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Three Strong Conviction Buys for the Week Ahead

By
Editorial Staff
-
0

When it comes to stocks, separating the wheat from the chaff is no easy feat. It’s a world where the wrong picks can erode your hard-earned gains, but the right ones? They have the power to catapult your portfolio to new heights. With thousands of stocks in the fray, pinpointing those poised for a breakthrough can feel like searching for a needle in a haystack.

This is where we step in. Every week, we comb through the market’s labyrinth, scrutinizing trends, earnings reports, and industry shifts. Our goal? To distill this vast universe of stocks down to a select few – those unique opportunities that are primed for significant movement in the near future.

This week, we’ve zeroed in on three standout stocks. These aren’t your run-of-the-mill picks; they are the culmination of rigorous analysis and strategic foresight. We’re talking about stocks that not only show promise in the immediate term but also hold the potential for sustained growth.

General Electric (GE) – GE Aerospace Could Soar as Boeing Struggles

General Electric (NYSE: GE) is increasingly becoming a standout in the aerospace industry, thanks to its dominant position with the LEAP engine. This advanced engine is set to power the majority of narrow-body planes in the coming years, potentially accounting for over 80% of engines in the air by the next decade. As Boeing (NYSE: BA) continues to grapple with manufacturing delays, particularly following the 737 Max 9 door-plug blowout earlier this year, airlines are being forced to keep older aircraft in service longer. This situation is driving strong demand for GE’s cutting-edge aerospace products, reinforcing its status as a leader in the sector.

The aerospace and defense industry has seen significant gains in 2024, with the iShares U.S. Aerospace & Defense ETF (NYSEARCA: ITA) climbing nearly 16%. GE’s stock has outpaced this, surging 70% year-to-date. With global geopolitical tensions on the rise, defense budgets are expanding, and GE stands to benefit from this trend as well.

Additionally, there’s a broader reinvestment wave in U.S. manufacturing, partly driven by a shift towards de-globalization and a focus on bringing supply chains closer to home. This trend is accelerating manufacturing construction across the country, further bolstering GE’s outlook.

Given GE’s strong market position, impressive stock performance, and the ongoing demand for its aerospace technology, now could be an opportune time to add this stock to your portfolio. While Boeing faces challenges, GE appears well-positioned to capitalize on the current dynamics in the aerospace sector.

Clorox (CLX) – Golden Cross Signals a Potential Bullish Run

Clorox (NYSE: CLX) is catching the attention of investors as it enters September with strong momentum. After a solid August, where the stock climbed more than 20%, Clorox is now flashing a classic bullish chart pattern known as the “golden cross.” This occurs when the 50-day moving average crosses above the 200-day moving average, signaling potential further upside. What makes this even more compelling is that Clorox’s 200-day moving average is starting to slope upward, adding weight to the bullish sentiment.

This technical signal comes after a challenging period for Clorox, where it had previously experienced a “death cross” back in May. However, the company has since turned the corner, bolstered by stronger-than-expected fiscal fourth-quarter earnings and an optimistic outlook for fiscal 2025. Analysts are now more confident in Clorox’s ability to weather economic uncertainties, especially given its position as a defensive play. The company’s 3%+ dividend yield also adds to its appeal, offering income potential in addition to capital gains.

As Clorox moves into September with this golden cross in play, it might be an opportune time to consider adding this stock to your portfolio. With the Federal Reserve potentially easing interest rates soon, and Clorox’s strong performance in recent months, the stock could be poised for further gains as we head into the fall.

BJ’s Wholesale Club (BJ) – Strong Growth and Expanding Footprint Make BJ’s a Buy

BJ’s Wholesale Club (NYSE: BJ) is showing impressive momentum, making it a compelling pick for your watchlist. The company has been delivering robust results, with a recent earnings report that exceeded expectations on both the top and bottom lines. BJ’s also reaffirmed its forward guidance, signaling confidence in its growth trajectory.

The warehouse club’s strength lies in several key areas: strong traffic trends, rising unit volumes in grocery categories, and increasing customer engagement. These factors are driving the company’s earnings potential, with plenty of room for further growth as BJ’s continues to expand its footprint by opening new stores in untapped markets.

BJ’s stock has climbed about 20% this year, and there’s still potential for more upside. The company’s strategy of refreshing its product assortment and enhancing customer experience is likely to keep boosting its top-line performance. Additionally, BJ’s has a long runway for new club growth, which should help it gain further market share in the competitive retail space.Given these strong fundamentals and growth prospects, BJ’s Wholesale Club is well-positioned to continue its upward trend. If you’re looking for a stock with both solid performance and future growth potential, BJ’s deserves a close look.

