Stocks On My Screen For Week Starting August 31ST, 2020

Every week, our model comes up with 40 stocks, 20 positive and 20 negatives, to watch for next week’s trading. The model is based on a mix of fundamental and quantitative factors, built on our proprietary database of detailed earnings model on more than 1225 U.S. listed companies. The historical data for these earnings models is sourced from SEC filings.

Performance of last week’s model portfolio was,

  • Net: -1.1%
  • Longs: 3.2%
  • Shorts:  -4.3%

Assuming 5% is dedicated to each position, resulting in 0% net exposure and no change in position size during the week.

Here are the names that came up for next week,

Positive

No.SymbolName
1UBERUber Technologies Inc.
2WKHSWorkhorse Group Inc
3NVDANVIDIA Corp.
4APIAgora Inc.
5HUBSHubSpot Inc.
6MITKMitek Systems Inc.
7COSTCostco Wholesale Corporation
8QCOMQUALCOMM Inc.
9ZZillow Group Inc.
10SNAPSnap Inc.
11DOYUDouYu International Holdings Limited
12ENVAEnova Investment Inc.
13NOWServiceNow Inc.
14WKWorkiva Inc.
15TXTernium S.A.
16GDDYGoDaddy Inc.
17LINCLincoln Educational Services Corporation
18LPROOpen Lending Corporation
19MAMastercard Inc.
20ALAir Lease Corporation

Negative

No.SymbolName
1NFLXNetflix Inc.
2MELIMercadoLibre Inc.
3WWayfair Inc.
4WBAWalgreens Boots Alliance Inc.
5DAOYoudao Inc.
6CTSCTS Corporation
7HCATHealth Catalyst Inc.
8INSGInseego Corp.
9VSTOVista Outdoor Inc.
10ALLTAllot Ltd.
11BESTBEST Inc.
12EPAYBottomline Technologies Inc.
13WWWW International Inc.
14BMIBadger Meter Inc.
15FTSFortis Inc.
16SATSEchoStar Corporation
17HAINThe Hain Celestial Group Inc.
18CLIMack-Cali Realty Corporation
19STMPStamps.com Inc.
20ZTOZTO Express (Cayman) Inc.

Trends visible in stocks for next week list

Large fast-growing technology names, aka the ‘new-age’ safety trade, continues to outperform or maybe the only names performing given the markets are driven by a handful of stocks, i.e. the likes of Tesla, NVIDIA, Zillow, etc. Yes, much to the annoyance of value-oriented investors.

Another interesting trend visible in the market is that investors are quick to reap profits on breakouts and not forgiving to stocks of companies coming out with weak numbers, i.e. weak relative to the expectations, irrespective of the sector. Right now, the trend is more visible in small and mid-cap names, but the same may soon catch up with large-cap names as well.

Last week, we talked about not expecting any major correction or retracement in the near-term given close to $5.5 trillion cash on the sidelines and the volumes may remain thin till Labor Day. Investor’s confidence is visible in how the market is warming up to the highly leveraged names, e.g. Aramark or Herc Holdings, suggesting ‘bottom-fishing’ taking holding or maybe value guys are finally throwing in the towel and participating.   

Positives  

Over the last month, only four electric vehicle stocks have dominated the space – Tesla, NIO Limited, Nikola, and Tortoise Acquisition (to be merged with Hyliion), with the stock of each up between 50-100%, but we believe other players will soon join this second-leg of the rally. If this year was when investors woke up to the promise of electric vehicles, next year will separate companies that can back the promise with deliveries. Secondly, investors have started to warm up to truck manufacturers after cars and other electric vehicles may soon join the party.

Why does Workhorse Group continues to be on the weekly list? The strength of the fundamentals of the business have been covered in our previous reports on the name and the recent success of DiamondPeak Holdings, which will merge with Lordstown Motors, U.S. based EV manufacturer with a ready product, in which Workhorse owns 10% besides some royalty arrangements.

Workhorse Group Stock compared to Tesla NIO Nikola Hyliion

After the first leg, most EV players with decent fundamentals consolidated for a few weeks and then moved to the second leg of the rally. Workhorse is entering into the 8th week. The stock continues to hold well besides numerous hack job of articles and negative rumors about the USPS contract, suggesting both the growing understanding of the name among long-term institutional investors as well as the strength of the technical chart.

Negatives

For the last few weeks, our bearish call on the stocks of China-based businesses worked well, but the risk-reward trade-off seems less favorable. Yes, there are names on the list; the number of names on this week’s negative list is much less than the previous week.

Slow-growth technology names that run up with the broader love for anything tech may be in trouble soon given the latest quarterly numbers have demarcated the tech businesses that are more exposed to cyclical headwinds than others and with high valuations, they may act as a good source of capital for new ideas for the next year.

Have a great weekend and happy hunting!

DISCLAIMER: These are NOT investment recommendations.

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