Top news and what to watch in the markets on Friday, June 12, 2020. U.S. stock benchmarks are in positive territory but well of their opening peaks on Friday, as Wall Street’s attempt to recapture losses from the sharpest… Could These Penny Stocks Benefit From Another Wave Of COVID-19? The stock… Miller Value Partners recently released its Q1 2020 Investor Letter, a copy of which you can download below. The Miller Value Partners Opportunity Equity Fund posted a return of -38.4% for the quarter (net of fees), underperforming its benchmark, the S&P 500 Index which returned -19.6% in the same quarter
Friday, June 12, 2020
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Stocks got smoked on Thursday.
When the bell rang on Wall Street, all three major indexes were down more than 5%. The Dow fell 6.9%, or 1,861 points, while the S&P 500 fell some 5.9%, or 188 points. By day’s end, all of the S&P 500’s gains in the month of June had been wiped out.
The reversal in markets — which followed two mixed, but not terrible sessions for the market — was swift and left many asking the age old question: why?
To our minds, four distinct stories converged during Thursday’s trading session, each contributing what became an ugly picture for the stock market.
The first pillar of this is what we heard from Federal Reserve Chair Jerome Powell. On Wednesday, Powell’s final comments during his post-FOMC press conference referenced the stock market and asset prices.
“We’re not looking to achieve a particular level of any asset price,” Powell said in response to a question from Bloomberg’s Michael McKee.
“What we want is investors to be pricing in risk, like markets are supposed to do. Borrowers are borrowing, lenders are lending. We want the markets to be working. And again, we’re not looking to — to a particular level.”
The Fed’s latest interest rate forecasts released Wednesday also indicated that interest rates would remain at 0% through 2022, news that put the banking sector under pressure. And this drop in financial stocks upset one of the market’s hottest trades in recent weeks. On Thursday, the KBW Bank Index (^KBX) fell 9%. Through Monday, the index had gained about 30% since mid-May.
Markets have also seen increasingly troubling data on the spread of COVID-19 infections in a number of states, bringing up investor fears over a “second wave” and highlighting that perhaps this first wave isn’t actually over.
States including Utah, Arizona, Texas, Florida, California, and the Carolinas have all seen case counts increasing in recent days. On Tuesday, Texas recorded its highest number of COVID-19 hospitalizations since the pandemic began.
The market’s rally has also created challenges on a technical basis, with traders who closely watch price levels in the S&P 500 finding little to be excited about as the index surged north of 3,200 in recent days.
Stephen Suttmeier at Bank of America Global Research noted Thursday that while initial support for the S&P 500 would be 3,163-3,128 — levels the index blew right through on Thursday — a “much more important level to hold on dips at the rising 200-day moving average (MA) and late May breakout zone in the 3,012 to 2,955-2,930 areas, respectively.”
In other words, the market’s technical setup through Wednesday indicated things wouldn’t get really interesting for a few percentage points. On Thursday, the market traded all the way down to this range. Which sets up some interesting dynamics in the days ahead with the S&P 500 sitting right in the middle of a battleground range for technically driven investors.
Which brings us to the week’s most interesting story in financial markets — the retail trader.
Earlier this week, we saw traders on the free online platform Robinhood making bets on companies that had either filed for bankruptcy or were rumored to be in the process.
This came after airlines, cruise stocks, and electric truck maker Nikola (NKLA) had become darlings of this retail investor set in recent weeks. And these trades have all come under serious pressure in recent days.
On Thursday, for instance, all four major U.S. airline stocks — Delta (DAL), United (UAL), American (AAL), and Southwest (LUV) — were down more than 11%.
The three big cruise line operators, Royal Caribbean (RCL), Norwegian Cruise Lines (NCLH), and Carnival Cruises (CCL), all saw their shares decline by more than 13%.
And Nikola shares fell another 6.9% on Thursday to bring the stock’s losses since Tuesday afternoon’s peak to more than 30%.
So, while no one of these narratives explains why the market dropped so far, so fast on Thursday, take these themes together and a quick, disorderly reset in the market makes a bit more sense.
By Myles Udland, reporter and co-anchor of The Final Round. Follow him at @MylesUdland
8:30 a.m. ET: Import Price Index month-on-month, May (+0.6% expected, -2.6% in April)
10 a.m. ET: University of Michigan Sentiment, June preliminary (75.0 expected, 72.3 in May)
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Author: Myles UdlandMarkets Reporter
Dow ‘s opening rally fading fast as stock market struggles to recoup Thursday’s selloff
U.S. stock benchmarks were in positive territory but well of their opening peaks on Friday, as Wall Street’s attempted to recapture losses from the sharpest selloffs for the market since mid-March appeared to stumble badly in late-morning action.
All three indexes saw their sharpest one-day drops since March 16 on Thursday. The S&P 500 and the Dow finished at their lowest levels since May 26, while the Nasdaq ended at its lowest since May 29, according to Dow Jones Market Data.
