Featured stock of the month: $CHTR Charter Communications

Charter Communications (ticker: $CHTR ) is a media sector company which provides cable services to residential and commercial customers in the United States.

It offers subscription-based video services and also provides internet services as well as other media-related services.

The company was founded in 1993 and is based in Stamford, Connecticut.

As of the end of last year it had 29 million residential and small and medium business customers.

It has a market cap in excess of 100 billion USD and can therefore be categorised as a large cap stock.

While it is currently trading at a trailing P/E of 61, it has a forward P/E of 26.6 which does not make it expensive considering that it is a growth stock with excellent track record.

In fact, based on current estimates, it is expected to grow its earnings by 45% over the next 5 years which corresponds to a 5 year expected PEG ratio of 0.84, implying that it is currently trading at a discount.

As it is a growth stock it does not offer a dividend. Despite that, it has profusely rewarded its investors over the past years, with more than a 36% capital appreciation per year in the last 3 years and a stunning 30% per year over the past 10 years. For comparison, investing in a S&P500 ETF over the same 10 years would have yielded a 9.4% annual return.

YTD the stock is actually up, sporting a 3.9% increase, while the S&P500 is down 11.8%.

Charter communications is also a primus inter pares (first among equals) as it has fared better than its peers and outperformed $XLC (a popular communications services ETF which also features the stock amongst its holdings) by 36% over the past year.

The stock has a beta of 0.8 which makes it less volatile than the stock market average.

The company reported Q1 earnings on May 1st missing expectations. However, it showed a significant rise in customer numbers as well as in revenue which made the stock go up after the earnings release.

From a technical analysis perspective, the stock is well above the Fibonacci 61.8% retracement line from its mid February 2020 highs which may indicate further short-term upside potential.

CHTR

If you want to find out which other long positions I hold in my eToro portfolio, please follow this link.

$CSX, $VIAV and $RR.L are my top 3 winners this week

Seven winners this past week ! Out of these, 3 were opened and closed in the same week and the rest I owned since earlier in 2020.

The top 3 winners where $CSX with a 10% gain in 5 days, $VIAV with a 5.01% gain in 2 weeks and $RR.L with a 4.90% gain in one day. While the future remains uncertain for Rolls Royce, I will look for opportunities to go back into CSX Transportation in the near future; also we still hold a 2% position on Viavi Solutions.

This week we have also gone back into Coca Cola (ticker: $KO ) which is a long term investment. The stock has dropped a lot and seems to have now stabilised with a potential breakout in sight. The dividend yield is 3.6% at these valuations and the stock goes ex-dividend early in June.

Aroundtown (ticker: $AT1.DE ) has been badly hit during this corona virus crisis, just like most of the real estate companies. We have previously invested in $AT1.DE and made a decent profit out of it. As the sector stabilises, it seems a good moment to go back in as it offers capital appreciation potential and sports a 5.2% dividend.

Just as the sentiment was turning on Thursday, I added to my $SQQQ position which played out really well as a hedge: the US markets were down between 2.5 and 3.2% on Friday, whereas my eToro portfolio was only down 0.39%. This highlights the importance of having hedges in times of volatility as the market can quickly change its course.

At this time, I am 58% in cash and have 5% in hedges (inverse ETF): if you don’t have enough cash, you won’t be able to take advantage of bargain stocks that will come your way in the future.

If you want to find out about all the positions in my eToro portfolio follow this link.

Four more winners, $TWTR and..

In a mixed week for the US stock market, ended on April 24th, we have made four more successful trades:

$TWTR +4.1%

$SYF +3.5%

$VLO +2.0%

$LH +2%

For some of these companies, under normal market conditions, I would continue to hold, rather than sell to lock in a small profit, however these are no normal conditions ! There is so much complacency right now and the market seem to price in not only the Fed interventions but the possibility that, if things get worse, the buying could extend to securities also.

Having said that I remain only 50% invested in my eToro portfolio so that a sudden market drop would not hurt as much and would give me enough fuel to enter more long positions after it stabilises again.

We have also initiated the following long positions last week:

$SQQQ this is a hedge for the reasons above

$PTON this is to attempt a ride on a popular stock

..plus another one which you are welcome to check out in my eToro portfolio.

The earnings season is in full swing: enjoy and invest responsibly !

Featured stock of the month: #Verizon $VZ

Verizon (ticker: $VZ ) has been a great investment for me so far, I have owned it for about 2 years now. It is one of the value stocks which offers both a solid dividend (>4%) and capital appreciation.

It is considered a 5G play and its deal with $DIS related to Disney+ has helped it soar.

Verizon is a mega cap, with a market value of 240B $. It currently trades at 58.13$ and it was trading at about 48$ when I bought it. This means a 20+% capital appreciation which outperformed the SP500 by 15 percentage points over the same period. And then you have to add the dividend, which was about 5% at the start of my investment and is now 4.28%. American stocks typically pay dividends out on a quarterly basis which gives you the option of re-investing more frequently than, say, most European stocks which pay a dividend on a yearly basis.

