Top Stock #1

Future Looks Promising For Uranium Producer Cameco (CCJ)

By Jay Soloff, Investors Alley

It's been challenging to find a safe and successful asset class to invest in recently. This year has been hard on stocks, bonds, and even real estate. Unfortunately, we may be in store for further difficulties in the financial markets with interest rates on the rise and a recession looming.

However, there has been one sector that has strongly outperformed just about every asset class during these tough months. Of course I'm talking about energy.

For a 10-month period in 2022, the energy sector was up over 40% as a whole. Over the same period, the S&P 500 was down 25%! “Outperform” probably isn't a strong enough word for what energy stocks have done recently.

The question for 2023 is, will energy investments continue to shine?

There are reasons to believe that may be the case. Natural gas costs have soared due to the supply cut from Russia as fallout over European support for Ukraine. The supply constraints on gas are expected to linger even if the war between Russia and Ukraine ends sooner than expected. Oil has also been expensive (we know all about high prices at the pump) due to a lack of refining capacity (among other things). With expected production cuts from OPEC, prices could remain elevated in 2023.

Let's be frank; the world would prefer not to rely on oil as a key source of fuel/energy. Besides the geopolitical challenges that oil comes with, it also results in high carbon emissions — something the global powers are desperately trying to move away from.

While natural gas is a cleaner energy source than oil, it won't solve the emissions problem over the long run. Moreover, European countries don't want a repeat of what happened with Russia and its chokehold on gas supply.

That's where nuclear power comes in.

Nuclear energy has gotten a lot of bad press historically due to high-profile accidents. Where to store nuclear waste is also a point of contention. Nuclear plants are also very expensive and time-consuming to build (especially with the national security risks). But despite those negatives, the path to clean energy independence almost certainly runs through nuclear power.

There is no energy solution that is more efficient than nuclear power. A small amount of fuel can produce a massive amount of energy. It's also extremely reliable. There is very little downtime with nuclear plants. Moreover, nuclear power has zero emissions. Producing the energy is about as clean as it gets. Finally, the future of nuclear power technology is promising — smaller, safer, modular reactors.

The fuel for nuclear power plants is derived from uranium, a very abundant mineral. Rich uranium deposits can be found in developed countries like Canada and Australia — in other words, far less political risk is involved.

One of the world's largest uranium producers is Cameco (CCJ). The $10 billion Canadian-based company has been around since 1987. The stock is up 20% over the past year, but there's reason to believe this strong performance will continue.

Interest in nuclear power continues to grow. The energy crisis of 2022 has proven the need for reliable energy production. Additionally, management is wisely consolidating power in the nuclear space, and Cameco is a strategic partner in a venture that will buy Westinghouse Electric (a company that services nearly half the nuclear plants in the world).

The bottom line is 2023 is set to be a promising year for Cameco.

Top Stock #2

Constellation Energy (CEG) Is A Bright Star For Your Portfolio

By Steve Smith, WealthPop

Two things that have been hammered home of late — energy is essential to economic stability and growth, and the transition to carbon free, while inevitable, will be a rocky road.

There is one company uniquely positioned to bridge the gap from fossil to alternative whose share price should appreciate meaningfully over the next year.

I'm talking about Constellation Energy Corporation (CEG). Here are the three main positives that have me bullish on the stock:

• Well diversified, mostly carbon free, energy production.
• A bullet proof balance sheet that will fuel growth and dividends.
• A billionaire believer who will act as a backstop to share price.

A bit of background on Constellation Energy. The company went public in February 2022 as a spin-off from Excelon (EXC) at $52 per share, giving it an initial market cap of $17 billion. As of mid-October, the stock is up 61% to $84 per share.

What I like about the increase in valuation is that it didn't come from an initial IPO pop, but rather has been trending steadily higher as business increasingly benefited from the macro environment.

In terms of scale and scope, there is no doubt energy is in a bull market on both a cyclical basis and a long-term secular trend.

