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It’s been a rough year for the major market averages, with the major indexes down roughly 20% in their worst year since 2008.
This poor performance is not surprising after a decade-long bull market that pushed valuations to historic extremes combined with an ultra-hawkish Federal Reserve that has aggressively hiked rates into a recessionary environment.
At the same time that higher rates have dented earnings and resulted in layoffs due to increased interest expense, the outlook for forward earnings is less clear, with consumer spending pulling back and reduced sales leverage for most corporations.
However, one sector stands out and has been trending higher over the past two months: the gold mining sector. In fact, the Gold Miners Index (GDX) has clawed back from a 30% year-to-date loss to just a 13% year-to-date loss, and many gold miners are trading in positive territory year-to-date.

Given that they’ve suffered through a much larger bear market than the Nasdaq (COMPQ) with a ~55% decline, these names are not only undervalued, but they’re long-term oversold, and the sector could have meaningful upside as we head into a strong seasonal period for the GDX.
In this update, we’ll look at two of the more undervalued names in the sector:
Osisko Gold Royalties (OR)
Osisko Gold Royalties (OR) is a $2.23 billion company in the precious metals royalty/streaming space.
This means that It finances developers, producers, and explorers in the commodity sector with a gold/silver focus, providing them capital upfront to build or expand their assets.
In exchange, Osisko Gold Royalties receives either a royalty or stream on the asset over its mine life, with the latter giving it a right to buy a percentage of metal produced at a fixed cost that is well below spot prices.
The result is that royalty/streaming companies have their tentacles in several projects, have their revenue streams spread across several countries, and are inflation-resistant. Hence, they are superior businesses from a margin and risk standpoint vs. most gold producers.
So, what’s so special about Osisko?
While Osisko may not be the largest royalty/streaming company in the sector, it stands out for three reasons.
For starters, it generates most of its revenue from royalties and streams in Tier-1 jurisdictions, a clear differentiator from its peers, making it more attractive from a geopolitical standpoint.
Secondly, Osisko is partnered with some of the largest operators in the sector on its projects, including Agnico Eagle (AEM), Newmont (NEM), and Alamos (AGI).
Not only does this mean that more meters are drilled on its properties which provides Osisko with a potential upside above its initial investment, but it also means that these mines are managed by highly skilled operators capable of maintaining and growing production without issues.
The final point and most important is that Osisko has a very deep pipeline of development assets and one of the best growth profiles sector-wide. This includes the potential to grow production from 90,000 gold-equivalent ounces [GEOs] in FY2022 to 140,000 GEOs in 2026 and up to 200,000 GEOs in 2030.
The latter represents an industry-leading 10.5% compound annual production growth rate which dwarfs the low single-digit production growth rate for larger royalty/streaming peers in the sector.
However, this growth assumes that Osisko doesn’t aggressively acquire new royalties/streams, which is certainly possible with over $600MM in liquidity currently.
Based on what I believe to be a fair cash flow multiple of 25.0 and FY2023 cash flow per share estimates of $0.74, I see a fair value for OR of $18.50, representing a 51% upside from current levels.
Tthese cash flow estimates assume that gold remains below $1,875/oz next year and silver remains below $23.00/oz, with these forecasts looking beatable based on spot prices today.
To summarize, OR is the most attractive royalty/streaming company sector-wide from a growth, quality, and value standpoint, and I am bullish at $12.00, where a large margin of safety is baked into the stock.
Barrick Gold (GOLD)
Barrick Gold (GOLD) is the world’s 2nd largest gold producer and sports a market cap of $30.8BB at a current share price of $17.50.
Despite its distinction as the #2 gold producer globally, Barrick has underperformed its peers and suffered a more than 45% decline from its 2020 highs despite a mere 14% decline in the gold price.
This underperformance can be attributed to the fact that Barrick’s operating costs have risen due to inflation, its production has been lower over the past three years as it’s made divestments, and it saw one asset go offline (Porgera), leading to a further decline in its global gold production (~4.2 million ounces per annum).
The combination of higher costs, a lower gold price, and declining production has put a major dent in annual EPS and cash flow per share, with Barrick on track to see its annual EPS decline from $1.15 in FY2020 to $0.81 this year.
While this is disappointing, it’s important to note that production is expected to increase materially, looking out to 2024 with its new Goldrush Mine, increased production at Turquoise Ridge and Pueblo Viejo, and a Porgera restart.
Simultaneously, its costs are also expected to decline materially with the benefit of some moderation in inflationary pressures, the optimization of key assets, and much lower sustaining capital after a year of elevated waste-stripping costs in 2022.
The result is that annual EPS will likely trough in 2022, rising above $1.00 in FY2024 assuming the gold price cooperates.
Given that we could be seeing peak operating costs and trough earnings/cash flow and the market is forward-looking, I believe it’s likely that Barrick has seen its lows at $13.00 per share and will likely trade in a range between $13.00 and $26.00 per share over the next 18 months.
So, while the stock is off its lows, I still see considerable upside left, and I would expect any sharp pullbacks to provide buying opportunities. This is supported by the fact that Barrick has historically traded at 25.0x earnings and currently trades at just ~17.5x FY2024 annual EPS estimates of $1.00.
Hence, even if we were to see it trade below this level (24x earnings), I see a fair value for its 18-month target price of $24.00.
So, why Barrick vs. other major producers?
Although Barrick may operate out of some less attractive jurisdictions (Papua New Guinea, Mali, Congo), its largest mining hub is in Nevada.
Notably, the company has a very bright future in the state with a joint venture completed to unlock significant resources and optimize these assets.

