Fidelity, Schwab Reportedly Tapping Market Makers For Crypto Trading Platform

Key Insights:

  • Fidelity and Schwab will be working with Citadel Securities on its new crypto marketplace.
  • They will not offer crypto trading directly due to U.S. regulatory uncertainty.
  • The institutional crypto marketplace is expected to launch in early 2023.

Mainstream and institutional investors may have more avenues into crypto markets as two more big names enter the fray. As reported by FXEmpire on June 8, Citadel Securities announced plans to build a cryptocurrency marketplace with several partners.

It has been reported that Charles Schwab and Fidelity will be among those working with the firm with a plan to roll out the crypto marketplace in early 2023.

Fidelity Investments provides financial planning, retirement plans, wealth management services, and trading and brokerage services. Last week it was reported that the firm plans to fill 210 new positions for its Fidelity Digital Assets division, signaling longer-term ambitions in the crypto space.

Charles Schwab (SCHW) is an American multinational financial services company, bank, and stockbroker with an electronic trading platform.

Institutional Arrival

According to Barron’s, a Schwab spokeswoman confirmed the move into the crypto sector:

“Schwab has made a minority, passive strategic investment in a new digital asset venture. We know there is significant interest in this cryptocurrency space, and we will look to invest in firms and technologies working to offer access with a strong regulatory focus and in a secure environment.”

A spokeswoman for Fidelity added, “Fidelity supports efforts that further efficiency in the digital assets marketplace and provide more optionality to source liquidity for investors,”

The move could be a big step towards onboarding more institutional and longer-term investors. The current options are limited to crypto exchanges which require some technical knowledge to use, and platforms such as PayPal (PYPL), which recently enabled crypto withdrawals, or Robinhood (HOOD)

It could be that these major institutional players are viewing the current bear market as a buying opportunity. Crypto markets have gone through several boom-bust cycles such as this one over the past decade.

However, Schwab did state that it had no plans to offer direct crypto trading due to the regulatory uncertainty in the United States. The spokeswoman continued:

“We recognize that there is considerable interest in cryptocurrencies, particularly in certain segments of the market, and will consider introducing direct access to cryptocurrencies when there is further regulatory clarity,”

Fidelity does not offer direct crypto trading yet, either. Its clients can get exposure to digital assets through thematic exchange-traded funds. It also announced plans to provide access to Bitcoin (BTC) in its 401(k) plans, a move that has drawn scrutiny from U.S. policymakers.

Crypto Winter Deepens

Crypto markets are back in the red again today, printing a 2% decline in total market capitalization over the past 24 hours. The figure currently stands at $1.29 trillion, down 58% from its peak of just over $3 trillion in November.

Crypto traders and analysts believe that there is more pain to come as the crypto winter deepens. Previous bear cycles have had a ‘capitulation wick,’ or massive final sell-off where the last of the weak hands are flushed out.

$7.5 Trillion AUM Company Charles Schwab Files for Crypto Economy ETF

Key Insights:

  • Charles Schwab filed for a crypto economy ETF.
  • The ETF will be tracking the Schwab Crypto Economy Index.
  • The fund will generally track the same securities as those included in the index.

Charles Schwab, one of the biggest financial services companies, filed for a crypto economy ETF with the Securities and Exchange Commission (SEC).

Approval of this exchange-traded fund (ETF) will enable Charles Schwab’s clients to speculate on the index without holding any asset.

Another ETF

After Blackrock filed its crypto ETF in the latter half of the month, many companies are looking to make the most of the opportunity and follow suit.

Charles Schwab already handles over $7.5 trillion of assets under its management. Thus it is not surprising that the company launched a crypto economy ETF.

Unlike traditional ETFs, a crypto economy ETF will not directly track the cryptocurrencies. This is because Charles Schwab does not own any cryptocurrency.

Within the SEC filing too, the company clearly said that the Schwab Crypto Economy ETF would not be investing in cryptocurrencies or any digital assets.

Instead, the ETF is designed to track the Schwab Crypto Economy Index. This index is comprised of companies that are engaged in some of the other forms of crypto-related activities.

Companies using, buying, selling, and facilitating crypto and digital assets or conducting similar activities are referred to as companies in the “crypto economy.”

