Investors must look for quality, strong stocks in bear market: Expert
Haverford Trust Company co-CIO Henry Smith says pent-up consumer demand will drive recovery.
U.S. equity markets tumbled Friday after a dismal March jobs report showing the COVID-19 pandemic hit the U.S. economy harder than expected.
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The Dow Jones Industrial Average fell 203 points, or 0.95 percent, in morning trading as unemployment surged to a level near the worst of the Trump era. The S&P 500 and Nasdaq Composite dropped 0.67 percent and 0.65 percent, respectively.
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The Labor Department said the U.S. economy lost 701,000 nonfarm jobs in the month as the unemployment rate climbed to 4.4 percent. Wall Street economists surveyed by Refinitiv were anticipating a loss of 100,000 jobs and an unemployment rate of 3.8 percent.
The U.S. economy had added 273,000 jobs in February as the unemployment rate ticked down to 3.5 percent.
Meanwhile, oil continued higher, with West Texas Intermediate crude up 12 percent near $28.25 per barrel, after reports indicated OPEC and its allies will hold a virtual meeting on Monday in an attempt to end the price war between Russia and Saudi Arabia.
Exxon Mobil, Chevron and Continental Resources were among the names in focus as oil executives were set to meet with President Trump on Friday.
EXXON MOBIL CORPORATION
Elsewhere, Tesla shares surged after the electric-vehicle maker reported record first-quarter deliveries despite disruptions caused by the pandemic. The company delivered 88,400 vehicles in the quarter, up from about 63,000 a year earlier.
Bed Bath & Beyond announced it was furloughing the majority of its workers until at least May 2.
On the earnings front, amusement company Dave & Buster’s reported better-than-expected top- and bottom-line results, but suspended its dividend and share buyback program.
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Pet-food seller Chewy reported a smaller-than-anticipated loss and in-line revenue.
U.S. Treasurys gained ground, pushing the yield on the 10-year note lower by 3.7 basis points to 0.59 percent.
In Europe, markets were lower across the board, with Britain’s FTSE down 0.85 percent, France’s CAC lower by 1.2 percent and Germany’s DAX weaker by 0.2 percent.
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Asian markets were mixed with Japan’s Nikkei edging up 0.01 percent while China’s Shanghai Composite and Hong Kong’s Hang Seng slid 0.6 percent and 0.19 percent, respectively.
When billionaire Bill Ackman went on television last week to tearfully warn that “hell is coming” and beg the White House to shut down the country for 30 days, he was knee deep in a bet against the markets that netted him $2.6 billion.
In a Wednesday note to investors of his Pershing Square fund, Ackman said he cashed out of a credit hedge on Monday for a profit of $2.6 billion. The hedge, which he started building on March 3, cost him roughly $27 million and scored big as stock and debt markets floundered on fears of the coming pandemic — fears, critics say, that he helped stoke.
After firing off a tweetstorm to President Trump on March 17 proposing that the US impose a nationwide “extended spring break” to combat the virus’ spread, Ackman called into CNBC the next morning. In an emotional interview, he claimed to have locked down in late February after realizing how deadly the pandemic was going to be for people like his immuno-compromised septuagenarian father.
“Everyone feels, you know, 99 percent chance I’ll be OK!’” Ackman said on the air. “But it’s not you: It’s the person you give it to. I am not going to kill my father, OK?”
After his CNBC appearance, Ackman was lambasted by critics for helping an already depressed stock market sink lower. “Please get Ackman off CNBC before people start jumping off bridges,” fellow billionaire and ex-hedge fund manager Michael Novogratz tweeted.
Now the size of Ackman’s profit — tied to credit spreads widening as investors ran for safety — is turning heads again.
“It looks like a hell of a trade,” quipped one trader at a large bank who read Ackman’s Wednesday letter. “I guess Bill was crying on TV for a lot of reasons. Tears of joy.”
Sources close to Ackman say he’s lost money overall given his exposure to stocks, resulting in a loss of 6.5 percent for the year in early March. And they point out that he was one of the first financiers to close his office and tell staff to work from home in order to prevent the spread of the virus in late February.
“Maybe it had something to do with what was going on in the world,” one source quipped about the global stock rout.
