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• Ben and Dan Agree to Disagree on market valuation – is it still overvalued after this correction? Or because valuations are higher than they have been historically, but up against a different interest rate environment and recent tech-driven rally aspect, is it harder to compare?
• Kevin Matras answers your questions in Zacks Mailbag
• Sheraz and Dan choose one portfolio to give feedback for improvement
• And much more
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The market was still in a selling mood coming back from the Labor Day weekend on Tuesday, and now the indices are on a three-day losing streak that has seen the NASDAQ plunge by more than 10%.
It’s only fitting that tech should lead us lower in this selloff, since the space was pushing everything higher in the great pandemic rebound that saw the indices skyrocket by more than 50% in five months.
Many market watchers, including most of our editors, have been waiting for something to ease the pressure… and it seems to finally be here.
The NASDAQ dropped another 4.11% (or about 465 points) on Tuesday to 10,847.69.
Of course, the FAANGs got beaten up with Apple (AAPL) getting the worst of it by slumping 6.73%. The iPhone maker jumped 7% in the two days following its stock split, but that’s all gone now as it has plunged double-digits in this pullback.
The S&P was off 2.25% today to 3331.84, while the Dow had the ‘best’ performance with a slide of 2.25% (or about 632 points) to 27500.89. These indices are down approximately 7.1% and 5.6%, respectively, in the past three days.
The Dow had climbed within 450 points of a new high last Wednesday, but has since plunged about 1600 points.
The indices are coming back from a rare down week, which saw the NASDAQ drop 3.4% while the S&P and Dow slipped 2.4% and 1.9%, respectively. And now they have a down payment on another rough week as the toughest month for the stock market rolls on.
So how much more downside is to come? Given the runup of the past several months, more declines wouldn’t be out of the question.
However, investors are getting excited about the opportunity of buying some recently-overvalued names at much more attractive prices amid an amazing interest rate environment.
Today’s Portfolio Highlights:
Counterstrike: This pullback is long overdue, according to Jeremy, and it has finally opened some buying opportunities on both the long and short sides. The editor added 5 names on Tuesday. The buys and their allocations were:
• Zebra Technologies (ZBRA) – 7%
• Lam Research (LRCX) – 5%
• Advanced Auto Parts (AAP) – 5%
• Ultra Clean Energy (UCTT) – 5%
• Royal Caribbean (RCL) – 5% (this is a short)
The first four additions all reported solid quarterly results, but have pulled back in this selloff. ZBRA, LRCX and UCTT tested their 200-day MAs, while AAP went down to its 50-day. LRCX, AAP and UCTT are Zacks Rank #1s (Strong Buys), while ZBRA is a Zacks Rank #2 (Buy). RCL is a Zacks Rank #5 (Strong Sell) that is being shorted on a purely technical basis, since Jeremy doesn’t think its problems are over.
Read the complete commentary for a lot more on each of these buys. By the way, the portfolio also sold Dollar Tree (DLTR) and iRobot (IRBT) after losing their solid Zacks Ranks amid weak price action.
Marijuana Innovators: The portfolio added a very small and highly-speculative investment on Tuesday. Artelo Biosciences (ARTL) is a biotech company that’s doing research with receptors in the human endocannabinoid system for the treatment of many common conditions. Dave suggests that you “tread lightly” on this one, so make sure to read his complete commentary on ARTL.
Commodity Innovators: Lumber prices have been trending higher of late, so Jeremy wants some exposure to the space. And this pullback is giving him a great entry point. On Tuesday, the editor added Universal Forest Products (UFPI), a Zacks Rank #2 (Buy) supplier of wood, wood composite and other products in the retail, industrial and construction markets. Meanwhile, it looks like the portfolio was really smart to change its mind and position for a downside move in crude. The ProShares UltraShort Bloomberg Crude Oil (SCO) position has surged 21.1% in just three days, so Jeremy decided to take this quick profit and move on. Read the full write-up for more on today’s action.
Zacks Short List: Half of the portfolio was changed this week. The positions that were short-covered included:
• Yandex N.V. (YNDX, +7%)
• Marvell Technology (MRVL, +4.1%)
• Netflix (NFLX)
• V.F. Corp. (VFC)
• Nike (NKE)
The new buys that replaced these names were:
• Burlington Stores (BURL)
• China Lodging Group (HTHT)
• Five Below (FIVE)
• Las Vegas Sands (LVS)
• Ross Stores (ROST)
Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.
Black Box Trader: The portfolio replaced three positions in this week’s adjustment, which is coming to you a day late due to the Labor Day holiday on Monday. The stocks that were sold today included:
• Hanesbrands (HBI)
• Maxar Technologies (MAXR)
• The Mosaic Co. (MOS)
The new buys that filled these open positions were:
• At Home Group (HOME)
• Big Lots (BIG)
• Sportsmans Warehouse (SPWH)
Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing.
All the Best,
Jim Giaquinto
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