Eq: Large Cap
Markets are getting more volatile by the day. Last week was a rough one and yesterday was total carnage. Investors might be thinking about allocating shares into some safer sectors. With that in mind, here are 7 safe dividend payers to take shelter in: JP Morgan (2.8% yield), Sempra Energy (3.1%), NextEra Energy (2.6%), Air Products & Chemicals (2.3%), Honeywell International (1.9%), McCormick (1.5%), Microsoft (1.5%).
FINSUM: One of the big things to remember here is that with the Fed on hold, the big headwind against dividend stocks is pretty much removed.
Tell us a mega cap stock that has 50% upside in the near term. Not so easy. That is what makes the current discussion of Boeing so compelling. The stock has been hurt by the 737 MAX fallout after the Ethiopian Airlines crash in March. Yet, overall, the trend for Boeing and other aeronautics companies is strong. Jefferies analyst Greg Konrad finds the stock so compelling, he believes there is 50% upside. More than 65% of analysts covering the stock rate it a buy.
FINSUM: It seems like there is a pretty clear path to put the 737 MAX issues in the rear view mirror and get the stock back on track. Could be a good opportunistic buy.
So what are the most popular funds held by mutual fund managers right now? This is always an interesting question, not only because it can give one ideas, but also because it can serve as a counter-indicator. Stocks that are very widely held tend to be over-bought and the most at-risk of falling sharply. The most popular stocks right now are Alphabet, Microsoft, Visa, Apple, Nestle, and Exxon-Mobil. Speaking about the outlook for these stocks, UBS, who made this report, says “Once these trades reach their critical value, or an exogenous shock occurs, we expect a sharp price reversal as investors unwind their exposure in tandem”.
FINSUM: Nothing particularly interesting in those top holdings, so the downside risk of them being there seems the most relevant.
The car industry has a big problem on its hands, and it is not something that can necessarily be solved with new technologies or better mpg. The problem is not even that that young people don’t want to buy new cars, it is that they don’t want cars at all. In fact, they don’t even care to have driver’s licenses. In 1983, half of all 16-year olds had licenses. In 2017, it was down to a quarter. Gen Z, those born after 1997, aren’t ageing into licenses and ownership either, as the rates of those who have licenses by 24 is falling. 16-year olds reportedly don’t care about the freedom of getting their own car anymore, as they have Uber and Lyft and increasingly just move from urban area to urban area as they age, where car ownership isn’t as ideal.
FINSUM: Not wanting your own car at 16 sounds almost unfathomable to older generations (including us), but it is a reality that is emerging.
One of the odd things about the recession fears since December is that spreads on junk bonds have not risen. Usually, junk bonds sell-off when there are recession fears, as they are the riskiest credits and likely to suffer the worst downturns. However, the opposite has happened in junk, with spreads to investment grade very tight. In fact, investors are picking up so little extra yield in junk bonds, that in many cases they are not even worth the risk. Spreads are tied for their narrowest since the Financial Crisis at just 60 basis points.
FINSUM: The last time spreads got this tight was last October, right before the market tanked. Warning sign.
The S&P 500 is up almost 4% since the end of February. Those are good numbers in anyone’s book. But some stocks in the index are absolutely scorching the market. Take a look at: Nvidia (NVDA), Advanced Micro Devices (AMD), Conagra Foods (CAG), Dentsply Sirona (XRAY), and Chipotle (CMG). NVDA is up 24% since the end of February, while Chipotle is up 17% since then, and about 123% in the last year. All the stocks have positive drivers behind them.
FINSUM: If you are momentum investor, these stocks are certainly top picks.