Security Trade Ideas March 2017
We offer Security Trade Ideas for investors who choose to manage their own investment portfolio. We write one post per quarter. Our goal is to decrease our reader’s research time by providing Equity Trade Ideas that creates prosperity for our subscribers. As of this year we have decided to offer our Security Trade Ideas only to those who subscribe for free. Please provide us with a valid email address to subscribe for free and we will provide you with Equity Trade Ideas that will enable you to prosper. We perform sector analysis and select companies within those sectors. Finding a Profitable Equity Trade Idea is a time consuming process. Our service is free.
In this post we offer twelve great Equity Trade Ideas with an in-depth analysis that you can read and choose what works for your portfolio. We also have a section devoted to the Emerging Markets in 2017. One of our Trade Ideas’ CEO is on the Barron’s Best CEOs List. We offer our Trade Ideas after analyzing the stocks within the sectors we like and finding the best one. Further, we talk about various peoples’ views about President Trump and his policies and how it may or may not affect the Markets. Finally, we conclude with a great conclusion section that you must read to prosper in the Markets.
We covered the Financial Sector prior to the increase of interest rates.
Many investors think an interest rate hike may be bad for the stocks and the U.S. economy. “You have to remember that the Fed would raise rates only if the economy would be healthy. A healthy economy helps bring a healthy corporate profit. Higher rates tend to lead to higher profits for banks. Some banks that stand out are: Charles Schwab (SCHW), Bank of America (BAC), Capital One Financial (COF) , American Express (AXP) and JPMorgan Chase (JPM). Janet Yellen said: “Banks are generally well capitalized and have delivered improved profitability since the depths of the financial crisis.” We continue to like Visa(V) and Master Card (MA).”
In December of 2016 we covered the Health Care/Bio Sector. We like some of the companies mentioned as an investment and not just because of M&A. Some of these companies are involved in serious disease discoveries. We have mentioned two other companies that we like in this post
Amgen (AMGN) with annual dividend Yield of 2.56%, Pfizer (PFE)with annual dividend yield of 3.73% , Merck (MRK) with annual dividend yield of 2.83%, Gilead Sciences(GILD) with annual dividend yield of 2.97% (good value).
GILD’s future is bright. The biotech has several great new products, especially HIV drug Genvoya and hepatitis C virus (HCV) drug Epclusa. Gilead’s pipeline includes strong candidates including experimental NASH drug GS-4997 and autoimmune disease drug filgotinib. Gilead also has a solid cash flow that should keep on flowing. Even though declining sales for HCV drugs Harvoni and Sovaldi will reduce cash flow somewhat, Gilead should still continue to enjoy an enviable cash position that allows the company to fund acquisitions and partnerships.
For the year 2017, we like these sectors: Industrial, Health Care, Energy, Information Technology and Financial. We prefer large cap stocks vs small caps. We also like to invest in Europe, China and India.
Ned Davis Research Group has lowered the Technology sector to marketweight and the Industrials to overweight. They have an overweight rating on Semiconductors and Semiconductor Equipment. They have a bullish outlook for Energy and Oil. They started 2017 with a bullish outlook for Energy and 0il. In line with this short-term and long-term bullish outlook for oil, they have moved both the Energy sector and the Energy Equipment & Services industry to overweight.
They have had an overweight rating on Financials since November of 2016 and in 2017 movements in long-term interest rates will have a major impact on relative performance for Banks and Broker/Dealers. They have an overweight rating on the Industrial Sector since December of 2016. They upgraded Industrials to overweight in December as they believe higher oil prices, an ongoing global economic recovery, and Trump infrastructure spending plans have the potential to materially lift capex. Industrials has been a modest underperformer so far in 2017, likely waiting for some form of action on the Trump administration on government-related capex spending.
We invest and trade on fundamentals. We look for companies with exceptional earnings growth, free cash flow, good credit rating, profitability and earning per share growth. If a company has a good product, is profitable, and takes care of its shareholders, then tweets without basis are useless. Trump’s bullying tactics used at real estate closings don’t’ work so well with businesses.
There is “No Bite behind Trump’s Barks” and we don’t trade based on Tweets. His “Dog and Pony” shows with various businesses is just a show without substance. Harley Davidson market is shrinking due to decline in motorcycle ridership. Cutting taxes or having favorable border adjustment tax (BAT) will not help increase demand for its product. A problem that President Trump can’t fix.
Another show in the oval office with the president to build a manufacturing company in the U.S. (Intel, INTC) ) (the same factory in Arizona has been talked about with President Obama and then Trump) because of Tax and regulation modification it make sense to do manufacturing in the U.S.
There is political uncertainty in the U.S. and Europe, skepticism toward the Bank of Japan’s monetary policy and bond purchases, and lingering Chinese liquidity uncertainty. Brexit and exit of Britain from EU. No one knows for sure what the risk of Brexit will be. We have the French election which begins on April 23rd. Stocks could slide as a result of the election.
Billionaire Ray Dalio’s honeymoon with President Donald Trump is looking to be short lived. Dalio, who in November was bullish on the incoming president’s ability to stimulate the economy, is now saying he’s more concerned that the damaging effects of Trump’s populist policies may overwhelm the benefits of his pro-business agenda.
Money managers at hedge fund Carlson Capital take an even more negative view of Trump’s nationalist agenda. His policies may have dire consequences for the U.S. and global economy and his attempts to tax imports and subsidize exports could touch off a depression, according to their quarterly letter to clients. “If the border adjustment mechanism is implemented as proposed we think it will cause a global depression and a major equity market decline,”
Richard Maraviglia and Matt Barkoff said in the letter. “It is still unclear whether it will happen but at the very least we expect that U.S. trade policy will put downward pressure on global growth.