Reiterating the same the filing noted:

“The fund may, however, have indirect exposure to cryptocurrencies by virtue of its investments in companies that use one or more digital assets as part of their business activities or that hold digital assets as proprietary investments.”

Plan in Making

It isn’t surprising to see the sudden appearance of this ETF filing because not too long ago, Charles Schwab’s CEO had something positive to say about cryptocurrencies.

In an interview, CEO Walt Bettinger said,

“Crypto is hard to ignore, right? It’s fairly significant today. We have a lot of ways that clients today can invest in crypto. What we don’t offer is direct trading. We would welcome the chance, if the opportunity presents itself from a regulatory standpoint. There’s a tremendous void in that space today for a firm like Schwab. The transaction costs in crypto trading are exceptionally high, the spreads are exceptionally high.”

Furthermore, as per Schwab’s Q1 Retail Client Sentiment Survey, 16% of Charles Schwab clients said that they will invest in cryptocurrency in the first part of 2022.

Thus, filing for a crypto economy ETF makes much more sense considering what clients are leaning towards.

In The Spotlight – Big Wall Street Banks as the Main Power in S&P 500

Banks’ earnings

Big Wall Street banks are in the spotlight right out of the gate with Goldman Sachs set to release results before markets open. They will be followed by Bank of America, Morgan Stanley, and U.S. Bancorp tomorrow (Wednesday). Bank results got off to a mixed start on Friday. JPMorgan Chase, Citigroup, and Wells Fargo all topped profit estimates for Q4 but JPMorgan and Citi delivered disappointments in other areas.

In particular, investors are nervous about higher expenses that cut into Q4 profits for both JPMorgan and Citi and which both banks forecast would continue to weigh on results in 2022. JPMorgan and Citi also saw -11% decreases in trading revenue, with fixed income trading down by double digits for both.

There are also signs of slowing loan growth that some analysts worry is an early sign of slowing consumer demand for big-ticket items as inflation continues to climb. While banks will eventually benefit from higher U.S. interest rates that are anticipated in the year ahead, a big pullback in consumer lending is a threat to some of the more lofty Wall Street expectations had for the sector in 2022.

Global economy

Globally, not a lot changed over the extended weekend. China might have provided a bit of a surprise with additional monetary easing into a struggling GDP and sagging real estate prices. It’s worth noting, Omicron has now been detected in Beijing for the first time, just three weeks before the city is due to host the Winter Olympics. Now the Chinese are shutting down and suspending the sale of Olympic tickets to the public.

Tensions remain heated between Hong Kong activists and Chinese government officials. North Korea launched its fourth missile test this month. After North Korea’s missile test last week, the US announced sanctions on eight North Korean and Russian individuals and entities for supporting North Korea’s ballistic missile programs.

Tensions between the U.S. and Russia seem to be headed in the wrong direction with Russia over the weekend moving troops and equipment into Belarus for joint military exercises.

The so-called “Allied Resolve” drills are set to take place near borders with NATO members Poland and Lithuania, as well as Ukraine where Russia has maintained its alarming military presence.

Most U.S. military experts don’t really think Russia has any real intentions of invading Ukraine or any other EU country. However, Western countries also have increased their military presence along borders and other strategic locations which increases the chances that a broader conflict could “accidentally” be sparked.

Europe’s gas supplies are also at risk as Russia continues to dangle the threat of cutting them off. Most of the tension stems from Russia’s demand that former Soviet countries be barred from entering NATO, something the U.S. and other NATO allies have refused.

In the USA, we are heading deeper into earnings season and investors are going to be paying close attention to costs and expenses. As I mentioned, late last week, JPMorgan warned that higher expenses and higher spending on hiring in 2022 could create some headwinds.

Looking ahead, it will be interesting to see how many executive teams start providing guidance and warnings that corporate expenses are rising faster than anticipated and what if any damage will be due to profit margins?

Remember, some companies have said they are passing the additional rising costs on to the consumer while other companies are eating a majority of the higher expenses in an attempt to gain more market share.

How the stock market decides to differentiate the strategy and style could greatly impact money flow and valuations. Goldman Sachs, J.B. Hunt, Charles Schwab, Citrix, Concentrix, and Interactive Brokers report earnings today.

