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PhilStockWorld's 2026 Trade of the Year · The PhilStockWorld Investing Podcast

• 0:00
  Roy: Welcome back to the deep dive. Today we are going to try and cut through a whole lot of market noise. We are focusing on one single really high stakes day, 12/16/2025, to see if we can find any kind of certainty for investors as we head into what looks like a very turbulent 2026.
• 0:18
  Penny: Yeah, and to do that we're digging into this fantastic analysis from the team at philstockworld.com.
• 0:24
  Roy: That's right. Specifically, they were unveiling their fifteenth annual trade of the year. And it's, I mean, it's a perfect example of the kind of insights you can get there. This is a premier site for serious stock and options trading. You see them referenced all the time on CNBC, Bloomberg, the Forbes Finance Council.
• 0:41
  They're legit.
• 0:42
  Penny: They absolutely are. And that kind of disciplined, you know, strategic thinking is exactly what you need in a market like this. Finding that little bit of certainty, that's the edge. Right? And PSW, it isn't just a news feed.
• 0:53
  It's a place to really learn, to connect with other serious traders, and to, you know, access some real expertise.
• 0:58
  Roy: And that expertise, it comes right from the top?
• 1:00
  Penny: Yeah. It does. The founder, Phil Davis, he's recognized by Forbes as a top market influencer. This is a guy who trains hedge fund managers. He's one of the most read analysts on Seeking Alpha.
• 1:12
  So when he and his team, along with their advanced AI and AGI model
• 1:17
  Roy: Look at like Warren two point o and Zephyr.
• 1:19
  Penny: Exactly. When they all distill this mountain of data down to one high conviction idea, you really wanna pay attention.
• 1:25
  Roy: That's what makes this so interesting, that mix of legendary experience and this next gen computational power. So here's a plan. First, we're gonna tackle the source of all the confusion, what the PSW analyst called the data fog from that morning. Then we'll look at a masterclass in risk management from their flagship Money Talk portfolio. And finally, we get to the big reveal.
• 1:47
  The 2026 Trade in the Year. Mess. So let's set the scene. 12/16/2025. It's jobs Tuesday.
• 1:56
  This was supposed to bring some clarity for the Fed, but instead it just, made things worse. The data was delayed. It was messy. The PSW team just called it a dense data fog.
• 2:05
  Penny: That's a good way to put it. The government had bundled two months of labor data, October and November, into one release. So it was a statistical headache for, well, for everyone. The noise was just deafening. But the team, and this is where their models like Warren two point o come in, they were just focused on finding the signal in all that noise.
• 2:23
  Roy: Okay. So let's start with a big shock in the jobs data.
• 2:26
  Penny: Right. So the headline number for November, it actually looked okay. We got plus 64,000 jobs. That was better than the 30,000 people were expecting.
• 2:35
  Roy: Okay, so far so good.
• 2:37
  Penny: But, and this is a huge but, the models immediately flagged the revision to the prior month. October wasn't just revised down a little bit, it was a catastrophic revision down to a loss of 105,000 jobs.
• 2:49
  Roy: Wow. Wait. A loss. So a 100,000 jobs just vanished from the record.
• 2:54
  Penny: It vanished. That's a massive swing. So you have this weak positive number on one hand, but it's completely overshadowed by this huge negative trend from the month before. The market's trying to figure out, you know, which one is real.
• 3:06
  Roy: So how did the analysis cut through that to find what actually mattered for the Fed?
• 3:10
  Penny: It wasn't about the job count. The real signal was the result of that weakness, the unemployment rate. It ticked up to 4.6%.
• 3:17
  Roy: And that's the highest it's been in Hawaii.
• 3:19
  Penny: Highest since 2021. And Phil and the team, they flagged this immediately. The AGI Zephyr, its analysis showed that this number, 4.6%, it's a critical pivot point for the Federal Reserve.
• 3:31
  Roy: Let's talk about that pivot. For years, all we've heard is inflation, inflation, inflation. Yeah. What does 4.6% unemployment change?