Ultimately, I see this leading to meaningful growth in its Nevada production profile post-2025, and with this being the #1 ranked jurisdiction globally, I would expect Barrick to continue to command a premium multiple.
This is reinforced by Barrick having a disciplined CEO and industry-leading diversification with over a dozen mines across multiple jurisdictions.
So, with the stock hated and on the sale rack, I would expect pullbacks below $16.40 to provide buying opportunities.
In a market where few stocks are making new 50-day highs, the gold sector is a clear exception, with several names like OR, GOLD, and AEM breaking out of bases.
Even more importantly, these bases have been built after two-year bear markets that have left these stocks with attractive valuations and considerable upside before they become overbought.
So, if I were looking to diversify my portfolio, I see OR and GOLD as solid buy-the-dip candidates.
Disclosure: I am long OR, AEM, GOLD, AGI
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.

It has been a challenging year for the stock market as most equities have witnessed a sell-off due to various macroeconomic and geopolitical concerns.
However, retail energy and renewable energy solutions provider Genie Energy Ltd. (GNE) has gained 84.7% in price year-to-date and 90.6% over the past year to close the last trading session at $10.29.
The stock’s strong performance can be attributed to the rise in energy prices that led to strong earnings for the company.
Post its third-quarter earnings, GNE’s CEO Michael Stein, said, “We reported record third-quarter profit metrics driven by strength in Genie Retail Energy (GRE), our domestic retail energy business. GRE continued to outperform in a volatile energy price environment. We were well-positioned with our customer book and hedges heading into the quarter and were able to drive a 54% gross margin and generate nearly $28 million in Adjusted EBITDA.”

Its Genie Renewables (GREW) segment also did well as it acquired site rights to 64MW solar projects and advanced them through its permitting processes.
“Given the challenging environment in the European energy market, we determined that the risk was beyond our acceptable tolerances. As a result, we exited our remaining international retail operations and no longer serve customers in Scandanavia,” he added.
GNE is trading at a discount to its peers. In terms of trailing-12-month GAAP P/E, GNE’s 5.44x is 73.5% lower than the 20.53x industry average. Its trailing-12-month EV/S of 0.55x is 86.4% lower than the 4.05x industry average. Also, the stock’s 2.07x trailing-12-month EV/EBITDA is 84.4% lower than the 13.30x industry average.
On November 30, 2022, GNE announced the acquisition of a portfolio of residential and small commercial customer contracts from Mega Energy. GNE’s CEO Michael Stein said, “Our strong balance sheet, with significant cash reserves, positions us to compete for additional books of business at favorable prices. We will continue to look for customer acquisition opportunities as specific markets become more conducive to growth.”
The acquisition helps it acquire new customers across seven states in the Northeast and Midwest. The portfolio comprises approximately 11,000 residential and commercial customer meters, and it is expected to be revenue and earnings accretive for the company immediately.
For the rest of the year, Stein guided, “We expect energy prices to remain volatile as we head into the winter months, but we continue to be well-positioned from a risk management position and will return to customer acquisition mode on a market-by-market basis when the risk/reward balance is favorable.”
“Additionally, we expect to receive all approvals necessary to begin construction on our first wholly-owned and operated solar generation project this quarter. Finally, we continue to redeem our preferred stock to enhance our flexibility to invest future cash-flows in value creation initiatives, including pursuing additional growth opportunities in our renewable business,” he added.
Here’s what could influence GNE’s performance in the upcoming months:
Mixed Financials
GNE’s revenue declined 7.3% year-over-year to $81.28 million for the third quarter ended September 30, 2022.
Its adjusted EBITDA increased 35.4% year-over-year to $24.50 million. The company’s gross margin came in at 53.1%, compared to 39.5% in the prior-year period.
Also, its net income attributable to GNE common stockholders came in at $18.31 million, compared to a net loss attributable to GNE common stockholders of $2.66 million in the year-ago period.
High Profitability
In terms of the trailing-12-month gross profit margin, GNE’s 49.45% is 26.9% higher than the 38.98% industry average.
Likewise, its 26.20% trailing-12-month EBIT margin is 40.8% higher than the industry average of 18.61%. Furthermore, the stock’s 1.52% trailing-12-month asset turnover ratio is 552.6% higher than the industry average of 0.23%.
Technical Indicators Show Promise
According to MarketClub’s Trade Triangles, the long-term and short-term trends for GNE have been UP since December 14, 2022, and its intermediate-term trend has been UP since December 5, 2022.
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, another MarketClub proprietary tool, GNE, scored +85 on a scale from -100 (strong downtrend) to +100 (strong uptrend), indicating short-term weakness. However, look for the longer-term bullish trend to resume. As always, continue to monitor the trend score and utilize a stop order.

The Chart Analysis Score measures trend strength and direction based on five different timing thresholds. This tool takes into account intraday price action, new daily, weekly, and monthly highs and lows, and moving averages.
Click here to see the latest Score and Signals for GNE.
What’s Next for Genie Energy Ltd. (GNE)?
Remember, the markets move fast and things may quickly change for this stock. Our MarketClub members have access to entry and exit signals so they’ll know when the trend starts to reverse.
Join MarketClub now to see the latest signals and scores, get alerts, and read member-exclusive analysis for over 350K stocks, futures, ETFs, forex pairs and mutual funds.
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Copper futures have closely followed the trajectory of the zigzag that was outlined this summer in the post titled “Copper Fears Recession”. Below is a copy of that monthly chart to refresh your memory.
Source: TradingView
The majority of readers bet that the price would remain above $3. Within the same month, the price reached a valley of $3.13 and subsequently recovered. This vote is still valid as the price hasn’t crossed that handle yet.