Data to watch

Tomorrow we have Alcoa, Bank of America, Kinder Morgan, Morgan Stanley, Procter & Gamble, and United Airlines.

Thursday we have American Airlines, Baker Hughes, Netflix, and Union Pacific.

Then next week we have big names like Apple, Boeing, Caterpillar, McDonalds, Microsoft and Verizon reporting earnings.

Let’s also not forget next week we have the first Fed FOMC meeting of the new year.

With the U.S. Federal Reserve getting ever closer to implementing its first rate hikes, which most anticipate will begin in March, investors are growing less enchanted with some of the high-growth and momentum stocks that saw outsized share price gains last year.

This trend is most evident in the tech-heavy Nasdaq where nearly half of the index’s stocks have fallen by -50% from their recent peaks. The Nasdaq itself is only down by about -7% from its most recent record high. The selloff has been very much concentrated in highly-leveraged companies that have yet to deliver a profit, as the prospect of higher rates reduce future profit potential. Earnings results from these high-fliers will likely be harshly scrutinized as Wall Street tries to separate the “wheat from the chaff,” so to speak.

On the economic data front, Empire State Manufacturing and the NAHB Housing Market are today’s highlights.

For a look at all of today’s economic events, check out our economic calendar.

Wall Street Week Ahead Earnings: Goldman Sachs, Procter & Gamble, United Airlines, and Netflix in focus

The following is a list of earnings slated for release January 17-21, along with a few previews. A number of big companies will report earnings in the week ahead, including Goldman Sachs and Bank of America, Procter & Gamble, Netflix, and a number of transportation companies. Investors will carefully monitor the latest news on the rapidly spreading Omicron coronavirus variant to see how it affects earnings in 2022.

Earnings Calendar For The Week Of January 17

Monday (January 17)

No major earnings are scheduled for release. The stock market in the U.S. will be closed in observance of Martin Luther King, Jr. Day.

Tuesday (January 18)

IN THE SPOTLIGHT: GOLDMAN SACHS

The New York-based leading global investment bank Goldman Sachs is expected to report its fourth-quarter earnings of $11.89 per share, which represents a year-over-year decline of about 2% from $12.08 per share seen in the same period a year ago.

The world’s leading investment manager would see a decline in revenue of nearly 1% to $11.65 billion from a year ago. It is worth noting that in the last two years, Goldman Sachs has surpassed market consensus expectations for profit and revenue most of the time.

“We expect Goldman Sachs to report mixed results, with revenues outperforming the consensus estimates and earnings missing the expected figure. The investment bank reported better than expected results in the last quarter, with the top-line increasing 26% y-o-y. This was driven by significant growth in the investment banking business, followed by higher global markets and consumer & wealth management revenues,” noted analysts at TREFIS.

“While investment banking grew on the back of growth in mergers &acquisitions (M&A) and equity underwriting deal volumes, global markets benefited from higher equity trading revenues. Similarly, the consumer & wealth management segment gained from an increase in outstanding loan balances. That said, the top-line was partially offset by negative growth in the asset management division, primarily due to lower equity investment revenues. We expect the same trend to continue in the fourth quarter. We estimate Goldman Sachs’ valuation to be around $447 per share which is 14% above the current market price.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 18

TICKER COMPANY EPS FORECAST
BAC Bank of America $0.78
SCHW Charles Schwab $0.83
CNXC Concentrix $2.54
HWC Hancock Whitney $1.33
IBKR Interactive Brokers $0.74
JBHT J.B. Hunt Transport Services $2.0
MBWM Mercantile Bank $0.85
ONB Old National Bancorp $0.38
PNFP Pinnacle Financial Partners $1.56
PNC PNC Financial Services $3.62
PRGS Progress Software $0.62
SBNY Signature Bank $3.92
TFC Truist Financial $1.27
UCBI United Community Banks $0.63

 

Wednesday (January 19)

IN THE SPOTLIGHT: PROCTER & GAMBLE, UNITED AIRLINES

PROCTER & GAMBLE: The world’s largest maker of consumer-packaged goods, is expected to report its fiscal second-quarter earnings of $1.66 per share, which represents year-on-year growth of just over 1% from $1.64 per share seen in the same period a year ago.

