IT'S ABOUT TIME
01/19/26 Prospero.ai Investing - 285th Edition (Weekend)
Years ago my wife and I were in the U.S. Virgin Islands, back when they still had movie stores. You know, the place where you went and rented a physical movie and brought it home? The lady that ran the store was probably in her early 60’s and my wife and I asked her if she had any recommendations. Without hesitation she recommended “About Time”, a movie starring Rachel McAdams, Margot Robbie and Domhnall Gleeson. The premise of the movie is that the men in this certain family can go back in time, except with one caveat – they can only go back in time to any point in their own life. Sounds goofy, but it ended up being mine and my wife’s all time favorite movie. We try to watch it about once a year. But as I watch it now as a 52 year old trader/investor that works for a Wall Street A.I. start-up, I couldn’t help but fantasize about going back in time in my own life and buying $ASTS (AST Spacemobile) on April 24th, 2024, the day it dropped to around $2.
Here’s the crazy part, back then, I was VERY aware of $ASTS. I owned 6000 shares with a cost basis of $5. When it dropped to $2 bucks I sold. Both my kids were getting married that summer and I couldn’t afford to be holding a massive bag. So I capitulated. Sold it all. Then, within a couple of weeks it began a massive run, that as we speak a year and a half later, the stock is sitting at a nice $115. Now, the good news? Over that year and I half I have bought and sold ASTS a few times and done REALLY well. The bad news? I could have easily retired by now had I left it alone. And we all have stories like that. Who wouldn’t want to go back in time and buy NVDA during its lowest point or Bitcoin at a dollar?
But here’s the question I want to ask you? What keeps us from making perfect stock buying and selling choices all the time? The negative answer is that when we get caught up in emotion and fear and we make bad decisions. But there are good and positive reasons why we sell stock, even at inopportune times. Those times have everything to do with what’s called “Risk Management”.
Risk Management: The deliberate process of sizing positions, setting exits and structuring a portfolio so that it limits potential losses.
The downside of risk management is that it also can limit our upside. And here at Prospero.ai, we just experienced that very thing with (you guessed it) with good old $ASTS. On Friday, news came out that ASTS was being added as one of the contractors for the Golden Dome Missile Defense system. The stock ran from around $92 to as high as $120 on Friday. We had recently exited our position before this latest run…and we honestly don’t feel bad about it. Why? We missed the upside for all the right reasons. Not because we fell into fear and capitulated. But because we made a calculated decision based on risk management.
What risk management principles led us to make the decision to trim ASTS.
1. We had already made significant gains on the stock and felt that upside was limited.
Some of our biggest gains came after Dec 17th, when our CEO George Kailas was interviewed on The Schwab Network. —During the interview, George stated that $ASTS was Prospero.ai’s “Top Pick of the Year for 2026” based on its fundamentals and its strength in its Prospero signals. At the time, ASTS had dropped almost -50% from its highs earlier in the year and was showing no signs of stopping. Fascinatingly, on the morning after George’s interview and picked $ASTS as Prospero’s stock of the year, it bottomed and started a massive run. Since George’s interview it’s seen a whopping over +90% gains. During that run, we captured a significant portion of that upside. So, when the stock ran into the high 90s last week, George made the decision to trim. You know what? It was the right call because managing risk properly is always the right approach as you get to larger numbers of decisions. Would we like to go back in time and change it? Sure. But without a time machine, we’d make the same decision. Risk management teaches us to take profit and trim positions that see parabolic moves.
2. There were other stocks in other sectors we felt had greater risk / reward.
During George’s interview with Schwab he mentioned Prospero’s 2nd “stock of the year”-- LEU (Centrus Energy). LEU is a nuclear energy company that has been looking really good in our signals lately. On top of that, Nuclear Energy has been getting beaten up lately, despite the known fact that the Trump administration is very bullish on nuclear energy. Over the same amount of time LEU has seen still been up close to 50% over the same time. As we did take some losses to end last year we’ve been more conservative with our risk management. We saw LEU and ASTS have days where they both took heavy losses. If we had to pick one stock we made the tough choice of LEU on the simple fact that it had a lot more room back to its all time high than ASTS.
