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It’s been an exciting year for the Gold Miners Index (GDX) with the index up 12% year-to-date and significantly outperforming the S&P-500 (SPY) for a second consecutive year.
This strong performance can be attributed to the recent strength in the gold price, with the metal launching 10% higher over the past month to hang out near psychological resistance at $2,000/oz.
The recent strength is a big deal for the average producer, which up until January suffered from considerable margin compression with a flat gold price since 2020 yet inflationary pressures across the board.
Unfortunately, for investors hanging out in the gold developer space, the returns have been dismal. Not only have the developers massively lagged the producers and many are scraping along the lows of their multi-year ranges, but they’re under-performing this year despite already lagging by 2000+ basis points last year as well.
This is obviously quite disappointing for investors and in some cases it may be leading to some irrational or forced selling as some investors are tired of not participating in the gold price move and choose to dump their shares.

In this week’s update, we’ll look at two names that continue to trade at massive discounts to fair value that offer a way to get leverage to gold without chasing names already up substantially year-to-date.
i-80 Gold (IAUX)
i-80 Gold (IAUX) is a $840 million market cap gold developer that has a resource base of ~15.0 million ounces of gold in the state of Nevada.
This is an enviable position to be in given that Nevada is one of the top-ranked jurisdictions globally for mining with an abundance of resources, access to a considerable workforce, and favorable permitting historically.
The company differentiates itself from its peer group for several reasons, with the main one being that it has the #1 growth profile sector-wide, with a plan to grow its production profile from ~30,000 ounces in FY2023 to ~250,000 ounces by H2 2026, with the potential to grow to 400,000 to 450,000 ounces long-term.
This profile is near unheard of in the sector, and producers of this size (400,000+ gold-equivalent ounces) in Nevada can command market caps north of $3.5 billion.
Today, partially due to a large share sale by a majority owner that spooked some investors and due to the depressed sentiment sector-wide for juniors, i-80 Gold is trading at just a fraction of its long-term potential, and well below my 2-year target price of US$4.70.
Some investors might argue that while this points to nearly 100% upside from current levels, there’s no clear path to a re-rating when sentiment for juniors remains in the gutter.
I would strongly disagree with this statement, with i-80 having nearly a dozen catalysts on the horizon and catalysts that will de-risk the story materially.
Plus, while i-80 is technically a “junior” or developer given that it’s busy drilling out and completing studies on the multiple mines in its portfolio, it’s actually already a producer and generating free cash flow, with one of its five potential mines already in production: Granite Creek Underground.
For those unfamiliar, the company’s five mines include Ruby Deeps (plus polymetallic potential at its Ruby Hill Project), Granite Creek Open Pit, Mineral Point, and McCoy Cove.
In regards to these catalysts, i-80 is drilling at multiple properties, and investors can look forward to drill results from Granite Creek, McCoy Cove, Ruby Deeps (gold), and different polymetallic deposits at its Ruby Hill Project which include Hilltop, Hilltop East, Blackjack, and the larger Hilltop Corridor plus the FAD deposit to the south (recently acquired).
This should provide a steady stream of news flow, and any new major discoveries to result in a sharp gap higher in the stock given that the stock is seeing little value for its high-grade polymetallic discovery made last year at Hilltop.
Additional catalysts for the company this year include a maiden resource estimate at its Blackjack deposit, a reserve estimate and Feasibility Study at Granite Creek, an updated resource estimate at its Ruby Deeps/426 Zone at its Ruby Hill Project, the possibility of a maiden resource at its new discovery at Granite Creek (South Pacific Zone) and a ramp-up to full production by year-end at its Granite Creek Underground mine.
In my view, these updated resources are likely to push i-80 Gold’s resource base to ~17.0 million gold-equivalent ounces, with upside to 20.0 million gold-equivalent ounces long-term from Hilltop and other polymetallic resources separate from Blackjack.
Despite gold sitting at $2,000/oz today, investors are able to get exposure to these resources for just ~$40/oz today. Obviously, not all of these ounces will go into production, and some ounces are more valuable than others if they are high-grade.
However, even if focus on just the higher-grade subset of i-80 Gold’s resource (which I believe could come in at 8.5+ million gold-equivalent ounces by 2025), i-80 Gold is trading at less than $80/oz on high-grade resources when peers have been acquired for north of $200/oz for high-grade resources that are still years away from production. Examples include Great Bear Resources, Fronteer Gold, Ventana Gold, Spectrum Metals, and several others.
So, I would argue that i-80 Gold is dirt cheap at current levels and if it stays at these levels, it could be a takeover target.
To summarize, I see multiple catalysts for an upside re-rating for i-80 and this could end up being the busiest year in the company’s life from a news flow standpoint with what’s likely to be a steady stream of news every other week for the next thirty weeks.
For investors looking for an undervalued producer flying under the radar of the average investor that focuses on the larger producers, I see i-80 Gold as a steal at US$2.30 or lower.
Liberty Gold (LGDTF)
Liberty Gold (LGDTF) has been one of the worst-performing gold developers since the Q3 2020 peak, declining over 75% from its highs at US$1.82 per share.
However, unlike most juniors, Liberty Gold has very carefully managed its capital. This has included ensuring its drilling only the holes it needs to vs. super regional targets that are less likely to hit, paying the right price for securing key land and water rights at its Black Pine Project, and divesting non-core projects to ensure it can continue to drill and operate without having to go raise capital in a soft equity market.
The result is that it has seen limited growth in its share count, which is exactly what investors want to see from a gold developer: capital discipline and putting shareholders first.
For those unfamiliar with the company, Liberty Gold owns two oxide gold projects (amenable to heap-leach) that are located in Idaho and Utah, two very favorable mining jurisdictions that rank just behind Nevada for investment attractiveness.
The company’s flagship project is Black Pine (Idaho), a project that’s home to a resource of 3.1 million ounces of gold with favorable metallurgy from recent testwork, with the company confident that 80% of leachable gold can be extracted within ten days.
Notably, the gold recovery at Black Pine is less sensitive to crush size suggesting the potential for a run-of-mine heap leach operation, which is one of the cheapest mines to build and operate.
The real story for Liberty Gold, though, is the fact that while Black Pine is home to ~3.1 million ounces of gold, there looks to be the potential for 5.2 – 5.5 million ounces here long-term as Liberty has barely scratched the surface on several targets.
This includes the Back Range Zone (northwest of main Discovery Zone), the Rangefront South Zone (southeast of the Discovery Zone and just south of Rangefront), the M Zone, filling in gaps between zones, and lowering cut-off grades to 0.17 grams per tonne of gold.
Assuming Liberty was able to prove up 5.5 million ounces of gold and we see a ~60% conversion rate (resources → reserves), this would translate to a ~3.05 million ounce reserve base and 15 years of production at 200,000 ounces per annum, with an operate of this size in a safe jurisdiction easily able to command a $500+ million valuation (which doesn’t even include its Goldstrike Project in Turkey).

