How Robinhood gets users addicted, plus Cathie Wood talks Tesla and GameStop

Hello and welcome to Insider Investing. I’m Joe Ciolli, and I’m here to guide you through what’s been happening in markets, as well as what to expect in the coming weeks. Here’s what’s on the docket:

If you aren’t yet a subscriber to Insider Investing, you can sign up here.

Have thoughts on the newsletter? Just want to talk markets? Feel free to drop me a line at jciolli@insider.com or on Twitter @JoeCiolli.


Your weekly outlook

The past week saw the market zeitgeist shift somewhat away from the pesky day-trading rascals on Reddit and towards bitcoin, which repeatedly set new records. The red-hot cryptocurrency got a coveted co-sign from Tesla, which said that it bought $1.5 billion worth and would start accepting it as payment.

It then surged even more to all-time highs after further adoption from the likes of Mastercard and BNY Mellon. With bitcoin now back at record highs, some age-old questions will persist over the coming weeks: Can increasingly widespread adoption continue to offset concerns the coin’s price is overextended? And who else will follow the lead of these high-profile companies?

But the return of crypto didn’t mean all was quiet on the Reddit front. There was significant day-trader interest around cannabis stocks throughout the week, pegged to expectations that federal legalization will gather steam under the Biden administration. Volume for options – the preferred investing vehicle for risk-hungry Wall Street Bets users – surged to records.

The initial pop in cannabis names did quickly subside, raising questions of whether the Reddit crowd will again be able to achieve the level of consensus and interest that made its GameStop wager so effective. The sudden interest in the cannabis space also showed the unpredictability of the Reddit cohort, which seems to shift its focus at a moment’s notice.

Lastly, stimulus will remain at top of mind for investors this coming week, even if progress has been slow and frustrating at times. The market still responds immediately to any sort of incremental development, so keep an eye out for guidance from politicans or further package details.


The design features that make Robinhood so addictive

robinhood gamification trading app 2x1

By all indications, Robinhood has become the investing app for beginner retail traders. Its sleek design, flashy features, and simple interface have attracted 13 million users since 2013. Insider spoke with 10 users and industry experts to find out how Robinhood has transformed trading.

Read the full story here:

GENERATION ROBINHOOD: How the trading app conditioned its inexperienced users to obsessively play the market


Cathie Wood & Co. discuss Tesla, GameStop, and the Chinese stock behind Clubhouse

Cathie Wood

Last week Ark CEO Cathie Wood said stocks are not in a bubble, but bonds are. She and her team break down the implications of Tesla’s $1.5 billion bitcoin investment, and also share the investment case for the Chinese stock behind the audio chat app Clubhouse.

Read the full story here:

Cathie Wood and her analysts discuss why Tesla’s $1.5 billion bitcoin purchase could trigger a wave of corporate investments, the fallout of the GameStop-AMC phenomenon, and their bullish views on the Chinese stock behind Clubhouse


Short-selling strategies from the man who wrote the book on it

Nitin Sacheti Papyrus Headshot

Nitin Sacheti is the founder and portfolio manager of Papyrus Capital, a long/short hedge fund. In a book called “Downside Protection,” Sacheti detailed his unique short-selling strategy. He breaks down how he evaded the short squeeze on meme stocks, and shares what stocks he’s buying.

Read the full story here:

A hedge fund manager who wrote a definitive book on short-selling breaks down how his strategy helped him evade the squeeze on GameStop – and shares what types of stocks he’s buying and shorting now


Stock pick central

Seeking experts who are willing to name names? Look no further:

Read the original article on Business Insider

Hunting for the next GameStop, plus an exclusive chat with short-seller extraordinaire Carson Block

Hello everyone! Welcome to this weekly roundup of Investing stories from deputy editor Joe Ciolli. Please subscribe here to get this newsletter in your inbox every week.

gamestop line

Hello and welcome to Insider Investing. I’m Joe Ciolli, and I’m here to guide you through what’s been happening in markets, as well as what to expect in the coming weeks. Here’s what’s on the docket:

If you aren’t yet a subscriber to Insider Investing, you can sign up here.

Have thoughts on the newsletter? Just want to talk markets? Feel free to drop me a line at jciolli@insider.com or on Twitter @JoeCiolli.


