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High inflation, the Fed’s interest rate hikes to handle it, the economic fallout from Russia’s invasion of Ukraine, and recessionary fears have kept the stock market volatile for most of 2022. October Consumer Price Index (CPI) data came in lower than expected, indicating some signs that inflationary pressures could be easing. Furthermore, Federal Reserve chairman […]
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Please take a look at the graph below. These futures left their competitors far behind with a tremendous gain of almost twenty percent in only one month.
Chart courtesy of finviz.com
On a one-month horizon, silver’s meteoric price increase is undeniable. None of the metals can even come close. Copper is lagging eight percent behind as gold futures show only half the performance of silver. By the way, I am about to show you the relative dynamics of these top metals in the chart below.
Source: TradingView
The chart above visualizes the comparative superiority of silver futures over gold futures that we revealed in the first graph. The white metal has been reversing its nine-year losses since the bottom of 2011 at 30 oz up to the all-time high at 127 oz in 2020, where the large age long cycle has been completed.
I wrote about it more than two years ago in the post titled “Diamond” Pattern Pushed Gold To Sky Vs. Silver. That piece has attracted a lot of attention as it was shared more than two hundred times with a bunch of your valuable comments.
From the record-high price in 2020 to 2021, the ratio has been falling heavily as it lost half of its value from 127 oz to 62 oz. I marked it as the AB segment within a larger model.
The next stage was a pullback that was close to hitting the 61.8% Fibonacci retracement at 102 oz. At 98 oz, the ratio has peaked slightly lower as marked by the letter C.
The downtrend that followed broke out instantly pushing the price back into the old range that was established between the peak of 2008 at 88 oz and the valley of 2011 at 30 oz.
Last month, the ratio closed below the strong support of the purple moving average. The RSI indicator has confirmed that move as well sinking below the crucial 50 level into a bearish area.
The CD part would touch 33 oz once it travels the same distance as the AB segment. It is close to the bottom of 2011 at 30 oz. The ratio should lose more than half of its current value to get there. Indeed, it’s a huge gain for silver.
Unless the ratio breaks below the bottom of 2021 at 62 oz, this scenario would be doubtful. The invalidation trigger sits at the current maximum of 98 oz established in September.
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Back in September, I’ve shown you an interesting chart of correlation between the Gold/Silver ratio and the S&P 500 index.
In regular conditions, these instruments have the opposite dynamics. The ratio acts as a barometer of risk on/risk off sentiment in the market. The expected price decline alongside silver’s strength versus gold could protect the S&P 500 index from further collapse, although its effects may take some time to materialize.
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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.
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Waters Corporation (WAT), to describe this little-known company most simply, makes tools that help scientists and researchers analyze the safety, quality, and durability of science-based, consumer-facing products. Waters’s tools help its customers perform scientific research by providing them with analytical instruments, services, and supplies.
Nearly 90% of the company’s revenue comes from its Waters division, which produces mass spectrometry and liquid chromatography tools, as well as related products. These tools are used primarily by pharmaceutical firms to analyze a molecule’s structure during the drug discovery, development, and production processes. These tools can also be used in food and environmental quality testing, as well as other industrial applications.
About 60% of the Waters division’s revenues in 2021 came from the pharmaceutical market, a more significant proportion than its peers.
The remaining 10% of Waters’s overall revenues is generated by the company’s thermal analysis business, which provides measurement devices for thermodynamic experiments. This helps scientists examine the physical properties of various materials. Thermal analysis testing can be conducted on batteries, circuit boards, and more.
Waters’ Business and Outlook
The company’s strategy is centered around distributing its instruments (including pre-installed software) among scientists and researchers, then providing necessary services throughout the useful life of each system. Waters also sells related consumables, such as sample preparation kits and tools.
This may sound like a small, very niche business, but many of the Waters’s instruments are clearly in demand across a number of industries. That is why the company was able to deliver organic year-on-year revenue growth of 15% in the third quarter. On its latest earnings call, management said that the company’s order book was strong, and that orders were growing “faster than sales.” That is particularly encouraging, given the darkening economic outlook.