Based on both the number of customers served and the megawatts sold, Constellation Energy is the second-largest generator of electricity in the United States.

But it's not Constellation's size that I like… it's the composition of its sources of production. The company uses nuclear, wind, solar, natural gas, and hydroelectric assets, making it far and away the largest producer of carbon-free energy. All told, it produces 12% of the carbon-free electricity in the United States.

Constellation is the largest operator of nuclear platforms, and that should become a huge driver of growth in the coming years.

With the disruption of oil supply due to invasion of Ukraine, the attacks on the Nord Stream pipelines, and OPEC's recent decision to cut production, governments and customers are increasingly receptive to nuclear power as a necessary component to not only meet demand and become energy independent but also to reduce CO2 emissions to meet clean energy targets over the next five to 10 years.

One tailwind for Constellation is the federal government's decision to include subsidies for nuclear energy in both the Build Back Better Act and Inflation Reduction Act. It should also benefit from private equity funds looking to invest in ESG (environmental, social, and governance) companies.

Unlike many recent spinoff stories, this one started off with a reduction in debt, courtesy of former parent Exelon (EXC). When Constellation was spun off, Excelon provided the company with a $1.75 billion cash payment, which it used to pay off most of its debt coming due this year, which is good timing as interest rates have since skyrocketed.

The strong balance sheet will enable the company to pay out $180 million in dividends this year, or $0.55 per share annually. Constellation plans to grow the dividend 10% per year.

Its relationship with Excelon gives Constellation a competitive springboard by providing it with a ready customer base as well as operations efficiency on the sales side of the business. Think of it as similar to when eBay (EBAY) spun off PayPal (PYPL); in both of these cases, the faster-growing company was spun off but maintained synergies with its parent company to benefit from the existing customer base.

Constellation is the second-largest merchant provider of electricity but has the highest market share of Commercial & Industrial customers at 23%. These customers tend to be more stable and predictable than residential customers. The total customer acquisition cost is less since there are fewer but much larger customers to serve.

Lastly, I want to talk about the billionaire involved in this story. I'm not usually one to be swayed by what funds or analysts are saying, but when one of the most astute investors of the past 30 years takes a large position, I stand up and take notice.

Shortly after Constellation's IPO, David Tepper, founder of hedge fund Appaloosa Management, purchased 2.7 million shares, giving him a 9.71% stake in the company and making the fourth-largest holding the Appaloosa portfolio.

I envision Tepper will be to CEG what Warren Buffett has been to Occidental Petroleum (OXY) in that he will continue to accumulate shares on dips. Buffett has been a buyer of OXY every time it dips below $60. I suspect Tepper will be waiting in the wings to buy CEG below the $80 level.

Bottom line: Constellation deserves a higher valuation than peers on a price-to-earnings (P/E) basis because of the public demand for low-carbon energy and investor preference for a low-debt balance sheet. The company's current 1% dividend yield is nothing special, but the company has stated it plans to grow that payout by 10% a year, which is attractive. The company will have ample surplus cash to fuel expansion, institute a buyback, or pay a sizable special dividend during 2023.

My price target for CEG is $110, or a 30% gain, over the next year.

Top Stock #3

Technicals Favor Big Year For World Wrestling Entertainment (WWE)

By Christian Tharp, WealthPop

Stock markets peaked back at the beginning of 2022, kicking off what we now know as a bear market correction. On the surface, traders and investors might think that all stocks have dropped during the bear market's tenure, to one extent or another. However, a select few stocks have performed well in 2022, and World Wrestling Entertainment (WWE) has been one of them.

World Wrestling Entertainment is an integrated media and entertainment company. The firm is engaged in the production and distribution of content through various channels including the premium over-the-top network monetized through license arrangements and direct-to-consumer subscriptions, content rights agreements, premium live event programming, filmed entertainment, live events, licensing of various WWE themed products, and the sale of consumer products featuring its brands.