Bear Watch Weekly: Stocks to Sideline Now

By
Editorial Staff
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0

The right stocks can make you rich and change your life.

The wrong stocks, though… They can do a whole lot more than just “underperform.” If only! They can eviscerate your wealth, bleeding out your hard-won profits.

They’re pure portfolio poison.

Surprisingly, not many investors want to talk about this. You certainly don’t hear about the danger in the mainstream media – until it’s too late.

That’s not to suggest they’re obscure companies – some of the “toxic stocks” I’m going to name for you are in fact regularly in the headlines for other reasons, often in glowing terms.

I’m going to run down the list and give you the chance to learn the names of three companies I think everyone should own instead.

But first, if you own any or all of these “toxic stocks,” sell them today…

Etsy (NASDAQ: ETSY)

Etsy (NASDAQ: ETSY) has been struggling with slowing revenue growth, a trend that’s becoming more evident across the e-commerce sector. In its most recent earnings report, Etsy posted another quarter of declining year-over-year gross merchandise sales (GMS), down 2.1% YOY. While revenue managed a modest 3.0% YOY increase, this growth was driven primarily by higher fees and advertising, not from expanding its core business. Net income took a hit, dropping 14% YOY, underscoring the challenges Etsy faces as its pandemic-driven growth continues to fade.

Despite hopes for a rebound, Etsy’s stock has been in a downward spiral, falling 32% year-to-date and more than 80% from its peak. The reality is that Etsy’s growth story may be over, and the market seems to be reflecting that sentiment. With revenue growth now dependent on price hikes rather than increased sales volume, the long-term outlook appears bleak.

Given these factors, it may be time to reconsider holding onto Etsy. The stock’s current trajectory suggests that further declines could be on the horizon, especially if revenue begins to decline YOY, as we’ve already seen with GMS. Selling now could be a prudent move to avoid deeper losses as the company continues to navigate a challenging environment.

Northrop Grumman (NYSE: NOC)

Defense stocks have been on a remarkable run recently, largely fueled by the volatile geopolitical landscape. Northrop Grumman (NYSE: NOC) has benefited from this surge, with the stock up 16% over the past month alone. The company has delivered strong results, including a 7% year-over-year increase in revenue to $10.2 billion and a 19% jump in earnings per share to $6.36. Their impressive performance is further highlighted by a record order backlog of $83.1 billion, including $38.4 billion in funded contracts.

However, despite these solid fundamentals, Northrop’s stock now trades at a rich valuation, roughly 20 times earnings. While this premium valuation reflects the company’s strong position in the defense sector, it also suggests that much of the news may already be priced in. Given the rapid ascent in its stock price and the current valuation, the downside risk is growing, especially if the geopolitical environment stabilizes or if defense budgets don’t expand as expected.

For investors, this could mean that the risk of holding Northrop Grumman is starting to outweigh the potential rewards. With the stock now vulnerable to a re-evaluation, particularly if there’s any shift in market sentiment or defense spending forecasts, it may be prudent to consider selling before any potential downside materializes.

In short, while Northrop Grumman remains a strong company fundamentally, the current market conditions and its elevated stock price suggest that taking profits now could be a wise move. 

iRobot (NASDAQ: IRBT)

As robotics continues to capture investor attention, driven by advances in artificial intelligence and automation, it’s crucial to remain discerning about where to place your bets. While the sector holds promise, not all players are well-positioned to capitalize on the opportunities ahead.

iRobot (NASDAQ: IRBT), known for its popular Roomba vacuum, has been struggling to maintain its footing in a rapidly evolving market. The company has seen its stock price plummet by nearly 81% this year, largely due to inflationary pressures and rising interest rates, which have dampened consumer spending on non-essential tech products. The pandemic-driven surge in consumer tech purchases has also left iRobot with a challenging environment to navigate.

In an attempt to stabilize, iRobot introduced the “iRobot Elevate” restructuring plan earlier this year, aimed at cutting operational costs and reducing inventory levels. While these efforts have led to some improvement in margins, they may not be enough to spark a meaningful recovery.

Adding to iRobot’s woes is the growing competition from emerging Chinese companies like Narwal, which are backed by tech giants such as Tencent and ByteDance. Narwal’s innovative products, like self-cleaning mops, are gaining traction and pose a direct challenge to iRobot in the premium market segment.

