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 1250 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: 1.5%
- Longs: 0.6%
- Shorts: 0.9%
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||DADA||Dada Nexus Limited|
|2||WKHS||Workhorse Group Inc.|
|5||COST||Costco Wholesale Corporation|
|9||SCHW||The Charles Schwab Corporation|
|10||YALA||Yalla Group Limited|
|11||ALLY||Ally Financial Inc.|
|14||DMYT||dMY Technology Group Inc.|
|17||BGFV||Big 5 Sporting Goods Corporation|
|18||SPT||Sprout Social Inc.|
|19||MAXR||Maxar Technologies Inc.|
|20||SIG||Signet Jewelers Limited|
|1||AAL||American Airlines Group Inc.|
|2||SAVE||Spirit Airlines Inc.|
|3||SBGI||Sinclair Broadcast Group Inc.|
|4||GTN||Gray Television Inc.|
|5||ENR||Energizer Holdings Inc.|
|8||IRM||Iron Mountain Inc.|
|9||STZ||Constellation Brands Inc.|
|10||PEAK||Healthpeak Properties Inc.|
|11||CPT||Camden Property Trust|
|12||EPAY||Bottomline Technologies Inc.|
|13||AZRE||Azure Power Global limited|
|14||EBON||Ebang International Holdings Inc.|
|18||Z||Zillow Group inc.|
|20||CLI||Mack-Cali Realty Corporation|
Trends visible in stocks for next week list
Large-cap high-growth technology names are a tired bunch, while small and micro-cap names with high growth continue to chug along upwards. Yes, this may be the start of the year-end rally, and investors positioning accordingly. What can put a spanner in the works – results for sure, but then expectations are largely baking in a washout year for most small and micro-cap names.
The market continues to be worried about the outcome of the US elections, the resurgence in Covid-19 cases, and the stimulus bill. Things that may continue to overshadow investor enthusiasm for now. Another reason large-cap names that are much more dependent upon long-term institutional investor support may remain range-bound.
Last week, I talked about how investor optimism is transferring to international markets, and going by returns on some recent IPO names in Europe and Asia, the trend may only be getting stronger.
Last week, I was concerned about scalping, i.e. booking profits on a small increase or decline in the price of the stock, which usually suggests both lack of conviction as well as increased participation from the retail investors who are more bothered about their win rates than the total winnings, but looking at the recent Russell 2000 performance, those concerns have ebbed.
Some of the recent IPOs that have failed to found love from the markets, busy with worries about election and Corona virus, look interesting. fuboTV, which we own, and Yalla are included in the positive list this week.
Once again, brokers and financial names that are driven by fundamentals of the subprime lending market also look good here. There are three on this week’s positive list. Fundamentals haven’t deteriorated but the stocks have been destroyed in anticipation of rising delinquencies that have yet to materialize in a big way, offering a very favorable risk/reward tradeoff. A new stimulus bill may accelerate investor interests in these names.
Even though the market didn’t like JB Hunt’s results yesterday, trucking as a sector looks very interesting. As we updated our models, it seems most companies are coming back fast after the weakness earlier this year and profitability is getting a boost from a much leaner expense structure.
Chinese ADRs, a theme from the last few weeks, still looking stronger. Yes, there’s just one name in the positive list, but that’s because of how strong some of the US small and micro names are looking.
Fastly performance over the last week has put on alert growth investors. There is not much margin of error for rich high-growth names and any semblance of slowing momentum on the growth front will be punished. This may be a big challenge for many Cloud and SaaS stories given they will be coming against growing competition and tough comps over the next few quarters.
Once again, retail is another sector that may find it hard to deliver as per increasing investor expectations. Even though the fourth quarter is traditionally strong for retailers, stocks are at risk of running ahead of the fundamental improvement, and investors on edge may run to book profit on a minor hiccup.
Airlines look vulnerable once again. Yes, the market can shrug off the delays in the stimulus bill, but growing concerns about the pace of comeback and stretched balance sheets may not be easy to overcome. One can put some of the REITs in the same basket as well.
Once again, traditional media names look vulnerable. Broadcasting names like Sinclair Broadcasting and Gray Television are on this week’s negative list as well and several other names from the space came up high on my negative screens.
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.