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: 3.8%
- Longs: 11.7%
- Shorts: -7.9%
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||PLTR||Palantir Technologies Inc.|
|2||WKHS||Workhorse Group Inc.|
|4||ARC||ARC Document Solutions Inc.|
|5||DADA||Dada Nexus Limited|
|6||TME||Tencent Music Entertainment Group|
|8||TRV||The Travelers Companies Inc.|
|9||UBER||Uber Technologies Inc.|
|11||SCHW||The Charles Schwab Corporation|
|14||MITK||Mitek Systems Inc.|
|15||AVY||Avery Dennison Corporation|
|16||TA||TravelCenters of America Inc.|
|17||RRR||Red Rock Resorts Inc.|
|2||ZM||Zoom Video Communications Inc.|
|4||SPOT||Spotify Technology S.A.|
|5||TDOC||Teladoc Health Inc.|
|6||CLI||Mack-Cali Realty Corporation|
|7||SGRY||Surgery Partners Inc.|
|8||SBGI||Sinclair Broadcast Group Inc.|
|9||GTN||Gray Television Inc.|
|10||PRO||PROS Holdings Inc.|
|12||JACK||Jack in the Box Inc.|
|15||CPB||Campbell Soup Company|
|17||WORK||Slack Technologies Inc.|
|18||PING||Ping Identity Holding Corp.|
Trends visible in stocks for next week list
The market was in a celebratory mood, whether it was the end of political uncertainty, hope for a particular outcome or usual short covering rally can be debated, but there are limited reasons to stand in front of this train, other than valuation which doesn’t seem high on even value investor’s list. Remember Snowflake, trading at 100x sales and counting Berkshire Hathaway as a major investor.
But this might be a good time to focus back on the fundamentals. Risk/reward tradeoff is favoring value and GARP, at least based on the parameters we look at. The rising number of Covid-19 cases may impact the holiday season, negatively impacting some of the consumer-focused plays.
What hasn’t changed is that doves continue to control politics and the fed, which is why Asia and other emerging countries that are trading at relatively cheaper valuations look better now. Yes, Covid-19 cases are also under check, those economies are also opening up.
Like the previous few weeks, Palantir and fuboTV, both recent IPOs are on this week’s list. Once again, even though the quantitative data is thin on these names, fundamentals are too strong to ignore, especially relative to their peers, which is why they are showing up high on my screens.
Carrying forward from the past few weeks, Chinese ADRs still looking good, mostly because of their fundamentals. There are four on this week’s list. Last week, I talked about how NIO Limited, Workhorse Group, and Li Auto from the EV space are expected to see hockey stick type growth over the next 1-2 years. NIO Limited and Li Auto are out mostly due to the recent run-up.
Another sector that looks good is the Insurance tech, not so much on the quantitative data, but looking better every day on the fundamentals. There aren’t any names on the list, but names like SelectQuote and Root are looking extremely good on fundamentals.
There are industries that are experiencing major tailwinds. I have been studying semiconductor fabs lately and things are improving fast for those guys, which may soon start to result in better orders for semi equipment manufacturers. Trucking and railroads are another two industries that are benefiting from changing industry dynamics.
Last week I talked about how retail, especially soft lines, which were showing up high on my screens a while back, may pause here for some time, even though results have come out good for most players and the holiday season is ahead. The trend continues.
Notwithstanding the performance of the last week, large-cap growth technology names continue to lose sheen in my models, relative to other sectors. Once again, negative catalysts are piling up and concerns about valuation are getting support from companies failing to deliver growth against strong comparison numbers.
Last week, I talked about payment processing names looking weak, with deteriorating fundamentals, lacking what the Street is used to expecting from any growth sector. This week, a growing number of financial names are popping up high on my negative screens, more due to quantitative factors than fundamental factors.
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.