Given the intense competition, ongoing operational challenges, and a shifting market landscape, it may be time to consider selling iRobot before its situation potentially worsens. The company’s path to recovery appears steep, and the risks seem to outweigh the potential rewards at this point.

Three Strong Conviction Buys for the Week Ahead

By
Editorial Staff
-
0

In the ever-shifting landscape of the stock market, separating the wheat from the chaff is no easy feat. It’s a world where the wrong picks can erode your hard-earned gains, but the right ones? They have the power to catapult your portfolio to new heights. With thousands of stocks in the fray, pinpointing those poised for a breakthrough can feel like searching for a needle in a haystack.

This is where we step in. Every week, we comb through the market’s labyrinth, scrutinizing trends, earnings reports, and industry shifts. Our goal? To distill this vast universe of stocks down to a select few – those unique opportunities that are primed for significant movement in the near future.

This week, we’ve zeroed in on three standout stocks. These aren’t your run-of-the-mill picks; they are the culmination of rigorous analysis and strategic foresight. We’re talking about stocks that not only show promise in the immediate term but also hold the potential for sustained growth.

Meta Platforms Inc. (META) – “Leveraging AI for a New Wave of Growth”

Meta Platforms Inc. (NASDAQ: META) has long been seen as a digital advertising powerhouse, but the company’s latest investments in artificial intelligence (AI) could set the stage for a new phase of growth. Earlier this year, Meta’s CFO Susan Li announced plans to spend $37 billion on digital infrastructure in 2024. While this move might seem surprising for a company that doesn’t sell cloud services like some of its tech peers, the reasoning becomes clearer when looking at Meta’s expanding product lineup.

One of Meta’s most intriguing ventures is its partnership with Ray-Ban to develop AI-enabled smart glasses. These glasses, which weigh only five grams more than standard sunglasses, have become an unexpected hit, especially among visually impaired users. The glasses can snap pictures and provide real-time descriptions of what the user is seeing—an innovation driven by Meta’s AI efforts.

Additionally, Meta’s development of Llama 3, its latest large language model, has accelerated its capabilities in image recognition and language translation, further enhancing its smart wearables. The most recent version, Llama 8b, is now considered the fastest and most affordable among current-generation language models, providing Meta with a strong foothold in the AI space.

While Meta’s core business still revolves around digital advertising, which is expected to see a 17.5% revenue jump in the third quarter—thanks in part to increased spending during the upcoming election year—its foray into AI and wearables adds significant upside potential. Investors buying Meta today are getting exposure to both a well-established digital advertising business and the exciting possibilities in AI-driven products like smart glasses and augmented reality devices.

With Meta’s focus on AI, smart wearables, and its continued dominance in digital advertising, it remains a strong contender for long-term growth, providing a blend of stability and innovation.

Informatica Inc. (INFA) – “Undervalued AI Data Management with Big Potential”

Informatica Inc. (NYSE: INFA) has been making steady progress since going public in 2021, focusing on AI-powered cloud data management through its Intelligent Data Management Cloud (IDMC) platform. Over the past three years, Informatica has achieved an average revenue growth of 6.4%, with analysts projecting that growth to accelerate to 9% by 2027.

Despite these promising fundamentals, Informatica’s stock has experienced a volatile year. After hitting a high of $40 in April, the stock dropped to $23 before settling just above $24. For value investors, this might signal an opportunity. With free cash flows expected to reach $431 million this year (equivalent to $1.43 per share), some models justify a share price between $40 and $50—suggesting an upside of over 90% from its current levels.

But it’s not just about value. Informatica’s strong position in AI-driven cloud data management makes it appealing to growth investors as well. With a net retention rate of 126% in Q2, the company is excelling at retaining and growing its customer base. As enterprises increasingly adopt cloud storage and AI, companies like Informatica are essential in managing this data, providing cost controls and insights that businesses depend on.

Given the current market, Informatica also looks like an acquisition target. With fast-moving industry consolidation, major players like Salesforce (CRM) could make a move to acquire a company with a solid platform like Informatica. Any potential buyer is likely to offer at least $35 per share, providing additional upside for investors.

With both value and growth potential, Informatica looks well-positioned for future gains.

Coca-Cola FEMSA (KOF) – “Defensive Play for Election Volatility”

Coca-Cola FEMSA (NYSE: KOF) looks like a solid defensive buy for investors looking to hedge against the upcoming election volatility. Shares of the Mexico-based Coke bottler were recently upgraded to a buy rating, with Goldman Sachs setting a new 12-month price target of $113.70, a notable increase from its previous target of $108.30. With shares currently trading around $84.24, this implies a potential upside of 35%.

