The Recovery Is More Than Day Traders Trading Hot Tech | | SPONSORED CONTENT Sponsored Content How to Turn $5k Into $2.8 Million Most folks make big mistakes trying to "predict the future" -- and it's why 9 out of 10 traders lose money. But there's a simple system I've perfected that uses options to make spectacular profits.
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After all, this isn't how markets normally behave, right? Corporate profits are on track to drop 25% this year, leaving stocks at a precarious and unsustainable 22X earnings multiple.
With fundamentals like that, even the Fed's support feels a little unreal, which forces the doomsday contingent to do a lot of logical gymnastics to figure out why investors are putting money to work. They blame "day traders" swarming the market with government checks, buying hot NASDAQ shares like they were Las Vegas casino chips. But here on Wall Street, the truth is a lot more interesting.
The economy took a big shock in the quarantine, it's true. A lot of companies are reeling and have no good reason to be chasing records.
However, a lot of the stocks that are doing well this year have solid fundamental reasons to rally. Don't blame their good fortune on novice traders throwing free cash around.
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Here on Wall Street, it's rapidly becoming clear that the pandemic didn't change the world in itself. The outbreak is more of a catalyst, accelerating economic trends that were already playing out.
Companies that had a weak or outdated competitive position last year now look worse. But more innovative disruptors are capturing more business than ever.
Whether you think the economy is in good or bad shape depends largely on where you work and where you invest. Some see a return to greatness already underway. Others are still mired in a deep recession.
We explore this "double-track recovery" every week on my Millionaire Makers radio show, embracing the highlights while steering clear of persistent weakness. (Click here for recorded episodes and local stations.)
Because we're open to the good news as well as the bad, I like to think my listeners and people who subscribe to my newsletters are aware that the day traders aren't necessarily "irrationally" exuberant.
It all depends on the sectors you're watching. Here's the simple truth: for about 10% of the S&P 500, life looks really good right now. Those stocks are up 20% or more YTD.
A few of those stocks are the Big Tech behemoths that beckon inexperienced investors looking for a casino-style experience. Amazon.com Inc. (NASDAQ:AMZN), Microsoft Corp. (NASDAQ:MSFT) and Apple Corp. (NASDAQ:AAPL) are all in that titanic 10% category.
Other strong spots have an obvious coronavirus appeal. Bio-Rad Laboratories Inc. (NYSE:BIO) makes medical diagnostic kits. Vertex Pharmaceuticals (NASDAQ:VRTX), Incyte Corp. (NASDAQ:INCY) and others are working on new vaccines to prevent future outbreaks.
There's going to be strong demand for vaccines and medical tests in the new economy. Likewise, Clorox Co. (NYSE:CLX) is selling all the disinfectant it can manufacture. That once-sleepy stock has turned into a growth machine worth a premium price. | | | Win Up to 87% of the Time -- Even in Volatile Markets My "5 Tips for Overcoming Market Volatility" can make you great returns in both good -- and volatile markets.
These strategies can turn even the most unstable markets into cash opportunities. Click here now to learn how protect and grow your money, regardless of market conditions. CLICK HERE... | | | And then there are the classic Wall Street darlings that embrace hot money. NVIDIA Corp. (NASDAQ:NVDA), Advanced Micro Devices Inc. (NYSE:AMD) and Chipotle Mexican Grill Inc. (NYSE:CMG) are the kinds of stocks novice traders dream about.
All three are also crowded trades now. While I think the technology companies are interesting, earnings are collapsing at CMG along with other aspects of the traditional consumer economy.
Chipotle currently commands a 119X earnings multiple even though profit will probably fall as much as 40% from last year. That's not a narrative long-term investors cheer if we can avoid it.
And we can avoid it. Even if you only focus on casino-style instant gratification, I see 40-50 stocks trading in the S&P 500 with comparable momentum and much more attractive fundamentals.
If the casino lights go dark this summer, CMG looks vulnerable. Investors who pick any of these other names can at least ride out the season with better fundamentals on their side.
These companies are legitimately dynamic and deserve high multiples. On average, an S&P 500 stock that's up 20% this year probably has at least 7% earnings growth.
MSFT has that. So do NVDA and AMD, not to mention Netflix Inc. (NASDAQ:NFLX), PayPal Holdings Inc. (NASDAQ:PYPL) and other high-flying technology stocks.
AAPL and AMZN, on the other hand, are looking at a stagnant year at best. AAPL at least carries "only" a 30X earnings multiple. Here above $3,000 a share, AMZN requires investors to pay 119X earnings -- true nosebleed territory.
Clorox looks a lot better. I could name a dozen obscure stocks that don't make a lot of headlines but have stronger numbers than mighty Amazon.
These are companies that are doing well in the post-pandemic world and deserve investor attention. When hot money goes cold, they'll still have what it takes to make shareholders happy.
We'll talk about them next week. If you can't wait, Turbo Trader subscribers know where I'm allocating hot money to exploit short-term market trends.
And for real growth, there are always GameChangers. | | Look at the Charts by Hilary Kramer
Editor, TurboTrader
Until the Big Cannabis cultivators start showing Wall Street solid operating numbers, they'll remain the territory of short-sellers and swing traders. At the moment, the swing favors the bulls.
Canopy Growth Corp. (NYSE:CGC) is up a healthy 5.8% this week. More importantly, it has tested and proved that it can hold 50-day support above $16.70.
That's now the floor that cannabis bears need to respect. They tried to push CGC below that line this week and failed.
If CGC can successfully recover the 200-day trend as well, the giant in the industry may be ready to launch a more sustained rally. That's only another 5% leap from here.
Likewise, while Tilray Corp. (NASDAQ:TLRY) surged a healthy 15% this week, I see room for at least another 6% in upside before the bulls hit serious resistance.
There's an opportunity to make a little easy money here. And if TLRY clears $8.48, the stock has a lot of open skies above. We just have to get there first.
Upcoming Appearance:
Join me at the MoneyShow in Las Vegas on Tuesday, August 16, for my special presentation Building Wealth with Stocks and the Master Class Value Investing with a Growth-&-Income Twist. Register at Kramer.MoneyShow.com. The event will take place at Bally's and the Paris right on the Strip. I hope to see you there! | | | Sincerely,
Hilary Kramer
Editor, GameChangers and Trading Desk
| | About Hilary Kramer
 Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. The Financial Times describes Ms. Kramer as “A one-woman financial investment powerhouse” and The Economist distinguishes her as “one of the best-known investors in America”. Ms. Kramer is often quoted in publications such as the Wall Street Journal, New York Post, Bloomberg, and Reuters. She is a frequent guest commentator on CNBC, CBS, Fox News and Bloomberg, providing investment insight and economic analysis.
Ms. Kramer was an analyst and investment banker at Morgan Stanley and Lehman Brothers. Ms. Kramer founded and ran a long-short hedge fund and has been chief investment officer overseeing debt and equity portfolios. Since 2010, Ms. Kramer’s financial publications have provided stock analysis and investment advice to her subscribers. Her products include GameChangers, Value Authority, High Octane Trader, Turbo Trader, 2-Day Trader, IPO Edge, and Inner Circle. | | | | |
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