For the week, the Dow is down 7.3%, the S&P 500 was on track to lose 6%, while the Nasdaq was off 3.3%, as of Thursday’s close.
Investors are assessing the state of the stock-market’s 10-week rally, a day after equity indexes registered a bruising decline prompted by fears of a resurgence in the coronavirus pandemic in the U.S. and a bleak economic outlook from the head of the Federal Reserve.
Indeed, the International Monetary Fund’s Gita Gopinath said that the global economy is recovering more slowly than expected and faces “significant scarring,” Bloomberg News reported. In a video released Friday but recorded June 4, Gopinath said the IMF will release updated growth projections on June 24 that will likely be worse than April projections for a global contraction of 3%, if the disease lingers.
Fears of an emerging second wave of the epidemic in the U.S. persist, with Reuters reporting that half a dozen states, including Texas and Arizona, are facing rising infections of COVID-19. Arizona, Utah and New Mexico all posted rises in new cases of 40% or higher, while Florida, Arkansas, South Carolina and North Carolina saw cases rise by more than 30% for the week ended June 7, on a rolling seven-day basis, according to Reuters.
Some analysts characterize the rebound Friday from Thursday’s slump as unlikely to be sustainable.
Naeem Aslam, chief market analyst said that it “is normal to experience some bounce next day.”
“I suspect the bounce is a dead cat bounce because the sentiment is further dented by the fresh comments by the chief economist of the IMF who said that the world economy is growing much slower than the anticipation and the scars of the coronavirus pandemic may linger for much longer,” he said.
However, a bullish investors don’t believe Thursday’s downturn signaled a unraveling of the trend higher for U.S. equities.
“The big question is where do we go from here. We had been saying for some time that we expected some corrections, but that the downside had become more limited given a still-bearish consensus, high cash levels, and a broadening rally,” wrote Esty Dwek, head of global market strategy, at Natixis Investment Managers, in emailed remarks Friday.
“We maintain this view and for now, do not believe this is the start of a new collapse,” Dwek wrote, also advocating that investors should be cautious in the road ahead.
In U.S. economic reports, a reading import prices for May rose, up 1%, by the most in more than year, marking the largest gain since February 2019, the Labor Department reported. Meanwhile, the University of Michigan’s consumer sentiment index showed an increase to a reading of 78.9 from 72.3 in May.
Meanwhile, a report on economic growth in the U.K. showed that gross domestic product contracted by a record 20.4% in April, highlighting weakness in Europe and one of the region’s hardest hit by the epidemic.
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Author: Mark DeCambre
3 Penny Stocks To Trade Under $3 Right Now
The stock market today is jittery and we’ve even seen it among a number of penny stocks. Fears of another wave of coronavirus coming about have some investors skittish and for good reason. Places like Texas, Arizona, and other regions of the U.S. are actually seeing record cases this week. The Dow dropped some 1,900 points, on track for worst day since March.
The number of U.S. coronavirus infections passed the two million mark and over 112,000 Americans have died, according to Johns Hopkins University. On top of this, U.S. Treasury Secretary Steven Mnuchin said the U.S. shouldn’t shut down the economy again even if there is another surge in coronavirus cases.
The recent euphoria has seen a rise in retail traders jumping into penny stocks. While many cases include high flying breakout stocks, there are also many bag-holders left in its wake. The main culprits: misinformation and lack of education in my opinion.
- Penny Stocks To Watch Before Next Week; 1 Up Over 370% In June 2020
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You can’t simply expect to be a professional trader overnight the same way you can’t expect to know how to race and Formula 1 car overnight. The high-volatility in penny stocks surely opens opportunities for big gains but the losses can come just as big and quickly.
This week we saw a surge in new traders looking to capture 10 baggers. What’s crazy is that there’s been plenty to choose from. Not just penny stocks, but penny stocks that ripped higher by 5 and 10 times within days; even hours.
If you remember the bitcoin craze, I feel like those “Hodlers” are looking at stocks the same way as crypto. But at the end of the day, a little education on how to trade penny stocks can turn you from a bag holder into a consistently profitable trader; it’ll just take a little time and study to do so.
With that in mind, take some time to reset those emotions. One of the main causes for losses besides not having a plan is letting emotions dictate the pace. This goes for both bull and bear markets. Bullish euphoria can cause traders to hold stocks too long. Bearish anger can result in missing opportunities entirely.
The cool part about penny stocks, however, is that there are always at least a few making big moves even when the market’s down. Let’s take a look at a few trading higher in June. Will they become top penny stocks to buy or avoid later this month?
It’s crazy to think how far things have come for Waitr Holdings Inc. (WTRH Stock Report) partially thanks to coronavirus. The company focuses on food ordering and delivery through on-demand apps. We first came across this company in November when it hit 52-week lows then more consistently in March when we speculated on companies that could capitalize on a “stay at home” trend. Since then, it’s become one of the turnaround stories to track.