In the next weekly chart update, we will examine the outlook further.  
Source: TradingView
This is a closer look at the second red leg down shown on a bigger time frame in the summer. When the first leg up within a bounce in copper futures was unfolding, it looked promising at the beginning.
The hope has evaporated with the second leg up that has shaped a classic “dead-cat bounce” hitting only the minor 38.2% Fibonacci retracement level. It was close to touching the purple barrier of the moving average at the round level of 4, but failed.    
This consolidation after the AB part was called the “BC” segment, and chances are high that was it, especially after the Fed’s Chair Powell revealed last week that “17 of the 19 [FOMC members] wrote down a peak rate of 5 percent or more, in the 5 range. So that’s our best assessment today for what we think the peak rate will be.” So it would seem another hike or two is in the pipeline.
The Fed still fears inflation rather than recession. The copper futures market is a barometer of the economy, so it reacted immediately. After the Fed hiked its interest rate projection for 2023, the price lost 20 cents by the end of the week.      According to the RSI, it followed the consolidation path to retest the crucial 50 level. Now, both the price and the market turned south.
The target for the CD segment equal to AB is located at $2.05 where the large red leg 2 is equal to the large red leg 1 in the first chart above. It is an amazing coincidence. Should the Fed throw the economy into recession, the price could fall into the abyss of 2008’s Great Recession’s valley at $1.25.
The closest volume profile support is located at $3.6. The bigger one is located lower at $2.9 and the largest volume profile sits at $2.6.
The nearest resistance level is the moving average and the 50% Fibonacci retracement level at $4-$4.1. A harder barrier sits at volume profile and 61.8% Fibonacci retracement level at $4.3.
There is another chart that I didn’t show you long ago. A strong distortion was spotted this time, so I want you to see it below.
Source: TradingView
Copper futures (orange) have a strong correlation with the AUDUSD currency pair (green). These two were in amazing sync for more than a decade from 2001 to 2016. The chain was then broken as copper futures showed a terrific gain while the Australian dollar continued to sink.

The divergence reached its peak last summer and is closing now, even as Ozzy dives further down. These days, the corresponding level for copper futures is at $1.75, less than half of the current price of $3.76. The distortion might be solved in the opposite direction as well with the price of AUDUSD reversing to the upside.
However, the chances are low as the real interest rate differential is in favor of the US dollar by a wide margin.         Possibly we will see a repeat of 1989-2001 when the Ozzy dropped drastically to catch up with copper’s low price. Copper may collapse this time to match a weak Australian dollar.   

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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.

Inflation cooled again last month after starting to decline in October.
The Labor Department reported that the Consumer Price Index (CPI) in November rose 7.1% increase year-over-year and was just 0.1% from the previous month.
Economists surveyed by Dow Jones expected prices to grow at an annual 7.3% and 0.3% over the prior month.
The favorable November inflation report kept the Fed on track to increase interest rates by a relatively smaller amount after four consecutive hikes of 75-basis-point magnitude.
In addition to the optimism surrounding the decline in the Fed rate hikes, December has proven to be a strong month for the stock market over the past 70 years. However, many experts still expect a mild recession next year.

Given the backdrop, it could be wise to take advantage of the uptrend in JPMorgan Ultra-Short Income ETF (JPST), IQ MacKay Municipal Intermediate ETF (MMIT), and VanEck Long Muni ETF (MLN) to diversify your portfolio this month.
JPMorgan Ultra-Short Income ETF (JPST)
JPST is an actively managed, ultra-short-term, broad-market bond fund that aims to maximize income and preserve capital.
The fund makes investments in fixed-rate, variable-rate, and floating-rate debt, including corporate issues, asset-backed securities, and debt pertaining to mortgages, as well as U.S. government and agency debt, including treasury securities.
JPST has $22.76 billion in assets under management. The fund has a total of 467 holdings. Its top holdings include U.S. Dollar with a 44.64% weighting, Fixed Income (unclassified) at 1.73%, BNP Paribas S.A. 3.5% at 0.94%, and Nordea Bank AB (New York) FRN at 0.81%.
JPST has an expense ratio of 0.18%, lower than the category average of 0.60%. Over the past six months, JPST’s fund inflows came in at $4.14 billion. Also, it has a beta of 0.04, indicating extremely low volatility compared to the broader market.
JPST pays an annual dividend of $1.04, which yields 2.08% on prevailing prices. Its dividend payments have grown at a 16.9% CAGR over the past five years. The fund has a record of dividend payments for five consecutive years.
JPST has gained marginally over the past month to close the last trading session at $50.19. It has a NAV of $50.19 as of December 12, 2022.
MarketClub’s Trade Triangles show that JPST has been trending UP for two of the three time horizons. The long-term trend for JPST has been UP since November 22, 2022, while its intermediate-term trend has been UP since November 15, 2022. The short-term trend has been DOWN since December 15, 2022.
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, another MarketClub proprietary tool, JPST scored +65 on a scale from -100 (strong downtrend) to +100 (strong uptrend), indicating signs of weakening momentum to the upside. Monitor JPST as it may be in the beginning stages of a reversal.