Your weekly outlook

If you expected GameStop mania to subside this past week, then you were sorely mistaken. The stock – and its similarly shorted brethren – took traders on a volatile ride, following steep sell-offs with torrid rallies. The so-called meme stocks are now well below highs, but also didn’t collapse immediately like many thought they would.

This recent price action has set up a make-or-break week of sorts for the Reddit revolution. Much of the focus will be on whether the retail-investor cohort can “hold the line” and avoid being swept up in profit-taking. Attention will also be paid to the brewing situation surrounding famed Wall Street Bets day trader Keith Gill, who’s under investigation as regulators look at his previous financial-advisement job.

Another lingering concern is that the Reddit legion will try to squeeze another heavily shorted asset. They already tried – and mostly failed – to do it with silver this past week. Given how that squeeze fizzled out, market watchers will be asking themselves if the jig is up, or if silver was just the wrong target.

The stimulus front will also be jam-packed with updates. President Joe Biden has made it clear that he’s going to push through his $1.9 trillion bill with or without GOP backing, and concrete progress is being made to that end.

To date, positive stimulus updates have been met with stock-market gains as traders scramble to price in a stronger economic recovery. And conversely, any hold-ups have seen sharp selling. Expect volatility along those lines as stimulus haggling continues into next week.


Hunting for the next GameStop

gamestop store crowded

In the wake of GameStop mania, everyone from day traders to institutional investors are scrambling to scoop up shares of the next big short squeeze target. Firms across Wall Street have been busy analyzing the market and pinpointing such names they recommend buying now.

Read the full stories here:

Buy these 26 heavily shorted stocks as retail traders trigger wild rallies in Wall Street’s least liked names, Wells Fargo says

Jefferies says these 20 heavily shorted and lightly traded stocks could see big jumps in the event of a GameStop-like squeeze


An exclusive chat with short-seller extraordinaire Carson Block

Carson Block, muddy waters

In an exclusive interview, Carson Block of Muddy Waters Research explained to us how bubbles are forming in individual stocks like GameStop. The famed short-seller cites constant flows to passive investment vehicles, which he says is driving out active managers, leaving the market more vulnerable to sell-offs.

Read the full story here:

Famed short seller Carson Block says a new type of liquidity bubble is feeding the wild swings in day-trading favorites like GameStop – and that stocks have become a fragile ‘game’


How to contend with inflation fears stemming from stimulus

Fed Jerome Powell

Inflation has not meaningfully risen in the US in several years, but waves of fiscal and monetary stimulus could change that and impact inflation-sensitive assets. Five experts dive into the prospects of an inflation comeback and how to position portfolios for it.

Read the full story here:

Biden’s stimulus plan is heightening Wall Street’s worries that inflation will upend the stock market. We spoke to 4 experts on what the raging debate means for investors, and how to take advantage of it.


Stock pick central

Seeking experts who are willing to name names? Look no further:

Read the original article on Business Insider

How to navigate GameStop madness – The strategy that outsmarted Wall Street – How Reddit traders are driving a populist movement

Hello and welcome to Insider Investing. I’m Joe Ciolli, and I’m here to guide you through what’s been happening in markets, as well as what to expect in the coming weeks. This week is packed with all the GameStop and Reddit content you could ever ask for.

Here’s what’s on the docket:

If you aren’t yet a subscriber to Insider Investing, you can sign up here.

Have thoughts on the newsletter? Just want to talk markets? Feel free to drop me a line at jciolli@insider.com or on Twitter @JoeCiolli.


Your weekly recap and outlook

If you’re reading this, that means you managed to make it through the stock market’s most absurb week in recent memory. You’ll always remember where you were when Reddit day traders banded together and pumped 90’s nostalgia stocks like GameStop to the moon – an unprecedented uprising that sent ripples through every layer of the financial system.

The story starts, of course, with the traders themselves, who conduct their business on r/WallStreetBets subreddit. They threw the exact perfect mix of market savvy, anti-establishment sentiment, and sheer will into a blender and came out with a destabilizing cocktail that left established Wall Streeters scrambling clean up the mess.