The Cincinnati, Ohio-based consumer goods corporation would post revenue growth of over 3% to $20.4 billion from a year ago. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

“We believe strategy changes can sustain Procter & Gamble (PG) LT topline growth in the 4% range. In the US, a strong breadth of performance and share gains give us confidence that market share momentum is sustainable and supports LT topline growth above HPC peers. While near-term pressures from commodity/freight inflation will impact margins, we believe PG has stronger pricing power than peers, particularly with share gains,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

PG trades at ~22.5x CY22e EPS, an HSD% discount to HPC peers CLX, CL and CHD, and looks compelling given our call for higher LT PG growth.”

UNITED AIRLINES: The major U.S. airline company is expected to report a loss for the eight-consecutive time of $-2.12 in the holiday quarter as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and travel restrictions.

However, that would represent a year-over-year improvement of about 70% from -$7.0 per share seen in the same period a year ago. The Chicago, Illinois-based airlines would post revenue growth of over 130% to $7.94 billion.

“Despite some headwinds around staffing issues, we expect United Airlines (UAL) to guide to a continued sequential improvement with capacity guided to be down in the 17-18% range in Q1, which incorporates domestic capacity down in the 1% range, while international capacity remains down 27%,” noted Sheila Kahyaoglu, equity analyst at Jefferies.

“Remaining in a Net Loss Position into Q1. We expect a continued sequential decline in CASM-ex to 11.63¢, which reflect a 9% increase vs. 2019 levels, which compares to the 13% increase we expect in Q4. Nonetheless, UAL will remain in a net loss position in Q1, before turning positive in Q2.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 19

TICKER COMPANY EPS FORECAST
AA Alcoa $2.5
ASML ASML Holding $4.3
CFG Citizens Financial Group $1.16
CMA Comerica $1.6
DFS Discover Financial Services $3.48
FAST Fastenal $0.36
FUL H.B. Fuller $1.06
KMI Kinder Morgan $0.27
MS Morgan Stanley $1.83
PACW PacWest Bancorp $1.06
PG Procter & Gamble $1.66
STT State Street $1.93
USB U.S. Bancorp $1.13
UAL United Airlines $-2.12
WTFC Wintrust Financial $1.56

 

Thursday (January 20)

IN THE SPOTLIGHT: NETFLIX

The California-based global internet entertainment service company NetFlix is expected to report its fourth-quarter earnings of $0.82 per share, which represents a year-over-year decline of over 30% from $1.19 per share seen in the same period a year ago.

However, the streaming video pioneer would post revenue growth of over 16% to $7.71 billion. It is worth noting that the company has beaten earnings per share (EPS) estimates just thrice in the last two years.

“We believe share performance is highly dependent on increasing global membership scale. Proven success in the US and initial international markets provides a roadmap to success in emerging markets, and scale should allow Netflix (NFLX) to leverage content investments and drive margins,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“Higher global broadband penetration should increase the Netflix (NFLX) addressable market, driving member growth and providing further opportunity given NFLX’s global presence. Longer-term, we see the ability to drive ARPU growth, particularly given increased original programming traction.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 20

TICKER COMPANY EPS FORECAST
AAL American Airlines $-1.72
CSX CSX $0.42
FITB Fifth Third $0.91
ISRG Intuitive Surgical $1.01
KEY KeyCorp $0.56
MTB M&T Bank $3.24
NTRS Northern Trust $1.82
OZK Bank OZK $0.98
PPBI Pacific Premier Bancorp $0.85
PPG PPG Industries $1.2
RF Regions Financial $0.49
SASR Sandy Spring Bancorp $1.1
SIVB SVB Financial $6.29
TRV Travelers $3.77
UNP Union Pacific $2.66
WBS Webster Financial $1.11

 

Friday (January 21)

TICKER COMPANY EPS FORECAST
ALLY Ally Financial $2.0
FHB First Hawaiian $0.47
HBAN Huntington Bancshares $0.37
INFO IHS Markit $0.71
SLB Schlumberger $0.39

 

Big Money Invests in Charles Schwab

So, what’s Big Money? Said simply, that’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And Schwab has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the shares have been trading points to more upside. As I’ll show you, the Big Money has been consistent in the shares.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all the Big Money signals SCHW has made the last year.