The Chart Analysis Score measures trend strength and direction based on five different timing thresholds. This tool takes into account intraday price action, new daily, weekly, and monthly highs and lows, and moving averages.
Click here to see the latest Score and Signals for JPST.
IQ MacKay Municipal Intermediate ETF (MMIT)
MMIT is actively managed to provide current income exempt from federal income tax.
The ETF seeks to enhance total return potential through its subadvisor’s active management approach by investing primarily in investment-grade municipal bonds with a duration between 3-10 years.
MMIT has $338 million in assets under management. The fund has a total of 397 holdings. Its top holdings include Miami-Dade Cnty Fla Tran Sys Sales Surtax Rev 5.0% with a 1.47% weighting, Alamito Pub Facs Corp Tex Multifamily Hsg Rev VAR at 1.18%, New Jersey St Hsg & Mtg Fin Agy Multifamily Conduit Rev at 1.17%, and Jackson Cnty Mo Sch Dist Hickman Mls C-1 5.75% with a 1.13% weighting.
MMIT has an expense ratio of 0.31%, compared to the category average of 0.30%. Over the past six months, its fund inflows came in at $69.23 million.
Also, it has a beta of 0.03. The fund pays a $0.61 per share dividend annually, which translates to a 2.51% yield on the current price.
MMIT has gained 2.7% over the past month to close the last trading session at $24.33. It has a NAV of $24.31 as of December 12, 2022.
MarketClub’s Trade Triangles show that MMIT has been trending UP for all the three-time horizons. The long-term trend for MMIT has been UP since December 1, 2022, while its intermediate-term and short-term trends have been UP since November 10, 2022, and November 1, 2022, respectively.
Source: MarketClub
In terms of the Chart Analysis Score, MMIT scored +100 on a scale from -100 (strong downtrend) to +100 (strong uptrend), indicating that the uptrend is likely to continue. Traders should protect gains and look for a change in score to suggest a slowdown in momentum.

Click here to see the latest Score and Signals for MMIT.
VanEck Long Muni ETF (MLN)
MLN tracks a market value-weighted index of investment grade, tax-exempt US municipal bonds.
Municipal bonds are used by local entities to pay for various services or to make improvements to infrastructure, paying for everything from new sewer systems to bridge construction.
This fund targets bonds with nominal maturities of at least 17 years, giving the fund a higher-risk profit and greater current income potential.
MLN tracks ICE Long AMT-Free Broad National Municipal Index. With $251.30 million in assets under management, the fund’s top holdings include U.S. Dollar with a 4.59% weighting, followed by Massachusetts St Dev Fin Agy Rev 5.0% at 0.76%, and Triborough Brdg & Tunl Auth Ny Revs 5.0% and Austin Tex Elec Util Sys Rev 5.0%, at 0.63% and 0.57%, respectively.
It currently has 482 holdings in total.
Over the past three months, the ETF’s net inflows were $29.65 million. In addition, its 0.24% expense ratio compares favorably to the 0.30% category average. Also, it has a beta of 0.05.
MLN pays a $0.53 annual dividend yielding 3.01% at the current share price. The fund has gained 4.3% over the past month and 3.4% over the past six months to close the last trading session at $17.76. Its NAV was $17.74 as of December 12, 2022.

According to MarketClub’s Trade Triangles, MLN has been trending UP for two of the three time horizons. The long-term trend for MLN has been UP since December 1, 2022, while its intermediate-term trend has been UP since November 10, 2022. The short-term trend for MLN has been DOWN since December 15, 2022.
Source: MarketClub
In terms of the Chart Analysis Score, MLN scored +85 on a scale from -100 (strong downtrend) to +100 (strong uptrend), and is showing short-term weakness. However, look for the longer-term bullish trend to resume. As always, continue to monitor the trend score and utilize a stop order.

Click here to see the latest Score and Signals for MLN.
What’s Next for These ETFs?
Remember, the markets move fast and things may quickly change for these ETFs. Our MarketClub members have access to entry and exit signals so they’ll know when the trend starts to reverse.
Join MarketClub now to see the latest signals and scores, get alerts, and read member-exclusive analysis for over 350K stocks, futures, ETFs, forex pairs and mutual funds.
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Best,The MarketClub Team[email protected]

The disaster we are all still watching play out with Sam Bankman-Fried and his cryptocurrency exchange FTX could actually be suitable for the longer-term viability of Bitcoin, Ethereum, and other cryptocurrencies.
I know it sounds crazy, and if you were an investor who had money in FTX, you are certainly not happy with this, but long-term, the size of the losses incurred by investors in FTX could benefit the crypto market in years to come.
Why?
Since massive losses were incurred, regulators are taking note and investigating what happened.
Sam Bankman-Freid has been arrested and charged with many crimes, including conspiracy, fraud, money laundering, and campaign finance violations.

However, while those charges against him don’t have much to do with cryptocurrencies, it is likely that the investigation into how these crimes were committed and, more importantly, how he and his team at FTX were able to evade detection sooner will lead to some changes in the crypto world.
The change I’m referring to, which would boost cryptocurrencies and in some ways turn a bad situation into a good one, would be government oversight and regulation of the cryptocurrency markets.
Since Bitcoin, Ethereum, and all the cryptocurrencies came into existence, we have had no legitimate regulation or oversight of the industry.
While some believe that is a good thing, a lot of investors have been hesitant up to this point to jump into the world of crypto because there is limited to zero oversight. And I am not just talking about small retail investors who have sat on the sidelines, but big-time money managers who are not permitted to invest client funds in such investments due to their largely unregulated markets.
We are talking billions of dollars that could be invested in Bitcoin, Ethereum, and the other cryptocurrencies, and thus increase demand for these investments and ultimately push their prices higher.
It’s not just money managers, though. Regulation and more oversight could also open the door even more for cryptocurrency Exchange Traded Funds.
We currently have ETF products that track a few cryptocurrencies but nothing that holds a large basket of them. Until this point, the SEC has been very restrictive of new crypto ETFs and set stringent guidelines about what they can hold and how they can invest in cryptocurrencies.
So why do I think the FTX collapse could be good for Bitcoin and crypto?
Typically it takes an event such as we see play out for outsiders to take note and get involved in fixing a problem. Investors losing billions is usually the type of problem needed.
Think of the dot.com bubble bursting or the more recent housing crisis. Regulators didn’t walk in after the fact and say, “we are no longer going to allow technology start-ups to be traded on the public markets.” Nor did they say, “We are no longer going to allow homeowners to have mortgages on homes or allow bankers to buy and sell those mortgages.”
This fact was recently noted by Sen. Patrick J. Toomey (Pa.), the top Republican on the Senate Banking Committee and a leading crypto booster in Congress. He compared the FTX meltdown to the 2008 subprime mortgage crisis.
“Did we decide to ban mortgages?” asked Toomey. “Of course not,” he said. But, the guidelines for opening a mortgage were tightened, and regulators changed rules about what the banks who owned mortgages were required to do in an attempt to protect the banks themselves and the economy as a whole.