Why say this? The simple fact that even its CEO admitted Waitr was lax in its efforts. Carl Grimstad, Chairman and CEO of Waitr, said that “distractions resulted in a lack of focus on our customers and operations.” That seems to have changed this year with WTRH stock trading much higher and after reporting two strong quarters of favorable earnings results. With a potential rise in chances of another wave, we could see interest return to those names that rallied earlier this year.
At the end of May the company announced a new partnership with Five Guys as it expands its delivery selection for diners. It also appointed a new advisor, Mats Diedreichsen to advise the company on all marketing aspects for Waitr. He was the former Chief Marketing Officer of Delivery Hero. With this news, of course, some attention might come to the penny stock from investors. But I personally think speculation is building around “coronavirus stocks” after the latest round of stock market news on Thursday. Since March, WTRH is up 564% as of Thursday’s $2.39 close.
You might remember eMagin Corp. (EMAN Stock Report) from May. At the time EMAN stock traded around $0.60 and saw a big day of trading ahead of its earnings results. There was also some speculation buzzing about its possible foot in the door of “thermal imaging”. In May there was a lot of focus on “getting back to normal” and major companies were beginning to implement the technology. However, after reaching highs of $0.92, shares eventually slid after the official earning results came out.
eMagin missed EPS estimates but the company said it expects Q2 revenues to be higher than Q1. The company has a backlog of open orders that came in at $14.9 million. Needless to say, over the last few days, EMAN stock has been back on the move. Despite dropping with the market on Thursday, it could be one of the penny stocks to watch before the weekend. Why? If you follow aftermarket news, eMagin released its latest update.
The company said it was awarded $5.5 million by the Department of Defense. The award was under the Industrial Base Analysis and Sustainment Program for Organic Light Emitting Diode Supply Chain Assurance. These funds are for procurement and installation of capital equipment in eMagin’s NY-based manufacturing facility. Andrew Sculley , CEO, said, “We are very pleased to be recognized by the Department of Defense as the only domestic producer of OLED microdisplays designated as a cornerstone of the U.S. manufacturing base. We view this as a recognition of the value of our OLED microdisplays in defense programs and an endorsement in what we believe to be our superior OLED technology.”
This was another one of the penny stocks to watch after hitting its 52-week low. HTG Molecular Diagnostics (HTGM Stock Report)’s proprietary HTG EdgeSeq technology automates complex, highly multiplexed molecular profiling from solid and liquid samples. In simple terms, its customers use its technology to identify biomarkers important for precision medicine, to understand the clinical relevance of these discoveries, and ultimately to identify treatment options.
In any event, since March, we’ve watched as HTGM stock climbed as high as $0.87. Considering it was trading around $0.33 at the time of our update, HTGM has quietly mounted a near-200% move in just a few months. Not only did the company report better-than-expected earnings results last month, it also participated in this month’s American Society of Clinical Oncology program. It got a chance to demonstrate its platform via posters and compare it to other options.
This week, HTGM stock is trading higher once again. The company announced the signing of three new European distributor agreements. These are to promote HTG products and services in Nordic and Eastern European Countries. Its distributor agreements were made with BioNordika (Denmark), Explorea (Czech Republic), and ELTA 90 (Bulgaria). Since this news came after the closing bell on June 11, it could be something to keep in mind at the end of the week.
Could Boeing (BA) Shares Double in the Stock Market Recovery?
Miller Value Partners recently released its Q1 2020 Investor Letter, a copy of which you can download below. The Miller Value Partners Opportunity Equity Fund posted a return of -38.4% for the quarter (net of fees), underperforming its benchmark, the S&P 500 Index which returned -19.6% in the same quarter. You should check out Miller Value Partners top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.
In the said letter, Miller Value Partners highlighted a few stocks and Boeing Co (NYSE:BA) is one of them. Boeing is an aerospace company. Year-to-date, Boeing Co (NYSE:BA) stock lost 43.7% and on June 10th it had a closing price of $203.41. Here is what Miller Value Partners said:
“We’ve known Boeing for a long time. It’s always been a high quality company that’s traded for a premium valuation owing to its position as a global duopoly. We’d looked at it recently after weakness due to its highly publicized Max 737 issues, but it never got cheap enough for us to pull the trigger. After the pandemic, the stock went into freefall as its customer bases’ business dried up and people worried about its liquidity. The stock fell from $338 on February 19th when the S&P hit its high to a low of $89. We bought the stock after the new CEO Dave Calhoun said publicly that it would not take government capital if it required equity dilution because it had many other options. Our average price is just above $120 where it was trading for less than 7x what it earned in 2018. It will likely take a while to normalize to those earnings levels, but this business will survive and ultimately we will own a leader in a global duopoly. Even on depressed forecasts, the company currently has about a 10-15% free cash flow yield. If and when the economy normalizes, we think Boeing could be worth more than double its current price.”
In Q1 2020, the number of bullish hedge fund positions on Boeing Co (NYSE:BA) stock decreased by about 34% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Boeing’s growth potential. Our calculations showed that Boeing Co (NYSE:BA) isn’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:
Disclosure: None. This article is originally published at Insider Monkey.
Author: Alex Smith