As most stocks have declined significantly, WWE has not, as you can see in the chart below.

WWE has moved in total opposition with the rest of the market. It bottomed at the end of 2021, the same time the S&P 500 was peaking. Since then, shares have steadily climbed while the overall stock market has declined. Although past performance is not indicative of future performance, investors could do worse than taking a look at a stock that has bucked the entire bear market trend.

Digging into WWE's technical picture (shown in the chart above), you can see the stock has been rising higher within a very clear rising trend channel. WWE has tested both channel resistance and channel support multiple times during its rally. It is clear that “the market” deems this channel as important, and as long as WWE's channel holds, the stock should be looking at new highs into 2023 and beyond.

More recently, WWE had also stalled at its $75 resistance on two separate occasions. That resistance level was also the 52-week high barrier for the stock. At the time of this writing, the stock appears to be attempting to break that resistance, which could open the door for a run back up to WWE's channel resistance again. If that scenario were to unfold, investors and traders could take a sale, or simply set a stop loss to protect gains.

Otherwise, the most ideal entry point on WWE, for investors or traders alike, would be on a decline back to the channel support. That is the point where the risk/reward is the most opportunistic, because if the support line were to fail, a signal would be given to possibly exit the position for the most minimal loss. In addition, an entry at channel support allows for the largest potential run back to channel resistance.

Top Stock #4

Covered Calls Are The Ideal Way To Play Alibaba (BABA)

By Tim Biggam, StockNews

Shares of Chinese internet giant Alibaba (BABA) look to have finally found a floor after a punishing pullback.

Alibaba is a major international company that continues to generate and grow profits quarter after quarter. However, it has experienced a punishing pullback thanks to the Chinese government's recent crackdown on private companies, with regulators introducing anti-monopoly legislation.

BABA seems to have found some footing around the $80 level. This is the stock's lowest level in the past decade, as you can see on the 10-year chart below. There is long-term support at $80, which has held nicely several times over the past year.

BABA is now trading for around 25% of its October 2020 price, when the stock traded well above $300 per share. While that price was likely a little rich, $80 per share is definitely dirt cheap.

Certainly, one could simply buy the stock near current levels around $80 and play for a move higher in 2023. As an options guy, however, I prefer to give up some of the big upside to protect my downside while still allowing for solid upside potential profit. A covered call strategy of buying the stock and selling a longer-term out-of-the money call is the way to accomplish this.

For this trade, I recommend buying 100 shares of BABA and selling 1 BABA January 2024 $100 call for a net debit of $68 or less. (The premium you receive from selling the call option will offset the price you pay for the BABA shares.)

It's possible that both the stock and the call option will be trading for slightly different prices than what you see in the trade example below; that's OK. As long as you can enter this trade for a net debit below $16.80, I recommend executing the covered call trade.

For the sake of example, let's assume you buy BABA shares at $81 and sell the call options for a premium of $13. This would provide 16% downside protection ($13/$81) while allowing for upside gains up to the short strike price of $100. This equates to potential profit of $32, or 47% ($32/$68) if BABA closes above $100 at the January 2024 expiration.

Even if BABA remains unchanged until January 2024 expiration, the standstill return would be 16%.

Selling this call reduces the net delta on the position by nearly half at trade inception, which dramatically lowers the trade's overall risk.

Analysts expect Alibaba to earn about $9 per share for FY 2023. This would put its forward P/E at 9, which is certainly a reasonable multiple. Using this covered call strategy, we'd own BABA for a cost basis of $68 per share, which equates to a forward P/E of just 7.55. That would be the cheapest valuation BABA has ever traded at.

The analysts have a big-time bullish outlook on BABA. Their average price target is $143.75 with a low forecast of $110. Even a move back to $100, below the lowest forecast of $110, would result in a solid winning trade using the buy stock/sell call strategy.

