Author: Andrew Packer

Stock market strategies

Let’s Talk Money: 10 Stocks to Buy BEFORE They Split Next

Posted on by Andrew Packer

Nvidia (NVDA) has helped the stock market reach new all-time highs this year. And in the past few weeks, shares have seen a boost thanks to a stock split.

A stock split simply turns 1 share into multiple shares. Nvidia did a 10-for-1 split, meaning the owner of 10 old shares had 100 new shares. While this doesn’t change the total valuation or ownership stake in a company, a split can help boost returns.

That’s because the lower price makes it easier to trade, whether directly with shares or with options.

Several other companies are looking to split their shares in the months ahead.

That includes Chipotle Mexican Grill (CMG). The quick service food chain has never split its shares since going public but is about to. Today, the stock trades at over $3,000 per share.

If it made a 10-for-1 split like Nvidia, it would still trade over $300, but that could make it easier to investors to add to their position. That could lead to further gains.

Online travel platform Booking Holdings (BKNG) hasn’t split shares since 2003. The stock now trades for over $3,800. That makes it one of the priciest stocks on the market today, and tough for investors to afford a position.

 

To view the full list of upcoming stock split opportunities, click here.

Commodities

Michael Snyder’s Substack: The Truth About What Is Happening To the Petrodollar

Posted on by Andrew Packer

The past few weeks have seen a number of stories about the death of the petrodollar. Essentially, the petrodollar is a deal struck between the U.S. and Saudi Arabia in 1974.

In exchange for military protection, the Saudis agreed to price oil sales in the U.S. dollar. And to invest excess cash into assets such as U.S. Treasury bonds. This deal has held up for the past 50 years. But the world is changing.

While the petrodollar isn’t officially dead, it is shifting. Most oil continues to be sold in dollars globally. But other currencies, such as the Euro, are also used to facilitate deals.

And emerging market countries, led by the BRIC nations, are working on a new currency and trading agreement. That could further weaken the use of the dollar as the standard for international trade.

As this trend shifts, so too will demand for U.S. dollars in international trade.

If the U.S. is unable to continue enjoying a massive global market for the dollar, there could be trouble. That’s because spreading the dollar globally makes it easier to print money and fund debt. With a smaller circulation, it would make it more likely to produce inflation.

With U.S. debt soaring, the dollar’s decline in world trade could prove a long-term danger. But the petrodollar isn’t quite dead yet.

 

To read the full analysis, click here.

 

Economy

The Compound and Friends: Get out of Cash

Posted on by Andrew Packer

Markets stand at a pivot point. Growth is slowing. And unemployment has ticked higher. It’s now at 4%, right at the Fed’s target rate. However, the Fed is still contending with inflation running hotter than desired.

The trade-off now is to either let unemployment rise higher or let inflation kick up again. Meanwhile, markets have adjusted to the idea that interest rates won’t drop much this year. But it does mean that investors need to consider their options now.

Currently, cash looks attractive. Yields stand at 15-year highs. It’s easy to see why investors continue to sit on record levels of cash.

However, if interest rates drop, yields will drop. And that will make other assets like real estate and stocks better alternatives.

While yields may not drop much, markets have adjusted to today’s high rates. That suggests that stocks can continue higher. Especially if the rollout of AI technology leads to bigger profit margins for companies.

Either way, cash offers low returns, even with markets at all-time highs. Investing in long-dated bonds could be attractive once interest rates start to drop. That could mean locking in a high yield and seeing capital gains.

Alternative assets have also been performing well. And analysts expect alternatives like gold and bitcoin to see continued gains in the years ahead.

 

To listen to the full episode, click here.

Stock market

The Maverick of Wall Street: This Is the Unhealthiest Stock Market Rally in History

Posted on by Andrew Packer

Stocks continued higher over the past week, with the Nasdaq and S&P 500 hitting new all-time highs. However, while the headline numbers have been ticking higher, behind the scenes, danger is emerging.

That’s because the market rally is being driven by just a small number of companies. In Wall Street speak, that’s known as market concentration. And market concentration has now become worse than compared to the tech bubble.

