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The Tech Trade Cools Off With Earnings On Deck

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By: Spencer Israel

As we head into August, the tech trade that seemingly carried the market out of the March bottom has suddenly lost a bit of luster.

One month ago we were wondering (again) whether the FANG stocks were overvalued. But the wave of momentum that carried tech stocks like Facebook, Apple, Alphabet, Amazon, Microsoft, Netflix, and Shopify through April, May, and June appears to have topped out—at least for now. 

With the exception of Alphabet, each of those stocks made a new all-time high on or around July 13. All of them have since come off those highs, and the members of this group that had run up the most in 2020—Amazon, Netflix, and Shopify—have since sold off the hardest. 

Stock All-Time High Made (YTD Performance As Of Date) Since ATH*
AAPL July 13, 2020 (35%) -7%
AMZN July 13, 2020 (78%) -10%
FB July 13, 2020 (21%) -7%
GOOG July 21, 2020 (18%) -4%
MSFT July 9, 2020 (36%) -7%
NFLX July 13, 2020 (76%) -16%
SHOP July 13, 2020 (166%) -13%

*As of July 24, 2020 close

So what happened on July 13, 2020 that marked a turning point? Sometimes it’s just a matter of market rotation. 

For three months, this group of stocks seemed to single-handedly lead the market higher. And that outperformance even made its way to the broader technology sector, which blew the other sectors out of the water from April-June 2020. But all good things must come to an end—or at the very least, a pause. 

Despite the fact that the S&P 500 has continued to move higher on the back of hopeful vaccine headlines in recent weeks, tech has not participated. And it’s not just the mega-cap names that are lagging. Over the last month, the Technology Select Sector SPDR Fund (XLK) is the third-worst performer of the SPDR sector ETFs. Only the energy and real estate sectors have been worse.


Source

It’s worth pointing out that XLK does not include Amazon, Alphabet, Facebook, or Netflix. But though they’re technically categorized in different sectors, the group of mega-caps tends to trade together. So, it’s not a surprise to see them all lag the overall market at the same time. 

Upcoming Earnings Catalysts
All of this will come to a head this week, as tech takes center stage on the earnings calendar. 

July 29 AM
Shopify

July 29 PM
Facebook

July 30 PM
Amazon
Apple
Alphabet

This group will have to contend with the fact that investors have thus far been less than thrilled with earnings from the mega-cap tech names. Netflix warned on July 16 of slowing subscriber growth in Q3 and Microsoft reported slowing growth in its cloud segment on July 22. Shares of both stocks have yet to rebound from their post-earnings drops.

The bull case for big tech in the short term is that the unenthusiastic reactions to NFLX and MSFT may have set the bar low. The bear case is that thanks to the huge rallies in the spring, any good news from these companies has long since been priced into their stocks. 

If there’s going to be a week that either solidifies the trend of tech weakness or ends it, it could be this one. 

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The post The Tech Trade Cools Off With Earnings On Deck appeared first on Low Cost Stock & Options Trading | Advanced Online Stock Trading | Lightspeed |.



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Is This the Best Gold Stock to Buy in August?

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Higher gold follows risk like one foot follows the other. But this year has seen gold stocks generate a momentum that exceeds the usual rush to safe havens characteristic of a frothy market. In fact, some gold stocks have come to resemble cannabis tickers at the height of pot stock fever.

And that risk looks set to continue mounting — albeit in a dangerous, quiet kind of way. The markets are yet to factor in the disruption potential from the U.S. election. And with the race for a workable vaccine heating up after Russia’s Sputnik V news, volatility is sure to be an issue in coming months.

Despite this strong, sustained positive momentum, exemplary miner Newmont (TSX:NGT)(NYSE:NEM) still exhibits decent valuation relative to its sector. From a P/E of 12.7 to a P/B of 2.3, Newmont is still a good play for value in 2020.

Newmont’s dividend percentage yield may not be all that impressive compared with some of the rich-yielding heavy hitters on the TSX. But Newmont’s approximately 1.5% dividend is nevertheless worth the investment money. While that yield is small, it’s larger than those of many of its closest competitors.

Buying stocks for the super long term?

One thing that investors may want to keep an eye on is a company’s balance sheet. This is especially true if stocks are being bought for the long term. Newmont looks solid in this regard. Its debt-to-equity ratio is suitably low at 26.3%. This makes Newmont a strong choice for investors with a lower tolerance for risk in their stock portfolios. This is also a good name to hold for moderate growth.

The outlook for gold is solid with some analysts calling for the yellow metal to hit US$3,000. Having broken all kinds of records already in 2020, this kind of valuation might not be as ludicrous as it sounds. After all, investors are dealing with a bizarro market combining both the remnants of the longest bull run in history plus echoes of the Great Depression. This also makes gold stocks a buy for investors with narrow financial horizons.