• 3:38
  Penny: It changes the entire focus. I mean, at 4.6%, the labor market isn't just bending anymore. It's threatening to break. So the Fed's mandate, it shifts and it shifts aggressively. They go from being an inflation hawk to a job saver.
• 3:51
  Roy: Because they have to, politically and economically.
• 3:54
  Penny: Exactly. This number gives them the justification or really the imperative to start easing, to cut rates in 2026 to stop a full on recession.
• 4:01
  Roy: Okay. Now I see why Warren two point o, their AI, called this the bad as good, good as bad zone. This weakness is terrible for Main Street, but Wall Street loves it because it means the Fed is gonna print money.
• 4:12
  Penny: Precisely. And that confusion, that volatility is the perfect environment for these kinds of options strategies. You want the indexes whipping around because it creates opportunities to sell premium, to sell insurance, and to buy your own long term insurance for cheap.
• 4:26
  Roy: And what about the consumer? Because the retail sales numbers were also pretty confusing.
• 4:30
  Penny: They were. The headline number was flat, 0%, which sounds bad.
• 4:36
  Roy: Sounds like a recession.
• 4:37
  Penny: It does. But when you strip out the big expensive things like cars, the ex otters number, it was actually up a healthy 0.4%.
• 4:45
  Roy: So the consumer is still alive?
• 4:47
  Penny: The consumer is selective, not dead. The money is still flowing to department stores, to online shopping. People are buying holiday gifts, you know, stuff. They're just pulling back on the really expensive rate sensitive purchases. The new car can wait.
• 5:01
  Roy: Which I suppose that supports the whole soft landing idea, doesn't it? As long as people are spending, demand doesn't just collapse.
• 5:08
  Penny: It does. But here's the massive caveat that Zephyr's analysis highlighted. That soft landing only works if the jobs market holds steady right here. The second that 4.6% starts to creep up to 4.8, or 5%, consumer confidence is going to shatter, and the soft landing is off the table.
• 5:25
  Roy: So the Fed is walking a very, very thin tightrope.
• 5:28
  Penny: Incredibly thin. The takeaway from the PSW analysts that day was that, yes, the soft labor data means rate cuts are coming. The odds of a March cut ticked up a bit. But because the consumer is still spending, inflation is still sticky. So the Fed can't just panic and cut rates to zero like the market wants.
• 5:45
  Roy: It's gonna be a messy path forward.
• 5:47
  Penny: And that messiness strategy is an asset, not a liability. The wisdom Phil Davis was teaching his members that day was basically don't panic. Use the volatility. Let the market pay you to wait for things to clear up.
• 5:59
  Roy: Okay. So that confusion in the data, it flowed right into the markets. The indexes were all over the place. S and P down a bit, Dow lagging, but the Nasdaq actually recovered to finish green.
• 6:09
  Penny: Yeah. A lot of rotation happening under the surface. But the big story of the day, I mean, one everyone was talking about was the collapse in oil.
• 6:16
  Roy: The oil slick as the team called it.
• 6:19
  Penny: It was a crater. WTI crude fell below $56 a barrel, closed around $55.29. That's a multiyear low. The lowest since early twenty twenty one.
• 6:29
  Roy: A drop that steep has to be more than one thing. What drove it down so hard?
• 6:33
  Penny: It was a perfect storm, really. First, you had some optimism about Ukraine peace talks. Any progress there means more Russian oil could hit the market. Second, the International Energy Agency, the IEA, put out a forecast predicting a big surplus of oil in 2026. And third, and this is the big one, once the price broke below that key technical level of $56
• 6:54
  Roy: The algorithms took over.
• 6:55
  Penny: The algorithms took over. Yeah. The CTA funds, the trend followers, they just hammered it with short sells and magnified the move way beyond what the news would justify.
• 7:05
  Roy: And the energy sector, the XLE, got crushed.