The central concept was relatively simple: focus on buying heavily shorted stocks, which will hopefully squeeze those positions until they’re forced to close, pushing the stock up even further. Ideally that inspires people that feel left out to pile in. Rinse, repeat. That these companies – which included Nokia, BlackBerry, and BB Liquidating (formerly known as Blockbuster) – were nostalgic, past-their-prime businesses was an added bonus to the Reddit crowd, who are never ones to pass up a chance at irony.

But the phenomenon goes far deeper than that. Underlying the memes and the hubris rests an anti-establishment streak. For a portion of the WallStreetBets crowd, this undertaking isn’t just about making money. It’s about making Old Wall Street pay, and the group isn’t exactly being coy about that fact. “It seems Occupy Wall Street had the wrong approach,” the official WallStreetBets Twitter account posted on January 26.

So what’s the damage look like on Wall Street so far? Arguably the biggest casualty has been Melvin Capital, which held a short position on GameStop that’s left them down 53% year-to-date – performance so bad that investing titans Steve Cohen and Ken Griffin have had to bail them out

But it hasn’t been all negative. Silver Lake Partners saw a convertible-debt investment strike gold when AMC Entertainment’s stock surged this past week. The firm was able to flip that debt into stock, which it then sold at the peak for a smooth $113 million profit. Some have called it the “trade of a lifetime.”

Then there’s also the matter of the preferred trading platform for the Reddit army: Robinhood. The online brokerage had a week for the ages after restricting further buying of GameStop, then backtracking after backlash from everyone from AOC to Chamath Palihapitiya. There have also been reports that Robinhood was forced to draw on bank credit lines amid the madness. How this impacts the company’s quest to go public this year will be a story to watch in the coming weeks.

So where do we go from here? One thing to watch is how hedge funds react. They were already shedding equity exposure in the early days of the GameStop craze, and it’s possible the market dislocations exploited by Redditors will cause them to retreat further.

Many other questions remain. Who else was caught short and ultimately doomed by WallStreetBets? Who else raked in big returns like Silver Lake? When will the so-called meme stocks come plunging back down to earth? And will the stock market ever be the same? Keep watching this space to find out the answer to those, plus many more.


JOIN OUR LIVE EVENT: A conversation with Insider’s markets gurus on the GameStop and Reddit-trader phenomenon

Join us Tuesday, February 2, 2021 at 1:00 p.m ET as deputy editor Joe Ciolli, markets and economy reporter Ben Winck, and senior investing reporter Vicky Huang discuss the GameStop phenomenon, the influence of WallStreetBets, and how the Reddit-fueled trade might end.

Register here.

WallStreetBets logo


How to navigate a GameStop crazed environment

GameStop Clerk

Ally Chief Investment Strategist Lindsey Bell says the meme-stock rally could be a good thing for average investors. Still, she says traders who want to play the newest hot stocks should understand they are speculating. Bell also advises investors to have a plan and stick to it when things get strange, and understand how unusual this time is.

Read the full story here:

A chief investment strategist breaks down how the GameStop saga could upend long-standing practices on Wall Street – and shares her 4-part advice for navigating the frenzied trading environment


The intricate strategy GameStop traders used to outsmart Wall Street

gamestop store line crowd

Steve Sosnick – the chief strategist of Interactive Brokers and head trader of its trading unit Timber Hill – breaks down the short squeeze and gamma squeeze Reddit traders put in place for GameStop. He also shares how the massive moves in these so-called meme stocks could permanently alter markets.

Read the full story here:

A veteran options trader breaks down the intricate strategy that Reddit traders used to outsmart Wall Street’s bet against GameStop – and shares 2 ways the parabolic rally could permanently alter the stock market


How Reddit-trader mania represents a full-fledged populist movement

occupy wall street reddit 2x1

The Reddit-fueled trading phenomenon lifting GameStop, AMC, and other stocks is backed by populist sentiments. Cries to dethrone the establishment and redistribute wealth resemble those seen at Occupy Wall Street protests in 2011. The trend has all but certainly formed a bubble, but its political messaging can still live on.

Read the full story here:

The GameStop mania driven by Reddit traders isn’t simple market trolling. It’s a populist movement threatening to disrupt the financial system to a degree Occupy Wall Street only dreamed of.