I don’t think the FTX collapse will cause regulators to ban crypto, the time and place for that are long gone.
But this could, at the very least, get people talking again about how it should be regulated and what safeguards should be implemented.
Perhaps if that is done, we can avoid this situation occurring again but hopefully make the crypto markets a little less like the wild wild west and more like a civilized society.
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.

As expected, the Federal Reserve raised the target for its benchmark federal funds interest rate by 50 basis points at its mid-December meeting, to a range between 4.25% and 4.5%.
That was down from the 75 basis-point hikes at its four previous meetings, yet the market’s immediate reaction to the move was an immediate selloff.
Was that a classic “buy on the rumor, sell on the news” reaction — i.e., the Fed delivered exactly what Chair Powell had earlier indicated it would do?
Or was there some element of disappointment that the Fed, despite the more modest rate increase, included in its updated economic projections that most officials expect to raise rates by another 100 basis points, to about 5.1%, next year?
But was that really a surprise, given earlier comments from Powell and other Fed officials?

On a positive note, according to the Fed’s revised economic projections, it now expects inflation to fall to 3.1% next year before declining in 2024 to 2.5% and 2.1% in 2025, putting it at its long-term target.
In November, the year-on-year increase in the consumer price index fell to 7.1% from 7.7% a month earlier, down sharply from June’s 9.1% peak. So it looks like the Fed is optimistic about where inflation is headed, whether its rate-rising regimen deserves the credit or not.
It’s also now calling for U.S. GDP to grow by 0.5% next year, unchanged from this year’s pace, before climbing to 1.6% in 2024.
By way of comparison, the economy rebounded at an annual rate of 2.9% in the third quarter following two straight quarters of negative growth.
The Fed projects the unemployment rate to jump to about 4.5% over the next three years, up from 3.7% currently, due to its rate increases.
(Which begs the question: Whatever happened to the Fed’s mandate to promote full employment? I guess it can’t do that and fight inflation at the same time.)
The Fed has a fairly light schedule in the first part of next year, so interest rate moves are likely to be few and far between anyway. The Fed’s next monetary policy meeting isn’t until the end of January, followed by one in the middle of March, and another one at the beginning of May.
Of course, the Fed could always announce a rate move — either up or down — in between meetings, but it usually only does so in times of crisis.
While investors seemed to be disappointed that we can expect another 100 basis points or so in rate increases, it’s important to put that in perspective.
After all, the fed funds target rate was near zero at the beginning of this year until the Fed started raising rates, by 25 basis points, in March, followed by six more, including the latest one. That would indicate that most of the pain is already behind us, with only a little more—hopefully—ahead of us, if you believe the Fed’s dot-plot chart.
So far, it seems, businesses and consumers by and large haven’t been terribly inconvenienced by all this, as attested by the third quarter’s 2.9% jump in GDP. The Christmas shopping season looks robust. The (few) restaurants I’ve been to have been full, as have the parking lots I’ve driven by.
There are other reasons for optimism. “Supply chain bottlenecks” were constantly in the news at the beginning of this year, but you don’t hear much about them anymore, do you? That’s because more companies have moved their supply lines on-shore or near-shore and away from Asia, while China seems to be relaxing its draconian Covid restrictions, or at least says it is. That should reduce inflationary pressures.
And despite dire predictions following Russia’s invasion of Ukraine last February that oil prices were headed to the stratosphere, prices have done the exact opposite and are projected to drop still lower even as we enter the teeth of winter. The world has managed.
While nobody’s happy about the level of partisanship in Washington, the results of the most recent elections are also a reason for optimism. With Democrats controlling the Senate and Republicans the House, political gridlock may be the happy result, as Congress and the Biden White House will have fewer opportunities to screw things up further than they already have.
Could this rosy scenario come unraveled in 2023? Of course.

Maybe inflation will remain stuck in the mid-single digits — or spike even higher — in which case the Fed will feel compelled to be more aggressive in raising rates, resulting in weaker economic growth and more job losses.
Maybe oil prices will increase as the weather gets colder.
Maybe the war in Europe will get even uglier.
Maybe some unforeseen Black Swan event will occur somewhere.
But right now it appears that the worst is behind us.
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.

It’s been a solid quarter thus far for the AdvisorShares Restaurant ETF (EATZ) and the restaurant index as a whole, with the ETF and the index up 9% and 17%, respectively, thus far in Q4, a significant outperformance vs. the S&P-500 (SPY).
This outperformance can be attributed to the fact that many restaurant stocks were priced very attractively heading into Q4 after a violent 18-month bear market and because gas prices have been trending lower and inflation looks to have peaked, which both benefit restaurant brands.
The reason? Restaurant food traffic is sensitive to gas prices which impact discretionary budgets, and food costs and labor costs have been rising for two years, pinching the margins of many restaurant brands.