”Billionaire George Soros, who had backed Democrat Hillary Clinton in last year’s election, said in January that the stock market rally since Trump’s win, spurred by his promises to slash regulations and boost spending, will come to a halt. He called Trump a “con man” and a would-be dictator.
Writing for CNNMoney, columnist Paul La Monica states that “the unbridled bullishness that Wall Street had for Trump could continue to fade if his administration stays on a path of economic isolationism.” In addition, he writes, “Trump’s tough talk with big American businesses about keeping costs down — be it the price of military planes or prescription drugs — seems to be scaring some investors as well.”Aslam noted that “optimism around infrastructure and fiscal spending” had helped boost the markets after the election. But traders are now “increasingly worried that there is a possibility of trade war.
Bill Gross said ” investors should not be ‘allured’ by ‘Trump bull market'” . Bond investor were warned that investors should not be tempted into buying high-flying equities and corporate bonds, given the possibility that U.S. President Donald Trump might fail to enact policies that fuel economic growth.
Active VS Passive Investment: Loeb & Co. are bullish but they also plan to wager on rallies overseas. “While our portfolio is primarily focused on the U.S., an accelerating U.S. economy (which results in global growth accelerating as well) creates the right backdrop for non-U.S. markets to perform, and so we will likely have more non-U.S.exposure as 2017 progresses,” Loeb and his team say. The $2.6 billion man and his support staff say they were up a “disappointing 6.1%” last year, underperforming the S&P 500. But they note the new environment is “undoubtedly better for active investing — just as active investing was considered to be on its deathbed Similar to billionaire investor Stan Druckenmiller, Loeb is optimistic on the U.S. economy under Trump.
President Donald Trump’s isolationist policies such as building walls, banning immigrants and proposing a border tax on Mexican goods may have damaging effects. Who knows which of these policies will actually become law? Proposing a big idea and turning it into law is difficult and time consuming. We have a president whose business investment strategy has been using debt and deficit. How can you have growth by cutting revenue (taxes) and increasing debt?
How and when are we going to see a tax reform? How big will the infrastructure spending be? How big will the defense spending be and how and when will it happen? We have enough debt in this country. On January 26, 2016, debt held by the public was $13.62 trillion or about 75% of the previous 12 months of GDP. This is reckless populism. He wants to ease sanctions with Russia, change NAFTA, Change tax laws (tax reform), expand the military, build infrastructure, change regulations, change affordable care act and reduce business tax. How is he going to pay for it all? How long will it take to implement?
Optimism about tax reform under a Trump administration along with pledges to boost spending and rollback financial regulation have pushed stocks broadly higher since the November election. Investors are bidding Trump will bring growth via tax cuts and infrastructure spending.
Better-than-expected economic data and improving earnings momentum have also fueled the gains.” Rebecca Byrne U.S. growth is strong. The unemployment is low. “A few weeks after the election, the Organization for Economic Cooperation and Development (OECD) predicted the U.S. growth rate would tick up to 2.3% in 2017 compare to last year’s 1.5%..
“The ADP Employment Change Report showed private sector payrolls jumped by 298,000 jobs in February, well above the Bloomberg forecast of a 187,000 gain, while January’s increase of 246,000 jobs was revised to a 261,000 rise. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader February nonfarm payroll report, expected to show an increase of 190,000 jobs (economic calendar). The unemployment rate is forecasted to dip to 4.7% from 4.8%, and average hourly earnings are projected to rise 0.3% month-over-month (m/m).”
“Nonfarm payrolls rose by a seasonally adjusted 235,000 in February from the prior month, the Labor Department said Friday, and the unemployment rate ticked down to 4.7% as both workforce participation and employment rose. Economists surveyed by The Wall Street Journal had expected 197,000 new jobs and a jobless rate of 4.7% in February The strong hiring “will erase any lingering doubts that the Fed might not hike interest rates next week,” said Paul Ashworth, chief U.S. economist at Capital Economics, in a note to clients” WSJ
The fed will probably have three quarter-point rate hikes in 2017. The Federal Reserve also seems more sanguine: It raised interest rates for the first time in a year in mid-December of 2016 and projects three more hikes in 2017. We had a rate hike on March 15th, 2017. The market expects the next hike to come in June and another in December. In September, it foresaw just two hikes in 2017.” The Fed chairwoman painted a largely upbeat picture of the US economy in her first congressional testimony since President Donald Trump took office “My colleagues on the [interest-rate-setting Federal Open Market Committee] and I expect the economy to continue to expand at a moderate pace, with the job market strengthening somewhat further and inflation gradually rising to 2%,” she said Fed policy makers expect economic progress “to warrant further gradual increases in the federal funds rate,” Yellen told lawmaker. The market, however, has only priced in two rate hikes thus far, and believes a rate hike in March to be unlikely.
“Inflation is still below our target,” he wrote. “While there are some signs of inflation slowly building toward our target, it isn’t happening rapidly, and inflation expectations appear well-anchored.”
But concern about the rally is growing, with one prominent analyst calling a 5% correction in the near-term.
If you think the market is going higher and fear overvaluation of stocks, you could buy Call Options on stocks or ETFs and ride the rise of the market and have limited loss in case of a fall. Better yet, you could also buy a put on the same call and have protection in case of a fall.
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