Investors looking to buy a cheap stock with solid growth potential and hedge it by selling upside calls may seriously want to look at using a lower risk covered call strategy on a beaten-down BABA.

Top Stock #5

Beaten-Down Hanesbrands (HBI) Looks Set To Soar

By Tim Melvin, Investors Alley

Most of the stocks discussed over the next few months as top picks for 2023 will have great stories and growth projections. The business will be humming along, and the company will have tailwinds from some collection of powerful global tailwinds.

Not mine. My pick is a company with inventory problems, and pricing issues because of inflation. In addition, it is seeing a significant amount of its revenue negatively impacted by the ongoing strength in the U.S. dollar.

Despite these headwinds, shares of clothing manufacturer Hanesbrands (HBI) are ridiculously cheap. Hanesbrands is the leading innerwear manufacturer in several countries around the world, including here in the United States.

Hanesbrands also makes the Champion line of hoodies and sweatshirts.

When you consider that, in addition to the Hanes and Champion brands, the company also owns Maidenform, JMS/Just My Size, Bali, Polo Ralph Lauren, Playtex, DKNY, Alternative, Gear for Sports, Sheridan, Bras N Things, Wonderbra, Zorba, Explorer, Maidenform, and Bellinda brand names, it becomes obvious that this company is the dominant innerwear company on the planet.

People are probably not going to stop wearing undergarments anytime soon. While Covid, global supply chain failures, inflation, and the strong dollar have presented challenges, none of these conditions are permanent.

And even if they become permanent, we could see a sudden surge in underwear demand.

The company introduced its Full Potential Plan in response to all the challenges Hanesbrands faced in May of 2021.

The plan had four significant steps management wanted to take to get the business back on track.

First, Hanesbrands wanted to expand the Champion brand internationally.

Second, management wanted to expand the company's innerwear offerings to include products more appealing to a younger market.

Next was making efforts to expand their e-commerce business.

Finally, management felt they needed to streamline the global brand portfolio.

The pan appears to be working. Champion sales have improved, as have e-commerce revenues since the management team announced the plan.

Hanesbrands is in the process of selling some of its brands that no longer fit in the portfolio.

The company has also been streamlining its supply chain. It has improved manufacturing output by 15% over the past few years. Unlike most of its competitors, Hanesbrands won most of its manufacturing facilities, so 70% of the approximately 2 billion garments Champion sells annually are manufactured in facilities they own worldwide.

The stock has been beaten up like a hopes-and-dreams tech company with no profits. However, Hanesbrands sells products almost everyone uses, and it dominates most of its markets.

The company is profitable and management expects it to earn about $1.20 per share for 2022, with Wall Street analysts projecting $1.31 per share for 2023.

Hanesbrands has paid a dividend since 2013 and has kept that payment at $0.60 per share since 2017. That equates to a dividend yield of over 7% at recent prices.

Shares are currently trading at just six times earnings. The board has also been taking advantage of HBI's low stock price and has been buying back stock this year. As a result, the share count has been reduced by almost 2 million.

It won't take much good news for this stock to soar by 50% to 100% or more in 2023.

Top Stock #6

National Retail (NNN) Has A Reliable Business And Dividend

By Tim Plaehn, Investors Alley

National Retail Properties (NNN) is a net lease REIT with a diversified portfolio of freestanding retail stores across the United States. The company owns 3,305 properties, with more than 380 tenants. Total assets are in excess of $4 billion.

National Retail's strategy features long-term investments in freestanding retail properties that are not susceptible to the threat of e-commerce. Examples include chains like Wendy's, 7-Eleven, and Circle K. The company avoids investing in shopping malls or strip centers to support its independent tenant profile. Lease terms can range from 10 to 20 years.

I like NNN for its healthy $2.20 dividend, and also because it's a super-reliable business to be in, especially with single-tenant properties. You see, National Retail's business is well insulated because its net leases pass most of the financial responsibilities of the properties onto the tenant.