Unfortunately, while some names like Restaurant Brands Intl (QSR) are sitting at 52-week highs, others have remained under pressure, and Jack In The Box (JACK) and Dine Brands (DIN) are two examples of names that haven’t participated much in the recent rally. Given that both are well-run and trading at attractive valuations, I believe both make solid buy-the-dip candidates.
Jack In The Box (JACK)
Jack In The Box is a small-cap stock in the restaurant sector, with two brands, including Jack In The Box and Del Taco, after completing the $585MM acquisition earlier this year.
Unfortunately, the stock has lost over $300MM in market cap since the deal closed in March, with this attributed to weaker restaurant-level margins at both brands of 16.2% and 15.9%, respectively (Jack In The Box/Del Taco). At Jack In The Box, this represented a 390 basis point decline year-over-year, impacted by higher food, labor, electricity, and paper costs.
In the company’s most recent quarter (fiscal Q4), it reported revenue of $402.8MM, up 45% year-over-year, but this was largely due to the new contribution from Del Taco that made the results look much better.
Meanwhile, on a same-store sales basis, same-store sales were up just 4% at Jack In The Box and 5.2% at Del Taco in fiscal Q4, suggesting meaningful traffic declines when factoring in double-digit pricing.
This is not the end of the world, and the rest of the industry is also seeing traffic declines, but it is a little disappointing, given that the quick-service and fast-casual brands have been outperforming casual dining.
Hence, I expected a little stronger results from Jack In The Box.
While this certainly isn’t ideal, and another tough year could be ahead with inflation remaining sticky, the good news is that inflationary pressures are finally easing.
Meanwhile, gas prices remain well below $4.00/gallon, and Jack In The Box is a value option for consumers, suggesting that it should benefit from economic weakness (being a trade-down beneficiary).
Hence, the company is now up against easier year-over-year comps as it heads into FY2023 after a rough first year following its Del Taco acquisition, and we may see trough margins in H1 2023 for the company.
The combination of easier comps and more robust results beginning in H2 2023 alone doesn’t mean we have an investment thesis. I would never buy stock simply because it’s up against easier comparisons.
That said, the valuation is starting to become more reasonable, with JACK trading at just ~10.5x FY2024 annual EPS estimates ($6.46) vs. a historical multiple of 17.0x earnings.
Even if we use a more conservative multiple of 14.0x earnings to adjust for the tougher environment, this translates to a fair value to its 18-month target price of $90.45.
So, if we were to see the stock dip below $59.00, where it would offer a 30% margin of safety vs. fair value, I would view this as a low-risk buy zone.
Dine Brands (DIN)
Dine Brands (DIN) fundamentally is a much stronger name and sports a $1.1 billion market cap. It is best known for its two iconic brands: Applebee’s and IHOP.
The company may be in the less desirable casual dining space that has suffered severe losses in foot traffic due to the pullback in consumer spending.
Still, Dine Brands has consistently outperformed its peer group from a same-store sales standpoint, and it is unique in the fact that it has an entirely franchised model, meaning that while it does suffer from inflationary pressures and traffic declines, this impact is much more muted than those companies that operate their restaurants and are taking the full brunt of rising food, packaging, and labor costs, like Brinker (EAT).
Unlike Jack In The Box, which had a rough year and is more of a turnaround story, Dine Brands has had a very solid year. And while annual EPS is expected to decline ($6.14 vs. $6.54 in FY2021), it remains just shy of pre-COVID-19 levels ($6.95) and is expected to hit new all-time highs in FY2023 at $7.10.
However, the stock has unfortunately been painted with the same negative brush as its peers, given that sentiment is so poor on the casual dining space.
In my view, this is a case of the baby being thrown out with the bathwater, and if we look out longer-term to FY2024 estimates, Dine Brands is expected to see annual EPS climb to $7.95 per share, 13% above pre-COVID-19 levels.
Historically, Dine Brands has traded at ~16.0x earnings, a far cry from its current valuation of ~11.1x earnings. Even in the tougher environment, I believe the company can easily justify a multiple of 13.0x earnings based on its fully-franchised model but offset by its lower unit growth rate than some of its peers.
Using FY2024 estimates of $7.95 translates to a fair value of $103.40 to its 18-month target price, representing a 52% upside from current levels.
The company is paying an attractive 3.0% dividend yield as a kicker.

So, if I were looking to add exposure to the restaurant space, I see DIN as a Buy below $65.00 for an initial position, and I would not be surprised to see the stock trade back above $85.00 within the next year, translating to a better than 30% total return.
While several of the better names in the restaurant sector have already enjoyed strong rallies off their lows, Dine Brands is a clear exception and one name that continues to sit at depressed levels despite solid execution.
Meanwhile, Jack In The Box’s pullback is partially justified, but further weakness should set up a low-risk buying opportunity, assuming the stock heads to new lows below $59.00, which might trigger panic selling among weaker hands.
In summary, I see DIN’s low-risk buy zone at $66.00, with JACK’s at $59.00, and if I were looking for exposure, these two names look like interesting buy-the-dip candidates on further weakness to play an extended rebound in the restaurant sector over the next 18 months with headwinds finally easing.
Disclosure: I am long QSR
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.

