Stock (Less) Trade for July Earnings Season
What a rebound!
The proof is in the charts: America 2.0 sparked an incredible V-recovery.
So, it’s time to let your #BOP (bullish, optimistic and positive) investing take the lead in the markets.
And buying during the coming earnings season is a great opportunity for you to get in. And one trading strategy will see a huge lift from this.
Ian shares his two cents with us on today’s Market Talk to tell you about this No. 1 trade.
It’s not a stock, but it’s a way to get FAST returns in the rocket recovery. Check it out here:
Welcome to Bold Profits Monday Market Talk.
Pending Homes Index Exceeds Predictions
Last week’s huge record rebound in the U.S. pending homes index showed a big jump of 44.3% to a three-month high of 99.6. This number exceeded all forecasts as economists were expecting an increase of just 19.3%
This index is a major leading economic indicator for pending existing home sales as it tracks signed contracts for existing single-family homes, condos and co-ops. This number helps confirm that our Bold Profits housing forecast that millennials are and will be entering the first-time homebuyer housing market.
As a study from Zillow noted, nearly 45 million Americans will reach the typical age of first-time homebuyers in the next 10 years, 3.1 million more than 10 years prior. Couple that with record-low 30-year mortgage rates and you get a record-setting pending home sales number.
Manufacturing is Expanding
U.S. June ISM Manufacturing gauge jumped by 9.5 points to 52.6. This is the highest reading in 14 months and biggest monthly increase since August 1980. A reading above 50 indicates manufacturing is expanding.
Jobs Market Rebound
We saw good news on the U.S. job market front where 4.8 million jobs were added in June, beating estimates of 3.2 million and dropping the unemployment rate to 11.1%. What’s most notable in the report is that payroll revisions showed that the U.S. added 90,000 jobs in the prior two months.
Bullish Developments in America 2.0
Per the National Association of Homebuilders, the U.S. 30-year fixed-rate mortgage averages 3.07% last week. The lowest ever recorded by Freddie Mac since the index began tracking in 1971.
This record low, coupled with a brand-new FICO scoring tool by Fair Isaac Corp., spells a boom for the housing market. The widely used FICO credit score is getting a major makeover. Introducing to you, the FICO Resilience Index.
This new index is created to “supplement the FICO score and is aimed to help lenders assess a borrower’s ability to withstand economic downturns, even if they have a low credit score.” The index pulls together personal financial information from before and after the Great Recession to measure a person’s chances of paying their bills on time during economic volatility.
Measuring on a scale of 1 to 99, lower scores indicate greater financial resilience in an economic downturn while higher scores indicate more sensitivity to economic shifts.
Per the Vice President of Scores and Analytics at FICO, “the hope is that it will allow lenders to continue to be able to make prudent loans. Fair Isaac’s new scoring tool places less weight on missed payments and greater emphasis on lower account balances, as well as credit use.”
America’s Most Innovative States
For the second consecutive year, California and Massachusetts took first and second spots.
Rounding out the top five are Washington State, number four is Connecticut and number three is Oregon. The ranking is based on “six equally rated metrics.” The top five highest valued private U.S. tech companies are all in California, which includes SpaceX.
Among the U.S. companies that went public last year, five garnering the highest year-to-date returns were also in California. These companies are producing big profits for early IPO investors. The companies are Zoom Video Communications, IT service provider Fastly and Livongo Health.
Implied Volatility Ranks Are Going Up
Implied volatility (IV) is basically the volatility the option is predicting for any stock in the future. IV rank tells you where the current option ranks among each of the daily ones over the past year.
The lowest ones, which I consider below 30, these are the stocks which have low implied volatility. This means the market is saying that these stocks are going to be flat over the next month or so. There were seven stocks in the group below 30%. Two of them were pot stocks, three were biotech and three were cloud.
Biotech and cloud there are obviously a lot more than three, so I don’t consider that a big deal. But I only have a few pot stocks in this list, so those stocks have — they rallied pretty hard in May, but they have flattened out since then. So that makes sense to me.
There’s not many with low IVs. That seven number came from my watchlist which has more than 200 stocks. So that’s not that many that have really low IVs right now. That makes sense because we are heading into options season.
Alternatively, 39 of these stocks have an IV rank above 70%, which means that the IV right now is higher than it has been 70% of the days in the past year. IV is going up for a lot of stocks because we are approaching earnings season.
Some trend stocks like Facebook, Twitter, Snapchat and Netflix — which I consider part of that group because it trades along with Facebook — those are all high IVs. In cloud we saw a lot: Cloudstrike, Shopify, Teladoc, Fastly, Ring Central and Cloudera.
For semiconductors, there were five in there: Teradyne, Lam Research, Xilinx, NXP and Qualcomm. The big payment stocks, all of them, like Visa, MasterCard, Square and PayPal.
A lot of tech stocks have very high IVs right now, which suggests there are going to be big moves during earnings season.
Historic Recovery on the Horizon
This is going to be a historic recovery that is going to be something that most people, including the vast majority of people who chose to sell during the crash and stay in cash — and there’s trillions and trillions of dollars that’s assigned to stock accounts.
We’re not just talking about random amounts of cash sitting around. We are talking about money that is in investment accounts and is generally allocated to go into stock markets. It’s all largely sitting outside. I believe they are going to come into the stock market and bid stock prices — America 2.0 stocks prices in particular — higher.
We told you that the markets would recover and go back to where they were with respect to our kinds of stocks, America 2.0 stocks, megatrend stocks, stocks associated with the millennial generation and gen Z coming after them. In other words, the growth part of the economy we told you is still growing.
For a short period of time there was an interruption. However, housing data and industrial data is all confirming what we have been telling you for months and months. Which is why our stock portfolios — without being boastful — are booming.
I want to say I am still bullish, still optimistic and still positive. America 2.0 stocks can keep running for a long period of time. The markets still have not really priced in the level of growth that is coming.
You may never see another rebound opportunity this big for the rest of your life.
As you heard in today’s Market Talk, Ian and I have developed a strategy specifically to seize these kind of market moves.
Currently, the scorecard for this rebound portfolio is:
The average gain is 56% over the last 25 days. Some closed position winners include gains of 49%, 63% and 102%. But with earnings season, we see more — possibly bigger — plays coming.
Editor, Profits Unlimited
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