JOIN OUR LIVE EVENT: Execs reveal what’s on tap for the red-hot IPO market in 2021

Join Insider on Wednesday, February 3 at 2:30 p.m. ET as Insider’s chief finance correspondent Dakin Campbell moderates a panel featuring Kim Posnett, Goldman Sachs partner and Internet investment banking chief, Greg Rodgers, a Latham & Watkins LLP attorney and direct-listings expert, and Mitchell Green, a venture capitalist at Lead Edge Capital who backed Uber, Spotify, Asana, and Alibaba.

These IPO experts will discuss what you can expect for the year ahead and how the recent changes have dramatically altered the calculus for startup entrepreneurs. They will also take reader questions. 

Register here.


Stock pick central

Seeking experts who are willing to name names? Look no further:

Read the original article on Business Insider

Crypto whale lays out bitcoin’s bull case – Cathie Wood’s 2021 forecasts – How to pick tiny biotech winners

Hello and welcome to Insider Investing. I’m Joe Ciolli, and I’ll be shepherding you through what to expect in markets in the coming weeks, while also featuring some of Insider’s best work on the subject.

Regular readers may notice that this newsletter has moved from its previous slot early in the week to Sunday afternoon. This will be the new publication time, so please do continue to enjoy!

Here’s what’s on the docket:

If you aren’t yet a subscriber to Insider Investing, you can sign up here.

Have thoughts on the newsletter? Just want to talk markets? Feel free to drop me a line at jciolli@insider.com or on Twitter @JoeCiolli.


Your weekly outlook

All eyes will be on corporate earnings this coming week, with Apple, Facebook, Tesla, and Amazon set to report. Given the massive weighting of these stocks in major indexes, it’s not an exaggeration to say their quarterly results – and, perhaps more importantly, their forward outlooks – will dictate the entire market’s direction.

The question is the same for these tech titans: Will they be able to keep delivering (and forecasting) stronger-than-expected profit growth? It’s something they’ve been able to do for years, even as estimates have gotten more ambitious. With their valuations sitting at all-time peaks across every imaginable measure, these tech titans are especially vulnerable to any disappointment.

But if the latest earnings report for mega-cap tech stalwart Netflix – which handily blew past estimates for subscriber growth – is any indication, investors may not have much to worry about. In a post-pandemic world where the products and services provided by these companies are still attracting major demand, there’s seemingly endless profit-growth opportunity.

And as it pertains to Tesla specifically, just ask the legions of scorched short-sellers what it’s like to bet against Elon Musk. They lost roughly $39 billion in 2020 as Tesla’s stock soared 743%. Will the company’s earnings give them reason to start shorting again? Tune in Wednesday to find out.


The bull case for crypto from a CEO that’s poured $1 billion into bitcoin

bitcoin

Michael Saylor is the chief executive officer of business intelligence and software firm MicroStrategy, which has plowed more than $1 billion of its funds into bitcoin.

In a recent “SALT Talks” interview with SkyBridge founder Anthony Scaramucci, Saylor recounted how he went from a bitcoin skeptic to its “most important proselytizer.” He also shared the eureka moment that changed his beliefs about bitcoin and laid out the hurdles that the digital asset still has to jump through to become the “newest institutional safe-haven asset.”

Read the full story here:

Michael Saylor has invested over $1 billion of MicroStrategy’s funds in Bitcoin. The software CEO-turned Bitcoin whale explains why he is making such a massive bet on the digital asset.


Cathie Wood’s ARK Invest shares its 2021 outlook on the economy, bitcoin, and Tesla

Cathie Wood

All of the five active ETFs run by Cathie Wood’s ARK Invest returned more than 100% in 2020. This strong performance helped the firm rake in over $20 billion last year and bring its total assets under management to $50 billion, according to Morningstar and Bloomberg data.

In a recent markets update, Wood shared her 2021 outlook, breaking down why the current bull market is very different from the dot-com bubble. ARK crypto analyst Yassine Elmandjra also detailed a new three-layered framework for valuing bitcoin‘s fundamentals, while analyst Tasha Keeney shared her Tesla outlook for 2021.

Read the full story here:

Cathie Wood’s ARK Invest runs 5 active ETFs that more than doubled in 2020. She and her analysts share their 2021 outlooks on the economy, bitcoin, and Tesla.