Build-A-Bear Workshop, Inc. (BBW) operates as a multi-channel retailer of plush animals and related products.
The company operates through three segments: Direct-to-Consumer, Commercial, and International Franchising. It runs around 346 locations managed by corporate and 72 franchised stores in Asia, Australia, the Middle East, Africa, and South America.
On November 30, the company announced record fiscal third quarter results. Its total revenue increased 9.9% year-over-year to $104.48 million, beating the consensus estimate by 1.8% and registering the seventh consecutive quarter of revenue growth.
Sharon Price John, BBW President and Chief Executive Officer, attributed this solid performance to momentum and consistency in business with solid brand interest from consumers. She expressed her confidence that the company is on track to deliver the most profitable year in its 25-year history.

Mirroring the above sentiment, the stock has gained 45.3% over the past month to close the last trading session at $25.17 despite the broader market remaining volatile on concern over the Fed’s potential rate hikes to bring inflation down to its 2% target.

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BBW is trading above its 50-day and 200-day moving averages of $17.33 and $17.28, respectively, indicating an uptrend.
Here is what may help the stock maintain its performance in the near term.
Solid Track Record
Over the past three years, BBW’s revenue has exhibited a 10.5% CAGR, while its EBITDA has grown at a stellar 99.4% CAGR. The company has increased its EPS at a 55% CAGR during the same period.
Robust Financials
Despite the negative currency impact of $2.5 million, BBW’s total revenues increased 9.9% year-over-year to $104.5 million during the fiscal third quarter, ended October 29, 2022.
This growth was mainly driven by sales from corporately-managed retail stores more than offsetting a decline in consolidated e-commerce demand (orders generated online to be fulfilled from either the company’s warehouse or its stores).
During the same period, BBW’s consolidated gross profit increased 9.5% year-over-year to $54.33 million, while its net income increased 25.9% year-over-year to $7.46 million. As a result, its quarterly EPS increased 41.7% from the previous-year quarter to $0.51.
Attractive Valuation
Despite solid financials and upward momentum in price, BBW is still trading at a discount compared to its peers, thereby indicating further upside potential. In terms of forward P/E, the stock is trading at 8.74x, 29.5% lower than the industry average of 12.40x.
In terms of the forward EV/EBITDA, BBW is currently trading at 6.24x, which is 32% lower than the industry average of 9.18x. Its forward Price/Sales of 0.79x also compares favorably to the industry average of 0.84x.
Favorable Analyst Estimates for Next YearAnalysts expect BBW’s revenue for the fiscal ending January 2023 to increase 11.9% year-over-year to $460.37 million. The company’s revenue is expected to increase 5.4% to $485.43 million during the next fiscal year.
Technical Indicators Look Promising
MarketClub’s Trade Triangles show that BBW has been trending UP for each of the three time horizons. The long-term trend has been UP since November 30, 2022, while the intermediate-term and short-term trends have been UP since October 18, 2022, and November 25, 2022, respectively.
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, strong swings in price.

In terms of the Chart Analysis Score, another MarketClub proprietary tool, BBW scored +100 on a scale from -100 (strong downtrend) to +100 (strong uptrend), indicating that the uptrend will likely continue. Traders should protect gains and look for a change in score to suggest a slowdown in momentum.

The Chart Analysis Score measures trend strength and direction based on five different timing thresholds. This tool takes into account intraday price action, new daily, weekly, and monthly highs and lows, and moving averages.
Click here to see the latest Score and Signals for BBW.
What’s Next for Build-A-Bear Workshop, Inc. (BBW)?
Remember, the markets move fast and things may quickly change for this stock. Our MarketClub members have access to entry and exit signals so they’ll know when the trend starts to reverse.
Join MarketClub now to see the latest signals and scores, get alerts, and read member-exclusive analysis for over 350K stocks, futures, ETFs, forex pairs and mutual funds.
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Recent data suggests that the U.S. economy has been more resilient than expected, despite the Fed’s efforts to cool it down through monetary tightening. However, the market widely expects the central bank to implement a lower rate hike in its meeting this month.
However, many economists believe that the terminal interest rates will beat the earlier estimates. This might tighten fund availability for growing businesses while softening consumer demand in the year ahead.
Hence it would be safe to bet on stocks with an encouraging outlook while avoiding the weak ones.

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Given its strong trends, it could be wise to buy NVIDIA Corporation (NVDA) to capitalize on increased consumer spending on electronics during holidays. On the other hand, CrowdStrike Holdings, Inc. (CRWD) might be best avoided now, given its downtrend.
NVIDIA Corporation (NVDA)
NVDA is a global provider of graphics, computation, and networking solutions. The company operates through two segments: Graphics and Compute & Networking.

NVDA’s revenue has exhibited a 41.8% CAGR over the past three years. During the same time horizon, the company’s EBITDA and net income have also grown at 51.6% and 35.2% CAGRs, respectively.
For the fiscal third quarter, ended October 30, 2022, NVDA’s non-GAAP operating income increased 15.9% sequentially to $1.54 billion, while its non-GAAP net income came in at $1.46 billion, up 12.7% quarter-over-quarter. This resulted in a sequential increase of 13.7% in non-GAAP EPS to $0.59 during the same period.
Analysts expect NVDA’s revenue and EPS for the fiscal fourth quarter to increase 1.5% and 37.9% sequentially to $6.02 billion and $0.80, respectively. The company has surpassed consensus EPS estimates in two of the trailing four quarters.
Owing to its strong performance and solid growth prospects, NVDA is currently commanding a premium valuation compared to its peers. In terms of forward P/E, NVDA is currently trading at 48.89x compared to the industry average of 19.35x. Also, its forward EV/EBITDA multiple of 65.13 is higher than the industry average of 12.75.
The stock is currently trading above its 50-day and below its 200-day moving averages of $139.16 and $176.47, respectively, indicating an uptrend. It has gained 13.7% over the past month to close the last trading session at $159.87.
MarketClub’s Trade Triangles show that NVDA has been trending UP for two of the three-time horizons. Its long-term trend has been UP since December 1, 2022, while its intermediate-term trend has been UP since October 27, 2022.
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, strong swings in price.
In terms of the Chart Analysis Score, another MarketClub proprietary tool, NVDA scored +85 on a scale from -100 (strong downtrend) to +100 (strong uptrend), indicating that a longer-term bullish trend could resume. Traders should continue to monitor the trend score and utilize a stop order.

