Best ETFs to Buy Now for July 2022

Everyone was pummeled by inflation and now we have talks of a recession, which usually don’t bode well for markets.

So, how is Big Money reacting? It’s selling more than buying. Let me explain.

Markets and Big Money in the Last Six Months

My research firm, MAPsignals, measures Big Money investor activity. That includes institutions, pension funds, big individual investors, and so on. We follow Big Money because our research shows Big Money moves markets.

We created the Big Money Index (BMI), which is a 25-day moving average of large-scale investor buy and sell activity. Over time it has shown itself to be a leading indicator of where markets may go. The BMI went oversold in May, which is a hugely bullish long-term signal. It’s bounced back a bit since but is trending lower again of late:

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The Big Money selling includes shedding the sector that’s been a lone 2022 bright spot – energy. That’s ushered in more volatility as uncertainty continues to reign over inflation, recession, and geopolitical tensions. Check out the recent dip:

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On a more macro level, Big Money has been selling ETFs heavily over the past six months. Worse, buying has been basically nonexistent since March, meaning there’s no leadership now. Big selling combined with no buying will drive markets downward every time.

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But in times of uncertainty, bargains can be had. This month’s ETF picks have long-term value appreciation in mind. Some of them are experiencing low liquidity right now due to market volatility and a lack of overall leadership. Still, we think these ETFs have great long-term potential: FFTY, IEIH, XLV, FXU, and XLP.

Long-term investors should look for ETFs (and their stocks), with great setups. Remember, ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all from strongest to weakest.

Now, let’s get to the best ETFs to buy now for July 2022.

Innovator IBD 50 ETF (FFTY) Analysis

This ETF is a weekly, rules-based, computer-generated stock index with a nearly 1.4% current dividend that seeks to identify the current top 50 growth stocks. It’s seen a downtrend for a while, with no Big Money buying. But, as markets rise again (and they almost certainly will at some point), FFTY should benefit because it holds great stocks focused on growth. It’s down 41.4% so far this year and is trading at an attractive price relative to its peak:

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FFTY holds many growth-oriented stocks across different industries. One health care example is Vertex Pharmaceuticals Incorporated (VRTX), which has three-year sales growth of 36.1%, three-year EPS growth of 23.5%, and a 30.8% profit margin. Here is the one-year Big Money action for VRTX:

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iShares Evolved U.S. Innovative Healthcare ETF (IEIH) Analysis

This is another low-liquidity ETF, so expect some volatility. That said, IEIH holds tremendous stocks in U.S. pharmaceutical and biotechnology firms with lots of long-term potential and pays a nearly 1.3% current dividend. It’s been choppy for much of the last year, but overall is down just 4.6% so far in 2022:

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One great stock IEIH holds is AbbVie, Inc. (ABBV). This drugmaker has seen big three-year EPS growth of 44.3% and sports a profit margin of 20.4%. Sales have been strong too, growing 20.6% over three years. The Big Money has been all over ABBV:

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Health Care Select Sector SPDR ETF (XLV) Analysis

Again sticking with the health care sector, XLV holds many great companies across several health care fields, including medicines, insurance, equipment suppliers, and more. This ETF is giant, so there should be no liquidity issues, and pays a more than 1.4% current dividend. XLV has seen Big Money action throughout the past year and is up 0.6% in that time:

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A fantastic stock within XLV is Thermo Fisher Scientific Inc. (TMO), a supplier of scientific equipment and services worldwide. It’s down in 2022, but its fundamentals remain strong. TMO has growing sales (one-year sales growth of 21.7%) and three-year EPS growth of 40.8%. Since 2012, TMO has attracted lots of Big Money. Each blue bar below shows when it was a Top 20 Big Money buy:

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First Trust Utilities AlphaDEX Fund (FXU) Analysis

When investors seek safety, that often means utilities that pay dividends. That makes sense because we all have to pay our utility bills, recession or not. FXU is a medium-liquidity ETF, so it still experiences some choppiness. But it’s up 5.4% over the past year, pays a more than 2.2% current dividend, and looks to have a bright future:

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One rock-solid dividend stock within this ETF is Duke Energy Corporation (DUK), a U.S. energy firm serving southern and midwestern areas of the country. While Big Money has been in and out of it over the past year, DUK has three-year EPS growth of 51.9% and a profit margin of 15.5%. Plus, it jumped 7.2% over a year’s time:

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Consumer Staples Select Sector SPDR ETF (XLP) Analysis

With recession fears high, consumer staples stocks are attractive to investors. That’s certainly justified right now. XLP holds several household names consumers buy regularly, is highly liquid, and offers a nearly 2.4% current dividend yield. It’s seen 12 Big Money buy signals in the last year and is up 4.2% in that time:

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A great stock in XLP is Coca-Cola Company (KO), the beverage maker (and Warren Buffett favorite). KO is fundamentally strong – it has one-year sales growth of 17.2% and a profit margin of 25.2%. It’s up more than 7% so far in 2022 and it wouldn’t surprise me to see this one rise more (it’s had 48 Top 20 Big Money buy signals since 1992 and is up 1,148.7% in that time):

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Here’s a Big Money recap:

  • When Big Money buying heats up, stocks and ETFs tend to rise
  • Deep selling on great quality can be a phenomenal opportunity
  • Repeated buying usually means outsized gains

Bottom Line and Explanatory Video

FFTY, IEIH, XLV, FXU, and XLP are my top ETFs for July 2022. They hover around health care a lot, but also cover other sectors that could rise over time. These picks can climb higher, in my opinion, largely because they each hold great stocks. With markets rocky, bargains can be had, and these ETFs show great long-term potential right now.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in FFTY, IEIH, XLV, FXU, XLP, VRTX, TMO, DUK, or KO at the time of publication, but holds long positions in ABBV in managed accounts.

