The market sure woke up on the wrong side of the bed yesterday. The Dow plummeted more than 900 points – its worst day in almost two months – and the S&P 500 suffered its worst loss in a month. The stock market continued to oscillate today.
The reality is there’s concern about the rise in coronavirus cases, especially in Europe, and those fears knocked down the market on Monday. France hit a new daily record on Sunday, reporting over 52,000 infections, while Italy has begun restarting some lockdown measures like closing bars and restaurants at 6 p.m., and Spain introduced a state of national emergency.
Investors are worried that the rise in cases will mean a drop in demand for energy and other energy-related products because folks are going to be traveling less.
The good news for my Accelerated Profits subscribers is that we don’t own energy stocks, so our portfolios shouldn’t be affected.
In addition, vaccines will be available soon. AstraZeneca’s (AZN) vaccine results showed that it helps the elderly build antibodies to fight the coronavirus. Even with Monday’s selloff, AZN climbed 2%. Johnson & Johnson (JNJ) said it has resumed vaccines trials after a pause and that its first vaccine shots could be ready in January. Pfizer (PFE) also has a vaccine in the works.
Keep in mind that the U.S. government has already paid for the vaccines, we just don’t know which one will be available first. So, it’s no longer a matter of if we’ll receive a vaccine, it’s simply a matter of when.
It’s why we should stay focused on what’s important to us as investors: the third-quarter earnings season. This will be a big earnings week for my Accelerated Profits service, with 12 companies reporting their most-recent results. Four reported today, and all beat analysts’ expectations. I look for our companies to continue to post wave-after-wave of positive earnings results, which will dropkick and drive our stocks higher.
And it will only get better from here. Earnings should also be strong in January and April, as the year-over-year comparisons will be easy to beat.
Now I know the fearmongering media would have you believe otherwise, but unemployment claims continue to drop, a decisive presidential election is looking more and more likely, and we will continue to prosper, regardless of who wins the election next week.
So, if you’d been following my Special Market Podcasts, then you’d know I wasn’t concerned about Monday’s selling one bit, even though two of my own Accelerated Profits stocks – Enphase Energy (ENPH) and Fiverr International (FVRR) – saw their own bout of profit-taking, starting last week. In fact, I recommended my subscribers use the weakness to buy on dips.
Seeing the Bigger Picture
The truth of the matter is there was nothing wrong with their fundamentals, these stocks had just been on such a strong run over the past month they were well overdue for a bit of profit-taking.
As you can see in the chart below, Enphase Energy began to dip last week and has fallen 9.6%…
The five-day chart certainly looks bad, but let’s take a step back and look at the bigger picture. This stock has been a tear this year, with an average monthly standard deviation (this measures the volatility of a stock, and the higher the deviation, the greater the volatility) in price of 29.45%.
In other words, the stock has made big moves and is just taking a breather at the moment. It’s currently sitting pretty in the Accelerated Profits Buy List with an 88% gain since I recommended it on March 3, 2020.
And check out Enphase’s year-to-date chart…
As you can see, it’s up nearly 297% so far this year! And, following today’s blowout earnings results, I look for the stock to continue trekking higher.
Or take Fiverr International. The stock’s 5-day chart doesn’t look great either, with the stock down over 13%…
But the stock’s monthly standard deviation is 21.6%. And since I added it to the Accelerated Profits Buy List in August 2020, it’s up 43%. So far this year, the stock has soared an incredible 564%!
My point is that when you have a fundamentally superior stock that goes up 30% or so in a short period of time, don’t be surprised if it eventually pulls back another 10% or 15%. That’s especially true when the pullbacks are within their trading ranges and the stocks have been soaring in previous weeks.
In some situations, even a stock that misses earnings can present a buying opportunity.
CyberOptics Corporation (CYBE) is a recent example. The sensing tech solutions company was the first on my Accelerated Profits Buy List to post an earnings miss (by three cents) so far this earnings season when it reported last Thursday, and the stock sold off.
However, the company posted 68% sales growth and 580% earnings growth, so the quarterly results were actually phenomenal! It’s why I view a dip like we’ve recently seen with CyberOptics as a good buying opportunity, and I told my subscribers exactly that.
The bottom line: Don’t let a short-term dip in a high-quality stock scare you. If its fundamentals remain strong, it will rebound over time. It’s like I always say, good stocks bounce like fresh tennis balls!
Note: I love the challenge of growth investing. It’s helped me make more money than I’ll ever care to spend. But I recently shined a spotlight on a different area… investing for income.
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With this venture, we believe we’ve found the key to financial freedom.
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For a limited time, you can watch a replay of the event by clicking here.
Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
AstraZeneca (AZN), CyberOptics Corporation (CYBE), Enphase Energy (ENPH), Fiverr International (FVRR), Pfizer (PFE)