Today, Liberty Gold sits at a valuation of just $142 million, suggesting it’s trading at one-third of its long-term potential, and I would argue that a $500 million valuation on Black Pine is conservative. In fact, we’ve seen suitors pay upwards of $100/oz for heap-leachable ounces in the United States.
I would argue that give progress securing water rights and the fact that there’s no fish-bearing streams or timer values in addition to favorable metallurgy, Liberty’s Black Pine is one of the better projects out there.
So, I see two paths to a considerable upside re-rating for Liberty. These include progressing towards the Feasibility stage where ounces tend to command a much higher value or being taken over given that this is an extremely profitable mine even at a $1,7500/oz gold price, let alone a more bullish scenario like $1,850/oz to $2,050/oz gold (range thus far this year).
To summarize, I see Liberty as a Speculative Buy at US$0.375, and I would view any sharp pullbacks in the stock as buying opportunities.
Many investors are busy chasing the names that have already doubled off their lows and while this may work, I prefer hated stocks that are still well below their highs that are being thrown out with the proverbial bathwater.
Liberty Gold and i-80 Gold are two such examples, and I believe both are likely to be outperformers in the developer space over the next two years as they have strong management teams aligned with shareholders, exceptional projects in favorable jurisdictions, and relatively simple operations that investors can be confident will be permitted in a timely manner.
Disclosure: I am long IAUX, LGDTF
Taylor DartINO.com Contributor
Disclaimer: This article is the opinion of the contributor themselves. Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information in this writing. Given the volatility in the precious metals sector, position sizing is critical, so when buying small-cap precious metals stocks, position sizes should be limited to 5% or less of one’s portfolio.

Editor’s Note: Our experts here at INO.com cover a lot of investing topics and great stocks every week. To help you make sense of it all, every Wednesday we’re going to pick one of those stocks and use Magnifi Personal to compare it with its peers or competitors. Here we go…

Real estate investment trusts, or REITs, have existed here in the U.S. since the 1960s. The mature American market means there are some interesting subsectors where investors can gain exposure.
One such asset class is infrastructure. American Tower (AMT), Crown Castle (CCI), and SBA Communications (SBAC) are the second-, fourth- and 11th-largest U.S. REITs. All three own communication towers across the country, which are leased out to mobile phone services providers, radio and TV broadcasters, government bodies, and other companies.
The other type of infrastructure popular in the REIT space is data centers. The third- and 10th-largest REITs, Equinix (EQIX) and Digital Realty (DLR), both own and lease data centers to technology companies requiring immense amounts of digital storage space.
However, the data center REITs have come under criticism. In 2022, well-known short seller Jim Chanos said he was raising money to bet against such companies, predicting that the tech giants currently renting the space would look to develop their own data centers going forward.
As Chanos put it, “…although the cloud is growing, the cloud is their enemy, not their business. Value is accruing to the cloud companies, not the bricks-and-mortar legacy data centers.”
Chanos also pointed to a wider issue in the REIT space: the risk that many are overvalued.
According to numbers compiled by FactSet, the average S&P 1500 REIT is priced at 2.39 times net asset value (NAV) and 40.2 times earnings. Also, the average S&P 1500 REIT’s net debt is 1.36 times its NAV.
However, the high multiples on REIT shares come from the fact that they have lots of exposure to high-growth sub-sectors, such as self-storage, healthcare, student accommodation, and the aforementioned infrastructure.
What we want to do this week is to compare a REIT in the sub-sector that Chanos doesn’t like — Digital Realty — and the largest of the communications tower REITs, American Tower.
The easiest way to do that is to ask Magnifi Personal to do it for us. It’s as simple as asking this investing AI to “Compare AMT to DLR.”

This is an example of a response using Magnifi Personal. This image is not a recommendation or individual advice. Please see bottom disclaimer for additional information, including INO.com’s relationship with Magnifi.
To have Magnifi Personal run similar comparisons for you, or to dive deeper into this one and compare the two REITs using different criteria, get access to Magnifi Personal completely free-of-charge – just click here!
As you can see, over three years, AMT comes out on top in terms of both returns and volatility.
This ability to have an investing AI pore over reams of data for you in seconds and spit out an easy-to-understand comparison of two or more stocks is an invaluable tool in deciding where to invest next.
We highly recommend you try it out. Click here to see how.
Magnifi Personal makes research like this as simple as typing a question. You can easily do this yourself, or ask Magnifi Personal to add other measures to the comparison, including dividend, valuation metrics such as P/E or P/B ratios, gross margin, and more. Just click here to see how to set up your Magnifi Personal account.
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In a previous post titled “Platinum Outshines Palladium, Yet Both Offer Opportunity,” I discussed potential opportunities for investors to buy into these two white metals.
The fact that platinum was chosen over palladium by three out of five readers in the ballot was not surprising. The platinum/palladium ratio and the chart setup for platinum futures were both supportive of the title’s argument.
Let’s check on what has changed in one month. We’ll start with platinum futures.
Source: TradingView
The price of platinum futures has been following my predetermined path with remarkable accuracy. I kept the previous annotations for you to see it.