How to make the biggest gains in the smallest biotech stocks

traders

Mutual fund manager Darren Chervitz has delivered returns of 32% a year for five years, investing in the market’s smallest stocks. Along the way, he’s become an expert in picking biotech stocks.

In an exclusive interview, Chervitz told Insider how he maximizes gains and reduces the risk of failures and blowups.

Read the full story here:

Darren Chervitz is crushing other fund managers in one of the riskiest parts of the market: small biotech stocks. He tells us how he scores the biggest gains, minimizes the risk of costly failures, and names his top 2 picks in the space.


JOIN OUR LIVE EVENT: Execs reveal what’s on tap for the red-hot IPO market in 2021

Join Insider on Wednesday, February 3 at 2:30 p.m. ET as Insider’s chief finance correspondent Dakin Campbell moderates a panel featuring Kim Posnett, Goldman Sachs partner and Internet investment banking chief, Greg Rodgers, a Latham & Watkins LLP attorney and direct-listings expert, and Mitchell Green, a venture capitalist at Lead Edge Capital who backed Uber, Spotify, Asana, and Alibaba.

These IPO experts will discuss what you can expect for the year ahead and how the recent changes have dramatically altered the calculus for startup entrepreneurs. They will also take reader questions. 

Register here.

uber ipo


Stock pick central

Seeking experts who are willing to name names? Look no further:

Read the original article on Business Insider

Calculating crypto – 6 stocks for the next 10-15 years – 10 top forecasts for 2021

Dear Readers,

Has the stock market gotten too predictable for you? Indexes have hovered near record highs for months, and it’s been the usual suspects driving moves: stimulus updates, economic-growth prospects, regulation and tax concerns, and maybe a dash of company earnings here and there.

Those looking for a little more excitement would be well-advised to look towards cryptocurrencies, which are constantly rewriting the record book amid unprecedented volatility.

Bitcoin in particular has been on a wild ride, with prices fluctuating by up to $5,000 per unit on any given day. New record highs are followed the next day by record drops. It’s a chaotic scene not for the faint of heart.

If you aren’t yet a subscriber to Insider Investing, you can sign up here.

We here at Insider have been sorting through the madness in an attempt to nail down a semblance of clarity. We spoke to the CIO of a $500 million crypto asset manager, who broke down five ways of valuing bitcoin and deciding whether to own it. You’ll also want to check out our discussion with a crypto CEO, who explained why bitcoin could double in 2021.

For more, see below Insider’s best Investing stories of the week, which include a wide array of additional recommendations, strategies, and tips for navigating uncertainty.

Thanks for reading!

— Joe


6 stocks to own for the next 5-10 years, according to 96th-percentile investor

trader celebrate

Over the past five years, Aram Green’s Select Strategy fund has outperformed 96% of its competitors. He shared with Insider 6 stocks that he identified as having strong secular growth prospects over the next decade, some of which have cyclical tailwinds behind them as the economy recovers.

Read the full story here:

A growth-fund manager who’s beaten 96% of his peers over the past 5 years shares 6 stocks he sees ‘dominating their space’ for the next 5 to 10 years – including 2 he thinks could grow 100%


10 Wall Street experts share their 2021 stock forecasts

Stock trader

The majority of Wall Street’s biggest firms remain bullish after a wild year that saw stocks plunge into the fastest bear market in March only to rebound to record highs and end 2020 with a 16% gain.

Despite their optimism, many strategists caution about risk factors that could derail the economic recovery and reopening, which is expected to support the next leg of the bull market.

We’ve compiled their best recommendations for how to maximize your returns in a year that is expected to carry forward much of the volatility and uncertainties of 2020.

Read the full story here:

10 top Wall Street experts unveil their stock-market forecasts for 2021 – and tell you where to put your money


A warning from investing legend Jeremy Grantham

Jeremy Grantham

On a recent podcast appearance, investing legend Jeremy Grantham – who famously predicted the last two bubbles – said that SPACs are “encouraging the most obscene levels of speculation” and “should be illegal.” Here are his complete thoughts on risk assets running wild.

