Each week for Stock Waves, I write a piece that analyzes stocks for which the fundamentals and technicals are both pointing in the same direction, bullish or bearish.Occasionally, I make one of them public, like this one.This week’s issue of “Where Fundamentals Meet Technicals” focuses on Facebook (FB) and Barrick Gold (GOLD).Facebook Facebook has been one of my stock selections in recent months that I continue to monitor pretty closely, and they just had a blowout quarter.Revenue and earnings came in way above expectations, and their planned capex for 2021 is projected to be $2 billion lower than they previously forecast. So, the company is a free cash flow machine right now.
Once per week in Stock Waves, I publish a piece called “Where Fundamentals Meet Technicals” that takes a look at various stocks or asset classes where my fundamental analysis aligns with the technical analysis from my partners Zac and Garrett, either bearishly or bullishly.Occasionally, like this one, I publish one of them publicly as well.As someone who is 95% fundamental-focused with a long-term view, I’m willing to buy an investment that I think is underpriced, and let it play out for years, which is a rather tax-advantaged strategy but requires considerable patience.
Zac and Garrett provided a ton of new charts for stocks I am following, so let’s dive right into a rapid-fire issue of “Where Fundamentals Meet Technicals”.AmgenAs a defensive stock, Amgen (AMGN) has underperformed in recent months along with other healthcare and utility and consumer staples and tech stocks as traders much preferred cyclical re-opening plays. In addition, Amgen growth is expected to be weak in 2021. However, Amgen has a solid balance sheet, and an attractive valuation for its long-term growth rate and multi-year forward growth potential. It’s one of the more diversified biotechnology stocks, and has been a reliable compounder with a current dividend yield of nearly 3%.
We’ve seen a revolution of sorts this past week, as millions of retail investors organized themselves on Reddit to perform swarm-like stock-and-option buys on heavily-shorted stocks, especially GameStop (GME), driving their prices up massively.This put a ton of pressure on hedge funds that were short some of those stocks and had trouble covering (they have to buy shares that are ballooning in price in order to cover, which can further contribute to the price going up), and after major losses some of them received capital injections from other, larger pools of capital. Indeed, Reuters reported that short-sellers are down $70 billion on their positions this month.
Here’s a brief liquidity update to start the year.Many market participants continue to be surprised by the resiliency of the stock market, even in the face of rising bond yields and the recent scene at the capitol.However, liquidity conditions continue to support equities, at least for value stocks.
In this issue of "Where Fundamentals Meet Technicals," we look at a couple high-yielding cheap value plays and provide an update on the Grayscale Bitcoin Trust (GBTC), plus a look at TSLA's corrective potential.
The FOMC released a statement today, along with a press conference by Fed Chairman Jerome Powell, that set the stage for ongoing monetary policy by the Fed. They have these releases every six weeks on average, and this one didn’t have many surprises.The Fed committed to continuing its bond purchases, and changed their target from $120 billion per month to “at least” $120 billion per month. They also re-iterated their view that more fiscal aid is needed, and indeed as of this writing, Congress appears to be narrowing in on actually passing a $900 billion piece of legislation prior to Christmas. We’ll see if any curveballs happen and break down those negotiations.
The Fed released the quarterly Z.1. Financial Accounts of the US today, which for financial nerds like me is a playground of data. It’s like a big balance sheet update for the entire country, from government to business to the consumer.Here are three charts that caught my eye at first glance.1) Money Market Top?The amount of money held in money markets may have hit a cycle peak:If so, it looks like it did in previous recessions, and this tends to be a good time to own solid value/cyclical stocks with a 3-5 year outlook.It also opens up funding questions for the US government, since a big chunk of those money markets are T-Bills.
Once per week in Stock Waves, I publish a piece called “Where Fundamentals Meet Technicals” that takes a look at various stocks or asset classes where my fundamental analysis aligns with the technical analysis from Zac and Garrett, either bearishly or bullishly.Occasionally, like this one, I publish one of them publicly as well.As someone who is 95% fundamental-focused with a long-term view, I’m willing to buy an investment that I think is underpriced, and let it play out for years, which is a rather tax-advantaged strategy.