One side note, in hindsight, Prospero’s signals were screaming this move from $ASTS from a mile away. Its Upside score jumped to 100 a few ago and has stayed there. Its Net Options jumped to the 90’s (high for that stock) and it too, stayed there. In hindsight, it’s a lesson we won’t forget. When an Upside score jumps to 100 and stays there, it usually means the stock will go on a run at some point. $ASTS HAD gone on a run, so we didn’t see the Golden Dome announcement. Again, a time machine would be nice.
We chose to teach on this subject today because we are at a significant crossroads in the market. The market has been making all-time highs, but SPY and QQQ Net Options have been extremely bearish. That tells us that as of right now, Big Money is being very cautious. That doesn’t necessarily mean there will be a crash, but Institutions are leaning HEAVILY on risk management. They’re protecting their downside. And until that changes, you should too! Now a word from our CEO.
A WORD FROM OUR CEO
The important thing about risk management is that you can still make big gains even while managing risk aggressively. Despite not being long ASTS this year our paper trading portfolio is still 610% above the market on an annualized basis, with a 62% win rate against SPY benchmarks.
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IT’S ABOUT TIME
Market/Macro Update w/ Cap/ Value Analysis
QQQ and SPY Net Options Sentiment
Sector Analysis
How we view the Sector performance and momentum
Portfolio Strategy
Putting it all together to make a portfolio that first controls for risks but also has upside
Longs
Adds —> Keeps —> Drops
Shorts
Adds —> Keeps —> Drops
Portfolio Summary
CAP / VALUE ANALYSIS
Small‑Cap Growth’s rally continues to power ahead, with Small‑Cap Value close behind. It’s a notable shift in market leadership, especially as the Russell has now outperformed the S&P for eight consecutive sessions. Worth considering adding a few selective small‑cap names to the book to capture the momentum. On the other side of the spectrum, Large‑Cap Growth remains highly shortable, and the setup across the mid‑cap complex still looks weak.
QQQ NOS waning a bit here, hasn’t been overly bullish for a while now as big tech earnings are coming up in the next month or two but things could change.
Again hard to distinguish the signal from noise here, just seems like extreme hedging activity rather than the signs of an actual bear market, as the market itself broadens out. In our opinion just a simple matter of the market at all time highs while also having elevated geopolitical risk as well as macroeconomic risk. (Disagreement on where rates might end up and uncertainty/concern around the Jerome Powell situation)
SECTOR ANALYSIS
Real Estate having a nice rebound here after the 401k announcement, would still caution to only play names with strong signals here. Industrials keeps having a strong multi-month run, good to allocate 1 or 2 good names to your book. Consumer Defensive had a good week, but seems more like a technical bounce than anything. Communication Services seems to a broadly shortable sector here as we noted in our midweek newsletter.
PORTFOLIO STRATEGY
Given that market conditions mirror last week, we’re maintaining a consistent positioning. We’ll continue leaning into areas of weakness, particularly within software, while keeping our core longs intact and allocating toward pockets of relative strength. 6 longs, 5 shorts.
Long / Bull Moves – AZO and BIDU adds / COST, CRWV, BITF and LEU holds / NBIS and AVAV drops
Adds
AZO was an easy add as it ranked at the top of our screener this week. BIDU was added for great Upside and Net Options.
Holds
COST was kept for its robust signals overall. CRWV was kept for both Upside and Net Options as well as Momentum. BITF and LEU were both kept for small cap exposure.
Drops
META was dropped as it had just okay Net Options and poor Tech Flow. NBIS and AVAV were both dropped as they were screened out this week.
Short / Bear Moves – INVA and ARES adds / TWLO, FWONA and MRVL holds / MA, TTEK, NTCT, ADSK and ANF drops
Adds
INVA was added to play the drawback in Healthcare. ARES was added for large cap exposure.
Holds
TWLO was kept for its favorable Tech Flow. FWONA was kept for Communication Services exposure. MRVL was kept for Large Cap Tech exposure.
Drops
MA, TTEK, NTCT, ADSK and ANF were all dropped as they performed poorly in our screener.
Portfolio Summary
Long / Bull Moves – AZO and BIDU adds / COST, CRWV, BITF and LEU holds / NBIS and AVAV drops
Short / Bear Moves – INVA and ARES adds / TWLO, FWONA and MRVL holds / MA, TTEK, NTCT, ADSK and ANF drops
6 Longs: AZO, BIDU, COST, CRWV, BITF and LEU
5 Shorts: INVA, ARES, TWLO, FWONA and MRVL
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