For 2024 alone, Nvidia (NVDA) has been responsible for 32% of the S&P 500’s entire rally. And if you add in the next two mega-cap tech companies, add another 13% to that total.

Meanwhile, the lowest 400 stocks of the S&P 500 have been negative this year, on average. That’s an unhealthy sign.

In a healthy market, most stocks will rise when the index rises. Backing out the tech giants, one could even argue that we’re not even in a bull market. And, we haven’t been since the end of 2021, over two and a half years ago.

If the big tech names take a hit, the overall market could easily reverse. And today’s all-time highs could quickly turn the other way.

As the old Wall Street saying goes, they don’t ring a bell at the top. But there are signs. And massive concentration masking a potential bear market already is one of them.

 

To watch the full analysis (language warning), click here.

Economy

Lead-Lag Report: From Nord Stream to Taiwan: Brandon Weichert on Global Flashpoints

Posted on by Andrew Packer

The stock market is having a strong year. So far, the only thing that has derailed the market rally has been some geopolitical fears back in the spring.

Those events led to the market selling off about 6% peak-to-trough. And the geopolitical flare-ups also led to two “risk-off” Fridays ahead of the uncertainty of the weekend. While events have calmed down, a potential resurgence could occur at any time, and tensions could flare up again.

That’s why astute investors will consider potential global flashpoints and their implications.

For instance, Russia’s invasion of Ukraine led to an immediate jump higher in energy prices. Fortunately, that moderated. As did a jump in wheat, a major global commodity.

But other flashpoints are possible. After the Nord Stream pipeline was bombed, supplies from Russia to Western Europe were curtailed.

Such an act of sabotage could occur on another pipeline. If that happens, energy prices could not only rise, but stay higher.

A further escalation of conflict in Europe threatens a significant global market. And it also threatens to further draw in the United States. U.S. food and material aid continue to move into Ukraine, but the speed could greatly accelerate.

If tensions rise over Taiwan, the United States and China could potentially go head-to-head. Before a shooting war starts, however, economic sanctions will likely surge. That could lead to higher prices and shortages in both countries.

 

To get a full idea of the potential global flashpoints and their investment implication right now, click here.

Income investing

Daniel Pronk: 5 Undervalued Stocks to Buy In June 2024

Posted on by Andrew Packer

With the market near all-time highs, some stocks have already made a big run. Some may have already hit their peak for the year. Investors can always find an undervalued stock, no matter what’s happening in the market.

By buying undervalued stocks, investors can benefit in several ways. The first is if the company has a catch-up rally. Many lagging stocks often do. The second comes from earning a high dividend payment in the meantime.

Undervalued stocks can also mean that investors get into an unloved sector as it starts to trend higher.

For instance, while not as exciting as tech, asset management services tend to fare well in rising markets. That’s good for Brookfield Asset Management (BAM).

The company went public at the end of 2021, but still looks like a value play today. They mange one of the largest alternative asset portfolios in the world.

Shares also pay a 4.0% dividend at today’s prices.

Another undervalued stock is Rexford Industrial Realty (REXR).

The industrial property REIT benefits from the soaring demand for warehouses, data centers, and other non-office commercial space.

Currently, Rexford is buying in California. It could have bigger growth by expanding to other states. Shares also pay about a 4.0% dividend at current prices.

 

To view the full list of undervalued stocks right now, click here.

Economy

The Pomp Letter: The Public Market Pivot

Posted on by Andrew Packer

For most of the past 15 years, interest rates have hovered near historic lows. That’s punished savers keeping cash in the banks. Or bondholders. But it’s meant a frenzy for borrowers.

Corporate borrowers have been even better off. With investors desperate for yield, issuing debt has allowed a number of companies to expand. In that space, venture capital funds have been able to outperform the stock market.

These companies have been able to acquire companies, whether publicly traded or privately held. Venture capital firms can then leverage up the company, sell off assets, or otherwise create value for them.

However, about half of all venture funds fail to return their original investor’s capital. The high debt levels required may cause issues if a deal doesn’t work out as expected.

And only about 5% of venture capital funds manage to return more than 3X what investors put in. Meanwhile, the number of venture capital funds seeking deals has more than tripled compared to 15 years ago.

