Recession proof Shopping list APRIL 2022

Inflation is raging and close to 8.5%, but peaking as per Yellen and ECB. Most of the market downturn is attributed to war in Ukraine, supply chain bottleneck, Covid surge in china and cheap liquidity available in the capital markets today. 

Growth stocks are bottoming out, what's the evidence behind this thesis ?

    Tremendous negativity and sell everything mentality among retail investors, fear is at all time high. Low volatility showing that institutional selling is limited  .  Most of the recent growth sector reports such as Tesla, IBM, SNAP has been received with muted responses. Slight disappointments such as Netflix subscription numbers wiped out 50 billion USD in one trading session and still going down.

    Tesla posted great numbers and how its circumventing supply chain issues with ease. The response to the earnings is 1 % move up vs 10 % during post covid recovery rallies. 

    Taiwan semiconductor being the backbone of chip industry posted blowout results and the stock is down 5% from its pre earnings stock price.

I think the inflation fears are overblown and temporary . The market is overpricing/overcorrecting to downside to keep up with the potential recession and very aggressive fed interest hikes.

    Value stocks are showing signs of exhaustion and overbought conditions . Take Walmart and J&J for example, both have hit 52 week highs with low average volume.

   The best approach is to turn off the noise in the Analyst predictions and focus on long term growth, value and dividend players.

    My shopping list includes rotating into low PE/higher growth stocks and dividend players. Some of them i have listed in the earlier posts including 

Value stocks(low P/E): MU,IBM,FB,GOOG,GILD and BJ

Dividend  stocks : Shipping companies such DSX, GOGL,KNOP > 15% plus dividends

High Risk/Reward Plays : TESLA,NVDA,AMD,MSFT > 20 % Growth

More shopping list in coming weeks while market is adjusting to peaking inflation and aggressive rate hikes. I expect market to bottom in May (sell in may and go away doesn't apply anymore).

Weeks Winners/losers                                                                          4/21/2022

Earnings Tracker Buy picks

IBM - Better than expected Results, Cloud revenue and solid execution with >4% dividend

DOW - Global supply chain issues doesn't seem to affect the Margins

SNAP - negative EPS, still maintaining growth, Less than expected AD revenue Loss

             FB,PINS and TWTR - Expected to raise with SNAP rally.

NVDA - Touching October 2021 lows , earnings momentum lifting the stock in coming weeks.

TSLA - Priced perfectly .Trading range 975$ to 1100$. Potential china slowdown will be offset by energy credits revenue and pricing power of EV cars.

Sell picks 

NFLX -  Dropping subscriber volume, pricing challenges and shared account issues. $175 as base price target based on 15 PE which seems to be a trend among tech stocks 

Disclaimer:

The Author owns one or more of the above stocks. I have a beneficial long position in the shares of one or more of above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own personal opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This is not a buy/sell recommendation for above stocks, but the earnings thesis based on recent results. Any investments can lose value overtime and you are investing at your own risk.

 

Today's winner

Back on the blog after many years...Personal issue kept me away from this wonderful hobby.. Not anymore..

Stock market has doubled since i stopped writing couple of years back... US economic Engine powering the world now while promising Economy like BRIC are falling apart due to internal Crisis. US dollar has stabilized, Gold is up since Iran crisis, British pound stabilized since BREXIT withdrawal..

Corona virus scare is going to have major effect on already stressed Global economy on shorterm..But it will be contained over few weeks like any other virus that popped over the past two decades. I am sure the Pharma companies have major interest in developing vaccine for 7 billion people in the world, at least 1.3 billion Chinese and 340 million Americans to begin with...

With Geopolitical and health scare apart, the biggest swing will be the impeachment trial ongoing in senate which seesaw the market for next 9 months.. While most of the Fund managers will not make huge bets on the companies benefited by the tax breaks in 2018, they will focus on small and medium size companies .


I believe the US economy is poised for a long term growth and resilient compared to other world economies.  New technology and innovation will keep this economy  afloat for rest of the decade. A political swing in November election will cause a huge swing the market due to Major US policies .

Lets hope the Growth continues

Today's winner -  Long term investors.


US stocks ??   i am not kidding...

Short Squeeze ,Great opportunity to Cost average Value Stocks


Right beneath all the Market turmoil and flash crashes,i see a great opportunity for buying the Value and Momentum players at a heavy discount..  I am not talking about Mall Discounts,i am talking about Outlet discounts and Costco discounts.  This market crash was caused by two unavoidable double edged sword of events

Friday - Massive option expiration in the middle of Rout

Monday  - Margin calls due to the Expiration of worthless options and issue of new covered calls.

Lets analyze today's crash at the peak levels ie. 1000 point DOW crash

FB -  Facebook was at one point trading at 72 $ and change.

