The market has gone nowhere since my return to positive on the market. Down 480 on the DJIA, today is interesting. Persistently weak sectors such as financials, Russell 2000 small caps, and the transports are not leading the market down. I believe this indicates this may be the last downward test for the market for the time being.
It may even mean that financial stocks are a tradable buy and could outperform for a while. As a sector, it does not interest me as I would rather concentrate efforts where there will be good secular growth.
On this score, some of the big-data/cloud stocks, particularly MDB, are doing well – again. They are joined by the better semiconductor plays. For these stocks the long-term outlook is excellent.
Johnson & Johnson’s troubles [down 10% now] are a drag on other pharm/bio stocks. Abbvie ABBV and Seattle Genetics SGEN should be bought on this sympathetic decline.
IBM and CTL should be bought for their great yields and their fundamental prospects that are likely to exceed current consensus thinking. Of the two, IBM is very secure as its free cash flow is excellent and it has many positive developments across the enterprise that should bring broad business strength over coming years.
For the first time in over a decade, high-quality gold stocks [WPM, GG, and ETFs GDX, GDXJ] offer a great opportunity to add stocks to a portfolio that will not only diversify but now have a very high chance of out-performing and doing so regardless of economic or market environment. I urge establishment of high-quality positions.
Finally, Yum China YUMC is added to the avoid list for the same reasons SBUX was added. It is not growing fast enough to justify its valuation and its total dependence on China puts its fundamental position at great risk.
I continue to urge avoidance of AAPL, FB, TSLA, ORCL, NFLX, BID, SBUX, and retail.
Chief Investment Strategist