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3 Stocks to Buy in Spite of Wall Street Anxiety

While investors work through their nervousness this week, there are plenty of stocks to buy. The reasons for doing so range from finding fixed income to…

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While investors work through their nervousness this week, there are plenty of stocks to buy. The reasons for doing so range from finding fixed income to overzealous bearishness creating value. The fact is that the S&P 500 chart suggests that the buyers are still in charge. Until this changes, there is no need to short markets. The default action is to buy dips still.

My assumption for this year is that we will likely set new highs before we correct 20%. Within that thesis, there are valuable stocks to buy. Today we will share three that vary from highly speculative to sure things. Of course, there’s no such thing as a risk-free trade, but some come close. Wall Street is on edge perhaps because of rhetoric rather than facts.

There are a multitude of scary topics circulating the headlines. None of which change the three basic price drivers. First, there’s nothing wrong with the structure of the system. Second, there is plenty of money floating in the economy. This is in large part thanks to the aggressive White House and Federal Reserve. They are both still in the dovish camp for as long as we need it. So, this leaves us only with sentiment as what’s ailing markets.

This is a fickle variable because it involves human emotions. We’ve seen how quickly they can change their mind. If you doubt that, revisit how wildly the stock prices acted yesterday over the release of the Fed minutes. Remember that these were accounts of past events. The Fed had already told us what happened two weeks ago. Then Fed Chair Jerome Powell answered questions. Yet, when they released the minutes yesterday, investors went hog wild trading up and down.

In the end, Wednesday turned out to be a green day going into an important options expiration. This brings me to another scary meme that’s been floating around for a few months. Consensus on Wall Street is that having a monthly expiry makes for a bearish week. I challenge that notion, but I do acknowledge that it brings volatility.

This means that there is equal opportunity to go up or down and it’s not an automatic red week. Hopefully closing out a flat to green week tomorrow will put that mean to bed.

I’m going to borrow from a cliche that I am cautiously optimistic. Because I am confident that the data supports higher prices. However, I also acknowledge that sentiment can be a powerful motivator, and I don’t know how long it will last. We’ve already overcome the taper headline unofficially. Other than that, going into the holiday season, I expect more bullishness to creep into the headlines.

We still have global hurdles to overcome from the pandemic. The shutdown last year triggered a chain of events that is causing some supply issues now. This is extremely visible in the technology sector, specifically in chip stocks. Sadly, and as we digitize, the impact from this has come to have a wide reach. For example, the auto industry is struggling because cars are mobile computers. If there are no chips, there will be no cars.

Inflation reports are no longer that important for stock price action. They mattered before because we feared they would hasten the taper decision. Wall Street looks forward and focuses on the next potential problem.

We should have clear sailing into 2022 from the macroeconomic headline perspective. Of course, we can always have a black swan, but we can’t plan around it because it’s ever present. Therefore, if you believe in my bullish outlook, then you will find these three stocks to buy interesting:

  • Verizon (NYSE:VZ)
  • Lemonade (NYSE:LMND)
  • Apple (NASDAQ:AAPL)

Stocks to Buy: Verizon (VZ)

Source: Charts by TradingView

Our first pick of the day was a complete surprise to see collapse. Verizon is as steady a company as they get, with a fortress financials. Yet, it has fallen off a cliff like it was a tech stock that disappointed on earnings. I read something about a downgrade from some expert, but therein lies the opportunity. I never let someone else’s opinion of a stock’s quality affect mine.

VZ stock’s financial statements and its technicals are solid. Verizon delivers $42 billion per year in cash from its own operations. I admit that its revenue line is boring and flattish for six years. However, the testament to management’s ability to be efficient is their net income doubling. In other words, they are doing twice more with what they have and that’s smart!

The bottom line is “the bottom line” and that’s the thesis today. There’s nothing wrong with the fundamentals except someone’s opinion of them. The current rapid descent scares investors away, but smart money evaluates the opportunity. This is a quality company stock that is on sale. VZ stock is falling into the pandemic lows. Back then the world was completely at a standstill. This cannot be the same situation now.

Therefore, my assumption is that there will be buyers lurking into $50 per share. And that this would make for an excellent starting point for short and long-term swings. The cherry on top is the 5% dividend rewards while investors wait. This is eight times the amount my bank offers me on high-yield accounts. This is also three times larger than a 10-year bond yield.