During his CNBC interview, Ackman said he would buy stocks based on his confidence that Trump would follow his advice. He was particularly bullish about stock in Hilton Hotels, which he predicted would “go to zero” if radical action wasn’t taken against the virus.
In his Wednesday letter, Ackman told investors that “substantially all of the proceeds” from his $2.6 billion windfall would be used to buy more stock in current investments, like Hilton, Starbucks, Restaurant Brands and Lowe’s.
Trump tweets support for coronavirus response spending bill
In a tweet, President Trump calls for both parties to vote for the coronavirus response bill and says it will include free virus testing and paid sick leave.
WASHINGTON — The House approved legislation Saturday to provide direct relief to Americans suffering physically, financially and emotionally from the coronavirus pandemic. Passage came after President Donald Trump had declared the outbreak a national emergency, freeing up money and resources to fight it, and threw his support behind the congressional aid package.
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From the Rose Garden, Trump said, “I am officially declaring a national emergency," unleashing as much as $50 billion for state and local governments to respond to the crisis.
Trump also announced a range of executive actions, including a new public-private partnership to expand coronavirus testing capabilities with drive-through locations, as Washington tries to subdue the virus whose spread is roiling markets, shuttering institutions and disrupting the lives of everyday Americans.
But he asserted “I don't take responsibility at all" for the slow rollout of testing.
TRUMP DECLARES NATIONAL EMERGENCY IN RESPONSE TO CORONAVIRUS CRISIS
The hard-fought aid package will provide free testing, sick pay for workers, enhanced unemployment benefits and bolstered food programs.
The House passed the bill after midnight on a bipartisan vote, 363-40. It now goes to the Senate.
“We did what we said we were going to do: Put families first,” said House Speaker Nancy Pelosi.
Trump: We had ‘largest 1-day increase in the stock market in history’
President Trump celebrates stock market gains while speaking to supporters at a ‘Keep America Great’ rally in Charlotte, N.C.
The Federal Reserve's emergency rate failed to calm skittish investors.
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U.S. equity markets tumbled and the 10-year Treasury yield hit a record low after Chairman Jerome Powell explained the intra-meeting rate cut was designed to cushion the economy from any coronavirus-related fallout.
The Dow Jones Industrials sank nearly 800 points or 3 percent and traded in a more than 700-point range, swinging between gains and losses, as investors digested the Fed's move.
The S&P 500 and the Nasdaq also lost close to 3 percent.
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The rate cut, which came hours after G7 leaders pledged to use "all appropriate policy tools" to safeguard against downside risks caused by the outbreak, lowered the central bank's key interest rate by 50 basis points to a range of 1 percent to 1.25 percent. The benchmark 10-year yield fell by 10 basis points to a new low of 0.984 percent.
"My colleagues and I took this action to help the U.S. economy keep strong," Powell said at a news conference. "The virus and the measures being taken to contain it will surely weigh on economic activity both here and abroad for some time."
Financials took a hit as lower rates mean banks and other lenders are forced to offer lower borrowing costs which may impact profits at some point. The flip side is consumers can borrow at cheaper rates.
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The coronavirus has sickened at least 88,948 people worldwide and killed 3,043, according to the latest figures from the World Health Organization.
As traders keep an eye on any coronavirus-related developments, they will also be monitoring the results of Super Tuesday primaries that will award 1,357 delegates to the Democratic Party’s presidential contenders.
Looking at stocks, Delta Air Lines gained after Warren Buffett’s Berkshire Hathaway raised its stake by about 1 million shares. The stock had lost as much as 20 percent during the market’s recent seven-day selloff. Competitors American Airlines and United Airlines were unable to maintain early gains on the news.
Electric-car manufacturer Tesla soared after a JMP analyst upgraded its shares to “outperform” and set a $1,060 price target, citing sustainable growth for the next four to five years.
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On the earnings front, Target reported mixed fourth-quarter results and issued a disappointing full-year profit forecast.
Clothing retailer Kohl’s reported a stronger-than-expected quarterly profit, however, and raised its dividend. The company’s 2020 earnings forecast also exceeded estimates.
Meanwhile, cannabis producer Tilray was under pressure after reporting a bigger fourth-quarter loss than estimated.
