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 1225 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: 4.3%
- Positive Longs: -1.4%
- Negative 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||UBER||Uber Technologies Inc.|
|2||WKHS||Workhorse Group Inc|
|4||DMYT||dMY Technology Group Inc.|
|6||KCAC||Kensington Capital Acquisition Corp.|
|7||TME||Tencent Music Entertainment Group|
|8||DOYU||DouYu International Holdings Limited|
|11||AXP||American Express Company|
|12||ALLY||Ally Financial Inc.|
|13||VICI||VICI Properties Inc.|
|15||MOS||The Mosaic Company|
|16||CYD||China Yuchai international Limited|
|17||AEO||American Eagle Outfitters Inc.|
|18||VTOL||Bristow Group Inc.|
|19||RCM||R1 RCM Inc.|
|2||PYPL||PayPal Holdings Inc.|
|6||SPOT||Spotify Technology S.A.|
|8||PING||Ping Identity Holding Corp.|
|10||X||United States Steel Corporation|
|13||CIT||CIT Group Inc.|
|14||EPAY||Bottomline Technologies Inc.|
|15||PRO||PROS Holdings Inc.|
|16||WW||WW International Inc.|
|17||GCP||GCP Applied Technologies Inc.|
|18||FOUR||Shift4 Payments Inc.|
|20||ORA||Ormat Technologies Inc.|
Trends visible in stocks for next week list
Our favorite ideas worked perfectly this past week. Last week, we talked about the beginning of the big rotation out of high growth names trading near extreme valuation and into value names, a trend that continued this week. With investors coming back after Labor Day, there is a clear shift towards reshaping portfolios.
Are equity investors once again thinking long-term given the rise in electric vehicle food chain stocks? We don’t think so. Other than the electric vehicle industry, the market has not been forgiving towards stocks of companies that delivered anything less than impressive guidance for future earnings and topline growth.
Once again, the economy continues to open up and the back-to-school season is expected to be weak but longs this year. Investors may continue to book profit and reposition.
The electric vehicle industry is once again in the spotlight and this time the U.S. based players seem to be catching investor’s attention. Our favorite Workhorse Group finally started to move again, even though less than the DiamondPeak Holdings Corp. (NASDAQ: DPHC), a company that will be merged with Lordstown Motors, in which Workhorse Group owns a 10% non-dilutive stake.
Kensington Capital Acquisition Corp. (NYSE: KCAC) is in the weekly list for two weeks in a row now, partly due to the promise offered by a good battery technology, which constitutes the biggest cost component in the price of an electric vehicle. The stock was weak but ‘battery day’ and more coverage on the technology may change that.
Last week, we talked about how our negative call on Chinese ADRs has largely played out and fundamentals continue to be strong, suggesting most names may not come under pressure, relative to other weak tech names, which is why there are hardly any names from the space in this week’s negative list. This week, there are three names on the positive list, highlighting changing dynamics for those names.
Financials are once again prominent in this list. Yes, some industry analysts continue to warn us about rising inflation and the resulting impact on interest rates, but risk-reward trade-off seems to be favoring the space and negative chatter may subside with signs of stability in the bond market.
Correction in Slack Technologies Inc. (NYSE: WORK) after the earnings this past week has clearly shown that more than themes like ‘stay at home’, the market is interested in ‘show me the numbers’ stories.
As we have continue to update numbers, the gap between earnings potential and Street expectations is becoming glaringly evident, which combined with weakness in quantitative data is the reason why so many high-growth high beta names are loved by retail investors are on this week’s negative list. Not surprisingly, most of those are from the technology sector.
Regular readers may know our bullish opinions on the retail sector, but this week there are several online retailers on the negative list. Mostly because of the gap between reality and expectations we just talked about.
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.