The Momentum stock which not too long before valued at 110$ by leading market analysts,is now trading at 38$  discount. That is one hell of a discount for company that grows in the excess of 35% annually. One cumulative trade during opening selling was either buy or sell around 72$ and FB quickly bounced back to  82$ in 1 hour... That is 10 $ ride from lows...Looks like a huge market manipulation going or Short covering by hedge funds.Either way its enough heart attack for small investors like you and me.

AAPL - Apple plunges 6% and trading around April 2014 lows..

Apple the darling of Mutual fund owners was trading at the levels not seen since April2014.That is right before 4 quarters of earning surprise. For me that's a huge discount on earning multiples and zero premium on the earnings surprises we encountered past few quarters.Apple is a screaming buy at 95$.   The flash point trade around market around was 16 million shares with low price of 92$.. Lucky ones who got it.

Please never invest using Margin account.That will put u in peril.

More Analysis continues......................



Disclosure :   The author expresses  his/her own viewpoint on stock market and individual stocks.This is by no means a recommendation to buy/sell these stocks.Individuals are advised not take this as a recommendation whatsoever.  Invest your money at your own risk.

Today's winner  - American Economy - A place to  be finally

Market had close to 7 distribution days this past month and very few accumulation days to count on.. There are couple of things that are rattling investor sentiments. Here are some to quote

1, Fed interest Rate decision pending September

2, Falling Oil prices due to Iran Nuclear Deal

3, China Market crashes.

4,  China Devaluation of Currency.

5. Upcoming US selections. (seriously )

6, Greece Economy.

7,  Crash of Euro as a Stable currency.

8. Mammoth Rise of US dollar and US stock market making new highs.


Lets analyse each one of them briefly ,so that you don't have to pour through tons of freakonomic predictions placed in the media and guys screaming on their lungs in CNBC.

Fed interest Rate decision pending September.

       Meetings after Meetings with Yellen and Company yielded all but one confusion for the Banks and institutions sensitive to interest rates.  We are debating and panicking over 0,25 bp rise, give us a break feds. That's enough thinking over past 1 year, go ahead and raise rates as Markets have already priced in 0.25 BP July 2015. This will send a clear message to world that U.S economy is not tanking and printing Dollars to cover its financial mess. In fact looking at the Job number and Manufacturing indexes we have actually grown in GDP from 2008 when we lowered the interest rates to pump cheap money into Banks. Any Delay in this will cause Global investors to panic and kick up a massive deflation of Dollar based assets.


Falling Oil prices due to Iran Nuclear Deal

Ok now...Kerry wins the Nobel peace  prize for Middle East coffee talks, OOh lah  we got ourselves a deal.  Iran is no longer a threat, (israel and Saudis never thinks so ) . We made new friends and scared away our allies.. Well who is benefited from all this ?  of course Iran and its Middle East allies. Russia gets to openly ship weapons and countries like India can go back to cheap oil days of last decade. Good for them.. What did we get in the process ?  Cheap oil and Good bye to all the progress made in the Carbon emissions control measures.  In the process we also killed the Fracking Oil industry from ever making any profits Note: U.S Oil production actually fell in the last quarter due to the Oil industry paralyzed by the fall of oil.  But all is good for the world's largest consumer of Natural resources.

China Market crashes

What is happening to China. The so called Red giant, 8 trillion economy is in shambles from when 2015 . How can i economy so strong , so powerful and its influences reaching across the Globe can look so much in trouble. Well answer lies in half baked Capitalism that China has followed for many decades. It work as long as they keep producing cheap  goods and the rest of the world keeps buying. It made lots of sense in 90's when Developed economies where looking to offset the high labor costs and ever increasing consumer demand. China became the single shop for buying finished goods and mass production factory for rest of the world. This killed smaller economies like Korea, Taiwan, Thailand and Malaysia as manufacturing basis for Finished goods and offshore production facilities.
But the rise of new economies like Indonesia, India, Brazil quickly became self sufficient by balancing their domestic consumption with Global demand. China began to lose its sheen after US and European financial crisis crippled the consumer demand ,making them take adverse steps to curtail imports and increase domestic production.   This was not apparent until 2014 when the US external deficit narrowed its fastest pace in a decade.. Thanks to Obama of course for his socialistic approach to failing capitalism.


(To be continued)

HOT SECTORS AND TOPICS FOR 2013

Promising Sectors for 2013

I apologize for not updating this Blog in a long time..I Still see quite Good traffic to my Blog with such long break in threads, i relate to my previous threads on some great companies who are still one of the Hottest stocks in 2013 such Netflix (NFLX) and Baidu (BIDU) which has given the investors double digit returns if picked up during November Election fiasco. For stats Bidu has returned around 30 % and NFLX has returned around 60% due to the recent earnings burst. For Institutional investors timing is immaterial since they cost average highs and lows all through the year, while Hedge funds seek out short term opportunities 

on both long and Short positions in the same sector.