The forecast that the price would reverse around the “golden cut” 61.8% Fibonacci retracement area proved to be successful, as the price tested the support twice and held. Subsequently, the futures price mimicked the trajectory of the blue zigzag, moving to the upside.
This month, the price began to build a sideways consolidation in accordance with the down leg of the blue zigzag.
Last time we observed a minor Bullish Divergence on the RSI, which played out with a short bounce before the last test of support. However, this time we can see a larger divergence, which contradicts the falling valleys on the price chart.
The size of the divergence is significant as it has pushed the price up by more than $100. Currently, the RSI is confirming the sideways consolidation on the price chart as it sits on the important level of 50.
The black dashed line represents a bullish trigger that was added at the latest top of $1,012. A break above this level would confirm the end of the consolidation phase and indicate further upward movement.
The upside target for point D has been adjusted to $1,224, which is $4 lower than previously projected due to the second test of the “golden cut” support at point C.
So, platinum has cleared the “launchpad” for palladium which only hit the crucial support and is yet to take off. Let us check it in the next chart.
Source: TradingView
My previous analysis for palladium futures was based on the monthly time frame and identified a large sideways consolidation in its final stages.
At the time, the price was in the last minor leg down out of the second large move downwards. A positive sign in this pattern is when the price retests the valley of the first large leg down in the second one, confirming the complete consolidation pattern.

Following the previous post, the price of palladium futures experienced a sharp decline and touched the first major valley of 2020 at $1,355. After a minor pullback, it dropped even further to $1,333 completing the large consolidation.
However, the RSI did not confirm this new low on the price chart and instead built a bullish divergence. It played out as it was supposed to, sending the price to the upper trendline of the orange narrowing downtrend.
However, the first attempt to break up failed, and the price retraced deeply without infringing upon the new low.
Currently, both the RSI and the price are near the barriers. The price is poised to explode out of the orange downtrend and a move above 50 for the RSI should provide confirmation. If successful, the initial upward move could follow the blue zigzag pattern, targeting the nearest resistance at $1,765.
Following a consolidation period, the price could then continue its rally towards the second resistance at $2,360. This area between the two barriers represents the consolidation zone before the minor downward move, which has recently been completed.
The price should keep above $1,333 to carry on in the bullish mode.
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.

In an early episode of The Simpsons, “Homer Defined,” Homer saves the nuclear plant from meltdown by randomly pushing a button on the control panel. Soon “to pull a Homer,” meaning to “succeed despite idiocy,” becomes a popular catchphrase.
Is that what happened last week? Did Jerome Powell and the Federal Reserve inadvertently “pull a Homer” by helping to create a bank panic that actually might accelerate their desire to slow down the economy? That might not have been their intention, but it sure looks like it.
At least it does to former White House adviser and Goldman Sachs President Gary Cohn (although he didn’t reference The Simpsons).
“We’re almost getting to a point right now where he’s outsourcing monetary policy,” Cohn told CNBC, referring to Powell. “I don’t believe they [the banks] are going to loan money, or as much money, and therefore we’re going to see a natural contraction in the economy.”

Minneapolis Fed president Neel Kashkari said basically the same thing on CBS’s Face the Nation Sunday.
“It definitely brings us closer [to recession],” Kashkari said. “What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch. That credit crunch … would then slow down the economy.”
Now, I sincerely doubt that the Fed deliberately phonied up a banking panic in order to put the brakes on the economy.
Just the same, though, it certainly did play a major role in creating one not just through monetary policy — by raising interest rates so high and so fast — but also through neglect.
Just as it did in the road leading up to the global financial crisis, the Fed allowed problems at several banks it regulated to reach the point that generated an electronic run on deposits and the banks’ eventual failure. 
While the details are certainly different, the current episode does harken back to the 2007 mortgage and real estate market meltdowns, which was largely due to regulators — led by the Fed — allowing banks and other lenders to approve mortgage loans for the asking without nary a hint of underwriting for years before it dawned on them to act. By then the mountain of debt had gotten so big and so combustible that the entire global economy was shaken for more than a decade.
Hopefully the current bank panic will remain just that — a panic, and not a full-blown crisis. But we really need to look at how the Fed goes about its business, and something clearly needs fixing.
The Fed is being asked to do two very important things – run monetary policy and regulate large banks — neither of which it seems capable of doing very well, unless it involves throwing massive amounts of money at problems it itself created or ignored.
The system in Canada provides a sharp contrast. There, the Bank of Canada, the country’s central bank, formulates and executes monetary policy, while the Office of the Superintendent of Financial Institutions (OSFI) regulates deposit-taking banks, insurance companies, and private pension plans, among others. Granted, OSFI has a much easier job of regulating about 400, mostly small, banks compared to thousands in the U.S., but it is very strict when it comes to regulation. When was the last time you heard of a banking crisis in Canada?
Yet some people in Washington don’t believe the Fed has enough on its plate. They want the Fed to be a major player in battling climate change and economic inequality, too.
While some of the problems at SVB, First Republic and others were certainly the result of poor management, the root problem appears to be Fed monetary policy that kept interest rates too low for too long.

The banks, like many others, loaded up on supposedly super-safe government bonds with super low interest rates that rapidly sank in value as the Fed raised interest rates. When the deposit runs began, the banks had to start selling off their bond holdings to meet massive withdrawal demands, forcing them to realize huge losses on their portfolios, triggering Fed and Treasury intervention.
While the Fed can probably be forgiven for not imagining a deposit run like this, it should have been perceptive enough to know that a problem was lurking in the banks’ bond portfolios, sitting as they were on possible massive losses if they were forced to sell them before maturity, which turned out to be the case.
“The question we were all asking ourselves over that first week was, ‘How did this happen?’” Fed Chair Jerome Powell said last week. Maybe the Fed’s bank examiners should have known.
If this whole episode does manage to get the Fed where it wants the economy to be without further raising interest rates — i.e., in recession — it certainly doesn’t put the Fed in a positive light.
We might as well have Homer Simpson run the Fed.
George YacikINO.com Contributor
Disclosure: 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.

