I am touching down in Baltimore today to join the rest of the RagingBull team for our annual holiday event.
There will be social distancing, some darn good drinks, and a lot of talk about where we expect the markets to go in the year ahead.
But we have to get through December first. The Dow doesn’t seem to want to push past that critical 30,000 level for any long period of time.
Moving forward, I do urge some caution. Even though there are plans to drop more stimulus, the question is how effective it will be with the economy taking another hit from the virus.
I want to dive into this K shaped recovery.
Then, let’s take a look at the Watch List.
On Thursday, the story will center on the two biggest influencers of the market right now.
First, the prospect of more stimulus. Nancy Pelosi and Chuck Schumer are angling for a new round of stimulus funding. Democrats want a $908 billion package. Republicans want a smaller package of about $500 billion. The market appears to be discounting the possibility of a deal done by the end of the month.
That has put my focus on the Treasury Department. When Janet Yellen takes over as Treasury Secretary, speculation is building that the agency will use all tools available to unleash at least $1 trillion to the public. This could include the introduction of more “Grants” that could be forgiven in the future.
They will likely get creative.
But keep in mind that we’ve already stimulated to the point of exhaustion. In 2020, the U.S. printed 40 cents for every dollar that was already in circulation. It’s rather incredible that the Fed is more concerned about deflation than inflation. But that’s a different story for a different day.
Meanwhile, we’re paying close attention to the timing and rollout of vaccines to fight the virus. This morning, Johns Hopkins reported that hospitalizations for the virus topped 100,000 for the first time. Hospitals are reporting incredible strains on the system. That said, Britain became the first nation to grant emergency approval for Pfizer’s vaccine. That country will be rolling it out in the coming weeks.
The real challenge in the months ahead will be deploying this vaccine around the world. Cold storage solutions will be critical, as will the coordination of governments and logistics companies. A lot of people are pouring their money into stocks like FedEx (FDX), UPS (UPS), and other well-known logistics firms. But those stocks have already surged in 2020. That’s why I did a lot of research over the last two months – and I’ve settled on three undervalued and little-known companies.
I am convinced that these three stocks are going to be the biggest winners as this global deployment of a vaccine takes place. But – because there is one tiny company on this list – I am only giving it to my Portfolio Accelerator readers. You can get your copy here.
MY STOCK WATCH LIST
RAIL: Recent insider buying combined with a Double Top formation in the chart makes this an interesting company. Rail stocks have taken a beating since 2019. But FreightCar America is a name to watch. It’s under $2.65. It could be rocky for another month, but this is about as contrarian as you can get right now.
SGH: Shares of Smart Global Holdings hit my radar thanks to stronger institutional buying and a round of recent price target assignments. Wall Street says it has an upside of as much as $45. That seems a bit high, but in an industry ripe for consolidation, I’m interested in a semiconductor company that people think are undervalued. The CEO bought more than $250,000 in shares last month.
TSLA: Tesla continues to just rip higher, and it’s now on the cusp of hitting $592 (split-adjusted from earlier this year.) I find it fascinating that anyone would want to even try shorting this stock at this point. There are certain times that you just need to get out of the way. I’m watching this because it will be interesting to see if its Halo effect will continue to lift the rest of the EV sector.
POAHY: Finally, I’m adding this to the list to show you how irrational this market is. Tesla will be the world’s largest producer of EV… until it’s likely overtaken in 2023. The company that is expected to surpass Tesla in EV production is Volkswagen. But Porsche owns 53% of Volkswagen. Because it doesn’t trade on an exchange, Porsche stock goes completely ignored. Shares are trading at about half of their book value. Tesla’s price to book value is north of 33.5. How’s that for a discrepancy?
Enjoy your day,