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: 2.0%
- Longs: 3.2%
- Shorts: -1.2%
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,
|2||WKHS||Workhorse Group Inc.|
|4||TME||Tencent Music Entertainment Group|
|5||AXP||American Express Company|
|6||CHTR||Charter Communications Inc.|
|7||MOS||The Mosaic Company|
|9||IIPR||Innovative Industrial Properties Inc.|
|13||ALLY||Ally Financial Inc.|
|14||DFS||Discover Financial Services|
|15||SHLL||Tortoise Acquisition Corp.|
|16||SPT||Sprout Social Inc.|
|17||MAXR||Maxar Technologies Inc.|
|18||DGII||Digi International Inc.|
|19||PACB||Pacific Biosciences of California Inc.|
|20||CYD||China Yuchai international Limited|
|1||CNNE||Cannae Holdings Inc.|
|4||CIT||CIT Group Inc.|
|5||ENR||Energizer Holdings Inc.|
|6||SJM||The J.M. Smucker Company|
|9||IRM||Iron Mountain Incorporated|
|10||PEAK||Healthpeak Properties Inc.|
|11||WEN||The Wendy’s Company|
|12||PZZA||Papa John’s International Inc.|
|13||CPT||Camden Property Trust|
|14||KDP||Keurig Dr Pepper Inc.|
|15||ORA||Ormat Technologies Inc.|
|16||ESE||Esco Technologies Inc.|
|17||MTSI||MACOM Technology Solutions Holdings Inc.|
|19||WW||WW International Inc.|
|20||GCP||GCP Applied Technologies Inc.|
Trends visible in stocks for next week list
Once again, our favorite ideas worked perfectly this past week. Growth is not working anymore and looking weak on our screens, but it’s the stocks that lack growth that seem extremely vulnerable unless they are backed by real value and comeback is visible for investors to see. Better to keep avoiding the growth names, even though the first leg of downdraft may be over for now.
Last week, we talked about how the economy continues to open up, the back-to-school season is expected to be weak but long this year and investors may continue to book profit and reposition. The trend continues for now.
Another interesting trend visible to us is the divergence in precious metal and basic metal stocks. Gold miners may be in for some profit taking while basic metal miners seem to be making a comeback. Now whether its normal rotation out of stocks that have worked well and into beaten-down names or the market recognizing that inflation will affect all commodities is still up for debate and numbers.
GameStop Corp. is the newest core entrant after Workhorse Group. Regular readers of the weekly list, now into hundreds, would recognize how Workhorse Group has been a regular feature in the Positive List for a while now. Rarely does a name props up that shows extremely high on both fundamentals and quantitative data along with a huge gap between our take on the core value of the business and the Street’s expectation of the same. Workhorse Group was one such name that we picked a few months ago and GameStop looks the same now.
Yes, we’ll be writing a detailed note on the name soon, though briefly, the business has undergone years of restructuring and consolidation, with new growth catalysts developing, the stock looks extremely undervalued compared to both current fundamentals as well as prospects.
Once again, financials are prominent in this week’s list too, even though industry analysts continue to warn about rising inflation and the resulting impact on interest rates. Our take is the same, the risk-reward trade-off seems to be favoring the space and negative chatter may subside with signs of stability in the bond market.
Last week, we talked about how the gap between earnings potential and Street expectations is becoming glaringly evident, which combined with weakness in quantitative data looks troubling times for some technology names. The theme continues for this week as well.
Some restaurant names and selective REITs are also showing up weak on our screens. Maybe inter-related, but the numbers for these two sectors are not improving like some of the other retail niches that are experiencing strength in their digital sales channels.
Airlines are also hanging by a thread, without a package from the government; a second leg of correction in the stocks may follow soon.
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.