sentence, which can be summarized by “our clients reduced their software spending to increase hardware spending.”

In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. This dynamic impacted client buying patterns. While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization. In addition, clients were distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter.

The stock was punished with a -25%, in line with the market’s recent violence.

The three others delivered a masterclass. They all sit at the top of the AI hardware supply chain: ASML with its lithography hardware, TSM as the largest and most advanced semi fab, and AEHR one of the leaders in semi testing.

All of them beat the market’s expectations, and the bottom line is the same for all: companies need much, much more hardware and are ready to pay the price for it. You can read detailed reviews, take accounting classes, go point by point or whatever; the conclusion will always be the same.

More hardware. No clue when demand will slow.

Strong end market demand this year has motivated our customers to aggressively add capacity on their leading-edge nodes.

Customer demand remains very strong, with visibility now extending several years into the future.

ASML Earning Call

Given the continued strong structural demand from our customers, including the newly emerging agentic AI market, we have decided to raise our full year 2026 capital budget.

If you asking about the AIs CAGR, let me give you not a number, but its stronger and stronger. We dont give you the number today because it continue to increase, so we dont know how to answer this question. Stronger than what we said before.

TSM Earning Call

So we had four tech earnings, and the overall conclusion was that their clients needed more hardware and were slowing down on software. Their cash was rotating. And yet, if we look at the market, what happened this week?

Sofware stable/up.
Hardware down.

Because context matters. Once again, we only make money if our stocks go up, not just by looking at fundamentals. The market isn’t fading AI hardware or disbelieving those earnings and comments; we simply don’t have buyers left at these prices, and as price falls, holders turn into sellers while buyers are too scared to step up early. They’ll step up - just not yet. Doom spiral for now.

When bad news triggers no reaction, you're close to a bottom.
When good news triggers selling, you shouldn't push your luck.

From here,

There’s no saying what will happen, but as usual we have to play probabilities, which aren’t favorable for a return of the uptrend in weak sectors. Those could bounce, but a real uptrend? I don’t believe it, yet.

So I’m doing what the market is telling me to do: selling weakness, buying strength.

I closed four positions today, names I still believe in but that showed weakness. And I put it all into one stock. A SaaS company I’ve followed for a while now. Fundamentals are stronger than when I first found it, valuation is much lower, and price action looks like textbook accumulation with extremely bullish option flow.

It has everything I look for, and I’ll go through the full breakdown: what I sold and why, the name I bought, why I’m building it into one of my largest positions, and what will make me increase it even more.