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The EV Market’s Most-Shorted Stocks to Buy

It’s a life in the fast lane for traders involved in the market’s most-shorted stocks. And maybe more so now with today’s notorious Reddit population…

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This article was originally published by Investor Place

It’s a life in the fast lane for traders involved in the market’s most-shorted stocks. And maybe more so now with today’s notorious Reddit population of bullish apes driving shares.

Still, buying into this caliber of stock and the fantastic scheming that goes along with it is far from a one-way street lined with bullish profits.

One prime example of that reality are the many popular, diverse and heavily-shorted EV-related plays whose price action has turned investors overstaying their welcome into crash test dummies.

The fact of the matter is that common and mind-blowing gains captured in 2020 as these most-shorted stocks came into their own vis-à-vis a massive global push into green energy, as well as generous promotion from Wall Street, has taken a nasty detour or two on the price charts.

  • Romeo Power  (NYSE:RMO)
  • Fisker Inc (NYSE:FSR)
  • QuantumScape (NYSE:QS)

Today and in the spirit of looking forward in a positive way rather than bearishly in the rearview mirror, let’s look at three of these most-shorted stocks ready for some “vroom, vroom” heading into 2022.

EV’s Most-Shorted Stocks to Buy: Romeo Power (RMO)


Source: Charts by TradingView

The first of our most-shorted stocks to trade is commercial electric battery specialist Romeo Power.

Shares of RMO harbor short-interest of 30%. And to be fair, the bears have been on the right side of trade in 2021.

The stock has surrendered 83% and is just off all-time-lows struck earlier this month.

Still, it could be a smart time for investors to consider a purchase in this most-shorted stock.

RMO is one of those EV stocks operating successfully in the real world. The outfit has already landed one high profile client in its battery deal with big rig manufacturer PACCAR (NASDAQ:PCAR).

What’s more, this most-shorted stock is starting to bring in sales today and not way down the road. In fact, back in November RMO stock delivered a solid top and bottom-line quarterly beat.

Bears might argue RMO’s revenues are still puny at $5.8 million. Still, it’s a big step in the right direction over the prior year’s sales take of just $675,000.

Also, this most-shorted stock’s management backed up the strong results inferring top-line growth will extend in the coming quarters on the back of four supply contracts which began this year.

Technically and as this year’s performance outlined above hints at, bears haven’t begun pumping the brakes to stop a decline in shares. But you also can’t squeeze juice from a turnip, right?

Bottom line, at a small-cap valuation of $500 million and price tag of $3.75, this most-shorted stock is worth putting on the radar for buying.

And confirmation of a monthly bottoming candle come early January, could turn into one of next year’s nicer-looking back-up-the-truck situations for RMO stock investors.

Fisker (FSR)

Fisker (FSR) monthly testing position of support within uptrend channel backed by stochastics
Source: Charts by TradingView

The next of our most-shorted stocks to buy are shares of soon-to-be luxury EV designer Fisker.

FSR stock currently maintains a bear population of 26%, and in our estimation imminent roadkill on the price chart.

Bottom line, Fisker’s Ocean series looks like the real deal when production commences in late 2022 based on its all-around eco-friendly attention to detail and what’s under the EV’s hood.

Further and tied to the top-line, based on estimated revenues of $2.2 billion for 2023, shares of this most-shorted stock look outright cheap compared to the competition with a price of just around 3x sales.

Technically and as the illustrated monthly view of FSR stock reveals, shares have pulled back into a testing position of uptrend and Fibonacci support.

And with the price action also backed by a bullish stochastics crossover in oversold territory, this most-shorted stock is ready for more than just a test drive today.

EV’s Most-Shorted Stocks to Buy: QuantumScape (QS)

QuantumScape (QS) testing angular support on monthly chart
Source: Charts by TradingView

The last of our EV and most-shorted stocks to trade are shares of QuantumScape with short interest of 13%.

QuantumScape’s next-gen solid state technology has been hailed as the Jesus Battery for electric vehicles. The start-up also has the backing of Volkswagen (OTCMKTS:VWAGY) and Microsoft (NASDAQ:MSFT) CEO Bill Gates.

Nice, right? It is. Importantly though, it’s also still way too early to know if the excitement over what QS stock might bring to the table actually lives up to its billing.

