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 1275 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: 0.22%
- Longs: 6.0%
- Shorts: -5.7%
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,
|1||DADA||Dada Nexus Limited|
|2||WKHS||Workhorse Group Inc.|
|4||ARC||ARC Document Solutions Inc.|
|6||TME||Tencent Music Entertainment Group|
|9||SPG||Simon Property Group Inc.|
|11||URI||United Rentals Inc.|
|13||SIG||Signet Jewelers Limited|
|14||LPRO||Open Lending Corporation|
|15||BGFV||Big 5 Sporting Goods Corporation|
|18||YETI||YETI Holdings Inc.|
|19||ASYS||Amtech Systems Inc.|
|20||CURO||CURO Group Holdings Corp.|
|7||TDOC||Teladoc Health Inc.|
|8||PZZA||Papa John’s International Inc.|
|11||BGS||B&G Foods Inc.|
|12||ENR||Energizer Holdings Inc.|
|14||IRM||Iron Mountain Inc.|
|15||ZTO||ZTO Express (Cayman) Inc.|
|16||WORK||Slack Technologies Inc.|
|18||TENB||Tenable Holdings Inc.|
|19||TSCO||Tractor Supply Co.|
|20||HCAT||Health Catalyst Inc.|
Trends visible in stocks for next week list
Yes, the second wave is here but for investors who are assigned to manage investments, an important question is whether to go back to the ‘stay at home’ trade? My screens are telling me not yet. Like the previous week, the vaccine is near and the market may have given up on the initial euphoria after the announcement of the vaccine, but the shift to position the portfolios for a post Covid-19 era is well established.
Having updated numbers for a lot of companies, I am getting comfortable with the idea that things might not be back to ‘normal’ before 2022-23 for some of the hardest hit sectors on the demand front, e.g. travel related names, but even if it takes that long, the businesses are worth studying given the relative valuation, especially if the balance sheets for those businesses are in good shape.
Capital equipment names, across the wide spectrum of industries, are popping up high on my screens. A lot of the companies in the space are getting extremely tight on capacity, leading to better utilization rates and improved margins. This might partly be due to the underinvestment of the last few years, a great time to start working on the names nonetheless.
Once again, six weeks left in the year and to expect the market to give up on its celebrations related to the end of political uncertainty and the vaccine would be a bit ambitious, even though valuations are near multi-year highs. Global and emerging markets look better than the US market due to better valuations and stronger growth metrics.
I have been bullish on the electric vehicle space for the most part of this year and this is no time to give up, even though names might change. News of Tesla’s entry into S&P may have added excitement for the bulls to bid micro caps higher, but I continue to believe the second leg of the rally may work better for non-Tesla majors experiencing the initial adoption driven revenue growth, names like Workhorse Group, China-based Li Auto, XPeng Inc. and NIO Limited.
We have updated our models for a lot major airlines and the result is encouraging, especially on the cost front. Yes, revenue comeback is a major question mark, but even if one assumes some of the major airlines to achieve previous peak revenue by 2024, the stocks are worth looking closely. Good time to study sectors like airlines, travel, casinos, cruise liners, etc. closely.
Results are validating my bullishness on the Chinese ADRs, a theme I have been bullish on for the last few weeks. There are five names on this week’s positive list, but several others showing up high on my screens. Other emerging markets also look interesting, but liquidity and the large number of available industries is making me favor the space.
Yes, this past week saw the ‘lockdown trade’ work once again, mainly due to recent spurt in Coronavirus cases, my screens continue to tell me to look beyond and favoring small medium caps over large caps.
Once again, major lockdown trades look extremely vulnerable, both on the basis of fundamentals as well as quantitative data. Growth metrics for the next year are coming up against what may be peak numbers seen earlier this year, valuations are extremely rich and the global economy is opening up. The list is weekly, but troubles for these players may stay for a while.
The large-cap growth technology names continue to lose sheen on my models. Yes, the resurgence in the number of Covid-19 cases may slow down the pace of correction, fundamentals deteriorating relative to value and GARP names. Negative catalysts continue to pile up and concerns and number of companies failing to deliver growth against strong comparison numbers is increasing.
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.