Big Money Buys Up Northrop Grumman

And the defense company could jump even more due to its new technologies and acquisition-fueled corporate growth. But another likely reason is Big Money lifting the stock.

Northrop Grumman Takes in Big Money

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 Northrop Grumman 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 NOC has made this 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 the last year, the stock attracted 11 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.

Northrop Grumman Fundamental Analysis

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, Northrop Grumman has been growing earnings at a big rate and is profitable. Take a look:

  • 3-year sales growth rate (+48.0%)
  • Profit margin (+19.6%)

Source: FactSet

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

In fact, NOC has been a top-rated stock at my research firm, MAPsignals. 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.

NOC has a lot of qualities that are attracting Big Money. It’s made the Top 20 report 11 times since 2014, with its first appearance on 04/05/2016…and gaining 151.8% since. The blue bars below show when Northrop Grumman was a top pick:

Chart, histogram Description automatically generated

Source: www.mapsignals.com

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

Northrop Grumman Price Prediction

The Northrop Grumman rally could have further to go. Big Money buying in the shares is signaling to take notice. Shares could be positioned for further upside, plus it pays a nearly 1.5% current dividend. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a diversified portfolio.

Disclosure: the author holds no positions in NOC at the time of publication.

Learn more about the MAPsignals process here.

Contact

https://mapsignals.com/contact/

Sell High-Beta Stocks. Buy Low-Volatility Stocks. It’s The Business Cycle

Summary

A sound investment strategy takes advantage of the economic environment.

The economic environment drives the relative performance of investments.

The business cycle tells which stocks should be in your portfolio: high-beta vs low volatility.

The main forces driving the business cycle

There are three main types of economic indicators: leading, coincident, and lagging. The lagging indicators are the most important ones for investors because they determine the length of the business cycle and the severity of the economic correction needed to bring them down so the economy can expand again.

Inflation, interest rates, and labor costs are the most important lagging indicators. A rise in inflation reduces consumers’ purchasing power. The rise in interest rates makes purchases of anything less affordable – housing and autos in particular. Rising labor costs hinder profitability. Consumers react to the rise in inflation and interest rates by cutting first the purchase of big-ticket items. This is also the time consumer confidence of the University of Michigan declines sharply.

The slowdown in housing and auto sales are the first developments reflecting the economy is downshifting. Such slowdowns are reflected in equity prices. Coincident indicators such as employment and sales eventually also begin to sputter.

The investment opportunity in equities takes place when the leading indicators – those which were the first to signal the slowdown – are going to rise again.

One of the most important tenets of the business cycle is the slowdown will continue until the causes that created the slowdown are brought under control.

The main causes of the slowdown are the rise in the main lagging indicators: inflation and interest rates. The slowdown will continue as consumers reduce spending until their purchasing power restored again. This happens when inflation and interest rates decline. This is also the time when labor costs decrease, improving business profitability.

As retail sales increase because of rising consumers’ purchasing power, the other coincident indicators also rise: employment, production, and income. These developments will reinforce themselves and the positive loop will continue until the economy overheats.

This is the time when the lagging indicators raise their ugly heads, and the business cycle starts all over again.

Where are we now?

The lagging indicators are rising. Consumer prices keep moving higher – up more than 8%. Interest rates – short-term and long-term – have reached new highs for this business cycle. The two-year Treasury yield soared from 0.2% to 2.6% in the last 12 months. The stock market, an important leading indicator, shows no gains since June 2021 as of this writing. Auto sales and housing have been weakening after several months of rising inflation and interest rates.

Consumers cut spending on big-ticket items first when income after inflation declines as it is happening now (see graphs of buying conditions from University of Michigan survey below). In other words, an increase in the lagging indicators (inflation and interest rates) lead a peak in the leading indicator consumers’ buying conditions (see above chart).

The business cycle is just past Point 7 (see first chart above). The next trends will be slower growth in the coincident indicators. Retail sales and income after inflation are already contracting. Production and employment are still strong. They will have to weaken to reflect cuts in production to reduce inventories.