In terms of valuation, the stock is actually quite pricey at the moment and the projected total return over the next 5 years, including dividend, is of 41%. There are plenty of better valued stocks out there which offer a greater growth potential (even >100%), like $AMZN and $TSLA, but you probably want to combine more aggressive plays with other less volatile investments in order to stabilise your portfolio. In 2008, when the market was down 38.5%, Verizon was “only” down 21%. So far in 2020 Verizon is down 7% compared to a 15% fall of the SP500.

The stock has had a steep recover from the late March lows and is now trading above the 5 and the 50 moving average, with the 200 moving average within grasp.

VZ TA

It reports earnings for Q1 of 2020 on Friday the 24th of April. Consensus estimates are EPS of $1.22 and revenue of $32.37B.

If you want to see all the positions of one of my portfolios, you are welcome to follow me on eToro here.

A potential takeover target: Nokia $NOK

This week saw the first group of earnings come in with the financial sector under the spotlight. The big US banks did rather poorly, for the most part: this is for example the case for Wells Fargo, which we own in one of our portfolios, who took a 14.6% weekly loss while the Dow was up 2.2%. On the flipside, our other bank stock, the Bank of New York Mellon Corp (ticker: $BK ) reported better an expected earnings and ended the week with a 0.6% gain. Even within a badly hit sector, there can be outperformers.

But our last week’s biggest winners were Danone (ticker: $BN.PA ) and AstraZeneca, both European stocks, one operating in the food industry and the other in the pharmaceutical sector, who boasted a 9.1% and a 12.1% gain, respectively !

We have made several buys and sells this week. For starters we have locked in a 5.41% gain on Dexcom (ticker: $DXCM ). This company is so promising that I am sure we will be back, but I don’t trust this overly positive sentiment at the moment and, feet to fire, I would guess that next week the market may pause.

The ETF we own which reproduces the German stock market has run a lot lately, after a period of consolidation (those who swear by technical analysis would say “bull flag”), and this week we have exited the position on $EWG with a 7.12% gain in just 2 weeks !

Finally, we have closed our long position on gold, via the $GLD ETF, with a nice 5% gain in less than two months.

From the buy side, we have initiated a long position on Nokia (ticker; $NOK ) which is a potential takeover target. We’ll keep a close watch on it and if it plays out it can result in a significant upside.

If you want to see all the positions of one of my portfolios, you are welcome to follow me on eToro here.

A successful short term trade on $EHTH

Another week of consistent recovery for the US stock market as well as for many others around the world. I remain cautious and still hold onto some hedges because this sudden reversal cannot be fully trusted and due to it being reportedly fueled by a short squeeze for the most part.

While I like to make investments for the long term, I do occasionally perform short term trades and this week I have managed to pull two off! One of them could be traded on eToro and related to eHealth (ticker: $EHTH ). What happened is the classic short selling amplified by the media, with a stock which was trading at 136$ until last week and dropping to below 100$ on Wednesday. I took the opportunity, bought at 99$ and exited at 114$ over the course of two days ! I believe the stock has the potential to go even higher and if I was a more aggressive investor, I would hold on to part of it, but decided to lock in the profit this week.

20200410

There were two more positions we closed this week, on two of the food-related stocks owned in my eToro portfolio, both with a 5% gain, Conagra Foods (ticker: $CAG ) and General Mills (ticker: $GIS ). These were both sold with the automatic sell function available on eToro. I am ready to get back into these two but when any my positions goes above a 10% gain, I have a take profit ready at 5% in order not to give up all the profit if the stock price goes down passed that mark. I then set up a price alert to be notified if the price goes up again past the sell price and re-evaluate my view on that particular stock.

I am also very satisfied with this week’s recovery in my $WFC position, with a 26% jump in just 4 trading days.

So now I am 49% in cash on my eToro portfolio and continue to look for more investment opportunities. One from my watchlist I am prepared to jump into is $BABA , but that will depend on how next week goes.

Enjoy the long weekend and for those who celebrate it, have a happy Easter !

Beating the #market

Another week in red has gone by, with the three major US stock market indices losing between 1.7 and 2.6%.

Perhaps the most significant development, however, relates to the price of #oil which has finally seen a spike from the lows of the beginning of the week. This is thanks to the expectation that the major producers may soon agree to cut production which should better align supply with the reduced demand. I have tried to play this with a very short term trade but didn’t actually succeed as I sold my $USO position too quickly with a marginal loss. It has taught me another lesson about how pointless short term trades can be, at least for me, as I am fundamentally a long term investor. Always invest in what you understand ! I did however benefit from a 12% gain in my Occidental (ticker $OXY ) position.

This week I have started a new long position in ConAgra Foods (ticker is $CAG ): I don’t expect it to work wonders, as it is a value stock, but to actually provide a single to low teens return within the next year or so and therefore some stability to my portfolio. I have bought it on Tuesday and have already achieved a 4.28% gain. It also pays a 2.8% dividend and the next quarterly ex-dividend date is expected in late April. I felt the timing was right as they have increased their guidance and now see FY20 adjusted EPS earnings per share above the high end of $2 to $2.07.