The stock has dropped 9% this year, presenting what analysts see as an attractive entry point. Coca-Cola FEMSA’s demand is expected to remain resilient due to the inelastic nature of soft drink consumption in Mexico, meaning price changes are unlikely to significantly impact demand. The company has seen positive low-single-digit volume growth, with pricing power that has generally outpaced inflation.

Goldman Sachs also highlights growth opportunities in other regions, particularly Brazil. Coca-Cola FEMSA is investing heavily in expanding its network, with 25 new production lines expected to be added by 2025. Meanwhile, costs in Mexico are expected to moderate in the low single digits, while prices are set to rise in the mid-single digits in the second half of 2024.

Given the stock’s defensive nature, exposure to less discretionary industries, and strong pricing power, Coca-Cola FEMSA is well-positioned to navigate potential market volatility stemming from the Mexican presidential transition and the upcoming U.S. election. For investors looking for a steady, resilient performer in uncertain times, Coca-Cola FEMSA is a stock worth considering.

September Watchlist: 3 High-Potential Stocks to Buy this Month

By
Editorial Staff
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0

As we head into September, certain stocks are showing strong potential despite the recent market turbulence. While stocks rebounded in late August, the start of this month has been choppy for the major indexes. Investors are on edge, bracing for more volatility, but that also creates opportunities. Here are some key names to watch that could see significant upside in the near term.

Fifth Third Bancorp (FITB) – “Benefiting from a Soft Landing”

Fifth Third Bancorp (NASDAQ: FITB) is one of the standout names this September. The stock is up 22% year-to-date, and Wolfe Research sees more upside, with a price target that implies over 16% potential growth. One of the reasons Fifth Third is in such a strong position is its minimal exposure to commercial real estate and its focus on high-quality consumer lending.

The firm expects record net interest income next year, assuming the Federal Reserve implements five 25 basis point rate cuts through the end of 2025. With a 3.3% dividend yield and solid financials, Fifth Third could be a safe bet for investors looking to navigate potential market instability.

Adobe (ADBE) – “Riding the AI Wave”

Though Adobe (NASDAQ: ADBE) is down 3.6% year-to-date, the stock has seen a massive 28% rise in the past three months after beating expectations in its fiscal second-quarter results. Wolfe sees this momentum continuing, with a price target of $685, representing a 19% upside.

What makes Adobe stand out is its dominant position in the creative design and enterprise software markets. As AI continues to reshape industries, Adobe is expected to benefit from faster subscription growth and better monetization, especially considering its vast installed base. This gives Adobe a solid competitive moat, making it a compelling choice for those looking to capitalize on the AI-driven future.

Vertiv (VRT) – “Poised for Strong Earnings Growth”

Vertiv (NYSE: VRT), a digital infrastructure company, has been performing impressively this year, with shares up 56% year-to-date. Wolfe sees even more upside, projecting a 41% gain from current levels. Vertiv has faced challenges from inflationary pressures in recent years, but the company’s strategic pricing response has turned things around. Now, with strong volume leverage and pricing power, Vertiv is poised to achieve over 20% profit margins.

With momentum in its end markets and improved earnings outlook, Vertiv looks like a solid growth opportunity in the tech infrastructure space.

Three Defensive Dividend Payers to Ride Out Market Storms

By
Editorial Staff
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0

In times of market turbulence, smart investors often turn to stocks that not only provide stable dividend payments but also exhibit resilience in their stock performance. Defensive sectors can shine in these bearish phases, offering not just safety but also a steady income stream. Here’s a closer look at three such stocks, each standing out with their solid dividends and promising technical setups.

AT&T (T): A Telecom Titan on the Rise

AT&T has bucked the downtrend that has ensnared tech giants like Alphabet and Meta Platforms this month. The stock achieved a key technical breakout in late June, surpassing the February high of $18.20. This upward movement was supported by a rebound from the 50-day moving average, underscoring a robust pattern of higher highs and higher lows. Currently offering a dividend yield of about 5.7%, AT&T not only promises capital appreciation but also handsomely rewards its shareholders with one of the higher dividend yields in the sector.

British American Tobacco PLC (BTI): Gearing Up for Growth

While U.S. counterparts like Altria and Philip Morris have seen their prices surge this year, British American Tobacco appears just at the cusp of its growth phase. The stock, with a hefty dividend yield of over 8%, offers a significant income advantage. After languishing below a downward-sloping 200-day moving average throughout 2023, BTI showed signs of a turnaround this April, marking a potential double bottom pattern. Since then, it has charted a steady course of higher highs and higher lows, recently breaching key moving averages to signal a promising uptrend.