Here is a brief liquidity update.The market has a potential inflection point coming up this spring or summer.Treasury yields have been rising on the long end since August, and are currently up to 0.88%.There remains considerable upside potential for this yield next year, as 10-year inflation breakevens are currently 1.70%.Meanwhile, the latest 20-year Treasury bond auction was rather weak.
Note: This is a research piece on Bitcoin. I initially covered Bitcoin in an article in autumn 2017, and was neutral-to-mildly-bearish for the intermediate term, and took no position.The technology was well-conceived, but I had concerns about euphoric sentiment and market dilution. I neither claimed that it had to go lower, nor viewed it bullishly, and merely stepped aside to keep watching.However, I turned bullish on Bitcoin in April 2020 in a Stock Waves deep dive report at about $6,900/BTC and went long. It had indeed underperformed many other asset classes from autumn 2017 into spring 2020, but from that point, a variety of factors turned strongly in its favor.
Liquidity UpdateDuring the worst part of March, I began a series of liquidity updates to provide info about forced selling pressure on assets (stocks, bonds, gold, etc). Due to the global USD shortage, margin pressure, and other things, there were clear signs of forced selling pressure back then. It was bad enough not only to affect stocks, but also gold and long-duration Treasuries (and for Treasuries, that's very rare). I reduced those updates as liquidity became more abundant. This week, however, renewed some (but not all) of the issues.
Today’s “Where Fundamentals Meet Technicals” article looks at two blue-chip foreign stocks that have decent long-term risk-adjusted forward return potential.Itochu CorporationWarren Buffett made headlines a couple months ago when it was announced that Berkshire Hathaway (BRK.B) bought a 5% stake in each of the five largest Japanese trading companies, worth over $6 billion in total, and that he had plans to hold for the very long term.The Japanese trading companies are diverse companies that deal with commodity production, importing, logistics, trading, etc. But what makes them different than most foreign commodity companies, is that they are conglomerates, that also own industrial operations, engineering, real estate, etc. All sorts of things.
Lately, the beaten-down energy sector has been telling us some interesting things. Nobody seems to want to touch it.Sovereign funds are divesting from it. Pension funds want out. Investors ESG mandates wish to avoid it. Jim Cramer has referred to it as uninvestable. Valuations are at multi-decade lows. Tesla (TSLA) aims to eat their lunch. And it’s a political hot point with an election coming up.For the U.S.
Here’s a liquidity update, for this afternoon’s Fed balance sheet release.The Fed added $18.5 billion to its balance sheet over the past week, mostly with the purchase of Treasury securities.The biggest reduction in the Fed’s balance sheet was that foreign central banks paid back another $8 billion in swap line loans. That brings the total down to less than $16 billion, from a peak borrowing amount of about $450 billion in May 2020. In other words, swap lines are now 97.5% paid back.
BTI is up over 2% today, with a bit of a breakout going on.
Zac and Garrett began highlighting a bullish technical pattern weeks ago, and I featured it as a fundamental long in both a Deep Dives report and a Where Fundamentals Meet Technicals report in the past several weeks as well.
The tobacco industry has been up against secular decline, but nonetheless has outperformed the SP 500 over the past 25-30 years and more. In recent years, many of them have been struck to lower valuations, which makes them more attractive on a long basis from current levels.
This report focuses on macro updates, discusses the latest portfolio updates, and then analyzes a relatively cheap insurance company with a historically great rate of return that has some advantages over traditional insurers.
As a housekeeping note, I recently published a public article on Bitcoin. As others have described it, it’s basically the case for considering a non-zero position in Bitcoin at this juncture.
I initially suggested Bitcoin as a bullish opportunity for a small position in my April 12th deep dive report, a couple weeks after it had a sharp drop in March and the beginnings of a recovery.
Investors have flocked into mega-cap growth tech names as well as stocks like Tesla (TSLA). On the other hand, traditionally cyclical stocks like industrials and banks have been left for dead. The divergence may be getting a little stretched, however.
by Lyn Alden Schwartzer - 11 months ago
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