Displaying items by tag: stocks

(Chicago)

Small cap stocks have been taking it on the chin. They have been getting hammered this week, and their performance (Russell 2000) has lagged the S&P 500 by almost 3% the last few days. That is a rare occurrence, which means there may be a buying opportunity. After such a bout of bad performance, the Russell 2000 has historically outperformed the S&P 500 by a percentage point over the next 20 days.

FINSUM: This could be a good short-term buying opportunity, but as ever, we struggle with these kinds of trade ideas because they seem to be based purely on historical precedent and lack any catalyst.

(New York)

Dividend stocks may have done well over the last month, but generally speaking, the last decade has been bleak. With the exception of a few months and quarters, dividend stocks have been largely out of favor with investors, who have instead devoted their capital to quick-growing growth stocks, especially in the tech sector. That said, the next year may be very good for good dividend payers, as yields are attractive and payouts are growing quickly. According to one portfolio manager in the space, “We are getting those yields and dividend growth—this is going to be a very good year for dividend growth—from the usual suspects”.

FINSUM: This seems like a risky bet to us. While dividend stocks have a place in the portfolio, the risk of rate rises to dividend sectors is considerable.

(New York)

October is usually associated with market panics and gives investors a general sense of anxiety. Many of the greatest market meltdowns occurred in October, including 1929, 1987, and 2008. However, this October seems likely to be different, says Barron’s. In fact, good Octobers are not infrequent. It may surprise investors to learn that October has the highest average return of any month in the last 20 years. But the reason this year might be good is that there is a midterm election in November, a factor that has historically made October a strong month for returns.

FINSUM: When you put together the numerous factors supporting markets with the midterm elections next month, it seems like this October will be a good one.

(New York)

In a sign that is setting off alarm bells on Wall Street, the market’s safest stocks have been surging of late. Investors are increasingly demanding “quality” stocks as a buffer against a potential downturn in the market. “Quality” stocks usually refers to to companies with a range of positive characteristics like high profitability and low debt. However, market strategists point out that such stocks are so well bought that they might not have their intended effect, “Quality factors are well bid so may not be as defensive as people expect”. ETFs that track “quality” stocks have been surging.

FINSUM: One can understand the flight to quality given very high valuations and the hawkish Fed, but it is still a worrying sign that so many feel the need to take cover.

(New York)

A trade war is in full swing. While the US finally closed an updated trade deal with Mexico and Canada this weekend, the big battle with China is still revving up. Both sides have raised tariffs considerably in recent weeks and have canceled various negotiations and meetings. With that in mind, Goldman has put out a list of stocks they say will perform well in the ongoing trade battle. Overall, Goldman says shares with high and stable margins are in the best position to pass along cost pressures, which means they are the best bet for investors. “Companies with high pricing power are well-positioned to pass through input cost pressure to consumers, preserving high margins … The market typically rewards companies with high margins when the outlook for corporate profitability worsens”, says the bank. Some of the stocks listed include Autozone, Adobe, Coca-Cola, VeriSign, Ralph Lauren, and Expedia, among a total list of 33 companies.

FINSUM: We like the approach and diversity of this list of shares. We do think a commanding market position will be key to maintaining margins, so agree with Goldman’s view here.