In terms of track record and returns, Newmont will have bagged you around 80% in the past year compared with the metals sector’s average of 50%. Neither are bad returns by any means, but Newmont is clearly outperforming its own sector when it comes to rewarding investors. Looking forward, the outlook for Newmont is likely to see this trend in returns continuing into next summer.

Barrick Gold, Franco-Nevada, Kinross Gold, Kirkland Lake Gold — these stocks are all solid gold buys this year. But Newmont is arguably the best in terms of its all-around buying points. For its mix of decent scores in valuation, outlook, track record, dividend, and track record, Newmont is a strong buy. For investors with a focus on regular passive income, its 1.5% yield is a standout feature worthy of a place in a low-risk stock portfolio.

Gold is galloping, but good value for money can still be found. However, these FIVE stocks also match affordability with growth potential:

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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

The post Is This the Best Gold Stock to Buy in August? appeared first on The Motley Fool Canada.



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Monday Morning Markets – Moving Past 5 Million Virus Cases

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5,045,564.

That's how many cases the US officially has (not that we are counting).  162,938 Americans are dead, that's much harder to cover up.  Globally we are about to cross 20M cases at 19,877,261 with 731,570 deaths so the US has more than 25% of the global cases and 22% of the deaths – despite having just 3.7% of the population so Trump is right – America is leading the world by a factor of 6 – no one transmits the virus or dies from the virus like we do!  MAGA!!!

The markets don't seem to mind and we're still up around record highs as the worst things are for the American people, the better things are for American Corporations, apparently, as the stimulus fairy comes and pays them visit after visit.  President Trump played the fairy this weekend, waving his executive action wand and unconstitutionally wishing for various bribes to the voters:

  • $400/week supplement to unemployment checks (states need to pay for it and Federal supplement comes from Disaster Fund that's meant for hurricanes, etc).
  • Suspend payments on Student Loans through 12/31 (but not the interest).
  • Extend eviction protection through 12/31 (the courts can't handle the backlog anyway)
  • Defer Payroll Taxes through 12/31 (a disaster for the Social Security and Medicare System and also puts a huge tax burden on the employees at the end of the year they are unlikely to manage for, which will be blamed on Biden as a tax increase, of course) 

In other words, Trump's Executive Orders are a whole lot of nothing but Congress and the White House have still failed to reconcile Democrats' $3.4Tn coronavirus-relief plan and Senate Republicans' far smaller $1.1Tn proposal.  The Paycheck Protection Program expired Saturday. The future of the small business rescue plan is in limbo.  “Meet us halfway and work together to deliver immediate relief to the American people,” Pelosi and Schumer said in a joint statement. “Lives are being lost, and time is of the essence.”      

Joe Biden, noting that Trump signed the “half-baked” orders at his golf club in New Jersey, said they short-change the unemployed and trigger a “new, reckless war on Social Security."  “These orders are not real solutions,” soon to be President Biden said. “They


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The IPOX® Week, August 10th, 2020

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  • IPOX Indexes fall towards week-end, many still set weekly all-time Highs. Track SPACs with the IPOX® SPAC (SPAC).
  • IPOX 100 U.S. (ETF: FPX) adds +0.80% to +12.64% YTD. IPOX International (ETF: FPXI) rises +2.31% to +40.58% YTD. IPOX 100 Europe (ETF: FPXE) gains +0.80% to +17.14% YTD.
  • Issuer Flexibility matters: Rackspace (RXT) tanks while Rocket (RKT) rocks. More deals lined up.

Now track SPACs live with the IPOX® SPAC (Ticker: SPAC). IPOX is pleased to note the launch of the IPOX® SPAC, a benchmark portfolio focusing on Special Purpose Acquisition Vehicles.

IPOX Indexes fall towards week-end, many still set weekly all-time Highs. The IPOX Indexes rose last week to close at or near weekly-all-time highs. Trading Sentiment deteriorated towards the weekend on increased China-U.S. tensions with encouraging U.S. and European economic data driving some asset allocation away from the hugely outperforming growth-focused portfolios to conventional benchmark exposure and U.S. small-caps (RTY: +6.00%). In the U.S., e.g., the IPOX 100 U.S., underlying for the $1.5 billion “FPX” ETF, rose +0.80% to +12.64% YTD, lagging the S&P 500 (SPX) by -165 bps. on the week. Amid earnings and renewed corporate actions activity, weekly returns of portfolio holdings diverged sharply: While medical devices maker Irhytm Technologies (IRTC US: +62.33%) and security services provider ADT (ADT US: +41.70%) soared on strong earnings and an investment from Google, respectively, profit taking after earnings pressured infrastructure software makers Datadog (DDOG US: -19.80%) and Fastly (FSLY US: -17.70%). Abroad, we note a fresh weekly all-time