A similar investment made earlier in March is in General Mills (ticker is $GIS ) which this week has gained 9.4% !

Here is a simple graph created with Yahoo Finance to compare these two stocks with the three major US indices for this past week. How did your portfolio fare compared to them?

20200404

I currently have 14 long positions in my eToro portfolio and 9 out of 14 have beaten the US market this past week. Ultimately, beating the market is the most important goal.

Be an active investor and invest responsibly.

Have a great weekend, all !

Has the #market bottomed ?

If anyone claims to have the answer to this question, they really don’t know what they are saying because the truth is nobody knows. So the best thing to do is to objectively assess what is going on, to invest responsibly and be patient.

This past week has been another rollercoaster with the US markets rallying more than 13% as you can see from the $SPY (an ETF which reproduces the SP500 index), however the #volatility has not moved much, with a weekly reduction of just over 1% (see $VXX the ETF which reproduces the VIX). This means that it is too early to call the bottom in my opinion.

SPY

All investors who are predominantly long are obviously pleased to see this week’s jump, don’t get me wrong, but there are many examples of rallies which have followed large drops. Look at what happened during the 2008 crisis for example, there were 6 positive jumps between +9 and +19% on the way down. Before the market finally bottomed in Q1 2009 the volatility was greater than 30.

File 28-03-2020, 15.14.28

So what can investors do in the meantime ? Be patient and take one day at a time. As I have a long term horizon and the market has already dropped a lot, I did do some nibbling this past week, focusing on dividend payers with a good valuation such as $BMY, but I still have a large cash position overall as I don’t reckon it is time to go all in yet.

I have also increased my hedges, by upping my position on a double inverse SP500 by 50%. One might ask, why enter or increase a long position on a stock while at the same time increasing a short position ? The answer lies in the time horizon, once again. I invest long when there is upside potential in the long term (most of the times), whereas I introduce hedges when markets are volatile, therefore in the short term. If there is another drop next week, my loss will be reduced; if it goes up again, I will gain less but hedges are typically a smaller percentage of one’s portfolio so the loss is limited. In fact, I wish I could always lose on my hedges !!!

If you are interested in seeing what additional stocks I might get long on when the conditions are right, please keep reading my weekend updates !

Stay safe everyone and invest responsibly.

Has #volatility peaked ?

Has volatility peaked ? Difficult to say, what’s certain is that over the past 4 weeks the US markets have wiped out all the gains of the last 3 years, basically since Trump’s presidency started. Some say that coronavirus has only been the trigger of the neutralisation of a rally on steroids caused by liquidity injection and tax breaks, ie not of true #earnings growth. While more #liquidity is coming, it would appear that monetary policy alone is not going to be a sufficient cure for the market and that fiscal policy is also needed as well as an effective way to put an end to this biological crisis.

Intro over. So what can investors do in these difficult times ? Last week we talked about raising cash and inverse funds. The situation has not changed as volatility remains high although it has decreased from about 80 to about 60 this past week.

In the meantime, it helps looking at what the new earnings are saying. $ACN for example, a company on my watchlist, has beat expectations early this week but halved their revenue forecast. This company traditionally releases earning much earlier than most S&P companies, which are not due for a few more weeks.

Another interesting observation. The Norwegian krona has tanked and lost about 20% compared to the Euro in the past 20 days: that is a massive drop for a currency of a country with AAA rating ! #Norway has been seriously hit by the virus, is not part of the EU which prevents them from accessing the benefits of QE and is heavily reliant on $OIL which is down >50% over the past month. Not looking good for Norway, but is their currency a possible future investment opportunity when the situation stabilises ?

This week 3 of our long positions have hit the stop loss limit, namely $SYF, $RR.L and $OXY . It is very important not to let your losses run beyond 7 to 20%, depending on your risk profile and whether they are dividend payers or not, so it is advisable to insert suitable stop losses, thankfully this is function that works well on many trading platforms. I continue to watch $SYF closely as I think there will be a great buying opportunity in the not too distant future, whereas I think $RR.L will be under prolonged pressure due to their reliance from the aviation industry and $OXY won’t recover until $OIL rebounds unless they are taken over.

As always, be patient and invest responsibly !

Happy weekend to all.

#Valuation drives the #market: which strategy for 2020 ?

“Stocks follow earnings”, says the old adage: even in this past 2019 which has seen great returns in multiple indices, it seems to describe the market behaviour well. If one compares the S&P500 earnings with the S&P500 growth, the correlation is quite clear and an indication that this growth is not unjustified.

Photo 05-01-2020, 15.49.38

On the flipside, can the same be said about the earnings themselves ? We commented before on the fact that earnings have partly been fueled by liquidity.

The PEG ratio of the S&P500 is much greater than 1 (with 1 meaning a future growth perfectly priced in the current stock value).

Photo 27-12-2019, 11.35.17

While earnings are the expected to grow also in 2020, a value investor will have to pick the right stocks to beat the market as the current P/E already appears to price in future earnings.

Even more now it is important to be a stock-picker. A recent example of a seemingly undervalued stock has been provided here.