The strategy has allowed the company to sustain high occupancy rates that historically average above 98%, maximizing the value of existing real estate assets. As of the company's most recent reports, National Retail's portfolio is 99.1% occupied, and it collected 99.7% of all its rents in the second quarter of 2022.

For over two decades, National Retail has generated consistent stockholder returns, supported by its strong dividend yield and 33 consecutive years of increased annual dividends with long-term annual growth of about 4%. Its dividend payment history was validated in 2012 when NNN was added to S&P High Yield Dividend Aristocrats Index. Dividend Aristocrats are a group of S&P 500 stocks that have maintained a continuous growth streak of increasing payouts and growth for 25 years along with strict liquidity and market cap requirements.

National Retail's membership in the Aristocrat index puts it in elite company and is a testament to its durability and long-term track record — an absolute indicator of stability for income investors.

The company's conservative payout ratio of 68% and strong balance sheet mean it should be able to easily withstand any ups and downs in the economy.

Based on recent prices, NNN shares yield 5.3%. Income investors will do well to take a close look at the company for solid, long-term returns.

Top Stock #7

Uncle Warren Sets Up Ideal Trade In Occidental Petroleum (OXY)

By JC Parets, All Star Charts

Relative strength and resilience from energy stocks continued to be a major theme for 2022.

Outside of the U.S. dollar, energy has been the only real place for investors to hide from the broader market volatility. Leaning on energy has been the right strategy for the better part of two years now, and I believe this will continue to be the case for the foreseeable future.

The way things are shaping up, right now could be another great opportunity to buy energy. And I'm not alone in my thinking…

One of the greatest investors in the world also agrees with me.

In early March 2022, Warren Buffett's Berkshire Hathaway filed a Form 4 with the SEC revealing a significant new investment in the energy space.

The renowned investment firm had accumulated over 90 million shares in the oil and gas exploration company, Occidental Petroleum (OXY).

Right off the bat, at a market value of around $5 billion, this had become one of their largest positions.

Berkshire's stake represented about 10% of outstanding OXY shares at the time. But that's not all. Buffett is also well known for attaining warrants in many of the companies he invests in. These derivative instruments are similar to call options in the sense that they provide leveraged exposure to a security, with an expiration date and strike price. In the initial Form 4 filing, Berkshire also reported owning warrants for an additional 83.8 million shares of OXY. With a strike price just below $60/share, they were not “in the money” at the time. However, under the assumption that the stock's price would eventually rise beyond this level and Buffett would exercise the warrants into shares, his ownership percentage was actually closer to 20%.

Let's fast forward a bit now.

Over the ensuing six months, Buffett would file 13 additional Form 4s as he continued to build his stake in Occidental. On a fully diluted basis, Berkshire now owns roughly 30% of the outstanding shares in OXY, representing a market value just shy of $20 billion.

With 278 million shares, Berkshire is far and away the largest shareholder of OXY, and OXY is the sixth largest holding in Berkshire's portfolio. Despite this already massive stake, we don't think they're done buying. In mid-August, it was reported that Berkshire had received approval from the Federal Energy Regulatory Commission, better known as FERC, to acquire up to 50% of the outstanding shares in Occidental Petroleum. Why would these guys ask the federal government for permission to purchase an additional 200 million shares if they didn't have the intent to do just that? At current prices, this would represent another $14 billion of purchases.

To put the materiality of this into perspective, OXY trades an average daily volume of about 25 million shares, or $1.75 billion in market value. This means it would take Berkshire eight full days, assuming 100% of the volume belonged to them (not a realistic assumption), to amass their remaining 20% of outstanding shares. The bottom line is, that's a whole lot of buying. This kind of institutional accumulation can tilt the supply-and-demand dynamic for a security and create a serious edge for investors who are paying attention.

Talk about having a good “support” system.