In fact, if all goes according to plan, investors shouldn’t expect to see a real world product prior to 2024 or possibly 2025.

Also, it’s fair to say the world’s largest auto manufacturer and one of the wealthiest individuals on the planet can afford to lose on private investments in QuantumScape well before QS became a most-shorted stock.

Still, while QS stock isn’t offering ordinary investors an opportunity to not get in on the same ground floor, a technical floor on this most-shorted stock’s weekly price chart looks great for buying into.

I’d suggest waiting for this past month’s testing of angular support to be confirmed with a weekly bottoming candle before buying QS stock. Also, a bullish crossover signal from an oversold stochastics indicator prior should back up the price action.

Should those conditions be met, a hedged married put looks like a great starting position for a notoriously volatile most-shorted stock which should enjoy a bullish bias, while giving investors the ability to avoid becoming a crash test dummy.

On the date of publication, Chris Tyler 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.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

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Economics

Here’s What Triggered Yesterday’s Selloff

Well, the stock market sure woke up on the wrong side of the bed this morning!

Source: ventdusud / Shutterstock.com

After a long holiday weekend, investors…

Well, the stock market sure woke up on the wrong side of the bed this morning!

Source: ventdusud / Shutterstock.com

After a long holiday weekend, investors were greeted with a more than 1% drop in the major indices. The NASDAQ was hit particularly hard, down as much as 2% earlier in the trading day. The fact of the matter is Wall Street was cranky because the 10-year Treasury surged to a two-year high today.

The 10-year Treasury yield now sits at about 1.85%. That’s up from 1.51% on December 31, 2021. That’s a fairly dramatic rise in the 10-year Treasury, and it’s a big reason for why we saw a massive rotation out of the tech-heavy index today.

The financial media would have you believe higher rates will hurt tech stocks, but that’s simply not true. Here’s the reality: The global pandemic accelerated technological change, with many folks working and studying remotely. And this technological change boosted productivity in the U.S., with several industries leading the productivity miracle. So, tech stocks, especially semiconductor companies, will have some of the best quarterly results in mid-January through mid-February. And wave-after-wave of positive results will not only help these stocks firm up but also drive their shares higher. It’s one reason why I’m betting big on 5G.

Tech stocks aside, this earnings season should also trigger rebounds in fundamentally superior stocks that were hit during today’s selling. I expect Wall Street to become laser-focused on earnings over the next five weeks, and after all the reports are out, we’ll see who’s left standing. I anticipate the winners will be those with superior fundamentals, i.e., my Breakthrough Stocks. My Buy List companies have 57.2% average forecasted annual sales growth and 231% average forecasted annual earnings growth. They should also issue positive forward guidance.

Now, due to more difficult year-over-year comparisons, my Breakthrough Stocks are actually “decelerating” from the previous 78.2% average annual sales growth and 724.8% average annual earnings growth. However, my Buy List stocks are still set to achieve earnings and sales growth well above the average S&P 500 company. According to FactSet, the S&P 500 is anticipated to achieve 21.8% average earnings growth and 12.9% average revenue growth.

The Bellwether Steps Up to the Earnings Bat

We’ve heard from a few companies so far, including the Big Banks (I’ll review their quarterly results later in the week, so stay tuned for that!), but I’m most excited to hear from Alcoa Corporation (NYSE:AA), which will report its fourth-quarter earnings results tomorrow afternoon. As you probably know, Alcoa is known for establishing the aluminum industry more than 130 years ago. The company primarily manufactures and sells bauxite, the primary source of aluminum, as well as alumina, aluminum, cast products, energy and rolled products. Alcoa actually is one of the largest bauxite producers in the world with seven active mines, as well as is the leading producer of alumina.

Alcoa is also considered a “bellwether” for earnings season, as it’s a stock investors have turned to in the past as an indicator for how the coming earnings season will shake out. Currently, analysts expect Alcoa’s earnings to surge 653.8% year-over-year to $1.96 per share, up from earnings of $0.26 per share a year ago. Revenue is estimated to climb 40.5% year-over-year to $3.36 billion.

I should note that analysts have lowered earnings estimates in the past three months, following the company’s announcement that it will temporarily halt production at its Spain plant due to rising energy costs. Alcoa noted that the production halt would reduce earnings by $0.32 per share, which is why analysts have lowered earnings estimates initially. Interestingly, in the past week, analysts have increased estimates by nearly 11%.