• 7:08
  Penny: Absolutely demolished, down 3% on the day. The worst performer by a mile. The implication here is huge. This is a massive disinflationary signal. It's great news for consumers, for airlines, but it is a disaster for energy producers.
• 7:22
  Roy: But while energy was bleeding out, tech was actually stabilizing a bit.
• 7:25
  Penny: It was. The Nasdaq managed a small gain after getting beaten up for a while. The analysis from Warren two point o suggested the selling was easing, but the correction probably wasn't over. They call it AI indigestion. The market's finally realizing that not every company that says AI deserves a 40 times earnings multiple.
• 7:44
  Roy: Right. Value is starting to matter again even in tech.
• 7:47
  Penny: Exactly. And there were a couple of big corporate stories that day that really hammered that point home.
• 7:51
  Roy: Let's start with the EV reality check from Ford.
• 7:54
  Penny: This was huge. Ford officially ended production of the f one fifty lightning, the electric truck, and they announced a massive $19,500,000,000 write down on their whole EV strategy.
• 8:05
  Roy: 19 and a half billion. Wow.
• 8:07
  Penny: It's the clearest sign you could get that the pure EV only narrative is basically over. Ford is now pivoting that money into hybrids, into what Zephyr's analysis calls mixed fleet pragmatism. It matches what's happening globally, like the EU walking back its 2035 combustion engine ban. The transition is just slower and more complicated than people thought.
• 8:30
  Roy: And that theme of capital discipline, of being smart with your money, was reinforced by a completely different company.
• 8:36
  Penny: Yes. ServiceNow, the software company. The stock crashed, what, almost 12% in a single day.
• 8:41
  Roy: It was just on rumors.
• 8:42
  Penny: Just rumors that they were gonna buy another company for $7,000,000,000. The market hated it. It shows you how allergic investors are right now to big cash burning acquisitions. The message from Wall Street is clear, conserve your cash.
• 8:56
  Roy: So you put it all together, the messy data, the oil collapse, the corporate news from Ford and Service Now, it all points to one thing for 2026.
• 9:03
  Penny: Index hugging is over. It is time for serious stock picking, for capital discipline, and for strategic positioning, which is the perfect lead in to talking about how they manage their own money in the Money Talk portfolio.
• 9:16
  Roy: The MTP. This is really the showcase for the whole PSW philosophy, isn't it? It's a real money portfolio, totally transparent. The performance is, well, it's pretty staggering. Started with $100 in August 2024.
• 9:29
  By this day in December 2025, it was at 346,437 gain.
• 9:34
  Penny: That's a 246% gain in just sixteen months.
• 9:38
  Roy: And what's amazing is how they do it. It's a low touch portfolio. They only make adjustments once a quarter.
• 9:42
  Penny: Right. And the strategy itself is so simple, it's brilliant. They pick stocks that are, and this is their phrase, extremely unlikely to go down, deep, deep value companies, and then they just consistently sell short term option premium against those stocks.
• 9:54
  Roy: So they're selling insurance?
• 9:56
  Penny: They're selling insurance. If the stock stays flat, they win. They keep the premium. If the stock goes up, they win even more. The only way they really lose is if they were fundamentally wrong about the company being a good value in the first place, which is rare because of the screening they do.
• 10:10
  They literally get paid to wait for the value to be unlocked.
• 10:13
  Roy: And on this day, December 16, the focus wasn't on making new profits, it was on defense. Building a cash fortress for 2026.
• 10:22
  Penny: Exactly. They were already sitting on more than 50% cash but they got even more defensive. Look at what they did with SYF which was their 2025 trade of the year. The trade had been a massive winner, they could have just let it ride. But instead, they cashed out the whole thing.
• 10:37
  The net result was they took $57,425 in pure cash off the table.
• 10:42
  Roy: $57,000. Just banked it.
• 10:45
  Penny: Banked it. Now they have this huge pile of cash. If the stock dips, they're happy to get back in at a lower price. If it keeps running, they can use that cash to buy a new position. It's proactive derisking.