The last few weeks have seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price:

Source: www.mapsignals.com

In 2021, the stock attracted 18 Big Money buy signals. Generally speaking, recent green bars could mean more upside is ahead.

Now, let’s check out technical action grabbing my attention:

Outperformance is important for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, Schwab has been growing sales and earnings at a double-digit rate. Take a look:

  • 1-year sales growth rate (+73.7%)
  • 3-year earnings growth rate (+13.3%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, SCHW has been a top-rated stock at my research firm, MAPsignals, for years. That means the stock has buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

SCHW has a lot of qualities that are attracting Big Money. It’s made this list 10 times since 2016, with its first appearance on 7/11/2017…and gaining 112.85% since. The blue bars below show the times that Schwab was a top pick:

Source: www.mapsignals.com

It’s been a top stock in the financial sector according to the MAPsignals process. I wouldn’t be surprised if SCHW makes additional appearances in the years to come. Let’s tie this all together.

The Bottom Line

The Schwab rally could have further to go. Big Money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds no positions in SCHW in personal or managed accounts at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/

 

Charles Schwab Stock Is A Big Money Favorite

So, what’s Big Money? Said simply, that’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And Charles Schwab has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the shares have been trading points to more upside. As I’ll show you, the Big Money has been consistent in the shares for all year.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all the big money signals SCHW has made the last year.

The last few weeks have seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price:

Chart, histogram

Description automatically generated

Source: www.mapsignals.com

In 2021, the stock has attracted 15 Big Money buy signals. Generally speaking, recent green bars could mean more upside is ahead.

Now, let’s check out technical action grabbing my attention:

  • YTD outperformance vs. Financial Select Sector SPDR Fund (+9.26% vs. XLF)

Outperformance is huge for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, Charles Schwab has been growing sales & earnings rapidly. Take a look:

  • 3-year sales growth rate (+10.87%)
  • 3-year earnings growth rate (+13.25%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, SCHW has been a top-rated stock at my research firm, MAPsignals, for years. That means the stock saw buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

SCHW has a lot of qualities that are attracting Big Money. And in 2021, it’s made this list 2 times, with its first appearance on 3/2/2021… and gaining 15%. The blue bars below show the times that Charles Schwab was a top pick:

Chart, histogram

Description automatically generated

Source: www.mapsignals.com

It’s been a top stock in the financials sector according to the MAPsignals process. I wouldn’t be surprised if SCHW makes additional appearances in the years to come. Let’s tie this all together.

The Bottom Line

The Charles Schwab rally could have further to go. Big money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds no position in SCHW at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/

For a look at all of today’s economic events, check out our economic calendar.

Interactive Brokers Launches Cryptocurrency Trading

U.S. clients of the brokerage will now be able to trade and custody bitcoin, ethereum, litecoin and bitcoin cash alongside stocks, options, futures, bonds, mutual funds and exchange-traded funds, the company said.

“As financial markets evolve, sophisticated individual and institutional investors are increasingly seeking out allocations to digital currencies as a means of achieving their financial objectives,” said Chief Executive Officer Milan Galik.

Chairman Thomas Peterffy said in June that Interactive Brokers, which caters to active traders and sophisticated investors, would launch trading in cryptocurrencies by the end of the summer as the nascent asset class becomes more mainstream.

Other brokers, including Robinhood Markets Inc and TradeStation also provide cryptocurrency trading, while Charles Schwab Corp and Fidelity currently offer access to bitcoin futures.

Crypto-trading commissions at Interactive Brokers will be 0.12% to 0.18% of trade value, depending on monthly volume, with no added spreads, markups, or custody fees, the New York-based company said.

Interactive Brokers said it partnered with Paxos Trust Company, a regulated provider of cryptocurrency services that also works with companies like PayPal on digital asset trading, to enable the new service.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by John McCrank; Editing by Marguerita Choy)

 

Robinhood Takes Investors on Roller Coaster Ride

The paint has barely dried on trading app Robinhood’s IPO, and the stock has already taken investors on a roller coaster ride. Shares are down more than 16% today on the heels of Wednesday’s monstrous rally in which the stock advanced more than 50%. The new stock is still managing to hover above its offer price of USD 38.

