Category: Uncategorized

$PCG rising from the ashes

You will remember the wild fires which severely hit Northern California back in 2018. As a result of this natural disaster, PG&E Corporation (ticker: $PCG ), a large utility company operating in Northern California with electricity and gas, had to file for bankruptcy and the stock price tanked. Well, this bankruptcy is different than your average one and $PCG is now seeing the light at the end of the tunnel. Time will tell if their plan will pan out but for investors this may be a profitable trade.

stock-photo-natural-disaster-firefighters-spray-water-to-wildfire-1051337354

I sent a Buy Alert on May 27th and the stock has shot up 9.37% since then: nice start ! In that alert I have indicated a Stop Loss (SL) of 9.5$ (corresponding to a 14% loss from my buy price of 10.88$) and a Target Price (TP) of 15.5$ (corresponding to a 43 % gain). These are my SL and TP values, based on my risk profile: you should assess what your own risk profile is and determine how tight a leash you want to keep.

I also warned that this is a trade, implying an opportunity based on technical analysis and/or momentum, not an investment. A lot will depend on the decision of the bankruptcy judge which is inherently affected by a certain degree of unpredictability. Utility companies do not tend to be cyclical as people always need to buy electricity and gas, also in times of crisis or a pandemic (though large companies will have reduced their consumption, albeit temporarily), which means that cash continues to pour in. But these large companies tend to be under the radar of politicians: if the wind blows in their favour, the future will look brighter for $PCG ; conversely, if regulators get in their way, further moves to the downside may be experienced by the stock.

Make sure you don’t miss my Buy/Sell/Accumulate/Reduce alerts by subscribing to my website.

I currently own another utility, Italian-headquartered $ENEL.MI . My portfolio also has spicier stocks, like $RACE and $VIAV . If you wish to see the long and short positions in my eToro portfolio, please follow this link.

Enjoy the weekend and invest responsibly !

 

$INDA and $EWZ : two ETFs to invest in G20 stock markets

ETFs are an efficient way of investing in markets or sectors for which one would otherwise have to hold multiple positions to reproduce. This is especially true is you have a limited capital to invest, say up to 10k Euro or Dollars.

We opened a 2% position in $EWZ which reproduces the Brazilian stock market. While the outbreak seems to be nearing the peak only now over there, the stock market fall has been so significant that some of the stocks in that market are greatly undervalued, e.g. Petrobras. As always, we will be vigilant and prepared to act if the outlook changes.

We also hold a 2% position in $INDA which mirrors the Indian stock market. I have opened this one due to a favourable technical pattern, something I do rarely as I am mainly guided by fundamentals when selecting stocks and ETFs.

Brazil and India

At present I have 21 open trades (4 of which at $SQQQ trades bought at different price levels). When I am fully invested, I target having 30-40 open trades with an average percentage of 3% each, though some positions may be higher or smaller depending on the strategy. It is very important to be diversified across the various sectors but also to have enough positions to avoid being severely affected by a major swing in an investment with too high a relative weight. While this limits the potential for greater gains, it does protect you on the downside and makes your portfolio more resilient.

Here are the 4 trades in my eToro portfolio from this past week (May 18th to May 22nd):

  • $AMAT +5%
  • $XLK +2 %
  • $DUE.DE +2% (thanks to the positive Zew numbers in Germany, we might be back)
  • $EWZ +2% (we might be back in this one too)

The US stock market is up about 3% this week and 5 of my positions have outperformed them, namely $KO, $SYF, $USO, $IRM, $VIAV. The European stock markets have also grown by about 2%.

In my eToro portfolio I am 35% in cash, 8% in hedges and the rest are long positions in stocks and, to a lesser extent, ETFs and cryptocurrencies.

$SQQQ as a hedge proved to be a winner

Over the past two weeks the market has been quite choppy, especially intraday, but overall it has continued to hold. In fact, the Nasdaq has gained 4.4% and the S&P500 1.1% while the Dow was basically flat at -0.2%.

The difference in performance can be explained by the stocks which compose these indices, with the Nasdaq obviously being packed with many technology stocks which have been outperforming most indices. To give a couple of examples, one of the technology ETF $XLK is up 5.1% this past two weeks, and the so called FAANG stocks are all above 4% with $NFLX up 9.4%.

The relative lack of technology stocks in the European indices, which are dragged down by many bank stocks ($XLF), is the main reason why the European stock markets have been laggards. The financial sector was already suffering from the dovish monetary policies of various areas of the world, with negative interest rates in Japan and Europe for example. The pandemic has only increased their pain as money printing continued everywhere, including the US.

Some say that March 23rd is when the markets bottomed: since then the 3 main US indices have recovered a lot of the previous losses due to the pandemic crisis with a gain ranging between 27 and 31%, while the European stock market has only rebounded by 14%. When they say that it is a market of stocks rather than a stock market, what they mean is that you have to pick the right indices if you want to invest in ETFs, or the right stocks if you want to have more chances of beating the market.

Here are my top 3 winners for these past two weeks:

$SQQQ +6.96% (this is a hedge)

$AMAT +5.07%

$BMY +4.51%

The earnings seasons is not over but its pace is certainly slowing down with a lot fewer companies reporting earnings next week: the one I will be watching most closely is $BABA on Friday.

If you want to see which stocks, ETFs and currencies I own in my eToro portfolio, please follow this link.

Have a great weekend everybody and invest responsibly !

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.