For small investors like us its i imperative that we time the Market right and exit as quickly as you see double digit returns on paper. Not only does timing helps make us good profits but sector rotation and Frequent portfolio balancing is quite critical to sustain the market swings or survive sudden crashes. 

Let us look at some promising sectors for this year. I scanned through some of the Hot sectors of 2012 and surprisingly Home builders on average returned double digit profits for investors. Oil industry was stagnant as the threaten of Gulf war and instability in Middle East has ceased to be the center stage. I guess it has direct correlation  with Election opinion polls and November results towards the end of the 2012 and a Democratic President back in office. (see my early blog on Obama versus Market)

Now i see some hot topics for the  year 2013 which will drive the Markets.

• Fiscal cliff - Fancy term to describe if U.S can survive/fail the Government borrowing limits from federal Reserve and Debt ceiling.
• Syrian Unrest and Geopolitical crisis .
• Renewed Threats from North Korea
• China Standoff with Japan over disputed islands
• Cut in U.S Military Spending
• Greece,Ireland and Portugal in 2012 replaced by Spain and Italy as the center-stage of EU crisis.
• China revamping growth using its Internal demand/domestic Economy.
• Brazil and Russia going into stagflation.
• Death of Apple and Face Book shares - will Tech ever come back to rule the Wall street.

With a political stability in White house and increased focused on domestic issues, U.S Government is on war footing to patch up its Ailing economy with new world economics . What it means for the Global economy is  decreased spending from worlds Largest Economy . This will result in less production and consumables from China and Other Service based economies pointing to low GDP growth among BRIC countries .Most of the offshore money flowing back into the U.S economy (i am talking about trillions held by major U.S and European companies abroad in low income generating assets to high risk assets) will bring back more Jobs and high pay slips to the U.S economy. Recent Immigration policy will have a profound impact on the Service and Hotel sectors, Tourism and Mass migrations to Big cities.

If you put together the above in plate and you will start getting the BIG picture. Most of the stock markets will depend on regional policies and consumption. Right out of the bat sectors that comes to my mind are Domestic oil companies,Retailers and Commercial Realtor in U.S, National Banks in Europe , Cyclical ,Auto industry, Financials in BRIC nations such as India , China and Brazil. Manufacturing and Petrochemicals in Russia.

Some of the dead sectors will be Solar Power , Mining, Shipping and Aerospace. 

Do your math and preserve your Nest egg before risking it.!!!

Good Luck and Happy New year

Wizard

How to Play the Iran conflict ?

Today's winner : Domestic Oil companies

The Oil is trading in range of 98$ to 105$ per barrel due to the recent war of words with Iran's Nuclear weapon program. It's a no brainier that the Iran conflict will drive the Oil prices to the range of 140$ plus not seen in the recent past. With world's 25 % of oil flowing through the Strait of Hormuz and half of them flowing to trading partners in raging economies of East, this makes it a very notable crisis .

 Chinese petroleum companies like Petro China has a huge exposure to the oil fields in Iran. India imports LPG heavily from Iran through this Strait.Even though Saudi and Iraq can transport close to 10 million barrels through pipelines ,any counter attack by Iran on U.S Air bases in Saudi, Iraq and Kuwait will put this pipelines in risk.
         Israel is a passive player in this since Uncle Sam is on the front of the Crisis, if Iran Ships are attacked, the Long Range missiles will be gunning for Israeli Bases and Jewish Settlements.  If the Israeli Air Defense comes into the Gulf , we have a full fledged war in the cards. 

 I have screened through many of Major Oil players with exposure to Middle East and one who are not.


Companies with Huge exposure to Middle East Oil


Exxon Mobil
Apache
Petrochina
Marathon Oil
Hess


Companies with Least exposure to Middle East oil can be categorized into 4 Regions.


East Europe and Northern Europe (Russia, Norway, Netherlands etc)
Companies in South America
Canadian Oil Sands 
U.S Domestic oil and offshore drillers (Alaska and Gulf Of Mexico)




With that in mind, these small players will be the first one to Rally followed by Big players since they are less leveraged across the world.


Based on the Exposure and Leverage i came up with Good Names to play in case of Iran Conflict or a Stand off in Middle East


Accumulate


Petro Brasil (PBR)
Canadian Natural Resources (CNQ)

Chesapeake Energy (CHK)

Sell

Exxon Mobil (XOM)

BP

Apache (APA)

Marathon Oil (MRO)

Hess (HESS)

Even though it is a very unfortunate situation and Millions will be impacted , the Good Old Mutual Funds and Hedge Funds would still be Reaping the Blood fromthis Desert  Sands by Hedging Oil futures and Oil Stocks across the Globe.  The Market will react negatively to this Crisis by selling Equities and  all World Currencies ,after Buying hoards of U.S Dollars, which would  drive the Oil prices still higher.


 The Best way to play this short term event is to Buy Oil companies with Least exposure to Middle East and ones which are closer to North American Shores.


Sit Tight and Play Safe.