High recorded by number of IPOX Portfolios. The IPOX International, e.g., basis for the $220 million “FPXI” ETF, rose +2.31% to +40.58% YTD, extending the YTD lead vs. its benchmark to +4932 YTD. Here, big gains in Japan-traded exposure including leading courier services provider SG Holdings (9143 JP: +24.55%) and e-commerce firm Mercari (4385 JP: +16.97%) after blow-out earnings more than offset declines in some of the European-domiciled portfolio holdings including Swiss pharma products retailer Galenica (GALE SW: -6.99%) and German medical devices maker DAX-30 candidate Spin-off Siemens Healthineers (SHL GY: -6.07%) which fell after announcing the buy-out of U.S. medical equipment maker Varian (VAR US: +21.69%) last week-end.

Select IPOX® Indexes Price Returns (%) Last Week 2019 2020 YTD
IPOX® Indexes: Global/International
IPOX® Global (IPGL50) (USD) 1.63 27.93 32.47
IPOX® International (IPXI)* (USD) (ETF: FPXI) 2.31 31.37 40.58
IPOX® Indexes: United States
IPOX® 100 U.S. (IPXO)* (USD) (ETF: FPX) 0.80 29.60 12.64
IPOX® ESG (IPXT) (USD) 1.66
IPOX® SPAC (SPAC) (USD) 0.93
IPOX® Indexes: Europe/Nordic
IPOX® 30 Europe (IXTE) (EUR) 0.98 34.55 24.77
IPOX® Nordic (IPND) 3.70 38.52 37.05
IPOX® 100 Europe (IPOE)* (USD) 0.80 30.97 17.14
IPOX® Indexes: Asia-Pacific/China
IPOX® Asia-Pacific (IPTA) (USD) 4.12 4.41 23.31
IPOX® China (CNI) (USD) 3.44 26.31 44.31
IPOX® Japan (IPJP)** (JPY) 5.63 37.91 6.06

* Basis for ETFs: FPX US, FPX LN, FPXE US, FPXU FP, FPXI US, TCIP110 IT and CME-traded e-mini IPOX® 100 U.S. Futures (IPOM0). Source: Bloomberg L.P. & Refinitiv/Thomson Reuters. For IPOX Alternative Strategies Returns, please contact info@ipox.com

IPOX-linked ETFs (FPX, FPXI, FPXE) Movers (Last Week in %):
IRHYTHM TECHNOLOGIES 62.33 DATADOG INC -19.80
ADT INC 41.70 FASTLY INC – CLASS A -17.70
SG HOLDINGS CO LTD 24.55 EVERGY INC -14.92
CARVANA CO 23.91 ASSETMARK FINANCIAL -13.03
SOLAREDGE 20.77 CAMPING WORLD -11.61
MERCARI INC 16.97 CORTEVA INC -11.34
SOLARWINDS CORP 16.88 BLACKLINE INC -10.85
INARI MEDICAL INC 16.10 TWILIO INC -10.24
VARTA AG 15.91 CROWDSTRIKE HOLDINGS -10.11
MEITUAN DIANPING 15.89 CERIDIAN HCM HOLDING -10.07
ASTON MARTIN LAGONDA 15.46 DYNATRACE INC -9.54

Issuer Flexibility matters: Rackspace (RXT US) tanks while Rocket (RKT US) rocks. More deals lined up. At least 11 companies went public across the global regions last week, with the average (median) equally weighted deal adding +40.37% (+13.30%) based on the difference between the final offering price and respective Friday’s close. Reception to last week’s deals was mixed: While Apollo-backed cloud company Rackspace (RXT US: -26.67%) fell, Detroit mortgage giant Rocket Companies (RKT US: +38.33%) climbed strongly after its 1/3 scaled-back, below-range offer. Shopify (SHOP US: +2.92%) competitor BigCommerce (BIGC US: +229.17%) tripled. China’s largest CRO Tigermed (3347 HK: +13.30%) also debuted strongly in HK, marking the largest healthcare-related IPO in Asia YTD. Insurtech unicorn Duck Creek (DCT US), Tencent & SoftBank-backed Chinese real estate broker KE Holdings (BEKE US), PE-backed Brazilian home furnishing retailer Lojas Quero-Quero (LJQQ3 BZ) and Philippine’s first REIT IPO AyalaLand REIT (AREIT PM) are lined up to list this week. Other IPO news Include: 1) Chinese EV-maker XPeng to add on recent EV-maker IPO fest, 2) Lufthansa’s Technik maintenance unit spin-off IPO still on the table, and 3) KKR reported to revive IPO of defense supplier Hensoldt in Germany.

Track global deal flow live on: https://bit.ly/2WMvnT9

The post The IPOX® Week, August 10th, 2020 appeared first on Low Cost Stock & Options Trading | Advanced Online Stock Trading | Lightspeed |.



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