• (0:45) – August’s Booming Market: Is It Another Dot Com Bubble?
• (11:00) – Breaking Down Large Cap Pharma and Energy Stocks
• (19:40) – Weak Small Cap Stocks: Where Is A Good Place To Invest?
• (26:50) – Episode Roundup: MRK, ABBV, PXD, VBR, VIOO
•     [email protected]

Generation X investors came of age in the dot-com boom when Microsoft and other tech titans hit new highs. Now, in 2020, it’s happening again.

Description:

Welcome to Episode #240 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Tracey is going solo to talk about the summer stock market rally.

As a Generation Xer herself, this rally is beginning to have a sense of déjà vu with the late 1990s.

In 2000, the NASDAQ was coming off its best year of the decade, up 85.6%. Everyone was diving into technology, as they chased the returns of the past 5 years.

It was a new era of the Internet and dot coms. Everyone thought the innovation would go on forever. If you didn’t own tech in 2000, you were a loser.

Flash forward to 2020. Just before the pandemic, the NASDAQ was hot and hitting new highs in February. But then the coronavirus hit.

Off the March coronavirus lows, however, the NASDAQ rallied over 75% to another set of new all-time highs, until the recent 9% pullback.

Millions of new traders and investors have opened up accounts on trading apps like Robinhood.

In 1999, eTrade, which allowed you to trade cheaply online, was also adding millions of new accounts and traders.  

What’s an Investor to Do Now?

Good investors have a diverse portfolio. They’re not just in technology.

Some industries have value and aren’t getting sold off as sharply right now as tech or the popular growth names.

Where should you look?

Big cap pharmaceuticals have underperformed this year and for the last 5 years. The industry is up just 52% over the last 5 years compared to a gain of 91.7% for the S&P 500.

Energy, value and small caps are also in the dog house.

Be a Contrarian

1.       Merck MRK is the only Zacks Rank #2 (Buy) stock in the large cap pharmaceutical group. There are NO Zacks Rank #1 (Strong Buys) right now. It’s expected to see earnings growth of 9.8% this year and another 4.2% next year. It’s trading with a forward P/E of just 15.

2.       AbbVie ABBV is one of the rare large cap drug makers expected to grow earnings by the double digits this year and next thanks to its acquisition of Botox maker Allergan. Shares are cheap, with a forward P/E of just 8.8 and it pays a dividend yielding 5.1%.

3.       Pioneer Natural Resources PXD is an energy exploration and production company with one of the best balance sheets in the industry. It’s paying a dividend, currently yielding 2.2%, even with crude prices under $50. Pioneer is a Zacks Rank #2 (Buy) as 7 estimates were revised higher for 2020, and none lower, over the last 30 days. Is the worst over for the energy companies?

4.       Vanguard Small-Cap Value ETF VBR is still down 17% year-to-date even though it’s off its March coronavirus lows. But small cap value is still out of favor as this ETF was down 1.8% over the last month while the NASDAQ was soaring. Time for small cap value again?

5.       Vanguard S&P Small Cap 600 ETF VIOO hasn’t fallen as much in 2020 as the purely value small cap ETFs because it’s a mix of growth and value. It’s down “just” 12.9% year-to-date as the small caps are still out of favor. Industrials and technology are the two biggest sectors in this ETF. Is it time to add to your small cap positions?

What else should you know about investing during the NASDAQ bull market and pullback?

Listen to this week’s podcast to find out.

[In full disclosure, Tracey owns shares of VBR mentioned on the podcast.]

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