The Chart Analysis Score measures trend strength and direction based on five different timing thresholds. This tool takes into account intraday price action, new daily, weekly, and monthly highs and lows, and moving averages.
Click here to see the latest Score and Signals for NVDA.
CrowdStrike Holdings, Inc. (CRWD)
CRWD offers solutions and workload protection for endpoints over the cloud via a software-as-a-service (SaaS) subscription-based model. The company’s Falcon platform delivers integrated technologies that provide security and performance while reducing customer complexity.
For the third quarter of the fiscal year 2023, ended October 31, 2022, CRWD’s loss from operations widened 40.1% year-over-year to $56.42 million, while its net loss widened 8.3% year-over-year to $54.63 million. The company’s total liabilities stood at $3.13 billion as of October 31, 2022, compared to $2.58 billion as of January 31, 2022.
In terms of forward P/E, CRWD is currently trading at 75.67x, significantly higher than the industry average of 19.35x. The company’s forward EV/Sales multiple is 11.67, compared to the industry average of 2.63. Also, its forward Price/Sales multiple of 11.95 compares unfavorably to the industry average of 2.52.
Despite its frothy valuations, CRWD’s stock is currently trading below its 50-day and 200-day moving averages of $149.17 and $176.15, respectively, indicating a bearish trend. It has slumped 10% over the past month and 42.6% year-to-date to close the last trading session at $113.83.

MarketClub’s Trade Triangles show that CRWD has been trending DOWN for all three-time horizons. The long-term trend for CRWD has been DOWN since May 9, 2022. Its intermediate-term and short-term trends have been DOWN since August 31 and November 17, respectively.
Source: MarketClub
In terms of the Chart Analysis Score, CRWD scored -90 on a scale from -100 (strong downtrend) to +100 (strong uptrend), indicating a strong downtrend that is likely to continue. Traders should use caution and set stops.

Click here to see the latest Score and Signals for CRWD.
What’s Next for These Tech Stocks?
Remember, the markets move fast and things may quickly change for these stocks. Our MarketClub members have access to entry and exit signals so they’ll know when the trend starts to reverse.
Join MarketClub now to see the latest signals and scores, get alerts, and read member-exclusive analysis for over 350K stocks, futures, ETFs, forex pairs and mutual funds.
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Best,The MarketClub Team[email protected]

Back in September, I shared with you my take on the USDJPY currency pair based on 360° view. A combination of fundamental factors and technical factors has supported the continued strength of the U.S. dollar relative to the Japanese yen.
However, the majority of readers predicted the opposite, as you can see in the screenshot below.

As the second largest vote played out the best, the USDJPY has soared more than six percent to reach a peak of ¥151.94. The previous time this level appeared on this chart was in the summer of distant 1990, two decades ago. That move was close to hit the CD=AB target at ¥152.89, however it has lost the momentum.

The pair has lost more than it gained in that call and there is a question, is that all or are we just in a large correction?
I prepared for you another bunch of visualizations below to answer that question.
Let’s start with the fundamentals first in the interest rate comparison below.
Source: TradingViewThe Federal Reserve is actively trying to control inflation by raising interest rates at each and every meeting. As a result, the real interest rate in the U.S. has soared from negative minus 8 percent this spring up to the current level of minus 3.7 percent.
It contrasts with the “let it be” approach of the Bank of Japan. Hence, the Japanese real interest rate has been sinking lower and lower to finally cross the U.S. real interest rate as shown in the chart above.
The margin is only 0.1 percent and it could probably rise by 0.5 percent this week at the Fed meeting. This makes U.S. assets more attractive, which will boost dollar demand.
The next chart shows the current market distortion that is clear as day.
Source: TradingView
Last time, we had the opposite situation – the USDJPY pair was above the real interest rate differential between the U.S. and Japan (red line) due to market forecasts of further Fed hikes. This indicator works perfectly, as we can see how USDJPY peaked right at the current maximum of the interest rate differential.
These days the market is far below the red line. The orange line highlights the area where the Fed could raise the differential this week. It corresponds to USDJPY levels between ¥155 and ¥156, which indicates significant growth potential of almost 14% for the pair.      
Let us move to the technical chart below to complete 360° view.
Source: TradingView
This time I zoomed out the view enough to spot the huge Inverse Head & Shoulders pattern (blue) in the monthly chart above. It is a bullish reversal pattern and its magnitude is fortified by the up-sloping right shoulder.
This April the price had broken above the trigger of the Neckline around ¥127.5. The follow-up move to the upside was unstoppable until it reached the next black barrier of August 1998 close to ¥148. The USDJPY spiked above that level and then collapsed swiftly below it.  

A target for this pattern is at the height of the Head added to the Neckline at ¥176. It should be a tremendous gain of almost 29 percent from last week’s close of ¥136.58.
The barriers to watch are located at the peak of 1998 above ¥147 (black) and at the maximum of 1990 around ¥160 (orange).
If the pair is to maintain bullish momentum, then it needs to stay above the Neckline around ¥127.  

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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.