Eq: Large Cap
(San Francisco)
Tech stocks have two very unappealing characteristics right now. They are at once both very expensive and increasingly vulnerable, as evidenced by their major selloff over the last week and a half. However, there are cheap tech shares out there, and Barron’s wants to share them with you. The five cheapest tech stocks in the Nasdaq 100 are Micron Technology, Western Digital, Seagate Technology, Lam Research, and Applied Materials. Their P/E ratios range from a low of 5.2x to a high of 11.9x.
FINSUM: Just a note of caution—these stocks were not selected to be good value, they were presented solely on the basis of valuation, so the multiples may be very representative of the quality of their businesses.
(San Francisco)
Facebook had an absolutely historic plunge last week, losing $120 bn of market cap in an afternoon. It has not fared so well since either, as many of its tech brethren have also seen big losses (like Twitter and Netflix). There are also mounting fears about a fundamentally darker future given the scandals and controversies it has become involved in. All that said, the stock still looks like a buying opportunity, at least according to some Wall Street analysts. The key to playing the company is not to wait for signs of margins and revenue stability. “Many investors prefer to wait for the appearance of margin stability … We understand this, but stocks tend to bottom and recover well ahead of margins and trade at much higher multiples when they do”, says a stock analyst.
FINSUM: Investors really need to contextualize this loss. Revenue growth rates came in 1% below expectations, leading to a massive loss. We think there is a good buying opportunity here.
(Portland)
Retail and consumer stocks have been all over the map over the last couple of years. With digital disruption happening across the industry and consumer tastes changing, it is a hard space to figure out. However, an old stalwart looks like a good pick right now—Nike. The company has had its ups and downs over the last few years as it popularity ebbed, but it is back in a big way with a new distribution model of going direct-to-consumer. Morgan Stanley sums up the company this way, saying it is “positioned to take share in the high-growth, global activewear market as well as increase profitability, which should make it one of the highest growth consumer names and one of the few to benefit from the shift to e-commerce”.
FINSUM: We have been saying for over a year that Nike would prove to be a good bet. It had a couple years of competing poorly with Adidas and Under Armor, but it seems to be back with a bang.
More...
(New York)
Dividend stocks usually don’t fare as well in periods of rising yields, but guess what, yields have been largely paused for some time. Further, investors may be wise to stay away from tech for awhile as it seems the sector is going through a reckoning. Well, interestingly, the famed Dividend Aristocrats—a group of companies who have raised their dividends for 25 straight years—has just one tech company in it, ADP, the payroll processor, so it is a very good way to earn income and hideout from the tech turmoil. Furthermore, and somewhat surprisingly, the average P/E ratio of the group is 18.1x, below the S&P 500’s average of 18.8x.
FINSUM: This seems like a nice stable group to buy into, and the ever rising dividends provide a nice cushion for any potential losses.
(New York)
Are you looking for high yielding stocks that also appear to have good upside? Look no further than this handful of picks. Market Watch has picked a group of stocks with solid dividends that are also seeing dividend hikes. This is a key feature to have not only as a way of offsetting any losses from rising rates, but also a means to drive price appreciation. All the names on the list have dividends of over 4% and have seen recent dividend hikes of 10%+. These stocks include CareTrust REIT, Six Flags Entertainment, AbbVie Inc, and Janus Henderson Group.
FINSUM: Dividend hikes have been rarer lately than one would expect given the good spell of earnings we have had. The reason why seems to be the prevalence of buybacks. All of which makes these shares unique.
(New York)
The FT ran an article today looking at the tech meltdown from an angle no one else is, and it is definitely worth paying attention to. Their worry is how ETF issuers are going to be able to offload shares of tech giants quickly enough to match benchmarks. For instance, Facebook lost $120 bn of market cap last week, and it will be difficult to source enough buyers to unload all that stock without roiling the market further. The overall point of the article is that trouble in tech might cause the dreaded “liquidity mismatch” issue in ETFs.
FINSUM: It seems like this problem is already rectified for last week’s fall, but the overarching argument is that any falls in FAANG stock prices are going to be exacerbated by large amounts of forced ETF selling. This could explain why the losses have been so steep.