Stocks On My Screen For Week Starting January 11th, 2021

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 my proprietary database of detailed earnings model on more than 1325 U.S. listed companies. The historical data for these earnings models is sourced from SEC filings.

Performance of last week’s model portfolio for the week was,

  • Net: 2.2%
  • Longs: 7.0%
  • Shorts:  -4.8%

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
1NIONIO Limited
2WKHSWorkhorse Group Inc.
3FUBOfuboTV Inc.
4ARCARC Document Solutions Inc.
5CURICuriosityStream Inc.
6LILi Auto Inc.
7UBERUber Technologies Inc.
8DASHDoorDash Inc.
9DADADada Nexus Limited
10AEOAmerican Eagle Outfitters Inc.
11MXLMaxLinear Inc.
12LTHMLivent Corporation
13LPROOpen Lending Corporation
14NUANNuance Communications Inc.
15LITELumentum Holdings Inc.
16SIGSignet Jewelers Limited
17WSCWillScot Mobile Mini Holdings Corp.
18GDSGDS Holdings Limited
19ALGMAllegro MicroSystems Inc.
20TMETencent Music Entertainment Group
This is NOT an investment recommendation

Negative

No.SymbolName
1ZMZoom Video Communications Inc.
2NFLXNetflix Inc.
3AMZNAmazon.com Inc.
4DLRDigital Realty Trust Inc.
5AVBAvalonBay Communities Inc.
6SPLKSplunk Inc.
7TALTAL Education Group
8WWWW International Inc.
9BIGBig Lots Inc.
10BGSB&G Foods Inc.
11FTSFortis Inc.
12CLIMack-Cali Realty Corporation
13CPBCampbell Soup Company
14OSTKOverstock Inc.
15RBARitchie Bros Auctioneers Inc.
16PROPROS Holdings Inc.
17FIZZNational Beverage Corp.
18IRMIron Mountain Inc.
19PEAKHealthpeak Properties Inc.
20WENThe Wendy’s Company
This is NOT an investment recommendation

Trends visible in stocks for next week list

Relatively, almost every valuation metrics is supporting a bigger shift towards value names, but almost every major quantitative metric is gunning for continuation of the trend, i.e. stick with the growth. The key question is what can change that? Fourth quarter results may force investors to look at valuation again but until then hard to fight the trend.

Compared to small and medium cap, large cap names look not just a safer bet if volatility increases, as some technical analysts predict, but also better positioned to monetize earnings recovery as Covid-19 vaccine rolls out.

Yes, high growth and Beta names are back again, but my fundamental screens are telling me that subscription-based revenue driven names may not command the kind of investor excitement they commanded in last year’s rally.

Bitcoin price movement may prove to be a better predictor of inflation than the price of gold this time. Gold price has corrected but almost all other major commodities are holding up strong just when recovery is beginning to take hold. I think we are heading towards tight capacity and challenges in capital expansion.

Positives

Chinese ADRs took a major sigh of relief after the US Senate election results. Fundamentally, a lot of names were already trading at a significant discount to the similar business out of the US and with quantitative support now, these names seem well positioned to outperform. There are five names in this week’s positive list.

Pharmacy stores, i.e. CVS, Walgreens and Rite-Aid, look very exciting around these levels. None of the names are in this week’s list due to the relative nature of the list, but worth a closer look nonetheless, especially for risk-averse investors.

Financials, especially those focused on sub-prime borrowers, seem to be coming out of funk. Companies aggressively provisioned for losses, but the consumer held up well and now that the recovery is taking shape, the names look very promising.

Semiconductor names are starting to draw investor interest and the trend may sustain for a while. Yes, economic recovery usually bodes well for the sector, but this time business might benefit from improved pricing power and resulting increase in gross margins on top of the economic recovery led gains.

Somewhat similar are dynamics for major construction equipment rental names, i.e. United Rentals and Herc Holdings. Improving demand, tight capacity and lean cost structure should lead to better pricing power and strong margins, leading sharp increase in earnings per share.

Negatives

REITs, of almost every kind, seem to be out of favor. Fundamentally, the story was already deteriorating and with value and safety out of favor, the shift against the names is accelerating. There are a number of names in this week’s negative list.

Once again, restaurant stocks look vulnerable. Yes, the third wave of Covid-19 cases is partly to blame but the stocks went up too fast in anticipation of the recovery as well. Initially, the businesses cut costs aggressively, which helped, improved the margins but most of those gains do not seem enough to offset the weak sales.

Retail stocks are working again and I have been bullish on the sector but I would avoid chasing the names. Fundamentals are yet not supporting a major rally. Market may soon have to get its arm around the lack of earnings growth post holiday sales.

Have a great weekend and happy hunting!

DISCLAIMER: These are NOT investment recommendations. Please do your research and consult your financial advisor before making any investment decision.

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