Contact:

https://mapsignals.com/contact/

Duke Energy Surges Higher After Earnings Top Expectations

Shares in Duke Energy Corporation (DUK) powered nearly 3% higher Monday after the company disclosed better-than-expected quarterly earnings, and a report surfaced that an activist investor has a stake in the utilities giant.

The company posted a first-quarter (Q1) adjusted profit of $1.26 per share, surpassing analyst expectations of $1.24 a share. Moreover, the bottom line improved 10.5% on a year-over-year (YoY) basis, driven by growth in the company’s electric utilities business. Revenues of $6.15 billion grew 3.4% from a year earlier; however, the metric came in shy of the $6.21 billion figure Wall Street had expected. Looking ahead, management sees full-year earnings per share (EPS) of $5.00 to $5.30 with a long-term growth rate of 5% to 7%.

“We are positioned to deliver sustainable long-term value as we accelerate our clean energy transformation by investing in renewables, battery storage and in our delivery system,” CEO Lynn Good said in a statement, per PR Newswire.

Monday afternoon, the Wall Street Journal reported that activist investor Elliott Management Corp. has a stake in the company. However, the size of the position remains unclear. According to the Journal, people familiar with the matter said Elliott may persuade Duke to offload underperforming assets and implement operational improvements.

As of May 11, 2021, Duke Energy stock has a market capitalization of $79.8 billion, offers an enticing 3.83% dividend yield, and trades 26.85% higher over the past twelve months. Since the start of the year, the shares have added 13.30%, outperforming the energy sector by around 8% over the same period. From a valuation standpoint, the stock trades 14% above its five-year average earnings multiple of 17.5 times.

Wall Street View

Last month, Wells Fargo analyst Neil Kalton raised the bank’s price target on the stock to $104 from $97, citing higher peer group multiples. Kalton also reiterated his ‘Equal Weight’ recommendation.

Elsewhere, broker coverage remains mostly bullish. The shares receive 6 ‘Buy’ ratings, 1 ‘Overweight’ rating, and 12 ‘Hold’ ratings. Twelve-month price targets range from a Street high $112 to a low of $96, with the average target sitting at $103.69. Look for additional broker upgrades in the months ahead as the push toward renewable energy gathers momentum.

Technical Outlook and Trading Tactics

Duke shares broke out from a pennant on above-average volume Monday, indicating further upside continuation. Furthermore, the moving average convergence divergence (MACD) indicator recently crossed back above its signal line to generate a buy signal.

Active traders who want to capitalize on short-term momentum should consider using a trailing bar stop to book profits. To utilize this exit strategy, remain in the trade until the price closes beneath the current day’s low, or the previous day’s low, depending on personal risk tolerance.

For a look at today’s earnings schedule, check out our earnings calendar.

3 Utilities Stocks Ready to Power Ahead

Utility stocks, known for their stable cash flow and high-paying dividends, have been out of favor over the past year as investors prioritized leading consumer cyclical and technology names that benefited from people spending more time at home during the pandemic.

However, the group may see renewed buying interest this year as the lure of predictable earnings and above-average yields in an unpredictable environment may draw in those looking for lower-risk investment options.

Below, we review three utilities stocks that appear ready to move higher in the months ahead.

Consolidated Edison, Inc.

With a market capitalization of $23.31 billion, Consolidated Edison, Inc. (ED) provides steam, natural gas, and electricity to customers on the U.S. East Coast. The utility also has a renewable energy segment generating gas and electric transmission. Edison has grown its dividend by an average of 3.5% each year for 45 consecutive years. The stock currently issues a 4.51% yield and has slipped 3.68% year to date (YTD).

Charts wise, the stock temporarily broke below crucial support at $69.50 but closed above that level Wednesday, increasing the possibility of a possible head-fake trade. Traders should look for a test of key resistance at $83.

Duke Energy Corporation

Duke Energy Corporation (DUK) provides regulated utility services to more than 7 million customers in the midwestern and southern USA. The 15-year-old energy giant, which trades flat on the year, operates through three divisions: gas utilities and infrastructure; and commercial renewables. Duke has increased its dividend for the past 14 consecutive years by an average of around 3%, currently offering investors a yield of 4.34%.

From a technical standpoint, the company’s share price has traded within a falling wedge pattern since early November but broke above the pattern’s top trendline in Wednesday’s session. Further upside momentum could see price test significant resistance levels at $99 and $104.

WEC Energy Group, Inc.

Milwaukee-based WEC Energy Group, Inc. (WEC) distributes gas and electricity to customers in Illinois, Michigan, Minnesota, and Wisconsin. Barclays analyst Eric Beaumont upgraded the company’s stock to ‘Equal-Weight’ from ‘Underweight’ this week, saying it has an above-average growth trajectory, similar to comparable industry peers. Beaumont maintained his 12-month price target on the shares at $107, indicating a 22% premium to Wednesday’s $87.86 close. The company pays a 3.18% dividend yield and trades 4.53% lower since the start of the year.

The stock rallied yesterday from the lower trendline of a two-month falling wedge pattern that finds support from the May and June swing lows around $84.50. A move higher from this area could see bulls test major resistance at  $105.50.

For a look at today’s earnings schedule, check out our earnings calendar.