Lemonade (LMND)

Stocks to Buy: Lemonade (LMND) Stock Chart Showing Potential BaseSource: Charts by TradingView

Our second ticker today doesn’t have as strong a fundamental statement as the first. Therefore, it’s not first in mind for a list of stocks to buy on dips. Nevertheless, LMND stock still shows a pretty strong trend in the profit and loss statement. It is still new to Wall Street, so it needs to earn its street cred. That can only happen over time.

Judging by the hideous price action that has transpired since January, I would say they’re still far from it. LMND has fallen 66% from its all-time highs. What is encouraging now is that it is close to the May base that served for a 100% rally. Moreover, this was the same base from which it exploded in November of last year into a 200% rally. Any way you slice it, LMND stock falling back into such a pivotal zone becomes an opportunity.

The income statement supports optimism but with reservations. The revenues are still tiny but they show fast growth. There’s no sense of looking at profits yet because they are still so young. This is not a cheap stock even after this huge drop. The bulk of its stock price is from hope of future successes. Meaning there’s nothing intrinsic now from the company statistics to stave off the selloff.

To make matters worse, the overall sour sentiment on Wall Street sentiment is not helping LMND. I would consider this a blend between a trade and an investment. Regardless, investors would do well to take small bites just in case we do have a correction coming. If Lemonade loses its May floor, there’s no telling where the next support lies. In theory they should be near $50 per share, but it wouldn’t be a guarantee they would stop there.

Stocks to Buy: Apple (AAPL)

Stocks to Buy: Apple (AAPL) Stock Chart Showing Potential Short Term BaseSource: Charts by TradingView

This leads us to our “sure thing” of the day. Arguably Apple stock is the cream of the crop on Wall Street. This is an extremely successful company that makes an insane amount of money. Its clientele gladly overpays for their product, and they always sell out of every widget they make. It is utopia for a management team to have such a machine beneath them.

This, however, did not stop AAPL stock from falling 12% in September. I can’t remember the last time this company delivered a bad earnings report. Yet, the stock keeps having tizzies like this. Since it persistently breaks records then these dips are buying opportunities.

The financial statements are top notch and borderline boring. It’s not an exciting grower like say Amazon (NASDAQ:AMZN), so it is relatively expensive. This is not a statement of absolute terms, but versus its usual self. We could look the other way for now since they also drastically changed their sales mix. Revenues now include a big chunk from services.

The critic in me wants to warn about bloat versus growth. AMZN grew its revenues 5 fold since 2014, Apple only 1.8. Yet, AMZN stock is twice as cheap as AAPL from the price-to-sales. Remember that I am including part of stocks to buy today. In spite of my nitpicking, I suggest that this is an opportunity to swing trade it to $152. I would consider this a trade more so than an investment. Proper stops are in order.

On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Nicolas Chahine is the managing director of SellSpreads.com.

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Author: Nicolas Chahine

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Economics

Peter Schiff Warns Of Irrational Exuberance In The Stock Market Casino

Peter Schiff Warns Of Irrational Exuberance In The Stock Market Casino

Via SchiffGold.com,

The Dow Jones and the S&P 500 hit new all-time…

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Peter Schiff Warns Of Irrational Exuberance In The Stock Market Casino

Via SchiffGold.com,

The Dow Jones and the S&P 500 hit new all-time records on Tuesday (Oct. 26). In his podcast, Peter Schiff focused on a few speculative stocks that have had meteoric rises (and in some cases crashes) over the last few days. He said this is evidence of the speculative fervor in this massive bubble.

What we’re seeing today is just another indication of the casino-like nature of today’s stock market that is completely the byproduct of artificially low interest rates, the inflation that the Federal Reserve and other central banks have created.”

So far, this latest round of speculative excesses has not marked the top of the market. After all, the markets continue to set new records.

I don’t know that this latest iteration of the speculative fever means that the markets have topped out. But it does provide additional evidence of the bubble-like nature of this market. And eventually, it’s going to come crashing down. If not now, sometime soon. And if it doesn’t come crashing down, it’s only because the dollar came crashing down instead.”

If we end up going down the hyperinflation route, we won’t see a stock market crash in nominal terms in dollars.