Personally, I believe Alcoa will post impressive fourth-quarter results. The reality is that aluminum prices are trekking higher again. The World Bank revealed that aluminum prices jumped from $2,004 per tonne in January 2021 to more than $2,900 per tonne in January 2022. Prices are anticipated to rise 6% this year, thanks to ongoing demand from the auto industry, rising energy prices and supply shortages.

Suffice it to say, Alcoa is the stock to watch tomorrow.

But for today, don’t be discouraged by today’s wild market gyrations. The reality is that earnings work 70% of the time, so given that earnings momentum has tapped the brakes a bit due to tougher year-over-year comparisons, I think companies that achieve better-than-expected results will see their shares climb higher as investors celebrate their results.

It’s why now is the time to make sure you’ve filled your portfolio with fundamentally superior stocks. If you’re not sure where to look, you might want to review my Breakthrough Stocks Buy List. As I mentioned, my stocks should post much strong earnings than the average S&P 500 company. I should also note that I recently created a special model portfolio I call the 5G Hypergrowth Portfolio: Six Stocks to Incredible Wealth. Each company is directly in line to profit from 5G.

I will be recommending another 5G stock on Thursday, after the market close. So, if you join Breakthrough Stocks today, you’ll have access to this new recommendation as soon as it’s released.

For full details, click here.

Sincerely,

Louis Navellier

The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

Alcoa Corporation (AA)

Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.

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Precious Metals

Cleantech Boom 2.0: Does Mining Have a Place?

Investment in mining and its resources is an integral part of cleantech as green initiatives to make the energy transition possible.
The post Cleantech…

The climate crisis is back at the forefront of political discussions following COP26 and several initiatives aiming to reduce carbon emissions have been announced. Decarbonising our economy is a difficult but urgent task and continued technological innovation will help. Although new technologies will aid the reduction of carbon emissions, the sheer volume of raw materials required to innovate are significant. Is investment in decarbonisation a reasonable excuse to further dig up the planet?

Defining cleantech

‘Cleantech’ (often used interchangeably with ‘climatetech’) refers to innovative solutions to address the challenges of climate change. These solutions help to achieve the goals of environmental sustainability by storing or generating energy with limited carbon emissions, thus assisting decarbonisation efforts. Investors are recognising the importance and potential longevity of this industry and investment is pouring in.

Electric vehicles (EVs) are one of the leading technologies required to reduce the emissions of the transport industry, but the transition to renewables and EVs will require an abundance of materials and extraction rates are rising.

Investment floods in

While there was a boom in cleantech investment in 2005, it began to be seen as a risky choice and interest dwindled due to investment failures in areas such as biofuels and solar. The investment bubble then burst. However, the urgency to reach net-zero has reignited interest in cleantech and, as innovations in areas such as agriculture and batteries are announced, investors are scrambling for their share. This investment boom is spurring an increase in the number of start-ups, driving the much-needed innovation required to help solve the climate crisis.

Mining activity is on the rise

To deal with the growing number of clean technologies, mining extraction rates are also growing. Various metals and minerals are required in the transition to decarbonisation and minerals such as cobalt and lithium are the building blocks of cleantech. As the world attempts to reach net zero, demand for critical minerals will skyrocket.

According to a 2020 World Bank Report, a low-carbon future will be more mineral intensive as clean energy requires more materials than fossil-fuel-based technologies. The International Energy Agency estimates that EVs require six times the amount of minerals as a typical car and nine times more minerals are required for wind energy plants than gas-fired equivalents. However, ESG concerns around the traditional heavy industry are so far causing investors to look the other way.

ESG in mining

There are several ESG concerns tied to mining, notably, the environmental degradation caused by the erection and operation of mines to meet the growing demand for materials. Social and governance concerns are becoming increasingly apparent and stories of dangerous working conditions, artisanal miners and child labour are common. ESG funds often exclude mining as a result. To counteract this, the mining sector is beginning to show signs that it is taking ESG seriously. A leading example is Glencore, who GlobalData classifies as a climate leader. Glencore has pledged to reach net-zero carbon emissions by 2050. Its carbon reduction strategies include the electrification of mining fleets, which has been pioneered by companies such as Newmont and Boliden.