Love/Hate Relationship

The narrative surrounding Robinhood’s stock has been just as dramatic as its price swings as the love/hate relationship with investors continues. On social media, some users are convinced that Robinhood has morphed into a meme stock in its own right, which is ironic considering its history placing trading restrictions on these names.

Most recently, the broker has revealed via an SEC filing that stockholders are poised to offload more than 97 million Class A shares. These investors include the likes of Andreessen Horowitz, 9Yards Capital, Ribbit Capital and others. Some of the investors on the list include those that bailed Robinhood out early in the year when it needed collateral for the surge in meme stock trading volume. Robinhood won’t receive any of the proceeds from the selling.

Retail investors who have flocked to the stock could be left holding the bag if they are not careful.

Dividend Divide

Robinhood competes with other discount brokerage platforms, including the likes of Etrade, TD Ameritrade and Charles Schwab, to name a few.  Shares of Schwab have been on a tear in 2021, having seen their value increase by nearly one-third year-to-date. Schwab also pays a dividend of USD 0.18 per share.

One investment firm that has benefited from Schwab’s performance this year has been Sydney, Australia-based Lakehouse Capital. Even though Schwab “is not a household name in Australia,” as the firm points out, it’s the largest discount brokerage in the U.S. By holding the stock in its Global Growth Fund, Lakehouse’s Robinhood position generated returns of 100% for fiscal 2021, making it the top performer in the investment vehicle.

While Schwab pays a dividend, Robinhood does not. In its S-1 filing, Robinhood revealed that paying a dividend is not a priority for the company for a couple of reasons:

  • Management plans to direct funds and earnings toward developing and growing the business.
  • Credit-facility terms restrict it from doing so.

While Robinhood is selling off today, the leading meme stocks that the broker is often remembered for are rising, including GameStop and AMC Entertainment.

Marketmind: “A Ways Off” and That’s Good

You couldn’t call China’s data dismal — average growth actually surpassed Q1 while June retail sales and industrial output beat expectations. But it does show authorities, who last week unleashed one trillion yuan into the financial system, will ensure conditions stay loose.

But markets’ delight after Powell told Congress he saw no need to rush the shift towards tighter post-pandemic monetary policy, has not lasted long.

World stocks are off recent record highs, tempered possibly by spiking COVID-19 cases across Asia and signs the post-pandemic bounce in company earnings is hitting a peak.

Asian shares rallied, led by a 1% rise in Shanghai but U.S. futures are mostly lower, with the exception of the tech-heavy Nasdaq. European markets too, are opening weaker and 10-year Treasury yields are down at 1.33%, almost 10 basis points off Wednesday’s high point.

The news from the corporate world is all good — the four biggest U.S. banks, Wells Fargo, Bank of America, Citigroup and JPMorgan have posted a combined $33 billion in profits. Asset manager BlackRock beat estimates, with assets at a record $9.5 trillion.

Omens in Europe are good too, with Sweden’s SEB, carmaker Daimler and food delivery firm Just Eat all reporting buoyant earnings. And earlier in Asia, Taiwanese chipmaker, TSMC, posted an 11% rise in Q2 profits.

Key developments that should provide more direction to markets on Thursday:

– South Korea held rates but signalled pandemic era record-low interest rates was coming to an end

-UK added 356,000 jobs in June

-ECB Board Member Frank Elderson speaks

-Philly Fed index

-Bank of England interest rate-setter Michael Saunders speaks

Fed events: Powell testimony continues, Chicago Fed President Charles Evans speaks

US earnings: BNY Mellon, Charles Schwab, US Bancorp, Morgan Stanley, Alcoa

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sujata Rao; editing by Dhara Ranasinghe)

 

Best ETFs For June 2021

A portfolio of outlier stocks can become chock full of monster gains for years to come, if chosen wisely.

But wouldn’t it be great if there was already a collection of outliers we could buy without even having to think about it?

Well maybe there is a way to do just that… through outlier ETFs.

So, here I’m going to give you the best ETFs that big money is getting involved in this month.