But everything will crash even faster and further in terms of real money. So, if we have hyperinflation, yes, these bubbles will implode, but you won’t be able to see the implosion if your prism is the US dollar. But it will be far more visible if you’re looking at it through the lense of gold.”

The first stock Peter discussed was Tesla. The stock hit an all-time high interday Tuesday although it closed off that mark. Nevertheless, the market cap is over $1 trillion. Only four other stocks in the world have market caps of over $1 trillion. Apple and Microsoft have market caps of over $2 trillion. Google is at $1.8 trillion, and Amazon has a market cap of $1.7 trillion.

That means Tesla is the fifth most valuable company in the world even though its earnings pale in comparison to those other four companies.

None of this would be possible but for the monetary policy of the Fed.”

So, why did Tesla stock go up so much?

The stock price surged after Hertz announced it would buy 100,000 cars from Tesla. The projected revenue for the contract is $4 billion. That means even if Tesla makes a 25% margin (an unlikely scenario), the profit would be just $1 billion. Meanwhile, the value of Tesla stock increased by over $100 billion on the news.

It makes absolutely no sense. It went up by more than 20 times the added revenue of the deal, 100 times the added profit of the deal. Why is that sale so valuable to Tesla? Does the market just believe that everybody is going to give Tesla these kinds of orders, like all the rental car companies? But even if they got all the rental car companies’ orders, it still isn’t going to be worth the increase in the market cap of the stock. This is just pure speculative frenzy.”

The point to understand is the increase in the market cap of Tesla stock has no relationship to the news that drove the price up. Nobody cares. It’s “buy now and ask questions later.”

Peter discussed some other stocks with crazy valuations, including Donald Trump’s company Digital World Acquisition Corp. and Bakkt Holdings, which saw a big rise on news of a crypto partnership with MasterCard.

In this podcast, Peter also talks about Jack Dorsey’s hyperinflation warning, Stanley Druckenmiller’s failure to understand the Fed is the problem, and how politicians aim their weapons at billionaires but end up hurting the middle class.

Tyler Durden
Wed, 10/27/2021 – 11:25












Author: Tyler Durden

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Economics

A dovish ECB could weigh on euro

The euro is treading in calm waters on Wednesday, ahead of the ECB policy meeting tomorrow. Currently, EUR/USD is trading at 1.1595, down 0.01% on the…

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The euro is treading in calm waters on Wednesday, ahead of the ECB policy meeting tomorrow. Currently, EUR/USD is trading at 1.1595, down 0.01% on the day.

ECB policy meeting next

‘The times they are a changing’ are for major central banks. With the Fed, BoE and other central banks looking to tighten policy, there is pressure on the ECB, which remains in accommodative mode, to join the bandwagon. ECB President Christine Lagarde has insisted that eurozone inflation is transitory, a message we have heard often from Jerome Powell at the Federal Reserve. However, with no sign that inflation in Germany or the rest of the eurozone will ease anytime soon, it is becoming harder for the ECB to ignore the threat of high inflation, especially with the surge in energy prices only adding to inflation levels. Eurozone CPI hit 3.4% in September and is expected to rise to 3.7% in October, which would mark a 13-year high. In Germany, inflation has accelerated for three straight months and climbed to 4.1% (YoY) in September, its highest level since 1993.

Rising inflation is new territory for the ECB, as inflation has continuously fallen short of the bank’s inflation target of 2 per cent. In September, Lagarde said that the ECB was “pretty far away” from raising interest rates, but there is a growing belief in the markets that the ECB may have to raise rates in 2022 if inflation does not ease lower.

The upcoming ECB meeting is unlikely to shake up the markets, unless the bank unexpectedly veers to a more hawkish position. The December meeting should be much more lively, as policy makers may signal their plans for the Pandemic Emergency Purchase Programme (PEPP), which is set to expire in March 2022.

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EUR/USD Technical

  • EUR/USD faces resistance lines at 1.1628 and 1.1685
  • EUR/USD tested support at 1.1588 earlier in the day. Below, there is support at 1.1531






Author: Kenny Fisher

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Economics

Loonie Soars After Bank of Canada Ends QE Early, Accelerates Rate Hike Timing To Mid-2022

Loonie Soars After Bank of Canada Ends QE Early, Accelerates Rate Hike Timing To Mid-2022

Another day, another hawkish surprise from a developed…

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Loonie Soars After Bank of Canada Ends QE Early, Accelerates Rate Hike Timing To Mid-2022

Another day, another hawkish surprise from a developed central bank.