In the case of OXY, Berkshire has been putting a relentless bid in the share price all year. With all this potential buying left to do, we don't think that is going to change anytime soon.

But, it gets even better…

We know exactly where Berkshire is likely to step in and act as support for the stock. Here's a look at the chart of OXY dating back to when Berkshire began to accumulate shares. We've even highlighted exactly where those purchases took place:

Notice a trend? Berkshire comes out and puts a floor in the stock every time it falls below $60/share! And each time it happens, the stock is spending less and less time below this critical level. Since mid-July, there have been just two occasions when OXY fell below $60. It was only there for three days on each occurrence, and Buffett was buying both times.

As an investor, I couldn't think of a better safety net than having Uncle Warren step in and buy billions of dollars worth of stock, creating a key support zone. As long as we're above $57.50, we want to ride this one higher, with Buffett by our side, with a target back toward those 2018 highs around $88.

Here's the setup: Energy is the strongest sector in the market, and OXY is one of the strongest stocks in the group. This should continue as long as Berkshire keeps stepping in to buy shares at or below $60. We want to be buying with them.

Top Stock #8

Direxion Daily Small Cap Bull 3X ETF (TNA) Should Rise From The Ashes

By Steve Reitmeister, StockNews

As I write this (in October), I am extremely bearish in my short-term outlook. I expect stocks to find a bottom between 2,800 to 3,200 by early 2023.

But then, I see things becoming glorious for the bulls.

Because from that darkest hour stocks will rise with gusto. We are truly talking about the “phoenix rising from the ashes,” which is how all new bull markets begin.

In fact, going all the way back to 1900, the average first-year gain for new bull markets is 46.2%.

Now consider that small caps generally rise 20% more than large caps.

Now consider that using 3x leverage in this small-cap ETF could easily lead to first-year returns north of 100%.

Now you understand why I am pounding the table on buying Direxion Daily Small Cap Bull 3X ETF (TNA), a 3x ETF focused on small cap stocks for 2023.

This sounds great except for one thing… when do you buy it?

If you buy too early, and the market is still racing lower, you will have tremendous losses on your hands. So I caution against just blindly buying it without some consideration for determining market bottom.

I wish I could give a more detailed answer for when to buy, but this is still an evolving story that needs vigilant watch on all the key indicators like employment, earnings, inflation, Fed rates, and price action. That is the only way to determine when it may be time to enact this TNA trade.

If you would like some help with timing the market bottom, (and when to buy into this TNA trade), then please sign up to get my free market commentary. Not only do I provide constant updates on the market outlook, but also timely trading strategy and top picks as well.

Top Stock #9

High-Growth DocGo (DCGO) Consistently Beats Guidance

By Adam Mesh, WealthPop

In a market where many companies are having a harder and harder time meeting revenue and earnings guidance, DocGo (DCGO) is a rare breed. In fact, the company is a top-100 growth stock. It has also crushed estimates in the past two quarters, reporting 139% and 76% sales growth in Q1 and Q2, helped by impressive growth in its Mobile Health segment.

Let's take a closer look at the company below.

DocGo is a $1.1 billion company in the Medical Services industry group that is a leading provider of last-mile mobile health services and integrated medical mobility solutions. The company was founded in 2015 and is currently led by Stan Vashovsky (CEO) and Chief Operating Officer Lee Beinstock. Stan Vashovky founded MedCare (a med-tech company) before selling it to Philips Healthcare and serving as VP of software innovation at the company for six years. Later, he helped to turn around publicly traded Health Systems Solutions as Chairman/CEO before selling the company to a private equity firm in 2011. Meanwhile, COO Lee Bienstock spent a decade at Google (GOOG), most recently serving as Global Head of Enterprise Partnerships for Devices and Services.