Read the full story here:

Jeremy Grantham predicted the past 2 financial meltdowns. Now he says these 3 signals are foreshadowing a crash in another bubble being created by stocks and SPACs.


JOIN OUR LIVE EVENT: How to invest in real estate

Join Insider on Wednesday, January 20 at 1 p.m. ET for a panel on how to invest in real estate in the coming year, featuring R. Donahue Peebles, founder, chairman and CEO of the Peebles Corporation, and Daryl Fairweather, Redfin’s chief economist.

Register here.

insider events how to invest in real estate in 2021 2x1


Stock pick central

Seeking experts who are willing to name names? Look no further:

Read the original article on Business Insider

Business Insider’s 6 best investing stories of 2020

Dear Readers,

It’s been an unprecedented year in countless ways, and the extreme volatility seen in the stock market was no exception. After suffering the swiftest bear-market plunge in history, US equities recouped those losses in mere months and now sit near all-time highs.

Most major events (the worst recession in 100-plus years, negative oil prices) were byproducts of the coronavirus outbreak. But some (repeated yield-curve inversions in early 2020, the US presidential election) weren’t. There were so many forces to contend with that you’d be excused for forgetting some of them were even in play.

If you aren’t yet a subscriber to Insider Investing, you can sign up here.

Ever the safety net, the Investing team at Business Insider was with you every step of the way, dissecting the vicious fluctuations while simultaneously telling you how to adjust your portfolios and capitalize on the chaos.

To that end, we’ve selected the six best Investing stories of the year. Enjoy the selection below, and we’ll see you back here in your inbox on the first Tuesday after the holidays.

Thanks for reading!

— Joe


(1) We spoke with Wall Street’s 9 best-performing fund managers of 2020 to learn how they crushed the chaotic market – and compile the biggest bets they’re making for 2021

Business Insider spoke to the nine top-performing US mutual fund managers of the year, based on their performance through November 6. They shared insights into investing strategies and stock picks that prevailed through the crisis, and shared their top trade ideas for 2021.


(2) Inside Eagle Investors, the 20,000-member online community run by 2 Indiana University students that’s helping spearhead the Gen Z day-trading revolution

Indiana University undergraduates Vishu Namburi and Ishaan Sandhir created Eagle Investors in July 2019, hoping to form a tightly knit community of options traders.

Pandemic-fueled market volatility drove much of Eagle Investors’ expansion, and both moderators and clients have made money along the way. But the group’s rapid growth presents a challenge for the founders who strive to maintain closeness within the community while still making space for new members.


(3) Nancy Zevenbergen is in the top 1% of investors over the past 5 years. She breaks down what she looks for in young companies – and shares 4 stocks she thinks could be market leaders 10 years from now.

Nancy Zevenbergen – founder of Zevenbergen Capital Investments, which has about $5 billion in assets – has a knack for investing early in companies that see extraordinary growth. She detailed for Business Insider her market-beating approach to investing, and shared four stocks she thinks could be the next market leaders.


(4) 14 Wall Street experts told us the single metric they’re each watching to assess coronavirus market fallout – and give their portfolios a leg up

Business Insider asked 14 investment strategists and analysts in April to share one crucial metric, index, or signal they’re closely tracking as the novel coronavirus throws markets and economies into disarray. Their answers illustrate where experts have been looking to gauge the way forward for markets and the economy.


(5) Robert Shiller, Rick Rieder, and 18 more of the brightest minds on Wall Street reveal the most important charts in the world

In February, amid the onset of the coronavirus pandemic, Business Insider asked 20 financial experts – including Nobel-winning economists and acclaimed investment chiefs – to share charts that capture the biggest trends in markets.

The charts included illustrate opportunities for the decade ahead, potential catalysts for the next economic recession, and other big themes that will inform where investors should be putting their money now.


(6) The ultimate guide to getting started in real-estate investing – according to entrepreneurs who built multimillion-dollar empires from scratch

The most successful investors are highly adaptable. Take Jacob Blackett, the CEO of Holdfolio and founder of SyndicationPro, for example. He lost $70,000 on his first deal, but has since amassed a portfolio of 1,000 units.

The best ones are also rigorous about choosing the right strategy, methodology, and location for their investments. To aid your own decision-making, we’ve centralized months of reporting on real-estate investing trends into a single guide.