However, it won’t be an easy road for Waters.
Although the company recently raised full-year revenue growth guidance from 11.5% to 12% (up from 9.5% to 10.5% previously), it cut its earnings-per-share (EPS) forecast in anticipation of foreign exchange headwinds. Currency volatility—and a strong U.S. dollar—is a material risk for the company. That’s because Waters makes about 40% of its sales in Asia, and another quarter of its sales in Europe. The company now expects gross margins for the full year to decline by 50 basis points, to 58% for the full year, with operating margins remaining flat at around 30.2%.
Investors will be closely watching those margins and EPS numbers for signs that an in-progress “turnaround” initiative is yielding results.
This turnaround was needed because Waters’ growth had underperformed expectations in recent years. That resulted in a change in management, including bringing in Udit Batra—formerly CEO of the MilliporeSigma, the $7.7 billion life science tools business of Germany’s Merck KGaA—as the new CEO.
When Batra joined Waters in 2020, it had lost its anchor. The company was focused more on certain growing areas, and almost completely ignoring its core business, which started slipping away. Batra aimed to reinvigorate the company through an instrument replacement drive, as well as strengthening its technology and e-commerce offerings. The latter of these is especially notable because, when Batra started in September 2020, Waters sold only 20% of its consumables online. This is sharply below what its peers do—typically selling about 50% of consumables online.
Under Batra, Waters is now focused on upgrading older liquid chromatography instruments with newer systems, highlighting the lack of urgency in the selling part of the organization, as had been proposed under the previous management team.
Additionally, Waters trails its peers, like of Agilent (A), Thermo Fisher Scientific (TMO), and Danaher (DHR), in terms of penetrating the contract research organization channel in pharmaceuticals. It is now focusing on gaining share in that part of the end market.
The turnaround Batra is leading at Waters seems to be working. In the third quarter, it enjoyed impressive instrument growth of 21% in constant currency terms (14% reported). This should bode well for future recurring revenue growth from the sale of instruments and related services. About half of its sales are already recurring revenues.
And importantly, Waters’ analytical instruments remain the gold standard, especially in liquid chromatography and mass spectrometry for pharmaceutical firms. That is a firm base from which to launch a turnaround. It’s also why Waters enjoys profitability near the top of the life sciences market, with returns on invested capital over 30%.
Waters also has a major tailwind behind it—the expanding universe of biopharmaceuticals testing and the increase in food safety and environmental testing by various entities.
Add it all up and Waters is a buy anywhere in its recent range of $300 to $350, in anticipation of more progress in its corporate turnaround story.
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.
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Growth stocks have been hammered this year due to macroeconomic and geopolitical uncertainties. However, healthcare services provider McKesson Corporation (MCK) has been an outlier. The stock has gained 52.1% in price year-to-date and 68.8% over the past year to close the last trading session at $378.04. MCK has been the second-best performing non-energy stock in
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When FTX, the cryptocurrency exchange founded and run by Sam Bankman-Fried, filed for bankruptcy, big and small investors experienced significant losses.
Some of these investors had money in FTX and, to some extent, knew they were taking on risk by doing so. Other investors simply were invested in funds or even pensions and honestly had no clue of their exposure to such a toxic business.
One large group of investors who likely had no clue they were invested in FTX, or even cryptocurrencies of any kind, where those who are beneficiaries of the Ontario Teachers’ Pension Plan.
After FTX filed for bankruptcy, the Ontario Teachers’ Pension Plan announced that it would write down its entry stake in FTX to zero. The pension fund had $95 million invested in FTX, which is now essentially gone.
Furthermore, what makes this situation even slightly more painful, is that the Teacher’s Pension manager just started investing in FTX in October of 2021 with an initial investment of $75 million and then added another $20 million in January 2022.