Eversource Energy (ES): A Utility Uptrend

In the utilities sector, known for its low volatility and high dividend yields, Eversource Energy stands out, especially with recent sector improvements. Similar to BTI, ES spent 2023 underperforming but established a firm double bottom pattern early in 2024, finding strong support around $52. After a quiet mid-year, the stock has broken to new three-month highs post-July, underpinned by a dividend yield of approximately 4.5%. This performance suggests that Eversource may be entering a new phase of growth, making it an attractive pick for those seeking both safety and income.

Navigating Market Uncertainties with Confidence

When broader market indices like the S&P 500 and Nasdaq show signs of weakness, turning to defensive stocks with strong dividends and stable technical charts can safeguard investments while providing essential income. AT&T, British American Tobacco, and Eversource Energy each offer a combination of reliability and potential growth that can serve investors well during uncertain times. Whether the market zigs or zags, these stocks are positioned to provide a buffer against volatility and a pathway to consistent returns.

Defensive Picks for September

By
Editorial Staff
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0

In a landscape where growth concerns dominate, our strategic focus on defensive quality stocks offers a pathway for investors seeking stability in uncertain times. This refined approach comes at a time when market volatility remains pronounced and the outlook increasingly hinges on economic growth rather than just inflationary pressures. Here are three compelling stocks that stand out for their robust fundamentals and growth potential, aligning with our criteria for defensive investing.

Public Service Enterprise Group (PSEG) (NYSE: PEG)

Positioned for Stability and Growth

Public Service Enterprise Group, known for its consistent performance in the utilities sector, emerges as a top pick. The company’s steady cash flow generation and commitment to sustainable energy solutions underscore its appeal in a defensive portfolio. With a robust infrastructure that supports both traditional and renewable energy sources, PSEG is well-positioned to navigate the evolving energy landscape.

AbbVie (NYSE: ABBV)

A Pharmaceutical Leader with a Promising Future

Despite challenges from competition for its blockbuster drug, Humira, AbbVie remains a standout in the pharmaceutical industry. The company’s focused efforts on diversifying its drug pipeline have poised it to deliver above-average revenue and earnings growth. Key immunology treatments continue to show strong sales momentum, ensuring that AbbVie remains a top contender in biotech. With analysts setting a conservative price target that reflects a modest upside, the stock’s 23% year-to-date gain reinforces its stable market position.

Northrop Grumman (NYSE: NOC)

A Defense Powerhouse with Long-term Value

Northrop Grumman secures its place on the list with its significant role in national defense, particularly through its involvement in the U.S. nuclear triad. Morgan Stanley’s optimism about the stock is reflected in an ambitious price target that suggests nearly 20% potential upside, highlighting its undervalued status amid peers. The company’s commitment to innovation and its robust financial health make it a solid investment for those seeking defense sector exposure with reliable returns.

Meta Platforms (NASDAQ: META)

Tech Innovation with a Robust Outlook

As one of the few tech giants to make the list, Meta Platforms is recognized for its ability to adapt and thrive amid macroeconomic shifts. The company’s advancements in artificial intelligence have significantly enhanced user engagement and revenue opportunities. Despite a high baseline set by its peers, Meta’s impressive year-to-date surge of over 45% is a testament to its ongoing relevance and leadership in the tech space.

Each of these stocks embodies the characteristics of defensive quality: resilience, growth potential, and stability, making them worthy of consideration for investors looking to fortify their portfolios against ongoing market fluctuations.

Long-Term Bullish on Nvidia? Here’s How to Hedge Against a Post-Earnings Pullback

By
Editorial Staff
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0

Nvidia (NVDA) has been a key player in the AI-driven market surge over the last 18 months, thanks to its dominant position in the GPU space, which is critical for AI computation. As the company continues to invest heavily to maintain its leadership, investors are eager to see when these investments will start to significantly boost revenue. However, with Nvidia’s earnings report due after the close on Wednesday, there’s growing concern about the possibility of a short-term pullback, despite long-term bullish sentiment.

Trade Outline

For investors who want to stay committed to Nvidia for the long term but are wary of potential short-term volatility, a protective options trade could be a prudent approach. Nvidia has been trading within a narrow range of $124 to $130, which could signal a breakout or breakdown following the earnings report. This range reflects the market’s uncertainty and the high stakes surrounding the upcoming earnings.