This trend may be starting to reverse. With interest rates now at their highest level in 15 years, deals aren’t as attractive with the debt attached.

That could make public companies, with the ability to issue stock, more attractive for reasonable returns going forward.

 

To read the full analysis, click here.

Economy

QTR’s Fringe Finance: The Bull Market Just Died

Posted on by Andrew Packer

There’s an old Wall Street saying: They don’t ring a bell at the top. Bull markets tend to end on wild speculation. On the notion that the party isn’t going to end anytime soon.

In time, and after a big pullback, investors can realize signs that they should have left the party. Today, investors may be seeing one such time. That’s because meme stocks are back.

Retailer GameStop (GME) saw some massive moves in recent weeks. From a low this year of $10, shares have touched on $60. While not quite the gains seen in 2021, the parallels are there.

This time around, hedge funds aren’t shore more than 100% of the stock’s available shares, or float. Since that danger is off the table, the prospect of a massive short squeeze isn’t as attractive as it has been three years ago.

Meanwhile, GameStop itself is helping to keep a lid on shares. The company has now twice announced plans to issue more shares. GameStop raised nearly $1 billion the first time it did so.

While the company’s core retail business remains at risk of obsolescence, big cash on the balance sheet could allow them to acquire another company. Or they could park that cash and earn about 5% right now.

But that kind of return pales compared to the movement in shares. And it may be an overall sign that the stock market may have hit its speculative peak for some time.

 

To view the full rationale on what GameStop’s recent moves mean, click here.

Stock market

The Lead-Lag Report: The Most Deceptive (And Phony) Bull Market In History

Posted on by Andrew Packer

While the market hovers near all-time highs, there are a number of signs that this market rally is unhealthy. That doesn’t mean stocks will crash anytime soon. But it does mean that investors should be cautious until some healthy signs improve.

The biggest sign of market sickness? Overall participation. Since late 2022, the market rally has been dominated by a number of big-cap stocks. Notably, they’re tech-heavy as well.

Tech stocks tend to be more volatile. And the concentration of these tech stocks relative to the overall size of the S&P 500 stands at a record high.

Meanwhile, small-cap stocks can’t seem to catch a break. The Russell 3000 index, which holds a number of much smaller stocks shows the danger. Over 70% of those companies continue to trade below their 2021 highs.

Again, the market isn’t at danger of a correction yet. But if there is going to be a correction, it won’t take that many stocks to get one started.

This situation does parallel the end of the bull market in tech stocks in the 1990s. We could still see one last final speculative top. That would involve traders throwing in the towel on a potential selloff now, and joining in tech stocks at all-time highs.

Eventually, the party will stop. For now, it’s simply starting to throw up some warning signs for investors.

 

To view the full extent of the market’s concentration danger, click here.

Stock market

FX Evolution: Most People Will Ignore This Stock Market Warning Sign

Posted on by Andrew Packer

Nvidia (NVDA) has been the market darling for the past 18 months. The rise of AI technologies means that the semiconductor designer has become the top play for investors.

While shares of Nvidia have soared, what’s more impressive is that this price move is still lower than the company’s surging earnings and revenues. However, there is an unusual event surrounding Nvidia that could mean some market trouble ahead.

That sign? Nvidia’s recent stocks split. On Monday, shares split 10-for-1. A holder of shares at $1,200 now has 10 shares valued at $120.

In theory, stock splits make it less expensive for smaller investors to acquire a position in a company. It also makes trading easier as well.

However, each of the prior share splits by Nvidia specifically have come ahead of a bear market for stocks. That includes the last split in 2021 that came ahead of the 2022 bear market.

But going into both the dotcom crashes and the global financial crisis, a similar story unfolded.

While this indicator has worked in the past and has no guarantee moving forward, it’s a sign for caution. With a market cap of $3 trillion, Nvidia recently became the second-largest company by market cap.

Further exceptional gains from those of recent years seem less likely going forward. And with Nivdia making up a big part of market indices, a selloff could mean the overall markets sell off too.

 

To view the full danger Nvidia’s recent stock split poses, click here.