A lot, if not everything, in the world of finance, is based on trust: trust that the future would be better than the present; trust that a dollar bill would guarantee an equivalent worth of goods and services at a given point in time; and trust that wealth created would be safe, accessible, and transferable at all times.
So, when events like those unfolding over the past fortnight undermine one or more of the aforementioned collective beliefs, the ensuing risks can quickly become systemic and existential.
On February 24, KPMG signed an audit report giving SVB Financial, Silicon Valley Bank’s parent company, a clean bill of health for 2022.
On March 10, federal regulators announced that they had taken control of the bank, which reopened the following Monday as Deposit Insurance National Bank of Santa Clara.

This was the second-biggest bank failure since Washington Mutual’s collapse during the height of the 2008 financial crisis. It was soon followed by the third-biggest, with Signature Bank shuttered by the regulators to stem the fallout from Silicon Valley Bank’s failure.
The resulting crisis of confidence has somehow been contained with an assurance that all insured and uninsured depositors would get their money back, the announcement of a new lending program for banks, and 11 banks depositing $30 billion in the First Republic bank.
However, the contagion risk subsided only after claiming an illustrious victim from the other side of the Atlantic, with UBS agreeing to take over its troubled rival Credit Suisse for more than $3 billion in a deal engineered by Swiss regulators.
Since we are more or less up to speed, let’s look deeper into what can make banks seem unbankable in a little over two weeks.
What is a Bank Failure?
Banks earn their bread and butter by putting to work the money their depositors entrust with them.
While the money can be invested to acquire assets that generate returns to keep a bank operating, it comes with the obligation to pay its dues on time.
Simply put, depositors should be able to access their money whenever they want and need it. A failed bank fails to ensure that.
How Does it Happen?
As discussed above, lending financial institutions, such as banks, are also borrowers to their depositors. However, the operating model of banks is based on the belief that they won’t have to pay their depositors all at once.
So, after maintaining sufficient reserves to service its current liabilities, a bank becomes an investment vehicle providing capital to turn the wheels of the modern economy.
However, this model gets foiled when uncertainty and groupthink meet to make fear more contagious than any virus. Depositors, driven by concerns for the safety of their deposits, rush to the exits en masse, turning their fear into a self-fulfilling prophecy. This is called a bank run.
Although SVB was a big bank, its depositor base was relatively concentrated in the geographical region from which the bank derived its name.
As the Fed raised interest rates in its efforts to fight the persistent inflation in a red-hot economy, the “ultra-safe” long-term U.S. Treasury securities in which the bank invested its burgeoning deposits suffered significant markdowns.
As the going got tough for the frothier tech companies and venture capital-backed startups amid increased borrowing costs, the bank’s clients began to dip into their deposits. The bank had to convert its paper losses into real ones to meet its payment obligations.
On March 8, SBV announced that it booked a $1.8 billion loss after selling some of its investments to cover increasing withdrawals.
As Moody’s downgraded SVB Financial, panic spread through texts and social media. Depositors began pulling their money out of the bank. The consequent snowball effect overwhelmed the bank with an attempted withdrawal of $42 billion by the time the bank closed for business on March 9.
What Does it Mean For Stocks?
Given how modern finance is structured, banks play an instrumental role in the way we hold and manage our money.

So, when the reliability of the banking system is compromised, it justifiably sends shockwaves across the entire economy, and, by extension, the ripples get reflected in the stock market too.
As SVB Bank’s stock crashed after the disclosure of a $1.8 billion realized loss from the sale of marked-down securities and the announcement of plans to raise $2.25 billion by selling a mix of common and preferred stock, the panic wiped out a combined $52 billion in the market value of JPMorgan Chase, Bank of America, Wells Fargo and Citigroup.
Going forward, the fate of the stocks would depend on the effectiveness of the measures, such as the lending program, in keeping banks well-capitalized for unpredictable but inevitable shocks in the weeks, months, and years ahead.
What Does it Mean For the Overall Market?
In his speech after the recent FOMC meeting, Federal Reserve chair Jerome Powell acknowledged the stresses banks have lately come under. He also suggested that tightening financial conditions arising from stringent lending decisions by banks to preserve liquidity could induce a credit crunch.
Since tight lending would have the same effect as interest rate hikes, the banking crisis, if managed and contained effectively, could be the mixed blessing that convinces the central bank to soften its stance and achieve the elusive “soft landing.”
Best,The MarketClub Team[email protected]

High-growth tech stocks have had to bear the consequences of the Federal Reserve’s aggressive rate hikes since last year. Amid concerns of a recession, most tech stocks have suffered a correction in their share prices due to fears of softening demand.
However, with continued digital transformation and the growing interest in AI, the tech industry is well-positioned to grow.
Earlier this year, Fed Chair Jerome Powell said the “disinflationary process” had begun. However, inflation still remains above the central bank’s comfort level, as evidenced by February’s CPI report.
The Fed has indicated that it intends to hike rates higher than previously predicted.
Although the recent bank failures are likely to stop the Fed from undertaking a bigger rate hike at the policy meeting, it is expected to return to its hiking spree once the banking crisis eases.