Commodities rallied as West Texas Intermediate crude rose to the $47 per barrel level and gold spiked 3.2 percent to $1,636 an ounce.
In Europe, markets were higher across the board, with Germany’s DAX gaining 2.1 percent while Britain’s FTSE and France’s CAC were both higher by 1.8 percent.
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Overnight, Asian markets ended mixed as China’s Shanghai Composite added 0.7 percent and Japan’s Nikkei fell 1.2 percent. Hong Kong’s Hang Seng was little changed.
WASHINGTON — Intelligence officials say Russia is interfering with the 2020 election to try to help President Donald Trump get reelected, The New York Times reported Thursday.
The Times said intelligence officials told lawmakers about the interference in a Feb. 13 closed-door briefing to the House Intelligence Committee. It said the disclosure angered Trump, who complained the Democrats would use the information against him. He berated the outgoing director of national intelligence, Joseph Maguire, the next day.
The Times attributed the report to five unidentified people familiar with the matter. The Associated Press could not immediately confirm the account.
U.S. intelligence agencies say Russia interfered in the 2016 election through social media campaigns and stealing and distributing emails from Democratic accounts. They say Russia was trying to boost Trump’s campaign and add chaos to the American political process. Special counsel Robert Mueller concluded that Russian interference was “sweeping and systematic,” but he did not find a criminal conspiracy between Russia and the Trump campaign. Trump has doubted the findings of Russian interference.
In the House briefing, Trump’s allies challenged the DNI’s chief election official, Shelby Pierson, who delivered the conclusions, saying Trump has been tough on Russia, the Times reported. But Trump has also spoken warmly of Russian leader Vladimir Putin and withdrawn troops from areas, like Syria, where Moscow could fill the vacuum. He delayed military aid last year to Ukraine, a Russian adversary — a decision that was at the core of his impeachment proceedings.
The Times said Trump was angry that the House briefing was made before the panel’s chairman, Rep. Adam Schiff, who led the impeachment proceedings.
Trump on Thursday formally appointed Richard Grenell, the U.S. ambassador to Germany and a loyal supporter, to replace Maguire as the new acting director of national intelligence. Maguire was required to step down soon under federal law governing acting appointments. The Times cited two administration officials as saying the timing, after the intelligence briefing, was coincidental.
At an open hearing this month, FBI Director Christopher Wray told the House Judiciary Committee that Russia was engaged in “information warfare” heading into the November election, but that law enforcement had not seen efforts to target America’s infrastructure. He said Russia is relying on a covert social media campaign to divide the American public and sow discord.
Las Vegas debate a ‘disaster’ for Bloomberg: Herman Cain
The New Voice CEO and former presidential candidate Herman Cain discusses the outcome of the Democratic debate in Las Vegas, Michael Bloomberg’s performance and the likelihood of Bernie Sanders winning the nomination.
Mike Bloomberg spent the past three months saturating airwaves across the country with $400 million worth of ads, enough to catapult him into third place in the hotly contested Democratic presidential election and secure him a spot on the Las Vegas debate stage.
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But on Wednesday night, in his first nationally televised presidential debate, the three-time New York City mayor risked losing those early gains.
Bloomberg, who bore the brunt of attacks from progressives and moderates alike, stumbled through the ninth Democratic debate, appearing detached, unprepared for the expected attacks and out of touch with American voters.
The razing of Bloomberg began within minutes of the debate, with Massachusetts Sen. Elizabeth Warren delivering a scathing takedown of the 78-year-old billionaire: "I'd like to talk about who we're running against: a billionaire who calls women 'fat broads' and 'horse-faced lesbians,'" she began. "And no, I'm not talking about Donald Trump, I'm talking about Mayor Bloomberg."
BLOOMBERG CAMPAIGN ZEROES IN ON SANDERS, CASTS OFF BIDEN
He offered a questionable reason for why he hasn't released his tax returns yet — "I can't go to TurboTax," he quipped, unintentionally highlighting the astronomical gap between his own fortune and the average American — and struggled to counter attacks from Vermont Sen. Bernie Sanders, former Vice President Joe Biden and Warren on his warm embrace of stop-and-frisk, the controversial policing strategy that disproportionately targeted men of color.
