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1 S&P 500 Stock to Buy Hand Over Fist and 1 to Avoid

The stock market has been battling macroeconomic and geopolitical concerns since the beginning of the year. The S&P 500 is down 22.8% year-to-date. The index fell 9.3% in September, closing its worst month since March 2020. Inflation has been a major Achilles heel for the economy, with the Fed’s aggressive interest rate hikes yielding little …

1 S&P 500 Stock to Buy Hand Over Fist and 1 to Avoid Read More »


The Dollar Has Hit The First Target

The king currency has finally hit the first long-term target of $114 that was set in the summer of a distant 2019 when it traded around $96.
That aim wasn’t clear then as the dollar index (DX) looked weak in the chart. The short-term structure was similar to a pullback after a heavy drop.
The majority of readers did not believe the DX would ever raise its head as you can see in the 2019 ballot results below.

However, I had found a bullish hint in a very big map, and I warned you “Don’t Get Trapped By Recent Dollar Weakness”.

Back in August, you had already been more bullish on the dollar as you voted the most for the target of $121.3 in the earlier post. This confidence is due to the certain position of the Fed, which resolutely fights the inflation, lifting the rate aggressively round by round.
Let me update the visualization of the real interest rate comparison below to see if the dollar still has fuel to keep unstoppable.
Source: TradingView
The real interest rate differentials are shown on the scale B: blue line for U.S. – Eurozone, orange line for U.S. – U.K. and the red line for U.S. – Japan.
As you can see in the chart above the dollar’s buffer only grows over time as the trend gets even sharper. In August, the blue line was at +2.4%, the orange line was at +2.35% and the red line was at -3.3%. The change is huge in favor of the U.S. compared to its rivals.
Currently, the DX is lagging behind two differentials: U.S. – Eurozone (the largest component of the DX) and U.S. – U.K. (3rd largest component of DX). We can clearly observe the potential of the dollar to close that gap, rallying at least in the area of $120-$123, where the next target of the distant 2001-year top is located.
Let me refresh the technical chart below for more details.
Source: TradingView
This chart above represents the right part of a Giant Double bottom pattern (purple). It emerges accurately as planned as the price is approaching the main barrier of the Neckline.
There is another crucial element in the chart, the uptrend channel (blue dotted). Recently, the price has pierced the upside of it above $114. However, the DX couldn’t consolidate the success and dropped back below the barrier to close the month’s candle underneath.

The price could take two paths from here. The continuation to the upside based on the aggressive tightening is the first option. Another option could put the market on the pause within a consolidation (red down arrow). The former is needed to let the market take a break and reflect on the consequences of the Fed’s actions. This path is not bearish as it is just one of the natural stages of the market to let the latter accumulate enough power for further growth.
The bearish scenario is not considered as the next target of $121 is closer than the first support at $100. That area has been shown in my earlier post. It consists of the simple moving average for the past one year and the large volume profile zone.

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Intelligent trades!
Aibek BurabayevINO.com Contributor
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

2 Stocks to Add to Your Must-Buy List in Q4

So far, 2022 has been a challenging year for the stock market due to rampant inflation, the Federal Reserve’s monetary policy tightening, and geopolitical concerns. The Fed recently announced its third consecutive 75-basis-point hike and hinted at maintaining its hawkish stance until inflation comes under control. Wells Fargo analysts expect steeper rate hikes in the …

2 Stocks to Add to Your Must-Buy List in Q4 Read More »

The Perfect Stock to Buy in a Bear Market

It is official: we are in a bear market.

What should we do now?

Sell stocks? Assume the fetal position and hide under the kitchen table with a death grip on a bottle of cheap tequila? Get a medical cannabis card to ease the pain of losing money? Buy gold and silver? Hide all our cash in a mason jar buried under the shed? Watch the financial and news media to get advice?

Too many people will go down one of more of these paths as the bear market sinks its teeth into their portfolios.

But history suggests that if you are still in the accumulation phase of life, you should probably start buying stocks. Warren Buffett is one of the richest men in the world because he mastered the skill of buying aggressively in bad markets.

