Emotions are running high these days – and in the financial markets, that’s been showing up as wild swings, up and down, each time a bullish or bearish headline emerges. The thing to remember is, you have to set emotions aside if you want to be a successful long-term investor. And who doesn’t?
I certainly have my opinions about the coronavirus crisis, oil price wars, and more.
But, as a stock picker, I wait for facts to emerge before I act. That means looking at front-page news AND earnings, analyst estimates – because those jerk prices around just as much – plus, of course, the latest stock ratings from my Portfolio Grader.
Plug any of your stocks into Portfolio Grader, and you’ll see grades on my eight top fundamental factors…as well as the stock’s Quantitative Grade. I want you to understand that this is, in fact, the single most important factor in a stock’s Total Grade – because it reflects the single most important determinant of a stock’s long-term success: buying pressure on Wall Street.
When we have a big shift there, it results in a lot of upgrades and downgrades.
I run these scans every Saturday, to get a week’s worth of market data. Then, on Monday, I publish a list of notable Upgrades & Downgrades, concentrating on big blue-chips.
But overall, 915 stocks (or about one in five stocks) saw rating changes last week alone. So, today let’s look at some of what I’m seeing within that.
Financial stocks achieved a lot of upgrades amid huge intervention by the Federal Reserve. I, for one, am not a fan of the big banks, though. On the flipside, brick-and-mortar retail sustained several downgrades to “Sell” last week, including Ulta Beauty (ULTA), Haverty Furniture (HVT) and Bed Bath & Beyond (BBBY). If you own anything that rates a “Sell,” I’d keep an eye out for earnings whispers and possibly the chance to, at least, sell into strength.
Meanwhile, we’re seeing a lot of capital moving into “quarantine stocks,” which has been a trend that’s not too hard to understand. This past week, that included:
- Household products that are being stockpiled, like Clorox (CLX) and the consumer-brand conglomerate Unilever (UL).
- Health services and especially biotech stocks. Several big names like Biogen (BIIB) and Gilead Sciences (GILD), whose potential coronavirus treatment is getting fast-tracked through FDA assessment, now get an “A” for their Quantitative Grade.
- Miners of precious metals.
- Drugstores like Rite-Aid (RAD) and PetMed Express (PETS), the online pet medication retailer.
- Telework stocks like Citrix Systems (CTXS).
So should you follow suit? Well, there’s a little more to consider first. You don’t just want to see popularity now; you want to see strong fundamentals to sustain growth, long-term. As I’ve noted, that’s where Clorox (CLX) might fall flat. While it earns an overall “Strong Buy,” that includes a “C” for its Fundamental Grade…which is also true of PETS and RAD, for example.
For exciting long-term potential, I’d be looking more at stocks involved in the massive 5G wireless upgrade.
The federal government is keen to deploy ultrafast 5G nationwide – and neither me nor any of my newsletter readers are surprised to hear it.
Now that so many people are online at home that the FCC has granted more bandwidth to internet providers, stocks like T-Mobile US (TMUS) are enjoying upgrades. But what if you live in a rural area without any high-speed internet? That’s where 5G wireless would come in. We already knew in December that the FCC plans to spend $9 billion to fill that gap. In general, the Trump administration is eager to compete with China, which has even used 5G networks/devices to help fight the coronavirus.
So, I think that we’ve got to start looking at stocks like Ciena (CIEN), which just became a “Strong Buy” in my Portfolio Grader. Network equipment, especially fiber optics, is instrumental to the big telecoms deploying 5G, and that’s what CIEN brings to the table.
Here’s CIEN’s full Report Card:
I’d like to see Ciena’s Sales Growth come up, although it’s hard to argue with top scores on many of my profitability factors, as well as the Quantitative Grade.
In the meantime, I’ve incorporated other 5G stocks into my Platinum Growth Club. That’s where I narrow down all my stock recommendations into one Model Portfolio of the best of the best stocks – even in corners of the market you wouldn’t normally think to look.
Besides 5G, that includes:
- Elite Dividend Payers, like high-quality real estate investment trusts (REITs)
- Aerospace and defense
- Software for business applications, especially in the “cloud”
- And medical device companies…just to name a few.