When it comes to smaller companies, leadership is a key differentiator, and DocGo certainly checks this box. However, the two key attributes that have historically enabled stocks to outperform the market significantly are:

• High double-digit sales/earnings growth
• A product and or service that changes the world

In DocGo's case, it has both covered, with two sets of clinical services helped by its proprietary AI technology. The first is its Mobile Health segment, which up-trains lower-cost medical professionals to provide care in patients' homes, offices, or a community setting. The second is its Medical Transportation segment, which provides non-emergency ambulance transportation for hospital systems. These services solve a huge issue because, while telehealth is a significant advancement with instant access to doctors to help with diagnosis, the service doesn't provide an end-to-end solution, which is providing actual care and treatment.

Fortunately, DocGo's services are a solution to making this process more efficient, with telehealth providers able to look at specific individuals' ailments and decide the best way to provide a solution. This can be either in-person at their home/office if it's a less serious ailment or by transporting them to a medical facility if it is more emergent. The result is lower healthcare costs, better reliability, and much better patient outcomes, with DocGo bridging the gap between diagnosis and treatment, where the telehealth model comes up short.

While the story sounds great in practice and certainly fits an unmet need, revenue and earnings growth are key. Fortunately, DocGo excels in this department, reporting 78% revenue growth in its most recent quarter, with Q2 revenue soaring to $109.5 million. Meanwhile, quarterly earnings per share (EPS) soared by 83% on the back of higher margins, with the strong growth in the quarter driven by its Mobile Health segment, where sales jumped 163% year over year.

In other words, DocGo is one of the few small caps to actually increase its revenue guidance by more than 4% at the mid-point ($430 million vs. $410 million), and its strong balance sheet has allowed it to pursue a $40 million share buyback program (3.5% of float) to utilize some of its $210 million in cash.

When it comes to recent developments, there have been several. DocGo recently announced it will be providing mobile health services to Cigna (CI) commercial customers in New York and New Jersey starting this month. The company also announced a new contract to provide mobile health services to Horizon members in New Jersey, potentially reaching an additional 3.8 million people. Finally, the company was also awarded three new contracts in the UK under its subsidiary, Ambulnz Community Partners, in Northwest England. These developments all occurred after quarter-end, suggesting a significant upside to its Mobile Health business, its highest growth segment in the period.

The recent increase in new contracts is quite encouraging, but from a “big picture” standpoint, I see a triple-digit upside for the stock and believe DocGo is in the earlier innings of its growth story. This is because its two segments have a combined estimated TAM of $280 billion for the United States alone, and DocGo has already begun its international expansion. If we compare this figure to its estimated FY2022 revenue of $425 million and with DocGo being a first-mover, the sky's the limit.

Based on what I believe to be a fair earnings multiple of 50 (given its high growth rate) and FY2023 annual EPS estimates for $0.38, I see a fair value for the stock of $19 per share. Looking out further, though, I see this as potentially a $30 stock in a few years if it can continue to execute successfully.

Top Stock #10

Robinhood's (HOOD) Basing Pattern Sets Up Move Higher

By Steve Straza, All Star Charts

When writing about the strongest stocks in recent months, I find myself repeating the same theme…

We want to buy the stocks that have been basing for the longest.

Bottoms are a process, not an event. They can take time. This is especially true following a prolonged downtrend like the one most stocks are currently experiencing.

While plenty of stocks are still making fresh lows, we can point to a long list of others that made their ultimate low many months ago.

Many of these names were also the hardest hit during the current bear market.

I'm talking about long-duration, speculative growth stocks.

One of my favorites is the $9 billion digital brokerage, Robinhood (HOOD).

The tech startup went public in the summer of 2021 and briefly achieved a $60 billion market cap. After peaking last August, the stock fell more than 90% over the subsequent 10-month period.

However, HOOD bottomed back in June and is currently trading more than 50% above those record lows. In an environment where the major averages are making fresh lows, this is some impressive relative strength.

