Will the Market Crash?
If it does, I wanna BUY these 5 Stocks
Let us face it folks. There is a good chance the market may crash next week. We are talking about 100, 250 point or more SOLID sell side activity once/if Powell opens his mouth on Wednesday and utters those insidious words to confirm what everyone feared: 3-4 rate hikes next year. Yikes!
Now will it happen for sure? I don’t know. But I do know one thing: it will not change my trading or investing style and I will still want to buy good stocks at good prices.
Investing for me is not gonna die even if the rates do go up. At least it will not die immediately and it may take a few quarters of consistent rate hikes to kill it. Good stocks will remain good as long as they are able to sell the product/services at good margins, extract profit , maybe even pass on some of the costs to the consumer.
Hypothetically, assume the FED comes out very hawkish on Wednesday and sinks the market. What are some names I want to buy in the ensuing dip? Read on to find out..
I used 3 criteria to make my list.
A) Does the company have significant cash flow , created by selling products at good margins or is it just a pipe dream with sales or no sales and certainly 0 profits.
B) Has the company done well technically? In other words if the stock is already down 20-30 or more percentage points on the year, I ain’t touching it. In fact it may have made my TOP 5 SELL list.
C) Will inflationary winds be a significant headwind or tailwind for this company ? In other words, if they rely on too much raw materials or labor which is gonna be either in short supply, very expensive or both, I tend to avoid it.
Without much further ado, here are my TOP potential BUYS if the market sinks next week (along with my buy points). Some of these names with the exception of a couple, I have been bullish on for a long time now, and even at these levels, I do feel they have room to run.
Starbucks. SBUX.
Good margins. Generated almost 5 billion dollars in profits this year. Trading at 117 dollars right now. It is a buy for me if it drops below 111 bucks. My target is 140+. They are also well placed to pass on some of the costs to the consumer.
Norfolk Southern. NSC.
One of the only 8 remaining Class 1 Railroads in North America, they have a dominance over the Eastern rail lines as well as some lines going into the midwest into Chicago and Dallas yards. Could be a winner of inflationary times as they are able to pass on the costs to the shippers, exert an almost monopolistic influence . Are trading at 288, and may be a buy for me if it dips into 268-272.
Bank of America BAC.
Some rate hikes are good for banks which hold a lot of deposits. At least in the first year or half of inflation, they will still make loans, now even at a higher rate and hence higher profits. Stock is at 45 dollars and I like it if the market crashes and the stock trades 41/42.
Microsoft MSFT
At 343, I think if I can get a DIP into 310-320, the stock is cheap. It is a powerhouse of generating profits. IMO it is pretty inflation proof, no matter how I slice and dice it.
COSTCO COST
The BEST Warehousing operation in the world and a very well run company. They have the wherewithal to meet the demands in a heightened inflationary times. I like it even now at 558 but may add if it dips into the 529/530 zone.
Toll Brothers TOL
I shared this only a few sessions ago at 72 bucks it is now at 75 dollars. Folks still need a roof, inflation or no inflation and as luxury developers they are able to pass on these costs. I remain bullish on housing in select geographies for next 2-3 quarters and this stock may win if I can get dips into 71/72. Housing also does better than general equities in times of high inflation along with Gold based on research I did during the last 2 major inflation cycles that lasted 5 years or longer.
This is it on the potentially bullish side of the house. There are many other names like HD Home Depot $400 and Pfizer PFE $51 which I am not sharing right now to respect the 5 stock limit. I will be regularly sharing these as the technicals become more attractive with my subscribers.
Now let us talk about the other side of the ledger! Below are my TOP candidates I want to sell on any potential pops. These stocks have little to no profit. I think they are astronomically expensive even right now after selling off 50-60%. Many of them are in a high flying ETFs which in my opinion are still bloated. Persistent 10-12% inflation alone will eat into their valuations, all else remaining equal. They have no cash flows to offset any of the impacts. No product that can generate cash, just massive valuations built on an assumption of low inflation forever.
ARKK Innovation
This is the mothership of everything that can go wrong if Powell is indeed serious about 3 hikes next year. Now trading at 96 dollars, I like to be able to sell this on any potential pops into 104-106 dollars.
ARKG Genomics
Another poster child of the type of stocks that may sink if there is a tighter than expected monetary policy. At 61 right now it may be expensive as it is, but an even better bearish bet for me if this were to pop into 72/74.
SE Sea Ltd
The only reason this makes it on this list is due to the theme of this blog i.e a hawkish surprised on Wednesday’s FOMC. If there is one, then this is ripe for sell on rips for me. A 137 billion dollar company that is losing 2 billion dollars a year on 8 billion of sales. Now 238, but a potential short for me on rallies into 262/267.
MQ Marqueta
I was quite bearish on this at 27 and it is now trading 18 dollars . If it pops into 22/23, it may get sold off, for a test of 12/13 dollar range.
HOOD Robinhood
I was bearish on this stock at 48 dollars and it is now trading 20 bucks. I still think quite expensive for a brokerage that makes no money and sells order-flow of “ever so reluctant to trade retail” at 20 billion dollars. A potential short on pops into the 25/27 range.
Many more on this list like OPEN, CHWY, CLOV etc which I will share with the subscribers. Remember this is a thematic idea, assuming a hawkish FED next week. Many of this may not apply, for instance ARKK may have a sharp rally, if the FED turns out to be dovish.
What else will you add to this list? What are some of the good stocks I can add to my shopping list for next week? Do lemme know!
If you enjoyed my blog, feel free to share it and spread the word.
Have a great weekend! Look forward to the action next week.
~ Tic
Disclaimer: This newsletter is not trading or investment advice, but for general informational purposes only. This newsletter represents my personal opinions which I am sharing publicly as my personal blog. Futures, stocks, bonds trading of any kind involves a lot of risk. No guarantee of any profit whatsoever is made. In fact, you may lose everything you have. So be very careful. I guarantee no profit whatsoever, You assume the entire cost and risk of any trading or investing activities you choose to undertake. You are solely responsible for making your own investment decisions. Owners/authors of this newsletter, its representatives, its principals, its moderators and its members, are NOT registered as securities broker-dealers or investment advisors either with the U.S. Securities and Exchange Commission, CFTC or with any other securities/regulatory authority. Consult with a registered investment advisor, broker-dealer, and/or financial advisor. Reading and using this newsletter or any of my publications, you are agreeing to these terms.
Nice, Thank you Tic.
Is the Market going to 1600 like you have been calling for?