• 10:55
  It's what the pros do.
• 10:56
  Roy: That's such a huge lesson. Take your profits. But the mechanics of how they adjust the positions, the rolling, that's where the real expertise shows. Let's talk about Lockheed Martin, LMT.
• 11:06
  Penny: So LMT was a newer position. It started with a net cost of about $3,700. On this day, they collected $7,825 in cash. Just by rolling their short options out from January to March, they were selling another ninety four days of premium.
• 11:21
  Roy: Hold on, let me get this straight. The trade cost them $3,700 to get into, and in one adjustment, they collected over $7,800.
• 11:29
  Penny: That's right.
• 11:29
  Roy: So, they now have a credit on the position. They've been paid to be in the trade.
• 11:33
  Penny: Exactly. The market has now paid them over $4,000 to own a position that still has massive upside potential. They got paid to enter and hold the trade.
• 11:42
  Roy: That is what bulletproof means. The risk is just gone.
• 11:45
  Penny: The risk basis gone and the reward is amplified. That role boosted the upside potential on the spread to 711% and they still have six more quarters where they can keep collecting that income. Warren two point zero, the AI, flagged this as textbook example of perfect execution.
• 12:01
  Roy: Okay, now what about the B trade? Their gold play. This one was a bit different. They actually paid money to roll this position. Why would you do that?
• 12:10
  Penny: This comes down to long term conviction. Phil Davis has a strong belief that gold is eventually going much, much higher. The position was already a big winner. It was close to its max profit. They could have just cashed out.
• 12:23
  Roy: But instead they spent about $4,700 to adjust it.
• 12:26
  Penny: They did. Because they were trading a small remaining profit for a much, much longer and more profitable runway, they spent that money to roll their options out another year, to 2028, and by doing that, they increased their potential upside from about $2,000 to nearly $45,000.
• 12:43
  Roy: So an 875% potential gain.
• 12:46
  Penny: And crucially, they added seven more quarters of potential income generation. It's a strategic investment in time and leverage on a trade they have total conviction conviction in.
• 12:54
  Roy: It makes sense when you put it that way. So after all of these moves, cashing out SYF, rolling LMT and B, what was the final state of the portfolio?
• 13:02
  Penny: It was incredible. The MTP added a net of almost $90,000 to its cash pile that day. So think about this. The portfolio now has more cash than it started with back in 2024, and it still has a remaining upside potential of over $426,000 They locked in profits, they killed the risk, and they kept all the upside. That is how you prepare for a chaotic year.
• 13:26
  Roy: Alright, so with the portfolio locked down and defended, it was time for the main event. The search for the one stock, the one trade that could provide at least a 300% return over the next two years. And it had to be based on uncertainty. A trade that is almost impossible to lose money on.
• 13:41
  Penny: Right. And the team, using their human expertise and the research from AGI systems like Bodhi McBoatface, they filtered thousands of companies. They were looking for very specific things. Deep value. A clear catalyst in the 2026.
• 13:54
  And it had to align with one of the big themes for the year.
• 13:57
  Roy: And they narrowed it down to a final four.
• 13:58
  Penny: The final four, yes. Each one was a great candidate.
• 14:01
  Roy: So let's run through them. First up was energy transfer, or ET. Uh-huh. The high yield infrastructure trade.
• 14:06
  Penny: The thesis here is pretty simple. In a world with sticky inflation, things like pipelines and energy terminals, they're like toll roads. They're inflation protected annuities. ET has a strong balance sheet. They pay a huge dividend.
• 14:20
  And the structure they designed offered a potential 471% upside. A really solid defensive income play.
• 14:27
  Roy: Okay. Contender number two was Micron, MU, the reasonably priced AI chip trade.
• 14:33
  Penny: This is the value play in the AI space. You know, NVIDIA is great, but it's priced for perfection. But all those AI data centers need a ton of high bandwidth memory, HBM, and Micron has broken into that market. The stock was trading at a really reasonable multiple, way cheaper than the rest of the semiconductor sector, so you get the AI tailwind without the crazy valuation risk. The potential there was 262%.