I suspect this particular bear is going to hang around for a while. It will take the Federal Reserve some time to wrestle the inflation dragon back into its cage, and rates will go higher and stay there for longer than most traders active today have ever seen.

There will be some of those rip-your-face-off bear market rallies along the way, but in the meanwhile, we should have plenty of time to build significant positions in good companies at great prices.

Keep an eye on two particular groups of people here for ideas about which companies to buy. One is the activist investors that take positions in companies they think are undervalued and then push the management and board to make changes that can push the stock price higher.

The other is insiders. Managers and directors know more about the businesses they run than anyone else—so when several of them are buying stock in their own companies in the open market, it is a bold statement about what they think of the companies’ current valuations.

Following insiders in the 2020 sell-off helped me spot the opportunity in Matador Resources (MTDR) right before the natural gas company went on a run that took shares above $65

I have recently noticed that the officers and directors, including the CEO, have been buying shares of Hanesbrands (HBI), manufacturer of underwear and athletic clothing. The company may see some slowing in sales thanks to a weak economy, but there is little to no chance it will go out of business anytime soon.

If markets get bad enough, the company might even see a sudden increase in demand for one of its product lines!

Hanesbrands includes a fantastic collection of companies with household names. Hanes, for instance, is the leading manufacturer of men’s underwear, with twice the market share of its two closest competitors combined.

The company owns Champion, the company that invented the hoodie 80 years ago and still dominates the market, as well as Playtex, Bali, and Maidenform—three of the most dominant women’s undergarment manufacturers—and Bonds, the dominant men’s underwear company in Australia.

Hanesbrands also owns most of its production and supply chain facilities. In addition, it has local manufacturing in more than three dozen countries worldwide. Almost 80% of the more than two billion pieces of clothing Hanesbrands sells globally each year are produced in company-owned factories.

Seven different insiders have been buying shares in the open market this month.

The stock is trading at less than seven times sales and under $0.50 on the dollar of sales. That’s cheap for a company that is a leader in its industry.

The recent decline has made the shares a high-yielding stock, with a dividend yield of over 7.5%. Moreover, the payout ratio is just 0.47%, so I can see no danger of a dividend cut on the horizon. Hanesbrands has also been buying back stock over the past few years and still has $575 million to buy under the current buyback plan.

It is a bear market. The stock will probably move against you after you buy it.

You can buy in stages if you prefer. Buy a little now and add on every move down.

You may get frustrated because the stock won’t move higher, even though the business is clearly worth more than the current price. But that’s the nature of bear markets. Make this one work for you and not against you and scale into a decent-sized position in this market leader. The bear market will end at some point. When it does, I suspect patient-but-aggressive investors will be able to cash in their Hanesbrands positions for several multiples of the current stock price.
It’s raised its dividend 37.5% on average, could be acquired, benefits from rising interest rates, trading at massive discount, and pays an 8% yield. This is my top pick for income during a rough market.Click here for details.

Sugar-Coating the Likelihood of a Recession

Does anyone remember when then President Donald Trump told the American population that the Covid-19 lockdowns and spread of the virus that caused the pandemic would all be over by Easter? Or when referring to Covid-19, that it was “the flu”?
During the first few weeks of the pandemic, President Donald Trump downplayed the severity of the virus to not panic the American population. In hindsight, perhaps the early days, especially when the country was in lockdown, it would have been more beneficial to not sugar-coat the virus and the timeline of when the government would lift the lockdown restrictions.
Had President Donald Trump told people the virus would kill hundreds of thousands of people, perhaps we could have stopped the virus from spreading during the lockdowns.
If President Trump hadn’t given a timeline for the lockdowns and the pandemic seeing brighter days, perhaps the government wouldn’t have lost its creditability with so many Americans during the summer of 2020 and its continued response to the pandemic.