Read the original article on Business Insider

Fundstrat’s Tom Lee says another epic rally in stocks hit hardest by COVID-19 could be coming soon

Hilton Hotel
  • Fundstrat’s Tom Lee said stocks in sectors hit hardest by the pandemic like travel and retail may be due for a rally. 
  • The head of research explained that the third wave of COVID-19 cases may be peaking in the US. When this happened after the second wave, epicenter stocks rallied shortly after, he said.
  • “From a market’s perspective, a rolling over of COVID-19 should be a “risk-on” signal for epicenter stocks,” said Lee. “The reason, naturally, is that epicenter stocks are more sensitive to lockdowns and benefit from economic re-opening.
  • View Business Insider’s homepage for more stories.

History shows that another rally for stocks hit hardest by the pandemic could be on the way. 

That’s according to Fundstrat’s Tom Lee, who wrote in a note to clients on Monday that “epicenter stocks,” or stocks in sectors like travel, retail, and services, could be poised to gain in the near future. 

The head of research explained that the third wave of COVID-19 cases may be peaking in the US. When this happened after the second wave, epicenter stocks rallied shortly after, he said. 

“From a market’s perspective, a rolling over of COVID-19 should be a “risk-on” signal for epicenter stocks,” said Lee. “The reason, naturally, is that epicenter stocks are more sensitive to lockdowns and benefit from economic re-opening. Hence, we should expect the epicenter stocks to rally.”

Read more:RBC unveils its 15 top biotech stock ideas for 2021 as the sector is poised to take off on the back of pandemic-related innovations and new funding

Lee said that the percentage of the US with declines in COVID-19 cases is at 62%. That’s the highest level since August. He also noted a recent comment from former FDA commissioner Dr. Scot Gottlieb, who said on Sunday that COVID-19 cases may be peaking nationally. This thinning out of cases could be a good sign for stocks that hinge on an economic reopening. 

Although this could be a temporary rollover of cases, and holiday gatherings could cause a spike in cases, Lee said COVID-19 is still rolling over earlier than he expected.  

Names in his basket of epicenter stocks include travel companies like MGM Resorts, Hilton Worldwide, Marriott, Norwegian Cruise Line, and Royal Caribbean, retailers including AutoNation, Harley-Davidson, Hasbro, L Brands, and Best Buy, and restaurants like Darden Restaurants and Starbucks.

Read the original article on Business Insider

Why the market’s lowest-quality stocks are embarking upon a rally that should extend for months, according to one Wall Street strategist

NYSE trader
  • As the stock market continues to cross its fingers that a stimulus package is near, investors are more willing to invest in lower quality stocks, according to CFRA’s Sam Stovall.
  • “Historically, investors’ rotation into low quality stocks has anecdotally indicated an improvement in confidence that the economy will recover, encouraging an investment in companies with questionable financials that may have been priced to go out of business but now might not,” said the chief investment strategist.
  • Stovall highlighted stocks such as Salesforce, Wynn Resorts, and Charter Communications that rank low on quality but have potential for a strong upside, according to CFRA research. 
  • Visit Business Insider’s homepage for more stories.

As the stock market continues to hope that a deal on a new stimulus is near, investors are showing more willingness to invest in lower quality stocks, according to CFRA’s Sam Stovall.

The chief investment strategist wrote in a Monday note that low quality stocks are set to rally for the next few months.

“Historically, investors’ rotation into low quality stocks has anecdotally indicated an improvement in confidence that the economy will recover, encouraging an investment in companies with questionable financials that may have been priced to go out of business but now might not,” Stovall said. “These companies therefore offer the greatest upside price potential.”

Read more:Goldman Sachs says buy these 19 beaten-down stocks on its ‘holiday shopping list’ that are poised to break out in the 1st quarter of 2021

Stovall makes the case that there is empirical evidence that this assumption is correct, and also highlights several “low quality” stocks within the S&P 500-where quality is based on the consistency of the company’s ability to raise earnings and dividends over the past 10 years-that have “strong-buy” ratings from CFRA. The list includes names such as Salesforce, Wynn Resorts, Laboratory Corporation of America Holdings, and Charter Communications. 

Read the original article on Business Insider