• 14:54
  Roy: Alright, and the third one was a surprise to me. PPL Corp, Utility. The AI power trade. Utilities are supposed to be boring.
• 15:02
  Penny: And that's the whole point. This is a great example of looking where no one else is. PPL is a simple utility in Pennsylvania and Kentucky, but it's right in the middle of data center alley. The explosive demand for electricity from AI is guaranteed growth for them. It's preapproved, stable, predictable earnings.
• 15:19
  Roy: But how does a boring utility stock translate into a 4000% potential return? That number is staggering.
• 15:26
  Penny: The magic is in the option structure. Because utilities are so boring, the market prices their options for almost zero movement. That means long term call options, LEP's, are dirt cheap. So you can buy these incredibly leveraged cheap calls, and if PPL just goes up a little bit, say 15 or 20% over two years, the leverage on those options creates an explosive return. You're leveraging the market's indifference.
• 15:49
  Roy: Three amazing candidates: infrastructure, AI value, AI power. So why, out of all of them, was the winner the final contender?
• 15:56
  Penny: The winner of the 2026 Trade of the Year, based on the ultimate combination of pessimism and potential, was Pfizer. Pfizer,
• 16:04
  Roy: the pharma giant that's been in the doghouse since the whole COVID cliff. That is a bold contrarian pick. And the philosophy here from Phil Davis was all about asymmetry.
• 16:15
  Penny: Asymmetry is the only free luncheon investing. And Pfizer is the definition of an asymmetric bet right now. The market has priced this stock as if it will never ever grow again. It's trading at nine or 10 times forward earnings with a 6% dividend. This is what you call maximum pessimism.
• 16:32
  Roy: So all the bad news is already baked in.
• 16:34
  Penny: It is. And the signal that it was time to buy came on this very day, December 16. Pfizer put out their 2026 guidance and it was bad. Flat to declining earnings, they were clearing the decks. And the market's reaction, it just shrugged.
• 16:47
  The stock barely moved. When a stock doesn't go down on terrible news, it means all the sellers are gone.
• 16:51
  Roy: Okay. So the setup is there. But the trade depends on the turn, the catalysts that make the market care again. And given how the market reacted to the ServiceNow M and A rumors, isn't Pfizer's reliance on its recent acquisitions a huge risk?
• 17:03
  Penny: That's the key question. And the answer is about timing and valuation. ServiceNow was trying to buy a company at a high price. Pfizer's management has already done the kitchen sink quarter. They've guided solo for 2026.
• 17:16
  It's a bar they're almost guaranteed to step over. The market is obsessed with their old drugs, but it's completely ignoring the growth from their new oncology and obesity acquisitions. The conviction is that positive clinical data in the 2026 will force analysts to remodel Pfizer as a growth story again.
• 17:33
  Roy: And the stock doesn't even need to become a superstar, right?
• 17:36
  Penny: Not at all. It just needs to go from hated to tolerated. If the stock just rerates from a nine times PE multiple to a boring standard 14 times multiple, the stock price goes from 25 to maybe 38 or $40 and that 3050% move in the stock creates enormous returns on the cheap LAP options you bought when everyone else hated it.
• 17:57
  Roy: Let's break down the trade itself because this is where the genius of the structure really comes through.
• 18:02
  Penny: So they're using twenty twenty eight lay p options. They bought calls, sold some higher strike calls against them. But here's the critical part. They also sold a lot of puts And the net result of the entire complex position was that the initial entry was for a net $3,390 credit.
• 18:20
  Roy: Wait. A credit. They got paid $3,400 to enter a trade.
• 18:25
  Penny: They got paid to enter a trade that has an upside potential of $38,390. That's a potential return of over 1100%.
• 18:33
  Roy: On a trade that pays you to get in, that's the asymmetry.
• 18:36
  Penny: That's the free lunch. And the income they generate from selling premium, it just secures the return over time.