Given the stretched valuations due to Nvidia’s leadership in AI, any earnings miss or a less-than-expected outlook could trigger a significant drop in the stock price. To guard against this downside risk, a put vertical spread using options with a September 20 expiration is recommended:

  • Buy the $125 put at $7.55
  • Sell the $110 put at $2.56
  • Net Trade Cost: $4.99 per share
  • Maximum Potential Profit: $1,001
  • Maximum Potential Loss: $499

This strategy provides substantial downside protection, covering a potential 14% drop in Nvidia’s stock price while capping the risk to just 4% of the position. Should Nvidia’s earnings exceed expectations, the trade’s upside is only reduced by the cost of the put spread. However, in the event of a significant downturn due to disappointing earnings, this strategy offers the potential to double the amount risked, effectively cushioning against sharp losses.

Bear Watch Weekly: Stocks to Sideline Now

By
Editorial Staff
-
0

The right stocks can make you rich and change your life.

The wrong stocks, though… They can do a whole lot more than just “underperform.” If only! They can eviscerate your wealth, bleeding out your hard-won profits.

They’re pure portfolio poison.

Surprisingly, not many investors want to talk about this. You certainly don’t hear about the danger in the mainstream media – until it’s too late.

That’s not to suggest they’re obscure companies – some of the “toxic stocks” I’m going to name for you are in fact regularly in the headlines for other reasons, often in glowing terms.

I’m going to run down the list and give you the chance to learn the names of three companies I think everyone should own instead.

But first, if you own any or all of these “toxic stocks,” sell them today…

 Lucid Motors (LCID) – Time to Lock in Gains

Lucid Motors, known for its sleek electric vehicles, has seen its shares climb an impressive 48% over the past six months. Despite this rally, spurred by increased deliveries and strong backing from Saudi Arabia’s Public Investment Fund, the fundamentals suggest caution is warranted.

Recent reports show Lucid delivered a record 2,394 EVs in the second quarter after implementing significant price cuts, marking a 70% increase in deliveries. However, when we dig deeper into the financials, the picture becomes less optimistic. Lucid trades at a lofty 15.2x sales, nearly double that of industry leader Tesla and almost five times higher than Rivian.

The valuation becomes even harder to justify considering Lucid’s distance from profitability. With a five-year net income CAGR of -31% and the lowest gross margins among American EV makers, Lucid faces a steep path to financial health. The disparity in scale is stark when compared to Tesla, which delivered 444,000 EVs in its most recent quarter against Lucid’s 2,394.

While Lucid’s recent performance might tempt investors to hold on for more growth, the current stock price may not be sustainable given the underlying financial challenges and the massive capex required to scale operations. Now may be the right time to sell LCID and secure any gains from the recent price surge, especially for those looking to manage risk in a volatile sector.

This sell alert highlights the need for a strategic reassessment of Lucid’s position in your portfolio, considering the broader market dynamics and Lucid’s operational realities.

SunPower (SPWR) – Time to Consider Exiting

SunPower, a prominent player in the solar panel industry, has seen its market value plummet by 75% over the past year, a decline sharply felt across the sector due to dwindling residential installations. The high cost of new solar panel installations, exacerbated by persistent high interest rates, makes SunPower’s financial outlook increasingly precarious.

However, the challenges don’t stop at market conditions. SunPower is currently grappling with significant internal turmoil. The company has been in the process of restating financials for the past two years, a red flag that signals deeper issues in financial management and oversight. This situation took a more dramatic turn with the recent dismissals of both the CEO and the chief operating officer, underscoring instability at the executive level.

Adding to the company’s woes, its auditor, Ernst & Young, has decided to step back, citing concerns that prevent them from associating with SunPower’s financial statements. This move by a respected auditor is particularly alarming, as it suggests serious misgivings about the company’s financial reporting practices.

Given these myriad issues—from the structural challenges in the solar industry and adverse market conditions to internal management upheaval and auditing concerns—holding SunPower’s stock becomes increasingly risky. With no immediate resolution in sight and potential ongoing inflation, now might be the prudent time to sell SPWR shares and secure any remaining value before further declines.

Chewy (CHWY) – Time to Reevaluate Amid Volatility

Chewy has experienced a tumultuous period in the stock market, initially spurred by speculative interest but now facing a steep decline. After a surprising 34% surge last week, influenced by meme stock icon Keith Gill’s (aka “Roaring Kitty”) cryptic social media posts, Chewy’s stock momentum has reversed sharply. The decline began when it was confirmed that Gill had acquired a significant 6.6% stake in the company, investing approximately $250 million.