Our current situation with the Federal Reserve and its chairman Jerome Powell, is very reminiscent of the early days of the Covid-19 pandemic.
Back in the winter and early spring, Powell told us that inflation was “transitory” and wouldn’t last. He even said current inflation wouldn’t need aggressive monetary policy changes to fall. Then, even when Powell began to raise interest rates, he told Americans that there was a high probability of a soft landing, referring to the idea that the Fed could bring down inflation slowly and gently.
Powell continued to tell us this summer that raising interest rates gradually and methodically would lower inflation but not put the economy in a recession.
Fast forward to just a week ago, and Powell tells us that the “chances of a soft landing are likely to diminish.” Inflation has hardly moved even though the Fed has raised interest rates five times, starting in March 2022. At that time, the Fed increased rates by 0.25%, 0.50% in May, then a 0.75% bump in June, July, and September.
Powell also said at the most recent Fed press conference following its announcement of the September rate hike that “we have to get inflation behind us. I wish there were a painless way to do that. There isn’t.”
The Federal Reserve is increasing interest rates so that borrowing money will become more expensive. Theoretically, fewer people will do it if borrowing money becomes more costly. If fewer people borrow money, spending will be reduced, and thus the economy will slow down. If the economy slows down, inflation or the increase in prices of goods and services will slow.
Slowing inflation is the Fed’s current goal. But Powell is currently sugar-coating that we are staring down the barrel of a recession. As things are now, it is improbable Powell and the Fed can increase interest rates precisely enough to lower inflation without sending us into a recession.
However, just like President Donald Trump didn’t want to come out and scare the world into an all-out panic, Powell is trying to do the same thing. The Fed Chairman wants to warn people but not put them in full panic mode that a recession is imminent.
The fear is that if Powell told us the recession was months away, it would be a self-fulfilling situation. That could be enough to cause people to panic and stop mass spending. A country-wide immediate spending stop would be enough to put the economy into a rapid recession.
One of a few things could happen from a snap recession. One would be the Fed would lose complete control of the situation. They could have a hard time pulling us back out of the recession. Another issue is that the severity of the recession may be worse. Suppose the economy stops immediately, the chances of falling into a profound recession increase.
On our current path, with the Fed sugar-coating the situation and controlling the slowdown, there is a good chance we don’t fall into a long-deep uncontrolled recession.

If you are looking for a few ways to benefit from the coming recession or how to protect your portfolio, take a look at these two articles I recently wrote, Now is the time to Hedge Your Portfolio and ETFs For a Negative Market Turn.
The Direxion Daily S&P 500 Bear 1X Shares ETF (SPDN) and ProShares UltraPro Short QQQ (SQQQ) are two Exchange Traded Funds I discuss in-depth in those articles. But I also like the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), the ProShares Short 20+ Year Treasury ETF (TBF), or my favorite ETF when interest rates are rising, the FolioBeyond Rising Rates ETF (RISR).
If you agree with what the Fed is doing or what you would do differently, let me know in the comments below.
Matt ThalmanINO.com ContributorFollow me on Twitter @mthalman5513
Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

Ride This Rail of This Stock to Profits to Beat Inflation

There are two big forces at work that show why the inflation beast will not be easy to tame for the Federal Reserve.

First, although overall consumer demand is slowing, it still remains strong in many sectors. Second, many supply chain woes are still resolved.

Supply chain disruptions due to the coronavirus pandemic were expected to gradually subside as global restrictions were lifted. Yet, the supply chain situation has actually worsened because of increased geopolitical risk and ongoing lockdowns and restrictions due to China’s zero-tolerance COVID policy.

My contacts in the logistics industry tell me that supply chain problems may not be resolved until mid-decade… and with de-globalization fully underway, these some of these headaches may never be completely resolved!

In this brave new deglobalized world, you want to own sectors and companies that can prosper under these conditions.

One such sector—and one totally ignored by Wall Street—is the rail sector. Moving goods by rail is approximately four times more energy efficient (per ton-mile of freight) moving by truck. As inflation rises, the efficiency of railroads for moving freight is looking more and more attractive…and my favorite stock in the sector, Canadian Pacific Railway (CP), comes with another big plus.