"If I go back and look at my time in office, the one thing I am really worried about, embarrassed about, is how it turned out with stop-and-frisk," he said. But the comment, which stopped short of a full apology, left an opening for Biden to argue that "it's not whether he apologized or not. It's the policy. The policy was abhorrent."
In 2020, shares of NVIDIA Corporation (NVDA) have gained 23%. The stock has been helped by big buy demand for the shares. This buying started in the second half of 2019. I actually wrote about this signal back in October, and you can read that post here. Shares have popped 40% since then.
A great way to uncover tomorrow's winners is to look for great stocks seeing big buy activity, and NVIDIA could be just the opportunity. The stock has been gaining for years. Smart money managers are always looking to bet on the next outlier stocks … the best in class. For Mapsignals, it's not enough to look at technicals and fundamentals alone. The key lies in the demand for shares … the big money.
I'll go into the fundamental picture later, but the true tell on the near-term trajectory of a stock lies in its trading activity. Simply put, it's all about supply and demand. When demand is higher than supply, the stock rises. When demand is lower than supply, stocks fall. For 2020, NVIDIA stock has seen strong demand – i.e., big buying. Semiconductor stocks were one of the best performing groups last year.
For Mapsignals, when we look for an entry on a leading stock, we look for big money signals. Just to show you what our big money activity signals look like, have a look at all of the big money (unusual institutional) signals NVIDIA stock has made over the past year. Focusing on February, you can see a lot of buy signals (green) throughout the month. What's happening now is big buying rushing in:
Just in 2020, NVIDIA stock has signaled four big money buy signals, indicative of buying in the shares (see chart above). This shows that traders are likely thinking the shares are poised to head higher. These data points suggest that big money appetite for the stock is high.
If you are going to make a bet on the direction of a stock, it is prudent to pay attention to how the shares are trading. Based on history, the odds suggest that NVIDIA stock is poised for gains. The big money is always looking for an opportunity to buy shares on the cheap. It's all about playing the odds by not fighting the trend.
Mapsignals' goal is to identify tomorrow's top stocks today. We're basically looking for outlier companies with healthy fundamentals accompanied by big money signals (outsized institutional activity). We are looking for the big money bets because big money moves stocks. By studying these data points, we can make an educated guess as to which stocks institutions are trafficking in and marry this information with fundamentally sound companies. We want the odds on our side when looking for the highest-quality stocks.
When we decide on a long candidate, we consider leaders that have a history of technical outperformance. When they show leadership, we see these as opportunities. Below are a few areas in which NVIDIA stock has grabbed our attention:
One-year outperformance vs. market: +65.16% vs. SPDR S&P 500 ETF Trust (SPY)
One-year outperformance vs. semiconductor ETF: +40.58% vs. VanEck Vectors Semiconductor ETF (SMH)
Recent big money buy signals
Now, we take it a step further and score the best stocks showing big money trading activity. Below you can see that NVIDIA has recently shown top-rated signals for Mapsignals. The following chart is since 2015. The main takeaway is how the signals tend to precede a lift in the share price. We think there is a rush by investors to own the shares:
On top of a long-term technical picture that is strong, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, NVIDIA's earnings growth is very strong, and its revenue growth rate is impressive. We think the ramp-up in top semiconductor stocks will cause the revenue growth rate to remain elevated:
Three-year revenue growth rate: +18.13%
Three-year earnings growth rate: +22.16%
NVIDIA shares are breaking out as the market sits near highs. The company is quietly gaining with demand for its shares. We like the long-term story of the stock. The narrative for NVIDIA and other high-quality semiconductor stocks is one of a growth cycle in the years ahead.
We are always on the lookout for great companies pressing higher year after year. The best companies in a group tend to outperform over the long run. All of this points to a long-term opportunity for the stock.
The Bottom Line
NVIDIA stock is breaking out with buying pressure. Our big money indicator is signaling that we should take notice. Shares could be positioned for more upside. Given the historical growth in share price and growing fundamentals, this stock could be worth a spot in a growth-oriented portfolio.
Disclosure: The author holds no position in NVIDIA shares at the time of publication.