As investors are increasingly becoming more climate aware, mining companies are recognising the potential upsides of taking ESG seriously. This will drive companies to innovate to establish how they can decouple their growth from emissions.

Investors need to think about the future

A boom in green investment has begun again but shifting investment away from mining will undermine the green energy transition. Mining companies should further implement ESG principles and demonstrate that they are serious about ESG. Green funds should also include these mines in their portfolios instead of blacklisting them. Without the mining industry, the energy transition is not possible and investors should stop shying away from this heavy industry by focusing all their investment on renewable technologies. Currently, the production of these technologies cannot be achieved without mining and the resources it produces. Investors should instead use the power they possess to exert pressure on mining companies to consider ESG strategies. They would then need to prove that they are more sustainable and innovate their techniques to achieve this. Therefore, the boom in green investment can be used to tidy up the mining industry and keep the cleantech bubble afloat.

The post Cleantech boom 2.0: Does mining have a place? appeared first on Mining Technology.

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Economics

Today’s Mortgage Rates Cross Over 4% Mark | January 19, 2022

The average rate for a 30-year fixed-rate mortgage is up to 4.033% today. It’s the first time this daily rate has averaged more than 4% since September…

The average rate for a 30-year fixed-rate mortgage is up to 4.033% today. It’s the first time this daily rate has averaged more than 4% since September 2020. All other loan categories are also seeing higher rates, with the average for a 30-year refinance loan increasing to 4.148%. The rate for a 5/1 adjustable-rate mortgage is up to 2.475%.

While rates have been steadily climbing over the past few weeks, many borrowers with strong credit can still find attractive rates and monthly payments on a new mortgage or when refinancing.

  • The latest rate on a 30-year fixed-rate mortgage is 4.033%.
  • The latest rate on a 15-year fixed-rate mortgage is 3.067%. ⇑
  • The latest rate on a 5/1 ARM is 2.475%. ⇑
  • The latest rate on a 7/1 ARM is 3.824% ⇑
  • The latest rate on a 10/1 ARM is 4.067%. ⇑

Money’s daily mortgage rates reflect what a borrower with a 20% down payment and a 700 credit score — roughly the national average score — might pay if he or she applied for a home loan right now. Each day’s rates are based on the average rate 8,000 lenders offered to applicants the previous business day. Freddie Mac’s weekly rates will generally be lower, since they measure rates offered to borrowers with higher credit scores.

Today’s 30-year fixed-rate mortgage rates

  • The 30-year rate is 4.033%.
  • That’s a one-day increase of 0.117 percentage points.
  • That’s a one-month increase of 0.464 percentage points.

The 30-year mortgage is the most common home loan in America thanks to its long payback time, relatively low and steady monthly payments and predictable interest rate. The downside is that the interest rate will be higher compared to a shorter-term loan, so you pay more interest over the years.

Today’s 15-year fixed-rate mortgage rates

  • The 15-year rate is 3.067%.
  • That’s a one-day increase of 0.124 percentage points.
  • That’s a one-month increase of 0.525 percentage points.

The 15-year fixed-rate mortgage has a lower interest rate compared to a longer-term loan, so you’ll save over time with this type of loan. However, the shorter term also means the monthly payments will be higher than a similar 30-year loan.

The latest rates on adjustable-rate mortgages

  • The latest rate on a 5/1 ARM is 2.475%. ⇑
  • The latest rate on a 7/1 ARM is 3.824%. ⇑
  • The latest rate on a 10/1 ARM is 4.067%. ⇑

The interest rate on an adjustable-rate mortgage will be fixed for the first few years before it becomes variable. The rate on a 5/1 ARM, for example, is fixed for five years, then resets yearly. An ARM could be a good option if you don’t plan on staying in the home long term, as the initial interest rate is usually very low. The downside is that there could be a big increase once the rate starts to reset .

The latest VA, FHA and jumbo loan rates

The average rates for FHA, VA and jumbo loans are:

  • The rate on a 30-year FHA mortgage is 3.9%. ⇑
  • The rate on a 30-year VA mortgage is 4.012%. ⇑
  • The rate on a 30-year jumbo mortgage is 3.726%. ⇑

The latest mortgage refinance rates

The average refinance rates for 30-year loans, 15-year loans and ARMs are:

  • The refinance rate on a 30-year fixed-rate refinance is 4.148%. ⇑
  • The refinance rate on a 15-year fixed-rate refinance is 3.185%. ⇑
  • The refinance rate on a 5/1 ARM is 2.77%. ⇑
  • The refinance rate on a 7/1 ARM is 3.967%. ⇑
  • The refinance rate on a 10/1 ARM is 4.212%. ⇑

Where are mortgage rates heading this year?