Canadian Pacific Railway

Think about this…as the world continues to isolate Russia, Canada offers the best alternatives for many of the commodities and products most closely associated with Russia, including Canadian grains, potash, fertilizer, oil, coal and natural gas. In fact, even before the Ukraine invasion, CP was shipping a lot of potash for export to China.

Canadian Pacific offers the best rail network coverage from one end of North America to the other. Last December, the company completed its acquisition of Kansas City Southern Railway, subject to final regulatory approval. This acquisition creates the first rail network that spans Canada, the U.S. and Mexico—which will provide the company with a competitive market reach in the quickly evolving supply chain.

Here is just one example that Canadian Pacific has analyzed completely: in the freight markets connecting Mexico to the U.S. Midwest, each and every day prior to Canadian Pacific’s merger with Kansas City Southern, an armada of trucks set out to connect auto parts and auto assembly plants spread across the Midwest and Mexico.

These long hauls are naturally opportune situations for transport by rail. But since no single railroad connected these regions, manufacturers were forced to rely heavily on trucks. The merged Canadian Pacific rail network will be able to convert to rail shipments the 64,000 truck shipments that currently clog public highways and border crossings as they move between Mexico and the Great Lakes region.

Add to all of this the company’s sharp management.

The company’s change in fortunes began in 2012 with the appointment of railroading legend Hunter Harrison as CEO. Harrison and his successor, rail operations expert Keith Creel (who worked alongside Harrison for 20 years), have between them taken Canadian Pacific from having of the worst Class I railroad profit margins to among the best. Creel has further infused the company’s culture with precision-scheduled railroading principles, which is largely behind its progress.

CP’s Bright Future

Keep this one important fact in mind when thinking about rail stocks as an investment: the network of track and assets already in place because of North American Class I railroad companies—designated as such based on their revenue—is essentially impossible to replicate.

Sounds like a classic Warren Buffett moat to me. No wonder his Berkshire Hathaway (BRK.B or BRK.A) owns BNSF Railway.

I expect Canadian Pacific’s 2023 operating ratio to improve—volumes should have rebounded in the second half of 2022 thanks to recovering grain shipments as well as auto carloads. Pricing power should remain healthy as well. The late-2022 Canadian grain harvest is currently expected to be much better than last year’s—a key driver of carload volume recovery by late 2022 through early 2023.

Morningstar says that: “Longer term, we believe CP’s pricing power will prove sound (above rail inflation), as will its ability to neutralize diesel price shocks via surcharges.”

The publication adds: “CP is an incredibly well-run railroad with a highly talented leadership team and an excellent track record in terms of efficiency improvement over the past decade, thus we consider deal risk [Kansas City Southern] to be relatively modest. We also agree that the merger makes sense from a strategic perspective and believe the combined railroads will forge meaningful opportunities on the revenue front, thanks to adding new seamless single-line services.”

A nice summation that I totally agree with.

Canadian Pacific stock has handily outperformed the S&P 500 year-to-date, rising about 2% versus a loss of nearly 20% for the S&P 500. CP shares are a buy on any stock market weakness, on worries about the economy, anywhere in the low-to-mid $70s.
It’s raised its dividend 37.5% on average, could be acquired, benefits from rising interest rates, trading at massive discount, and pays an 8% yield. This is my top pick for income during a rough market.Click here for details.

1 Stock to Avoid as the Fed Attempts to Cool Down the Economy

With a $1.98 billion market cap, Opendoor Technologies Inc. (OPEN) operates a digital platform for residential real estate in the United States. The company’s platform allows consumers to buy and sell a home online. In addition, it offers title insurance and escrow services. Last week, the Federal Reserve announced the third consecutive 75-basis-point interest rate …

1 Stock to Avoid as the Fed Attempts to Cool Down the Economy Read More »

When THIS stock crashes…that could be the bottom

Retail investors are resilient.  While institutions have de-risked their portfolios… Retail investors have kept record amounts of money in equities despite the markets wavering.  There’s one stock I’m watching… it’s held up fairly well during this beatdown.  While other stocks in the sector have dropped 90%… it’s only down 20% or so.  But, I believe, …

When THIS stock crashes…that could be the bottom Read More »