• 18:41
  Roy: Yep.
• 18:41
  Penny: Even if the stock moves slowly, the income alone will likely generate that 300% target return.
• 18:46
  Roy: Okay. But what's the risk? They're selling puts, which means they could be forced to buy the stock, a lot of it.
• 18:51
  Penny: They could. They are risking having to buy 4,500 shares at $25 a share. But that's the whole point. That's the value proposition. If you are forced to own Pfizer at $25, you're buying it at about eight times forward earnings with a nearly 7% dividend yield.
• 19:07
  As Phil said to the members, why would I not want to own it at that price? The risk has been priced out of the stock.
• 19:13
  Roy: That structural analysis is just invaluable. But for me, what really sets aside like Phil's stock rolled apart is that they don't just tell you what to trade, they teach you how to trade it. And there was this incredible lesson in execution that day.
• 19:26
  Penny: There was. It came from a member, Marco Sicpinto, who was trying to put on the Pfizer trade. He noticed that the option prices were moving around, they weren't hitting the exact entry target Phil had laid out. And he was getting impatient. He just wanted to get in the trade, so he asked if he should just chase it and accept a worse price.
• 19:41
  Roy: I think we've all been there. Fear of missing out.
• 19:43
  Penny: Absolutely. But Phil's response was just pure market wisdom. He said never ever just accept the market's price. Always ask for a little bit more in your favor, 5 or 10¢, and have the patience to wait for a good fill. The market pays you to be disciplined, not to be fast.
• 19:59
  Roy: It sounds like such a small thing, just a few pennies, but it really separates the pros from the amateurs.
• 20:04
  Penny: It's everything. And he actually quantified it for the members. He said, look, if you accept just a 5¢ worse fill on 20 contracts, and that's a pretty normal trade size, that's a $100 you just threw away.
• 20:15
  Roy: Yeah.
• 20:16
  Penny: Now if you do that twice a day for a year, you are losing $40,000.
• 20:21
  Roy: $40,000 lost just to impatience.
• 20:25
  Penny: Gone just from poor execution. That's the difference. That $40,000 lesson is a perfect example of the kind of wisdom that separates gambling from professional trading, and that's the level of insight they share with their community every single day.
• 20:37
  Roy: So let's bring it all home for you, the listener. What are the big lessons from this deep dive into the data fog? First, in a confusing market, you need a systematic, cash secured strategy like the MTP. You want to protect your capital and harvest that volatility. Second, true value is found in asymmetry.
• 20:56
  In stocks like Pfizer, where the risk is already priced in and you literally get paid to wait for the story to turn. And finally, that $40,000 lesson: discipline in execution is everything.
• 21:06
  Penny: That's it. And the final synthesis from Zephyr and the analytic team was that the market is making a huge pivot. With oil collapsing and unemployment ticking up, the narrative is shifting from inflation fear to growth fear. That means capital discipline and smart stock picking are what will win in 2026.
• 21:24
  Roy: And there was an immediate test of that thesis right on the horizon.
• 21:27
  Penny: A huge test. Right after this analysis was published, Micron MU was set to report earnings.
• 21:32
  Roy: One of the final four candidates? The whole AI value story rests on that DRAM super cycle.
• 21:36
  Penny: And if Micron came out and poured cold water on that forecast, if they said demand for HBM wasn't what people thought, then the whole semiconductor sector would been at risk of rolling over again. It's that critical test that shows if the AI indigestion correction is over or if it has a lot further to run.
• 21:55
  Roy: So if this kind of deep real time analysis, you know, connecting the macro dots, the option strategies, the wisdom from Phil Davis and the power of their AI systems. If that sounds like the level of understanding that could help your own trading, well now you know where it comes from.
• 22:10
  Penny: We've shown you the playbook, how to not just survive a messy market, but how to thrive in it.
• 22:15
  Roy: That's all the time we have for this deep dive. Thanks so much for tuning in. We'll talk to you next time.