The date of the investments is important for two reasons. The first reason is that the whole investment has been lost just over a year from the initial investment. The second reason, and probably more important, is that the teachers who are part of the Pension fund didn’t have much time to even realize they were invested in FTX.
I know what you are thinking, “they had a year to figure out their pension fund was invested in FTX.” Yes, I understand the investment was a year old. However, funds don’t have to disclose their holdings right when the purchases are made.
Furthermore, while most funds disclose their holdings quarterly, they are only required to do so yearly. I don’t know how often the Ontario Teachers’ Pension Fund announces its holdings, but if they disclose yearly, investors may have only been told about the initial $75 million invested in October 2021 and had not even been informed of the additional $20 million invested in January 2022.
None of that matters because I’m just using the Ontario Teachers’ Pension Fund as an example. There are tons of private and publicly traded funds that you as an investor could have money tied up in, which may be investing in businesses that you wouldn’t touch with a 10-foot, sorry, 100-foot pole.
Whether it is FTX and cryptocurrencies, marijuana stocks, alcohol stocks, or even just lowly-rated ESG businesses, when you turn your money over to another person to invest and manage for you, they may buy companies on your behalf that you would not personally feel comfortable investing in.
While I constantly hear the argument that the individual investor doesn’t know enough to properly handle their own money, before you blindly turn your hard-earned cash over to someone else, remember that managing your own money may be better than “trusting” a so-called professional.
While every money manager has the same goal in mind, to give you back more money than you gave them, they may not all have the same ‘morals’ and-or risk tolerance that you have.
If you don’t like to invest in the “Sin” stocks or new technologies that carry high risk, it may be better for you to invest your own money yourself. Or, it would help if you were super precise with your money manager about what you are and are not comfortable with owning.
But, even if you do go the route of investing your money yourself, you need to be very diligent with your research about what even you are buying.
For example, if you buy the SPDR S&P 5500 ETF (SPY), you will own a number of the so-called ‘Sin” stocks. Stocks like Altria (MO), Constellation Brands (STZ), MGM Resorts International (MGM), and a number of defense stocks that make weapons of war are all held in SPY.
If you want to avoid the sin stocks, start investing in Socially Responsible (SRI) Exchange Traded Funds or Environmental, Social, and Governance (ESG) Exchange Traded Funds. It is easy to find these newer groups of ETFs, but you can start with the iShares ESG Aware MSCI USA ETF (ESGU) or the Harbor Corporate Culture ETF (HAPI).
However, just because they have ESG in their name or state that they only invest in certain types of companies, you still need to perform your due diligence and confirm that they adhere to your standards. Just like you would if you handed your money to a financial advisor.
You will never be able to avoid fraud situations, but you can do an excellent job at controlling what types of business your money is being invested in if you do just a little work.
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.
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When a stock is trading in a range, sometimes a covered call strategy can be a good way to take advantage of the situation. Sunpower (SPWR) has been range-bound for most of the year and is trading somewhere near the middle of its range. A trader is attempting to capitalize off the situation by making
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The chip industry has been under pressure this year due to economic uncertainties such as rising inflation, aggressive rate hikes by the Fed, geopolitical issues causing supply chain disruptions, and material shortages. The pressure on the industry has been further worsened by recent regulatory action taken by the United States to curb chip export to
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Lots of investors and traders alike use options for their strategies… are you one of them? Maybe you like a covered call to generate income on stocks you already own or trade them to leverage your cash on quick trades… or maybe you’re someone who wouldn’t touch an option with a 10-foot pole. Hey! It
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With the data released by the Labor Department last week showing better-than-expected employment growth from a resilient economy during November, concerns of wage increases driving prices higher are rising. This may cause the inflation the Fed is trying so hard to tame to go out of control. As a result, albeit slowly, the Fed could
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I have never believed you can see the future by comparing current economic factors to the past.
The current economic conditions validate my belief: they are so different that making that type of comparison would not provide valid signals.
