Looking for Laggards (LOL): MGM, FCX, WFC, NOV, USO and others.

April 7, 2020

Guys, this post is quick.

 

Markets seem to be on a second wave higher, some companies have gone up quite a bit. It's tough to go into those that have already surged, but here are some laggards to consider:

 

I want to reiterate that I can't tell the future.

 

If the CCP virus gets worse, we could see markets fall in a hurry, but at the same time, as I mentioned in earlier posts, that we have to subscribe a probability that we might have already seen the bottom. I gave it a 40% chance of a real bottom in an earlier Zoom, that's why 2 weeks ago at the absolute bottom of this cycle, I mentioned that I was already nibbling at a bunch of stocks. 

 

Remember that if you are convinced that the fallout to the economy in the US is worse than expected (Ben Bernanke expects a sharp recession with a fairly quick rebound,  Goldman Sachs expects quarter-on-quarter annualized growth rates of -6% in Q1, -24% in Q2, +12% in Q3, and +10% in Q4) ...

 

... then you might want to consider taking a pass.

 

But if you want to hold some stocks for the long term, and get some skin in the game, here are some to consider, that are laggards.

 

Of course, if you feel COVID will get worse, and you cannot stomach volatility, you can pass on this article, or at least remember these names if there is a significant pull back. I have attached the insider prices for your reference.

 

I spend hours going through the insider actions everyday to try to pull out what I think is more relevant and worth paying attention to. There are literally hundreds to scroll through. When I find some good ones, I also check on the insiders past history to see if they have a good track record of buying low and selling high.

 

These have better odds than the average stock because of the insider play and technical set up.

 

Remember that the story can change from week to week during the COVID, so do your due diligence on the company, and if unsure, take a pass, or speculate/invest in a basket of a few to diversify risk.

 

All the following long-term and short term targets are all speculative (guesses on my part and shouldn't be taken as law), and are "convenient" or "reasonable" places to take profit should prices increase from here.

 

MGM Resorts International MGM

 

Hotels and Casinos.

 

Interestingly enough, this one hints to me that the CCP virus rampage might be more manageable than some think.


This is the latest buys.

 

All bought between $11-$12.

 

Short Term Target: If price successfully closes above $14, it's going $17-%18.

 

 

Freeport-McMoRan: FCX

 

 

Gold and copper miner.

 

CEO and CFO bought at $10.

 

if you believe that the panic selling of gold is over, then their thesis was made at gold prices at $~1600 per ounce. Gold is back at that price now. Unlimted QE and low interest rates should support gold prices.

 

Technically, it looks to have a second move up.

 

Long term target: $10-$12 if gold prices stays at reasonable levels.

Short term target: $8.50.

 

Wells Fargo WFC

 

 

Long term target: $37++

Short term target: $32

 

 

National Oilwell Varco NOV

 

 

 

Oil engineering,

 

If you believe oil is going to more respectable levels (I do). Then oil engineering work will still be needed.

 

Unfortunately, the insider buying is not that big, BUT, in NOV's case, when the insiders buy, it tends to be at good prices. But he bought at $8.59 which was almost at absolute low. Darn he is good.

 

Long term target: $15 (It would be $20, if oil goes back to $40. I'll give it a discount because it might take more time for COVID economy to recover)

 

Short term target: $$13.5 (if it breaks out of $12)

 

Because of lack of time, I will just highlight a couple more stocks for you to check out and understand their business model and risks.

 

XOM, VST, PLNT, USO, Valuetronics SG, Venture SG.

 

 

A Convenient Stop Loss.

 

For all the stocks listed above, my advice is the same as I posted 2 weeks ago. I said that a good strategy (in terms of being emotionless about it), was to buy at close to insider price or buy on pullbacks for those stocks that MACD were going to cut upward or have cut upward, and if one is skittish, or not holding for long term, to sell it if the MACD cuts downward. Those that did this are sitting pretty. 

 

All of the stocks above are on positive short term momentum and the MACD has cut upward (black above red). One can wait for MACD to cut downward for a stop loss.

 

Below are most speculate ones with more uncertainty, more risks and more gains.

 

New Residential Investment Corp NRZ

 

 

 

Most risky Mortgage REIT.

 

Insiders bought at ~$5+

 

This is likely the most risky of the lot in this post.

 

Book value has gone down by 30% to increase liquidity for the company. The thesis is that management has guided that the new NAV of the company is at $11.

 

The Colorado Wealth Management Fund has a good write up on the risk and rewards when looking at mREITS like NRZ.

 

https://seekingalpha.com/article/4336307-mortgage-reits-bite-back-what-you-havent-heard

 

The risk is that the COVID fallout last longer than expected, forcing them to sell more assets. The thesis is that at the price of ~$3, are you compensated for this risk? If they never have to sell any more assets, eventually when things normalize, price will get back to $11. But every quarter that doesn't go in the way they expect will drop their book value further.

 

Long term: if optimistic, $11.

Short term: ??? 

 

I'd wait for the MACD to cross upward, if it does, hard to say where it will go, but taking profit just under $5 is reasonable.

 

This trade is definitely the most speculative in nature.

 

Love Gifts: If these posts have blessed you and you would like to send a love gift or tithe, do send an email to Ken@quantzombie.com to let us know! We would be so happy to know that you have chosen to sow into this ministry and will give you details for e-transfer. We are in the process to find ways to make this easier.

 

 

 

Disclaimer: This site has been designed for informational and educational purposes only and does not constitute an offer to sell nor a solicitation of an offer to buy any security which may be referenced upon the site. Please consult your own financial adviser to determine what trade is appropriate for you. See our full disclaimer here.

 

 

 

 

 

PS: My Secret Ingredient

 

In times like this, I always fall back on my Christian faith. Just like in the GFC, I find the wisdom and precision God gives very necessary to combat the fear and information thrown at us from all sides in the financial markets.

 

The ability to be brave when everyone is fearful, and clear thinking in the midst of chaos does not come naturally. If so, everyone would be millionaires. Instead people are fearful, selfish, love their status so much that they do selfish and impulsive things in the midst of chaos. In the supermarkets, we see it when people fight over toilet paper. In the financial markets, we buy at stock at 10 year lows, but sell it quickly when it drops another 15%, only to see it spike 40% 1 week later.

 

If you are Christian, remember what you have in Jesus, and ask Him for a double portion of it.

 

For the Spirit God gave us does not make us timid, but gives us power, love and self-discipline. (2 Tim 1:7)

 

If any of you lacks wisdom, you should ask God, who gives generously to all without finding fault, and it will be given to you. (James 1:5)

 

And this is the confidence that we have toward him, that if we ask anything according to his will he hears us. And if we know that he hears us in whatever we ask, we know that we have the requests that we have asked of him. (1 Cor 5:14-15)

 

During these times of great shaking, you might feel regret, sorrow, frustration. You might feel you've lost too much money and feel condemned.

 

I've been there.

 

Let this be the time you realign your life and ask God what He is doing.

 

1) Align yourself with God's will and not yours. Apologize for living a selfish life, ask God what He is trying to accomplish and actively help that cause.

 

2) Understand the promises given to all those who are in-Christ.

 

3) Ask Him for a heart of real courage, to keep fighting, and making right decisions from now on.

 

4) Ask God for supernatural wisdom that cuts deeper than the hysteria of the masses.

 

 

 

 

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