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 1270 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: 0.9%
- Longs: 1.0%
- Shorts: -0.1%
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||UBER||Uber Technologies Inc.|
|2||WKHS||Workhorse Group Inc.|
|3||TA||TravelCenters of America Inc.|
|7||YALA||Yalla Group Limited|
|8||SCHW||The Charles Schwab Corporation|
|9||ALLY||Ally Financial Inc.|
|14||MITK||Mitek Systems Inc.|
|15||BOOT||Boot Barn Holdings Inc.|
|18||PBI||Pitney Bowes Inc.|
|4||PING||Ping Identity Holding Corp.|
|5||Z||Zillow Group inc.|
|7||AVB||AvalonBay Communities Inc.|
|8||AZRE||Azure Power Global limited|
|9||GTN||Gray Television Inc.|
|12||SBGI||Sinclair Broadcast Group Inc.|
|13||ENR||Energizer Holdings Inc.|
|14||RLGY||Realogy Holdings Corp.|
|15||CPB||Campbell Soup Company|
|16||CLI||Mack-Cali Realty Corporation|
|17||IRM||Iron Mountain Inc.|
|19||STZ||Constellation Brands Inc.|
Trends visible in stocks for next week list
Call it ‘election paralysis’, but the market is in no mood to take direction, even though both parties and their candidates are supporting dovish policies. With no hawks left, there is hardly anyone fearful of a lack of liquidity. Looking at the price of the Bitcoin, the latest favorite of investors worried about inflation, the market may be worried about too much of the good thing.
Numbers over story is how the market preference has changed. Last week, we talked about how this may be the start of the year-end rally, it seems investors are in no mood to risk profits, given high-beta storied names are starting to underperform. Once again, bad results are being punished and sell-side opinions matter.
Investor enthusiasm about international markets that was visible over the past few weeks seems to have cooled off a bit, not sure if this is due to the US elections, rise in Covid-19 cases, or the usual consolidation. Since international stocks are trading at a discount, especially the high-growth names, any shift towards value is bound to help those names.
Once again, stocks of consumer-driven names that held well over the past many weeks seem to be losing momentum, even though there is hardly anyone who doubts that there will be a stimulus package soon. What is concerning is that some of these stocks, like the semiconductor food chain, have served as good leading indicators for the economy as well.
Carrying forward from last week, fuboTV and Yalla, recent IPOs that have yet to command interest from the investors are in this week’s list. Even though the quantitative data is thin on both, fundamentals are too strong to ignore, especially relative to their peers, which is why they are showing up high on our screens.
Even though many consumer-based stocks are losing momentum, some of the consumer discretionary names continue to be strong, i.e. names like Boot Barn Holdings, but these types of segment outperformers are getting fewer. Instead, retail names like Shopify and Tractor Supply that led the rally earlier this year seem to be tiring.
Metal processing companies look good here. Ternium is in this week’s positive list, but several other names look nice too, including US Steel. Yes, some of the basic metals are doing good, but the fundamental improvement seems to be largely driven by better than expected pricing, improved margins, and low capital expenditure requirements.
Once again, trucking as a sector looks very interesting. Most companies are coming back fast after the weakness earlier this year and profitability is getting a boost from a much leaner expense structure.
Large-cap growth technology names are losing sheen fast. Negative catalysts continue to pile up. Usual complaints about valuation are fast getting support from companies failing to deliver growth against strong comparison numbers. Overseas, especially China-based, growth names continue to perform well and BAT (Baidu, Alibaba, and Tencent) vs. FANG argument is gaining ground.
Chinese ADRs, a theme from the last few weeks, is looking tired on the quantitative front. Yes, there are three names on the positive list, but the number of names that cropped up high is shrinking fast, mostly due to deteriorating quantitative data.
Real estate brokerage related names look tired. Rightfully so given the fundamental performance is not improving in sync with the investor excitement. At the same time, homebuilder stocks, which failed to draw any meaningful interest from the Street over the last few years, look good, with improving sales and profitability while valuations trading in line with historical trends.
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.