Instead of trying to guess the future based on history, let’s look at the last three years to start to get an idea of what the next phase may look like…
And the best income investment for what’s ahead.
The Crash. In early 2020, the coronavirus pandemic spread across the globe. The U.S. federal government ordered much of the economy to shut down. The stock market crashed by 35% (S&P 500) within a few weeks. For one day, crude oil traded for a negative $37 per barrel. Chaos reigned. No one knew if businesses would even be able to continue. Congress passed, and President Trump signed, the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES), which paid hundreds of billions of dollars to businesses and individuals.
The Explosion. The 2020 stock bear market turned out to be the shortest in history. The CARES Act put cash in the pockets of stay-at-home workers. Online businesses saw sales take off. Trading stocks on apps like Robinhood became the thing to do. The Federal Reserve slashed the feds fund rate to zero percent.
The stock market recovered completely by late September 2020. The bull market continued through the rest of 2020 and all of 2021. From the March 2020 low, the S&P 500 gained 120%. The tech-heavy Nasdaq 100 stock index gained 140%. Meme stocks became a thing in 2021, with new traders making huge gains on near-bankrupt stocks like AMC Entertainment (AMC), GameStop (GME), and Bed Bath & Beyond (BBBY).
Many young, new-to-the-market traders believed that making money and getting rich was easy. There was no reason to go back to work if you could stay home and play the market like a video game, winning on every try.
Igniting Inflation. For January 2021, inflation came in at 1.4%. By May, it had topped 5.0%. The Fed and government officials called the rise in prices “transitional.” They were wrong. The government continued its spending pile-on with the $1.9 trillion American Rescue Plan Act passed in March 2021. In December 2021, inflation reached 7.0%.
Happy with their “transition” outlook, the Fed kept the fed funds rate at zero percent until April 2022. By then, inflation was at 8.3%, and the Fed board figured out they had been very, very wrong. At that time, the Fed started on the most aggressive trajectory of rate increases in its history. Inflation, however, has remained stubborn. The October rate of 7.7% was not far from the 8.3% average for the first ten months of 2022.
In 2022 we also learned that the dictators running Russia and China were not good guys and were not out to do what was best for the rest of the world. Who would have guessed?
As a result, 2022 has been a year of financial crashes. The stock market crashed, recovered, and crashed again. The bond market crashed. Bitcoin tanked. Crypto investors discovered that much of the crypto universe was (and is) a giant Ponzi scheme. Recently, Wolf Street shared a list of 1001 stocks that have dropped by more than 80% this year!
Investors and traders who jumped into the markets in 2020 and 2021 discovered that getting rich was not as easy as they thought and losing a large portion of their portfolio values was easier.
But as an aside, subscribers following the income-focused strategy of my Dividend Hunter service have done fine in 2022…
A New Normal. I think the disruptions of the three preceding years will have a lasting impact on the investment universe. There will be great opportunities, but it is unlikely that they will be the same ones that propelled the 2009-2020 bull market or the 2020-2021 bull market.
One easy prediction to make is that fixed-income investments will now pay attractive yields. A portion of a portfolio earning 7% to 10% with fixed maturities will bring some stability.
Different business sectors will lead the way. Business development companies (BDCs), which lend to small businesses, have already shown that they will thrive in a higher interest rate environment.
Real estate investment trusts (REITs) have been oversold this year. For example, this year, the SPDR Dow Jones RIET ETF (RWR) is down 25%. I like residential REITs as investments, and the new Home Appreciation U.S. REIT ETF (HAUS) gives excellent exposure to the apartment and single-family rental property markets.
A new normal means that in 2023, we need to watch and study to see which companies thrive and which left their better days in the 2010s.
Check out the picture on the next page. It’s a beat up building that would’ve turned $25k into $4.1 million. It’s not a real estate play. Actually, with the Fed raising rates, it’s the best asset to buy right now. View this beat up, millionaire-making asset.
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