While nobody expected the Bank of Canada to hike rates today despite soaring inflation, the BOC did surprise most most traders when it announced it is ending its bond buying stimulus program, and accelerated the potential timing of future interest rate increases amid worries that supply disruptions are driving up inflation.

In a policy statement on Wednesday, Canadian central bankers led by Governor Tiff Macklem announced they would stop growing holdings of Canadian government bonds, ending a quantitative easing program that has poured hundreds of billions into the financial system since the start of the Covid-19 pandemic, to wit: “The Bank is ending quantitative easing (QE) and moving into the reinvestment phase, during which it will purchase Government of Canada bonds solely to replace maturing bonds.” Then again, one look at the BOC’s balance sheet makes one wonder just how long this QE halt will survive…

The Bank of Canada will release details of how it will implement the “reinvestment phase’’ of bond purchases in a market notice at 10:30 a.m. That will be a situation where it acquires bonds only to offset maturities, keeping overall holdings and stimulus constant. Most recently, weekly bond purchases had been C$2 billion. BOC head Macklem will also provide more insight into his policy decision at an 11 a.m. press conference.

In any case, the BOC also signaled it could be ready to hike borrowing costs as early as April, as supply constraints limit the economy’s ability to grow without fueling inflation.

Macklem maintained his pledge not to raise the benchmark overnight policy rate until the recovery is complete, but officials now believe that will happen in the “middle quarters’’ of 2022, bringing it forward from the second half of next year as previously thought.

We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s projection, this happens sometime in the middle quarters of 2022. In light of the progress made in the economic recovery, the Governing Council has decided to end quantitative easing and keep its overall holdings of Government of Canada bonds roughly constant.

The language will reinforce market expectations the Bank of Canada is poised to quickly pivot to a tightening cycle amid growing price pressures. Investors are anticipating the Canadian central bank will start raising interest rates within the next six months, with markets pricing in four rate hikes next year.

The Bank of Canada has been using two major tools to keep borrowing costs low: maintaining its policy interest rate near zero and buying up Canadian government bonds from investors to keep longer-term borrowing costs in check. The benchmark interest rate was left unchanged at 0.25% on Wednesday. The central bank has increased its bond holdings by about C$350 billion since the start of the pandemic.

“Shortages of manufacturing inputs, transportation bottlenecks, and difficulties in matching jobs to workers are limiting the economy’s productive capacity,’’ the BOC said adding that “although the impact and persistence of these supply factors are hard to quantify, the output gap is likely to be narrower than the bank had forecast.’’

The more hawkish tone at the bank on Wednesday comes even amid a less rosy outlook for the economy. The central bank cut its growth estimates for both 2021 and 2022, but officials said much of that reflects worse-than-expected supply disruptions in the global economy.

Because of those disruptions, the Bank of Canada marked down estimates of “supply’’ by more than their downward revisions to output. That means the central bank now sees less excess capacity in the economy, and less reason to accommodate demand with cheap borrowing costs.  The build-up of inflationary pressures also appears to be testing the Bank of Canada’s patience. The Bank of Canada revised higher its forecasts for inflation — to 3.4% in both 2021 and 2022.

This means that the BOC is joining the Fed in tightening into a stagflation.

“The main forces pushing up prices — higher energy prices and pandemic-related supply bottlenecks — now appear to be stronger and more persistent than expected,’’ policy makers said. “The bank is closely watching inflation expectations and labor costs to ensure that the temporary forces pushing up prices do not become embedded in ongoing inflation.”

In the accompanying Monetary Policy Report that contains the Bank of Canada’s new forecasts, policy makers also said upside risks to inflation have become a greater concern because price increases are above the central bank’s 1% to 3% control range.

In response to the surprise announcement, the Canadian Dollar soared as much as 0.6%, rising to 1.2309 against the USD…

… while the Canadian 2Y yield spiked more than 24bps above 1.00%…

… in a day defined by violent treasury moves, first in the UK and now in Canada.

Tyler Durden
Wed, 10/27/2021 – 10:16










Author: Tyler Durden

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