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RoboStreet – July 16, 2020
Rotation Into Value Looks Legit
Without question or argument, mega-tech, biotech, and leading high-PE growth stocks have led the rally, taking the Nasdaq to a series of new all-time highs. Coming into the month of July those stocks got over-extended, over-owned, and over-valued – triggering a pause in what has been a torrid rally.
The SPY continues to retest the upper boundary of six-weeks range at $323 on the news about coronavirus vaccine trial from Moderna. Value stocks (Industrials, Financial, Energy, and Transportation sectors) continue to outperform the growth stocks. U.S. Dollar continues to sell off (bullish for emerging markets and commodities.)
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
The short-term bottom is at $293 and potentially can be retested in the next two weeks. SPY longer-term overhead resistance is at $325. The market has started the July correction phase and can retest $293 level in the next 14 days. At this point, I do not think the market will break $293 level as FXI (China large-cap stocks), and value stocks continue to outperform.
I expect the market volatility and the two percent daily market moves to persist. SPY top is set at $325 and the market can potentially break this level in the next 2-4 weeks. The market can overshoot support and resistance levels when VIX is elevated. Short term support is set at $293. My strategy is to buy 5-10% market corrections.
Fortunately, as some of the air came out of the growth stock trade, it didn’t wholesale leave the market. Instead, fund flows into value stocks have been brisk this week, with trucking stocks hitting new highs, railroads getting bid higher, big pharma suppliers in rally mode, and select financials catching a strong bid.
Case in point, shares of Pfizer, Inc. (PFE) have been on the receiving end of strong fund flows, not just because they are a player in the COVID-19 race to produce a vaccine, but investors are accumulating low PE stocks that have fortress businesses resistant to recessionary pressures. Pfizer sports a PE of just 12x.
When we apply our AI tools to some value stocks like Pfizer, the Tradespoon Seasonal Chart flashes “higher” indicator readings for the next 20, 30, and 40-day periods.
Looking at anther leading value stock, Morgan Stanley (MS), that just posted earnings that handily beat on the top and bottom lines, we get a Model Grade “A” rating from our AI-driven Stock Forecast Toolbox with a near-term price target of $60.22 – representing a solid move higher from its current price of $52.40.
Some other stocks that are worthy of noting are JB Hunt Transportation Services (JBHT), Old Dominion Freightways (ODFL), Union Pacific Corp. (UNP), UnitedHealth Group (UNH), Berkshire Hathaway (BRKB), Johnson & Johnson (JNJ), Verizon Communications (VZ) and Vodaphone Group PLC (VOD) that was just added last week to our RoboInvestor Portfolio with its 6% dividend yield.
The same two guiding rules of investing apply every day. Don’t fight the Fed, and don’t fight the tape. This week, the tape is warming to rewarding value stocks with solid fundamentals and it’s a very healthy development for the broader market, Apple Inc. (AAPL), Amazon.com (AMZN), Tesla Inc. (TSLA), Alphabet Inc. (GOOG), Facebook Inc. (FB), Microsoft Inc. (MSFT), Adobe Inc. (ADBE) and Nvidia Inc. (NVDA) got ahead of themselves per their valuations.
Within our RoboInvestor Portfolio, we’re long several blue-chip value stocks like Rockwell Automation (ROK), Chevron Corp. (CVX), CVS Health Corp. (CVS), Target Corp. (TGT), Cisco Systems (CSCO), Dominion Energy (D), Lockheed Martin (LMT) and JP Morgan (JPM). We’re locked and loaded for the market to move into value.
The iShares S&P 500 Value ETF (IVE) broke higher on July 14 in a sharp move that is evidenced in the one-month chart below. I’ll be looking to initiate and add to our value stock holdings and quite possibly this ETF for another similar one that will catch the full move of this dynamic sector rotation underway.
Readers of this column that want to get in on this trade when I alert our RoboInvestor members to do so should join today, to not miss out. Our Winning Trades percentage is 88.58% – which means our track record is on fire. Below are some of the profits we’ve booked over the past weeks and months. In fact, the last losing trade we absorbed with back on March 9.
We take great pride in making money in about 9 out of every 10 trades we recommend and is also why I’m so confident in asking all readers of this column to not spend another minute marinating on what investment system deserves their hard-earned capital. RoboInvestor is the system and the solution to long-term wealth creation. Take a minute and come aboard so we can go to work for you today, putting your next winning trades into your inbox tomorrow!
“I’m investing my own money in each and every stock as my AI platform identifies.”And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
*Please note: RoboStreet is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader, MonthlyTrader, or RoboInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
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