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 our 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: 0.4%
- Longs: 4.7%
- Shorts: -4.3%
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||TTD||The Trade Desk Inc.|
|2||WKHS||Workhorse Group Inc|
|3||PLTR||Palantir Technologies Inc.|
|4||PERI||Perion Network Ltd.|
|6||UBER||Uber Technologies Inc.|
|8||Z||Zillow Group Inc.|
|9||SIG||Signet Jewelers Limited|
|10||BOOT||Boot Barn Holdings Inc.|
|11||AEO||American Eagle Outfitters Inc.|
|13||LPRO||Open Lending Corporation|
|14||RCM||R1 RCM Inc.|
|16||ALLY||Ally Financial Inc.|
|17||SCHW||The Charles Schwab Corporation|
|3||SBGI||Sinclair Broadcast Group Inc.|
|4||ENR||Energizer Holdings Inc.|
|5||CLI||Mack-Cali Realty Corporation|
|7||IRM||Iron Mountain Inc.|
|8||FIZZ||National Beverage Corp.|
|9||PZZA||Papa John’s International Inc.|
|11||KDP||Keurig Dr. Pepper inc.|
|12||SAVE||Spirit Airlines Inc.|
|13||GTN||Gray Television Inc.|
|16||PRO||PROS Holdings inc.|
|17||GCP||GCP Applied Technologies Inc.|
|18||EPAY||Bottomline Technologies Inc.|
Trends visible in stocks for next week list
Value is no more value and growth is cheaper than it was last month is our theme for the week. Last week, we talked about how we believe value trade may be over for now and results are the culprit. This week, we are even more convinced of the same. Most growth-oriented names are delivering strong, whereas value names look extended. Yes, historically, value names outperform coming out of a recession, but the numbers suggest that comeback would be slow and there will be many hits-and-misses along the way. This might be one of those.
We are not big fans of pair trades, but the divergence in the EV sector seems to offer some opportunities, especially for market-neutral books. In this week’s list, Workhorse Group and NIO Limited are on the positive side while Tesla and XPeng are on the negative list. This is mainly the result of current growth and stock valuations right now. As a sector, Nikola disaster may have scared off some of the investors, nudging them to cover for Tesla, but these types of ‘safety trades’ in growth sectors are usually short-lived.
In the US retail space, looking at the stocks, it seems consumers will only be focused on upgrading their wardrobes and buying used cars. Suddenly, investors are waking up again on apparel manufacturers and used car plays, thanks to tight inventory are strong demand for used cars. Yes, dynamics are strong for both, but running too far and too fast is usually a recipe for disaster.
The semiconductor sector has been a good leading indicator for the economy, just like oil prices and semiconductor stocks are telling us to side with caution and economic recovery may be slower than what value plays and cyclical stocks are suggesting right now.
Last week, we talked about how sectors tied to travel, gold, interest rates, casinos, etc., may take a hit if doubts over faster economic comeback persist. A trend that was validated this past week.
Chinese ADRs, a theme from last week, continues to look good. There aren’t very many names on the positive list for the week, but several names are starting to show up high on our screens, mainly due to strong results and the risk-reward tradeoff, once again, looking favorable.
We included several recent IPOs in our database and names like Palantir, which we own in our portfolio, KE Holdings (NYSE: BEKE) and Yalla Group (NYSE: YALA) look good, even though the market response to those was less than excited.
Ad tech is another sector that is showing up. We own Perion Network, which along with The Trade Desk is included in this week’s list, and there are several names from the space that are benefiting from what seems to be very strong industry tailwinds.
Airlines may be at the mercy of a government package, but the whole tourism food chain, i.e. travel booking sites, hotels, car rentals, etc., looks equally fragile as hopes of quick economic recovery fades away and the Street adjusts their numbers for the same.
The capital equipment sector also looking weak, especially the technology-focused plays like semiconductor equipment and networking. As mentioned before, the semiconductor sector is already softening and without a strong demand recovery in semiconductors, semi-equipment revenues are bound to come under pressure.
Another sector that seemed promising just a while back and now looking weak is the traditional media space. Broadcasting names like Sinclair Broadcasting and Gray Television are on this week’s negative list, but several other names from the space came up high on our 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.