While this move initially fueled investor excitement, the subsequent downturn reflects growing concerns over Chewy’s financial stability and the speculative nature of its recent price movements. Long-term, value-focused investors are particularly wary, given the company’s less-than-ideal financial outlook.

Chewy’s story might seem appealing to those betting on a turnaround, especially with leadership from figures like Ryan Cohen, known for his role in reviving struggling companies. However, the current market dynamics suggest that holding onto CHWY shares could be increasingly risky.

Given the volatile nature of Chewy’s recent stock performance and the speculative reasons behind the movements, it may be wise for investors to consider securing any gains or cutting losses. Speculating on such uncertain grounds could lead to significant financial setbacks. Therefore, for those looking for stability and long-term growth, Chewy might currently be a stock to sell.

Bear Watch Weekly: Stocks to Sideline Now

By
Editorial Staff
-
0

The right stocks can make you rich and change your life.

The wrong stocks, though… They can do a whole lot more than just “underperform.” If only! They can eviscerate your wealth, bleeding out your hard-won profits.

They’re pure portfolio poison.

Surprisingly, not many investors want to talk about this. You certainly don’t hear about the danger in the mainstream media – until it’s too late.

That’s not to suggest they’re obscure companies – some of the “toxic stocks” I’m going to name for you are in fact regularly in the headlines for other reasons, often in glowing terms.

I’m going to run down the list and give you the chance to learn the names of three companies I think everyone should own instead.

But first, if you own any or all of these “toxic stocks,” sell them today…

AT&T (T) – Reassessing Amidst Persistent Challenges

AT&T’s latest quarterly results have brought some concerning trends to light, particularly within its core fiber-optic business. The telecommunications giant reported a second-quarter earnings per share of 57 cents, aligning with forecasts but marking a 10% decline from the previous year. More notably, its revenue slightly missed expectations at $29.80 billion, down 0.4% year-over-year. This miss was largely attributed to its underperforming fiber-optic segment, which added just 239,000 customers—falling short of the anticipated 248,600.

Despite these challenges, AT&T has maintained its full-year earnings guidance, projecting optimism in its broadband revenue growth of about 7%. However, the persistent issues in key areas of growth, coupled with a stock decline of 26% over the past five years, suggest deeper systemic problems. This chronic underperformance raises valid concerns about the company’s ability to compete effectively in the rapidly evolving telecommunications landscape.

Given these factors, investors may need to reassess their stake in AT&T. The company’s struggle to revitalize its core operations and its ongoing market underperformance could potentially limit future returns. In a sector where technological agility and innovation are crucial, AT&T’s current trajectory may not meet the growth and stability criteria that long-term investors seek. Considering the broader market dynamics, there might be more dynamic opportunities available that align better with growth-focused investment strategies.

SunPower (SPWR) – Heading Towards Potential Collapse

SunPower’s recent dramatic downturn presents a stark warning for investors. The company’s decision to halt new leases, installations, and shipments has triggered a precipitous 70% drop in its stock price, signaling deep underlying issues that might not be surmountable. Following this announcement, the stock plunged further, totaling a 93% decrease, which prompted Guggenheim Securities to slash its price target to $0—effectively labeling SunPower’s equity as potentially worthless.

The dire assessment by Guggenheim analysts suggests a possible winddown of operations, which could lead to asset sales and eventual delisting from the stock exchange. Adding to the concern, JPMorgan cites indefinite suspension activities due to alarming cash flow problems, a weakening balance sheet, and issues with regulatory compliance, painting a grim future for the company. Piper Sandler has even stopped covering the stock, indicating a lack of confidence in its prospects.

In the broader context, the residential solar sector has been under pressure from high interest rates, an oversupply in the market, and ongoing economic and political turbulence. Although the Inflation Reduction Act previously injected some optimism into the sector with tax credits, the effect appears to have waned, with SunPower not positioned to benefit in its current state.

For investors, the overwhelming consensus among top analysts and the severe stock performance suggest that SunPower is a stock to avoid. The risks far outweigh potential gains, making it prudent to consider more stable opportunities in the energy sector. SunPower’s challenges seem insurmountable, pointing to a scenario where distancing from this investment could protect your portfolio from further losses.