In fact, HOOD has been exhibiting leadership for many months now. Here it is breaking out of bearish-to-bullish reversal patterns relative to both the IPO index (IPO) and the Global X Fintech ETF (FINX):

While these are both appropriate peer groups for Robinhood, these indexes have been under severe pressure since last year, setting a low bar for outperformance. With that said, even when we benchmark HOOD relative to the Nasdaq 100, we can see a similar rounding bottom formation playing out:

We think it is only a matter of time before HOOD resolves higher relative to the Nasdaq 100, at which point this base will look like the other relative trends.

So, how do we want to trade this?

With the stock currently basing in a similar formation as the relative trends just discussed, we think it will soon break out and follow a similar path higher on absolute terms. Here's the price chart:

As price has been consolidating since May, the trend has shifted from down to sideways. This is illustrated by the long-term moving average flattening out and curling higher, just beneath the current price.

As the trend transitions, we're seeing buyers take control of the price action. The exhaustion of sellers is illustrated by the waning downside momentum in the daily RSI-14 in the lower pane.

Momentum hit its ultimate low in December of last year and barely registered an oversold reading when price bottomed much later, in June. This bullish divergence was confirmed in August with the first overbought reading (RSI-14 above 70) in the stock's short history.

While we want to be patient with this name as the basing process could take more time, we can define our risk at the shelf of intraday lows from Q1 at 10.

The AVWAP from the all-time lows comes in just below $9.50 and has been a reliable floor for the stock price since it bottomed this summer. This level also coincides nicely with the long-term moving average.

We want to use $9.50 as our stop, which would result in about a 5% loss in the event this trade doesn't pan out for us.

In terms of upside, we want to use the pivot highs around $11.25 as confirmation for the potential reversal pattern. We're targeting the March highs around $16 as our objective. This gives us a reward/risk ratio just over 10x.

Top Stock #11

This Easily Overlooked Pick Is The One Stock To Watch For 2023

By "Trader Travis" Wilkerson, INO.com

If investing were simple, what would it look like? That's the question I asked myself when my wife and I did our estate planning. As the person in charge of the finances, I wanted to ensure that our investments would continue to flourish in my absence and that my wife wouldn't need to stress about being an expert. After much research, I found what I consider the perfect solution (for us).

We found one stock that provides income, adequate growth, and keeps the risk of losing all of our money as low as possible. Even Warren Buffett, one of the world's most famous investors, often recommends that people put their money into this investment. So who am I to argue with the wisdom of a billionaire? Thus, our core holding is the S&P 500.

The S&P 500, created in 1926, tracks the rise and fall of the 500 largest stocks trading on U.S. exchanges. The S&P 500 is arguably the most critical market performance measure used by investors and traders worldwide, and with just one trade, you get instant exposure to the entire market at a low cost. However, there is one hiccup.

You can't directly buy the S&P 500. But you can invest in its alternative, SPDR S&P 500 ETF Trust (SPY), an exchange-traded fund (ETF) that tracks the S&P 500. Broad-based ETFs, like SPY, are more diversified and have less risk and volatility than individual stocks. SPY is also the oldest and one of the most heavily traded ETFs.

If you're looking for an excellent investment, it's hard to beat the S&P 500. Do you want to own the top tech stocks? How about the leading consumer brands? Maybe you want to own whatever sector is hottest right now. Yes, those are all in the S&P 500, and when you buy it, you instantly own the best stocks in the U.S. economy.

Investing is simple for us now. We focus on a single stock; it's like owning an apartment building with 500 individual units. We no longer have to stress about a bad earnings report. We have saved hundreds of hours of time as we don't have to research company fundamentals extensively. There is no single company bankruptcy risk. And SPY collects the dividends issued by all the dividend-paying stocks in the S&P 500 and sends them to us.

SPY has become the ultimate "set it and forget it" stock that we can hold forever and even pass down to our kids. More importantly, SPY has listed options to trade. That means we can obtain growth, income, and market crash protection with just one stock.