However, that should not make investors stay away from quality tech stocks.
Wedbush analyst Dan Ives believes that cost-cutting by major tech giants will likely show improved profits this year. The recent banking crisis made investors count on reliable tech stocks, as is evident from the tech-heavy Nasdaq Composite’s 13.3% increase year-to-date and 3.2% gain over the past month. According to Gartner, worldwide IT spending is expected to rise 2.4% year-over-year to $4.50 trillion in 2023.
Several technical indicators look positive for Microsoft Corporation (MSFT) and Salesforce, Inc. (CRM), so it may be worth investing in these stocks now.
Microsoft Corporation (MSFT)
MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. It has a market capitalization of $2.03 trillion.
MSFT’s revenue grew at a CAGR of 15% over the past three years. Its net income grew at a CAGR of 15% over the past three years. In addition, its EBIT grew at a CAGR of 19.2% in the same time frame.
In terms of trailing-12-month gross profit margin, MSFT’s 68.16% is 35.9% higher than the 50.17% industry average. Likewise, its 47.99% trailing-12-month EBITDA margin is 386.5% higher than the industry average of 9.87%. Furthermore, the stock’s trailing-12-month Capex/Sales came in at 12.14%, compared to the industry average of 2.44%.
In terms of forward EV/S, MSFT’s 9.65x is 257.9% higher than the 2.70x industry average. Its 9.94x forward P/B is 173% higher than the 3.64x industry average. Likewise, its 9.75x forward P/S is 268.9% higher than the 2.64x industry average.
For the second quarter ended December 31, 2022, MSFT’s total revenues increased 2% year-over-year to $52.75 billion. The company’s adjusted net income declined 7% year-over-year to $17.37 billion. Also, its adjusted EPS came in at $2.32, representing a decrease of 6% year-over-year.
MSFT’s EPS and revenue for the quarter ending March 31, 2023, are expected to increase 0.6% and 3.5% year-over-year to $2.23 and $51.08 billion, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. The stock has gained 14.2% year-to-date to close the last trading session at $273.78.
MSFT’s stock is trading above its 50-day and 200-day moving averages of $252.30 and $252.51, respectively, indicating an uptrend.
According to MarketClub’s Trade Triangles, MSFT’s long-term trend has been UP since February 2, 2023. In addition, its intermediate and short-term trends have been UP since March 14, 2023.
Source: MarketClub
The Trade Triangles are our proprietary indicators, comprised of weighted factors that include (but are not necessarily limited to) price change, percentage change, moving averages, and new highs/lows. The Trade Triangles point in the direction of short-term, intermediate, and long-term trends, looking for periods of alignment and, therefore, intense swings in price.
In terms of the Chart Analysis Score, MSFT scored +100 on a scale from -100 (strong downtrend) to +100 (strong uptrend), indicating that the uptrend will likely continue.

The Chart Analysis Score measures trend strength and direction based on five different timing thresholds. This tool considers intraday price action; new daily, weekly, and monthly highs and lows; and moving averages.
Click here to see the latest Score and Signals for MSFT.
Salesforce, Inc. (CRM)
CRM is a customer relationship management technology provider. The company’s Customer 360 platform enables its customers to work together to deliver connected experiences. It has a market capitalization of $188.68 billion.
On January 12, 2023, Walmart Commerce Technologies announced its partnership with CRM to provide retailers with technologies and services that power frictionless local pickup and delivery for shoppers everywhere.
CRM’s Executive VP, Alliances & Channels, Tyler Prince, said, “Salesforce is thrilled to partner with Walmart as it transforms its business and further expands into the digital technology market.”
“Through this partnership with Salesforce, Walmart can grow its business in new ways by productizing its proven retail processes – empowering other retailers to create new and personalized experiences for their customers,” he added.
CRM’s revenue grew at a CAGR of 22.4% over the past three years. Its net income grew at a CAGR of 18.2% over the past three years. In addition, its EBIT grew at a CAGR of 58.9% in the same time frame.
CRM’s 73.34% trailing-12-month gross profit margin is 46.2% higher than the 50.17% industry average. Likewise, its 17.34% trailing-12-month EBITDA margin is 75.8% higher than the 9.87% industry average. Furthermore, the stock’s 32.60% trailing-12-month levered FCF margin is 436.4% higher than the 6.08% industry average.

In terms of forward Price/Sales, CRM’s 5.45x is 106.2% higher than the 2.64x industry average. Its 5.52x forward EV/Sales is 104.7% higher than the 2.70x industry average. On the other hand, its 2.92x forward P/B is 19.9% lower than the 3.64x industry average. Likewise, its 1.10x forward non-GAAP PEG is 32.8% lower than the 1.64x industry average.
CRM’s total revenue for the fourth quarter ended January 31, 2023, increased 14.4% year-over-year to $8.38 billion. Its non-GAAP income from operations rose 123.3% year-over-year to $2.45 billion. The company’s non-GAAP net income increased 96.4% year-over-year to $1.66 billion. In addition, its non-GAAP EPS came in at $1.68, representing an increase of 100% year-over-year.
Analysts expect CRM’s EPS and revenue for the quarter ending April 30, 2023, to increase 64.5% and 10.2% year-over-year to $1.61 and $8.17 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters. The stock has gained 42.3% year-to-date to close the last trading session at $188.68.
Trade Triangles show that CRM has been trending UP for all three-time horizons. The long-term for CRM has been UP since January 27, 2023, while its intermediate-term trend has been up since March 2, 2023, respectively. Its short-term trend has been UP since March 14, 2023.
Source: MarketClub
In terms of the Chart Analysis Score, CRM scored +100 on a scale from -100 (strong downtrend) to +100 (strong uptrend), indicating that the uptrend will likely continue.

Click here to see the latest Score and Signals for CRM.
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According to The New York Federal Reserve, consumer debt is at record highs.
At the end of 2022, U.S. consumer debt across all categories totaled $16.9 trillion. That was an increase of $1.3 trillion from one year ago. What’s more alarming is that in 2019, the total U.S. consumer debt was $14.14 trillion.
So, while higher interest rates likely fueled some of the increase from 2021 to 2022, increasing consumer debt had occurred even before the Federal Reserve began its rate hikes.
What is concerning about the increasing consumer debt is what it says about the future of our economy. In 2017, the International Monetary Fund released a report that showed a correlation between rising consumer debt and the economy’s health. The IMF concluded that rising consumer debt was good for the economy in the short term.
For example, the more consumers take out auto loans, the more the automotive industry, from the auto parts manufacturers to the big auto manufacturers to even the auto dealers, will experience an increase in labor needs. This increase reduces unemployment, which increases overall economic activity and spurs the economy.