First thing’s first: to find them, I looked at all the ETFs making Big Money signals. I did that by heading over to MAPsignals.com and then looked at the Big Money ETF Buys and Sells chart. I looked at days with the biggest buying, circled here:

Once I had all the ETFs, I wanted to know which were the best potential opportunities. ETFs are baskets of stocks. And because MAPsignals scores over 6,000 stocks every day, as long as I know which stocks make up the ETFs, I can rank them all.

Here are the 5 best ETFs with scores: The Composite score, Technical score, and Fundamental score. These were computed by accounting for each components stock’s score and its associated weighting in the ETF. (keep in mind that weightings will change from time to time)

Below we see each ETF, their recent Big Money activity, and their scores. XLF, ITB, and XLC are top ranked ETFs. That makes sense because financials, home builders, and communications stocks have been leading the market much of this year so far.

IGV and ARKG, however, rank low on our list of ETFs. But there is opportunity here because the low scores are due to weak technicals. Big Money has been selling these ETFs, largely because they are heavily concentrated in growth stocks. But these stocks have excellent fundamentals: growing sales and earnings and big profits. These weak ETFs represent great potential bargains.

Let’s quickly look at the year-to-date performance of these 5 ETFs:

  • XLF +29.3%
  • ITB +29.2%
  • XLC +13.5%
  • IGV -4.0%
  • ARKG -18.1%

Now let’s quickly look at Big Money buying in the ETFs. Each chart below has many green bars which represents unusually large buying. The few red bars represent unusually large selling. What jumps out is the huge buying in all the ETFs.

Only with IGV and ARKG, there was recent selling too. But again, selling on ETFs and stocks with great fundamentals represents a value opportunity.

Source: www.mapsignals.com, End of day data sourced from Tiingo.com

Here’s why I like these ETFs: they are highly concentrated with fundamentally superior stocks. Below we see a table of three stocks in each ETF. They are some of the highest weightings in each.

Notice their fundamental scores are very strong on a scale from 0-100. This means strong growing sales, earnings, and profits over one and three years. This is how MAPsignals boils down all its fundamental research into one elegant score.

Now with XLF, ITB, and XLC – we see the stocks also have strong technical scores. That means Big Money has been pouring into them, lifting them to new highs. They are buoyant with Big Money support. But in IGV and AKG, we see weak technical scores. This means Big Money has been exiting the stocks.

But before you get spooked, let’s keep the recent environment in mind: Growth has fallen out of favor while value and reopen stocks have become all the rage. But it’s essential to remember these growth companies create phenomenal products and services enhancing our lives. I don’t foresee that stopping in the future. The recent selling is temporary and thematic.

What really drives this home is looking at how long-term Big Money buying can lead to monstrous gains. Below are charts showing all the instances these stocks were Top stocks in our research since 2015: our weekly report of outliers. We don’t need to go into details on each chart.

I’d like you to notice a few things:

  • When Big Money buying pours in, stocks go up
  • Repeated outliers, especially for years often means outsized gains

Owning outlier stocks is the way I try to beat markets. Easy exposure to many stocks can be achieved by buying ETFs. But just like anything, you must be in the 1% if you want to be in the 1%.

We can find outlier ETFs by tracking the Big Money. But that alone isn’t enough: when we catalog the components and find outlier stocks underneath… that’s the winning recipe.

So, there you have it: the 5 best ETFs that Big Money has been trafficking in recently. Outlier ETFs hold outlier stocks. Finding them is the key to finding potentially outlier gains.

Now let’s look at what those look like:

Source: www.mapsignals.com, End of day data sourced from Tiingo.com

The Bottom Line

XLF, ITB, XLC, IGV, & ARKG represent top ETFs for June 2021. Financials, homebuilders, & Communications stocks have performed well lately, which should continue. Software and Genomics companies have reached interesting levels, too. Paying attention to the fundamental quality of ETF constituents is paramount.

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

Disclosure: the author holds long positions GOOGL, CRM, & REGN in managed accounts, but no positions in XLF, ITB, XLC, IGV, ARKG, BLK, SCHW, SPGI, DHI, LEN, LOW, FB, ATVI, ADBE, MSFT, TDOC, & VRTX at the time of publication.

Investment Research Disclaimer