Inflation and interest rates will decline following more weakness in the coincident indicators (sales, income, production, and employment). In the meantime, growth in business activity will continue to decline until inflation and interest rates drop enough to increase consumers’ purchasing power. It will be a long and drawn-out process.

Economic growth drives sectors’ performance

The environment faced by the financial markets is slower economic growth. This is an important trend because the sectors outperforming the market when the business cycle declines, reflecting slower economic growth, are the non-cyclical sectors (XLP, XLU, XLV, XLRE) ( see chart below, energy being the exception).

The chart shows the percent change over the last 200 days. During a period of stronger growth cyclical stocks (XLI, IYT, XLF, XLE, XLB, XME) outperform the market. The strong performance of the non-cyclical sectors confirms the stock market is past its phase of fast growth.

High-beta and low volatility stocks respond to economic forces

High-beta (ETF: SPHB) and low-volatility stocks (ETF: SPLV) perform in different ways depending on the trend of the business cycle as shown on the following chart.

The above chart shows two sets of graphs. The upper panel represents the graph of the ratio SPHB/SPLV. The busines cycle indicator computed in real-time from market data and reviewed in each issue of The Peter Dag Portfolio Strategy and Management is in the lower panel.

High-beta stocks (SPHB) outperform low-volatility stocks (SPLV) (the ratio in the uppere panel rises) when the business cycle rises, reflecting stronger economic growth due to declining or stable inflation and interest rates.

However, low-volatility stocks (SPLV) outperform high-beta stocks (the ratio in the upper panel declines) when the business declines because of rising inflation and interest rates – as it has been happening since late 2021.

Key takeaways

  • The leading indicators will continue to decline reflecting rising inflation and interest rates.
  • During such time low volatility stocks (SPLV) will continue to outperform high-beta stocks (SPHB).
  • The leading indicators, such as stock prices, autos, housing, consumer sentiment of the University of Michigan, will bottom and rise again following a decline in inflation and interest rates.
  • The decline in inflation and interest rates will be preceded by declines in the coincident indicators (sales and income after inflation, production, and employment).
  • This will be the time when high-beta stocks (SPHB) start outperforming low-volatility stocks (SPLV).

ZIM Carrying Big Money

And the newly-trading Israeli seaborne transportation company could rise even more due to a favorable valuation relative to earnings and a huge current dividend of 14.24%. But another likely reason is Big Money lifting the stock.

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 ZIM 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 ZIM 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 the last year, the stock attracted 25 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, ZIM has been growing sales at double-digit rates. Take a look:

  • 1-year sales growth rate (+21.0%)
  • 3-year sales growth rate (+10.5%)

Source: FactSet

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

In fact, ZIM has recently become a top-rated stock at my research firm, MAPsignals. 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.

ZIM has a lot of qualities that are attracting Big Money. It’s made this list three times since it began trading last year (all in 2022), with its first appearance on 1/18/2022…and gaining 10.88% since. The blue bars below show the times that ZIM was a top pick – Big Money may have a new gem:

Source: www.mapsignals.com

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

The Bottom Line

The ZIM 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 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 ZIM at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/

 

Big Money Drives Deere

And the heavy machinery giant could rise even more due to easing supply chain pressures and new autonomous products. But another likely reason is Big Money lifting the stock.

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 Deere 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 DE 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 the last year, the stock attracted 19 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, Deere has been growing sales and earnings at double-digit rates. Take a look:

  • 1-year sales growth rate (+23.7%)
  • 3-year earnings growth rate (+47.8%)

Source: FactSet

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

In fact, DE 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.

DE has a lot of qualities that are attracting Big Money. It’s made this list five times since 2016, with its first appearance on 1/2/2018…and gaining 136.56% since. The blue bars below show the times that Deere was a top pick:

Source: www.mapsignals.com

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

The Bottom Line

The Deere 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 DE at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/