Mortgage rates sank through 2020. Millions of homeowners responded to low mortgage rates by refinancing existing loans and taking out new ones. Many people bought homes they may not have been able to afford if rates were higher. In January 2021, rates briefly dropped to the lowest levels on record, but trended slightly higher through the rest of the year.

Looking ahead, experts believe interest rates will rise more in 2022, but also modestly. Factors that could influence rates include continued economic improvement and more gains in the labor market. The Federal Reserve has also begun tapering its purchase of mortgage-backed securities and announced it anticipates raising the federal funds rate three times in 2022 to combat rising inflation.

While mortgage rates are likely to rise, experts say the increase won’t happen overnight and it won’t be a dramatic jump. Rates should stay near historically low levels through the first half of the year, rising slightly later in the year. Even with rising rates, it will still be a favorable time to finance a new home or refinance a mortgage.

Factors that influence mortgage rates include:

  • The Federal Reserve. The Fed took swift action when the pandemic hit the United States in March of 2020. The Fed announced plans to keep money moving through the economy by dropping the short-term Federal Fund interest rate to between 0% and 0.25%, which is as low as they go. The central bank also pledged to buy mortgage-backed securities and treasuries, propping up the housing finance market but began cutting back those purchases in November.
  • The 10-year Treasury note. Mortgage rates move in lockstep with the yields on the government’s 10-year Treasury note. Yields dropped below 1% for the first time in March 2020 and have been rising since then. On average, there is typically a 1.8 point “spread” between Treasury yields and benchmark mortgage rates.
  • The broader economy. Unemployment rates and changes in gross domestic product are important indicators of the overall health of the economy. When employment and GDP growth are low, it means the economy is weak, which can push interest rates down. Thanks to the pandemic, unemployment levels reached all-time highs early last year and have not yet recovered. GDP also took a hit, and while it has bounced back somewhat, there is still a lot of room for improvement.

Tips for getting the lowest mortgage rate possible

There is no universal mortgage rate that all borrowers receive. Qualifying for the lowest mortgage rates takes a little bit of work and will depend on both personal financial factors and market conditions.

Check your credit score and credit report. Errors or other red flags may be dragging your credit score down. Borrowers with the highest credit scores are the ones who will get the best rates, so checking your credit report before you start the house-hunting process is key. Taking steps to fix errors will help you raise your score. If you have high credit card balances, paying them down can also provide a quick boost.

Save up money for a sizeable down payment. This will lower your loan-to-value ratio, which means how much of the home’s price the lender has to finance. A lower LTV usually translates to a lower mortgage rate. Lenders also like to see money that has been saved in an account for at least 60 days. It tells the lender you have the money to finance the home purchase.

Shop around for the best rate. Don’t settle for the first interest rate that a lender offers you. Check with at least three different lenders to see who offers the lowest interest. Also consider different types of lenders, such as credit unions and online lenders in addition to traditional banks.

Also. take time to find out about different loan types. While the 30-year fixed-rate mortgage is the most common type of mortgage, consider a shorter-term loan like a 15-year loan or an adjustable-rate mortgage. These types of loans often come with a lower rate than a conventional 30-year mortgage. Compare the costs of all to see which one best fits your needs and financial situation. Government loans — such as those backed by the Federal Housing Authority, the Department of Veterans Affairs and the Department of Agriculture — can be more affordable options for those who qualify.

Finally, lock in your rate. Locking your rate once you’ve found the right rate, loan product and lender will help guarantee your mortgage rate won’t increase before you close on the loan.

Our mortgage rate methodology

Money’s daily mortgage rates show the average rate offered by over 8,000 lenders across the United States the most recent business day rates are available for. Today, we are showing rates for Tuesday, January 18, 2022. Our rates reflect what a typical borrower with a 700 credit score might expect to pay for a home loan right now. These rates were offered to people putting 20% down and include discount points.

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