Consumer debt rises related to the housing industry have the same effect but on an even larger scale. It’s been reported that for every new home built in the U.S., 1.5 new jobs are created.
The IMF study clearly says that while consumer debt is increasing, there are economic benefits. But, in three to five years, those positive effects are reversed. The report states that growth is slower than it would have been if the debt had not increased, and more importantly, the odds of a financial crisis increased.
The IMF went into detail about how much consumer debt needs to grow in order to raise the likelihood of a financial crisis. Their calculations indicate that a five percent increase in the ratio of household debt to the gross domestic product over a three-year period forecasts a 1.25 percentage point decline in inflation-adjusted growth three years in the future.
If we look at nominal GDP from January 2019 to January 2023, it has gone up by almost 24.5%. Consumer debt during that same timeframe has gone up by 19.5%. That doesn’t sound bad since GDP is growing faster than consumer debt.
However, we are looking at nominal GDP, which considers price inflation. That means if inflation causes prices of goods and services to rise, those increases are enough to cause GDP to go higher, even if actual output remains the same.
And this is an excellent time to remind everyone that since the middle of 2021, we have been experiencing relatively high inflation levels, both worldwide and in the U.S.
So what does all of this mean for investors?
Well, it could mean nothing, and the economy continues moving along, strong and healthy.
Or it could very well be predicting the next recession.
The IMF study would indicate the economy is still strong since GDP is growing faster than debt. Currently, the household debt to GDP ratio is at 76.83%, essentially the same as it was three years ago when it sat at 76.41%.
But, household debt is at an all-time high during a period of high inflation. All while the Federal Reserve continues to raise interest rates, making that high debt load even more expensive.
Due to all the factors floating around, it shouldn’t shock market participants if default rates rise over the next few months, which could be enough to start the next recession.
We all should be watching defaults on all forms of debt, not just mortgage debt, which helped fuel the financial crisis in 07-08. Auto loans, personal loans, and credit card debt must be closely monitored as a sign that the start of the next recession is close.

Suppose you are wondering how you can benefit from rising consumer debt and the potential debt crisis caused by a high number of possible defaults. The best way would be to short the market as a whole.
There are no Exchange Traded Funds that focus on the companies that would be negatively impacted the most by high defaults, but it would cause the major indexes to decline. Thus if you buy something like the UltraPro Short S&P 500 ETF (SPXU) or the Direxion Daily S&P 500 Bear 3X Shares ETF (SPXS) you would have three times the inverse leverage of the S&P 500 and benefit significantly if the market were to head south.
Remember, though, at this time, the consumer debt doesn’t indicate the market is ready to roll over, but that could change anytime. Watch for either debt to continue increasing rapidly, or massive defaults as your cues to get short the market.
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.

It’s been a choppy start to the year for the major market averages and while many large-caps have begun new uptrends, several small-cap names remain stuck in the mud, unable to gain much upside traction.
In some examples, this underperformance is justified with many businesses not being worth owning and or having weak balance sheets.
However, there are a few small-cap names with solid business models and decent balance sheets generating free cash flow, and contrarian investors are being presented with an opportunity to invest in these stocks at a very reasonable price, especially given that they have robust growth plans.
In this update, we’ll look at two stocks worthy of adding to one’s watchlist:
MarineMax (HZO)
MarineMax (HZO) is a small-cap name ($600 million market cap) in the Retail-Leisure Products industry group, and is the world’s largest lifestyle recreational retailer of boats and yachts plus yacht concierge and superyacht services.

The company was founded in 1998 in Clearwater, Florida, and has grown through strategic acquisitions to now control a footprint of 125 locations globally, including 57 owned and operated marinas and 78 dealerships.
Some of the company’s recent acquisitions include BoatYard.com and Boatzon, Fraser Superyacht Services, MidCoast Marine Group LLC, and IGY Marinas.
Understandably, many investors might not be that interested in owning a business that derives its revenue from recreational boat and yacht sales during a period where consumers are pulling on their spending and in what appears to be a recessionary environment with increasing layoffs.
However, it’s important to note that MarineMax has improved its mix over the past several years so that just ~73% of FY2022 revenue came from new boat sales, with the other 27% including parts/accessories, finance/insurance, brokerage, service/repairs/storage, and used boat sales.
It’s also worth noting that although 73% of revenue from new boats is still quite significant especially if we saw sales pulled forward in the pandemic, MarineMax does skew towards more affluent consumers vs. lower-end consumers that have been hit the hardest.
In the company’s most recent Conference Call, the company noted that it has “a pretty resilient wealthy client it’s lending to”, suggesting that while the macro environment is impacting buyers, MarineMax is more insulated than it might appear on the surface.
So, why even bother with a volatile small-cap name that relies primarily on new boat sales in a tough macro environment?
(Source: FASTGraphs.com)
Although MarineMax could see continued downward pressure on earnings and annual EPS is expected to decline from a peak of $9.06 (FY2022) to $6.94 in FY2022 and $6.24 in FY2023, the stock is trading at just ~4.5x FY2024 earnings estimates which are expected to mark trough earnings at a share price of $28.00.
Not only is this one of the lowest earnings multiples for any publicly traded non-commodity stock based in North America, but the current PE ratio is over 60% below its historical multiple of 11.9x earnings.
Even if we use a 40% discount to this multiple to adjust for the more difficult macro environment (7.1x earnings vs. 11.9x earnings), I see a fair value for the stock of $44.30 per share, pointing to 59% upside from current levels.
Obviously, investing in sub $1.0 billion market cap names is not for the faint of heart and there is a higher risk to owning a name that some funds may not touch due to its relatively low daily average volume.
For this reason, I believe in sizing the position conservatively at less than 3.0% of one’s portfolio.
That said, while HZO may be volatile and may be higher risk than the average mid-cap or large-cap name, I see the risks as quite low given that it’s down ~50% from its highs and trading at its lowest valuation in years despite just coming off a record FY2022 with 300 basis points of gross margin expansion and 15% revenue growth.
The Joint Corporation (JYNT)
The Joint Corporation (JYNT) is a micro-cap stock ($250 million market cap) in the Medical-Services industry group that has been one of the best-performing stocks since its IPO debut before its recent 80% correction.
This was evidenced by an ~800% rally from its high in 2015 ($12.99) to its recent all-time high made last year of $111.06, driven by strong unit growth across its system and steady growth in revenue per share.
For those unfamiliar with what the stock does, it is a chiropractic franchisor and operator in the United States with a private pay, non-insurance cash-based model.
The company has grown from eight clinics in 2010 to over 830 clinics as of year-end 2022, with an ~85% franchised model.
The company collects a 7.0% royalty on sales from franchised clinics and a national marketing fee of 2.0% of gross sales. It also receives a fee of ~$40,000 for each franchise sold directly for single-franchise purchasers, making this a very attractive business model.
Since FY2015, Joint Corporation has grown its annual revenue from $13.8 million to $101.9 million, making it one of the highest growth stocks in its industry and across the entire market.
In the same period, it’s enjoyed a 1100 basis point improvement in gross margins (90.4% vs. 79.6%). Finally, it has increased its annual EBITDA to over $10 million despite a relatively modest footprint to date and revenue base.
Unfortunately, while this growth has been impressive and the stock massively outperformed during the bull market off the March 2020 lows, this performance has reversed and the stock has found itself over 80% off its highs.
The culprit for this underperformance is that the stock was priced for perfection heading into the peak for the major market averages in Q4 2021 at 20x sales, an insane multiple even for a high-margin business like Joint Corporation.
However, since then, the stock has reverted to a much more reasonable valuation of ~2.0x FY2023 sales estimates ($130 million) and less than 1.8x FY2024 estimates.
This is a significant discount to its historical revenue multiple of 4.1, even if this is a less attractive environment for owning risky stocks when one can scoop up a risk free ~4% return in treasury bills.
So, why own the stock here?
(Source: FASTGraphs.com)
While Joint Corporation is quite volatile, management is confident that it’s in the earlier innings of its growth story with the potential to grow to well over 2,000 clinics domestically.
This would push annual revenue to well over $300 million, making Joint Corporation one of the cheapest publicly traded franchisors if it stays at these depressed levels. Plus, the stock is finally becoming oversold, setting up a buying opportunity from a technical standpoint.
Based on what I believe to be a conservative multiple of 3.0x forward sales and FY2023 estimates of $8.50, I see a fair value for JYNT of $25.50, pointing to 52% upside from current levels.