CrowdStrike (CRWD) – Considerations Amid Technical Challenges and High Valuation

CrowdStrike, a notable leader in the cybersecurity arena with its cloud-delivered endpoint and cloud workload protection platforms, is at a crossroads that could impact investor confidence. Recently, the company encountered a significant hurdle—a technical glitch that led to a global IT outage. This incident has not only questioned the reliability of CrowdStrike’s software but also exposed the company to potential financial liabilities as businesses around the world were disrupted.

Although CrowdStrike acted swiftly to rectify the issue, the repercussions of this event could linger, potentially tarnishing its reputation and affecting its financial performance. The immediate effects have already been felt in the stock’s performance, prompting investors to reassess the stability and future growth prospects of their holdings.

Adding to the concerns is CrowdStrike’s current market valuation. With a forward price-to-earnings (PE) ratio of 346x, the stock is priced substantially above the industry average. This premium is notably high even when considering CrowdStrike’s strong historical performance and leadership in the cybersecurity space. This valuation starkly contrasts with that of other top players in the field, such as Palo Alto Networks and Fortinet, who are trading at more conservative multiples and continue to aggressively expand their market presence.

Given the highly competitive nature of the cybersecurity market, CrowdStrike’s elevated valuation and recent operational hiccup could put additional pressure on the company. To maintain its market share, substantial investments in sales and marketing may become necessary, potentially impacting profit margins.For investors, these factors combined suggest that it may be prudent to reconsider their positions in CrowdStrike. The current market dynamics and internal challenges could hamper the company’s ability to sustain its premium valuation, especially if further reliability issues arise or if competition intensifies. Those holding CRWD stock may want to evaluate the risk/reward scenario in this evolving landscape, considering whether the potential for future growth justifies the ongoing investment amid heightened uncertainties

Diversify with Lesser-Known Stocks: Strategic Moves Beyond the “Magnificent Seven”

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Editorial Staff
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Seeking Value in Small-Caps and International Markets

As the market buzz continues to focus on the heavyweight tech giants known as the “Magnificent Seven,” savvy investors are turning their attention to potentially undervalued areas of the market. While companies like Alphabet, Amazon, and Apple have delivered impressive returns, their current valuations suggest a cautious approach. Instead, exploring lesser-known small-caps and international stocks could provide more appealing opportunities.

US Small-Caps: A Sector Ripe for Discovery The Russell 2000 index, a barometer for U.S. small-caps, has shown promising activity, rising 8.5% year-to-date. In contrast, larger indices like the S&P 500 and Nasdaq 100 have seen higher gains, which may leave small-caps relatively undervalued. By focusing on specific ETFs, such as the DFA Dimensional US Small Cap Value ETF and Avantis U.S. Small Cap Value ETF, investors can tap into a pool of small-cap stocks that are poised for growth. Notable holdings from these ETFs include Abercrombie & Fitch (ANF), Cadence Bank (CADE), and Commercial Metals (CMC) from DFA, along with KB Home (KBH), Jackson Financial, and Warrior Met Coal from Avantis.

Exploring Opportunities in Hong Kong Turning to the international scene, Hong Kong presents a “shopper’s paradise” for undervalued stocks, particularly in sectors that have fallen out of favor. Stocks like Chow Tai Fook, MTR Corp, and Tencent offer attractive valuations and are also available as American Depositary Receipts (ADRs), making them accessible to U.S. investors. Tencent, a major player in technology, continues to attract bullish sentiment from analysts, including a recent endorsement from Goldman Sachs.

Global Picks: Healthcare and Resources Beyond Asian markets, there are compelling opportunities in global stocks such as Fresenius Medical Care and Kazatomprom. Fresenius, a leading healthcare provider in Germany, and Kazatomprom, a major uranium producer from Kazakhstan, are stocks that have shown resilience and growth potential. While Kazatomprom has seen price adjustments, it remains a unique asset in the uranium sector.

The Case for Nestle: A Value Stock in Focus Lastly, Nestle represents a classic value stock scenario, particularly attractive due to the strength of the Swiss Franc. With shares currently trading below 100 Swiss francs—a price point seen as undervalued by the market—Nestle stands out as a stable investment with upside potential. The average price target suggests a 12.3% increase, reinforcing its status as a solid buy for value-focused investors.Conclusion: Broadening Horizons for Growth While the allure of the “Magnificent Seven” is undeniable, their high valuations and market saturation point towards exploring other areas. By diversifying into small-caps, international markets, and specific global stocks, investors can potentially achieve better risk-adjusted returns. The current market environment, characterized by pockets of undervaluation in less-traveled corners, presents a strategic opportunity to balance portfolios and tap into new growth trajectories.

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