So, if the stock were to head back towards its recent lows near $14.50, I would view this as a buying opportunity.
While several names in the large-cap space are on the sale rack currently, with Enbridge (ENB) being one attractive name that’s offering one of the best yields in the market and trading in the lower end of its 2-year range, I am always happy to add some small-cap exposure to my portfolio to add additional torque.
The key, however, is that these businesses are trading at a deep discount to fair value and offering a margin of safety to adjust for their higher volatility and increased risk given that they’re much smaller companies.
Today, two names that stand out are JYNT and HZO, and the recent pullback has set up low-risk buying opportunities in both names.
So, if I were looking for a way to diversify my portfolio with two names offering growth at a reasonable price, I see JYNT and HZO as solid buy-the-dip candidates below $28.00 and $14.50, respectively.
Disclosure: I am long HZO, ENB
Taylor DartINO.com Contributor
Disclaimer: This article is the opinion of the contributor themselves. Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information in this writing.

According to some doomsayers, the stock market is on the brink of a crash, and the collapse of Silicon Valley Bank (SVB) is being considered as a potential “Black Swan” event.
They believe it could trigger a domino effect similar to the Lehman Brothers collapse in 2008. There are already indications of this, as the failure of SVB has had a ripple effect in Europe, with the second largest Swiss bank, Credit Suisse, also being hit.
Source: TradingView
In the comparative chart above there is a year-to-date dynamics of S&P 500 Financials index (SPF, black), the iShares Global Financials ETF (IXG, green), SVB Financial Group (SIVB, red), Credit Suisse (CS, orange), JPMorgan Chase (JPM, blue) and Bank of America (BAC, purple).
On the chart, all of the lines indicate negative performance, with each one below the zero mark. Indeed, SVB and CS are the ultimate losers, while BAC is also suffering a significant loss at -17.01%. Meanwhile, IXG, JPM, and SPF fared slightly better, with losses of -6.43%, -6.85%, and -10.35%, respectively.

This indicates that banking stocks around the world are losing ground following the trigger from SVB, as seen with the decline in IXG and the top two banks in the US.
Source: TradingView
The chart for the S&P 500 Financials index (SPF) indicates the possibility of continued weakness. It exhibits a classic pattern, with two large red moves downwards connected by a consolidation area in green. This consolidation area includes two upward moves (green i and ii), which form a Rising Wedge pattern in green.
The price target for the second red leg downwards is set at $428 (leg 2 = leg 1), which is a drop of almost 17% or $85 from the current level. With a year-to-date loss of 10%, this further decline would add to the pain.
The price has already covered over 50% of the second drop by reaching the significant support area created by the high points in 2018 and 2020, as well as the low point in 2022.
The RSI has already dropped below the support level of 50, indicating a shift towards a bearish trend.
Once the price breaks below the support area formed by the peaks of 2018 and 2020 and the valley of 2022, there are no other significant supports until it reaches the valley of 2020 at $291. This collapse could happen quite rapidly, as seen in 2020, and would result in a loss of over 43% from the current level.
The financial sector makes up 12% of the broad S&P 500 index. Therefore, the descent of the former for 17-43% would likely have a negative impact on the overall stock market.
Source: finviz.com
The positive momentum in the technology sector, which accounts for 27% of the S&P 500, helps to mitigate the negative impact of the financial sector’s decline and prevent a significant collapse in the broad index. We can see green spots in the sea of red though in the map of 1-month performance above.
Source: TradingView
Compared to the financial sector’s graph, the chart of the broad index looks much better. In January, the price broke out of a large correction (indicated by orange trendlines).

Currently, there is a textbook pullback in progress as the price retests the former orange trendline resistance, which has now become a support. The collapse of SVB caused the index to briefly puncture the trendline, but it was quickly pushed back up by technology stocks.
For continued growth, the RSI needs to overcome the resistance at the 50 level. According to a conservative approach, the price should retest the all-time high at $4,819.
If the trendline support is broken and the RSI fails to break into the bullish area, the red-colored scenario could become a reality. This would follow a similar structure as the SPF chart with two legs down in red. The main downside target for the broad index would be located at $3,013, which is equal to the first leg down.
In the worst-case scenario, a crash similar to that of 2020 could bring the price down to the valley of $2,192.

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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.

Last year, when the Federal Reserve realized that the inflation, which was earlier thought to be “transitory,” might be feeding on itself and soon spiral out of control, it acted swiftly to respond with an aggressive interest rate hike cycle, one of the quickest on record.
As a result, we have gone from living in a world of virtually free money, marked by a target federal funds rate of 0% to 0.25%, for more than 12 years since the global financial crisis to a world of constricted credit, with a target rate at 4.50% to 4.75%, the highest since 2007.
Right on cue, the market and economy responded to the end of the era of easy money with withdrawal tantrums. Although the Fed has been able to bring down CPI inflation from a 40-year high of 9.1% in June 2022 to 6.4% in January 2023, it has come at the cost of increased market volatility, stressed margins due to increased borrowing costs, and bank runs due to bond price devaluations.
Given that the federal funds rate appears to be nothing short of a force of nature for the capital markets and the economy at large, its deeper understanding would serve market participants well.

What is the Federal Funds Rate?
The federal funds rate is the interest rate that banks charge other institutions for lending excess cash to them from their reserve balances on an overnight basis.
Legally, all banks are required to maintain a percentage of their deposits as a reserve in an account at a Federal Reserve bank. This mandated amount is known as the reserve requirement, and compliance of a bank is determined by averaging its end-of-the-day balances over two-week reserve maintenance periods.
Banks, which expect to have end-of-the-day balances greater than the reserve requirement, can lend the surplus to institutions that expect to have a shortfall.
The Federal Open Market Committee (FOMC) guides this overnight lending of excess cash among U.S. banks by setting the target interest rate as a range between an upper and lower limit. This target interest rate is called the federal funds rate.
How is it Determined?
The FOMC is the policy-making body of the Federal Reserve. It is constituted by the members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining 11 Reserve Bank presidents.
The FOMC meets eight times a year to set the target federal funds rate, based on the prevailing economic conditions, as part of its monetary policy designed to serve its dual mandate of ensuring maximum economic growth and employment while keeping inflation under control.
It is important to note that the federal funds rate, set and meant to serve as guideposts, can’t be imposed by the FOMC. The actual interest rate between banks is negotiated, and the weighted average of interest rates across all transactions of this type is known as the effective federal funds rate.
The Effective Federal Funds Rate Since 1954 (Source: FRED)
However, the Federal Reserve influences the effective federal funds rate through open market operations, which involve buying and selling government securities to adjust the money supply in the banking system. Interest rates are inversely proportional to the amount of money in the system.
Why is the Federal Funds Rate Important?
Fabled investor Warren Buffett once said, “interest rates are to asset prices what gravity is to the apple.” He further added that they “power everything in the economic universe.”
Here are a few ways the federal funds rate influences our economic prospects, directly or otherwise:

By determining the cost of money in the U.S. economy, the Federal Reserve tries to strike a balance between economic growth and demand-driven inflation. A low rate increases the economy’s liquidity, making borrowing cheaper and stimulating growth.
However, when excessive growth and subsequent inflation threaten to reduce purchasing power, the Fed can raise interest rates to slow inflation and return growth to more sustainable levels.
Since interest rates are used to discount future cash flows while determining the value of the assets, low-interest rates inflate asset prices, while high-interest rates deflate them. This could be the reason for the downward volatility currently witnessed in the capital markets.
Asset price inflation in an environment of low or decreasing interest rates makes holders of those assets feel richer and willing to spend more which acts as an added tailwind for the economy.
Low-interest rates make borrowing cheap and encourage businesses to invest in facilities and equipment, which stimulates economic growth. The low cost of capital ensures that businesses operate with healthy margins and look more profitable.
Falling interest rates make returns from safe investments look paltry and incentivize investors to seek out riskier investments while demanding a modest premium for taking on additional risk. This increases the inflow of funds into equities and other speculative asset classes (cryptocurrencies, SPACs, “growth” companies, etc.), creating asset bubbles.
An environment of high or increasing interest rates stimulates investors’ “risk off” mindset and makes returns from safe investments look more attractive. Hence investors demand higher returns and risk premiums from riskier investments leading to an outflow of funds and the subsequent bursting of bubbles created earlier.
When the Federal Reserve increases the fed funds rate, it typically increases interest rates throughout the economy, strengthening the dollar. This makes imports cheaper but ends up hurting exports.
On the other hand, the currency’s weakness, costlier imports, but more profitable exports are characteristic of a decreasing or low interest-rate environment.

How to Take Advantage When the Fed Raises Rates?
Investors, speculators, and consumers can benefit or limit losses from increases in the fed funds rate in various ways, depending on their risk appetite and investment horizon. Some possible ways are:

Investing in U.S. dollar-denominated assets, such as Treasury bills, bonds, certificates of deposit, or money market funds. The higher yields attract investment capital from investors abroad seeking higher returns on bonds and interest-rate products.
Investing in short-term interest-rate products, such as floating-rate notes, adjustable-rate mortgages, or bank loans. These products have interest rates that adjust periodically based on benchmark rates, such as the fed funds rate. Hence, when the fed funds rate increases, these products also increase their interest rates, which means higher income for investors.
Shorting long-term-interest-rate products, such as fixed-rate bonds or mortgages. These products have fixed interest rates that do not change over time, which means their prices decline to raise their yields when interest rates rise. Investors who expect interest rates to rise can sell these products at a higher price and buy them back at a lower price later, making a profit from the markdowns.
Using credit cards wisely. When the Fed raises interest rates, credit card debt becomes more expensive since the interest charged by credit card companies usually moves in lockstep with the federal funds rate. However, reward programs that offer cash back to borrowers who pay off their dues in full every month also become more valuable.
Taking advantage of higher savings rates. Higher interest rates mean higher returns on savings accounts, certificates of deposit, or money market accounts. Savers could shop for the best rates and lock in their deposits for longer terms to earn more interest.

Best,The MarketClub Team[email protected]