Best ETFs For July 2021

That’s why I spend my time crafting portfolios chock full of outlier stocks. If you choose right, you’ll have enormous gains on your hands in the years to come.

Now, I pick my ETFs perhaps a bit differently than other people. I can find outlier ETFs by tracking the Big Money. But that alone isn’t enough: when I catalog the components and find outlier stocks underneath… that’s the winning recipe.

That’s how I found the best big-money ETFs for July.

First, I looked at all ETFs making Big Money signals by going to MAPsignals.com and scanning the Big Money ETF Buys and Sells chart. I looked for recent days with heavy buying (the bright blue spikes):

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Once I knew which ETFs Big Money was buying, then I wanted the best opportunities. Remember: ETFs are just baskets of stocks. MAPsignals specializes in scoring more than 6,000 stocks daily. Therefore, if I know which stocks make up the ETFs, I can apply the stock scores to the ETFs. Then I can rank them all strongest to weakest.

Once the ETFs were sorted, I noticed Real Estate funds at the top. That’s why this month the top ETF is IYR.

#1 IYR – iShares U.S. Real Estate ETF

As we can see- there was a lot of Big Money buying plowing into this ETF over the last year. It accelerated noticeably since February:

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IYR holds some great stocks. One fine example is PLD (Prologis, Inc.). Below are Big Money signals for PLD:

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#2 BOTZ – Global X Robotics & Artificial Intelligence ETF

A.I. and Robotics are undoubtedly a huge part of our future. Big Money thinks so too. Look at the buying of BOTZ over the last year below.

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One great example stock that BOTZ holds is Intuitive Surgical. They make the surgical robot called DaVinci. It allows remote surgery- a phenomenal technology.

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#3 VDE – Vanguard Energy Sector ETF

Energy was an unloved sector last year. But it’s having a sudden resurgence. Big Money has been buying VDE:

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VDE holds a bunch of great energy stocks. One such stock that has been a Big Money darling in the past is FANG which is seeing a rebirth:

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#4 LIT – Global X Lithium ETF

Like it or not, lithium is the power of the foreseeable future for EVs. Look at all that green last year:

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And LIT holds some great stocks. One of them is the best-known EV manufacturer which is very reliant on lithium: Tesla Inc.

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#5 ARKQ – ARK Industrial Innovation ETF

The media has recently heaped scorn upon Cathie Wood, CEO of ARK Invest after she was Wall Street’s darling last year. The proof is ultimately not in the headlines, but in the Big Money buying. Here we can see clearly that Big Money loved ARKQ last year. The question is: when we see selling (red) should we worry?

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The answer lies in which stocks the ETF holds. And ARKQ holds some great ones. One such outlier is Teradyne:

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Let’s summarize here: the top 3 ETFs (IYR, BOTZ, and VDE) for July score well in terms of MAPsignals’ scores. That means Big Money has been pouring into them:

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LIT and ARKQ however, rank lower on our list of ETFs. This is because of weak technicals. These weaker ETFs represent great potential bargains.

So, there we have the 5 best ETFs for July.

The Bottom Line

IYR, BOTZ, VDE, LIT, & ARKQ represent top ETFs for July 2021. Real Estate, Energy, and Robotics stocks have performed well lately, which should continue. Lithium has an interesting story 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 in TER in managed accounts, but no positions in IYR, BOTZ, VDE, LIT, ARKQ, PLD, ISRG, FANG, or TSLA at the time of publication.

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

Investment Research Disclaimer

Best Growth Stocks June 2021

The hallmark way we go about finding the best stocks…the outliers, is by looking for quiet Big Money trading activity.

Oftentimes, that can be institutional activity. We’ll go over what that looks like in a bit. But, the 5 stocks we see as long-term candidates are SQ, CYBR, TTD, NOW, & FIVE.

For MAPsignals, we believe the true tell on the near-term trajectory of the stock lies in the trading activity of the stock. The bottom line here is that oftentimes the manner in which a stock trades can oftentimes alert you to the forward fundamental picture more so than by simply looking at a company’s financials alone. We want the odds on our side when looking for the highest quality stocks.

Up first is Square, Inc. (SQ), which is a leading point-of-sale company. They help businesses seamlessly transact with their consumers. They also own the popular Cash App.

When we decide on the strongest candidate for long-term growth, we consider many technical areas important. Square has been pulled lower like many Technology stocks:

  • YTD performance (-6.65%)
  • YTD underperformance vs. technology ETF (-9.91% vs. XLK)
  • Historical big money signals

Just to show you what our Big Money signal looks like, have a look at all of the top buy signals SQ has made recently. It’s had a strong chart over the past few years, too. Green bars are showing that Square was likely being bought by a Big Money player according to MAPsignals. It’s clear there’s a lot of green historically with this stock. That’s exactly what you want to see when looking for a great growth name.

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

On top of technicals, you need to look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Square’s numbers have been strong:

  • 3-year sales growth rate (+64.45%)
  • 3-year earnings growth rate (-.66%)

Next up is CyberArk Software, Ltd. (CYBR), which is a leading cyber security company. The stock has been a huge winner over the years.

When we decide on the strongest candidate for long-term growth, we look at technicals. Sometimes a pullback is healthy. Here’s where CYBR stacks up:

  • YTD performance (-25.83%)
  • YTD vs. technology ETF (-29.09% vs. XLK)
  • Historical big money signals

While the stock has underperformed recently, look below. These are the top buy signals CyberArk has made since 2015. Clearly the Big Money has been consistent for years:

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

On top of a great long-term technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, CyberArk has solid fundamentals:

  • 3-year sales growth rate = +21.53%
  • 3-year earnings growth rate = +34.3%

Another growth name to consider is Trade Desk, Inc. (TTD), which is a online advertising platform. The stock has been in beast-mode for years.

When we decide on the strongest candidate for long-term growth, we want to see a history of big money buying the shares. TTD has that. Also, the shares have pulled back massively in 2021:

  • YTD performance (-36.52% vs. SPY)
  • YTD underperformance vs. software ETF (-32.64% vs. IGV)

Below are the big money signals TTD has made since 2016. That’s a chart of a rocket:

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

On top of a strong technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. Trade Desk’s revenue growth rate is impressive. I expect earnings to rebound in the coming years:

  • 3-year sales growth rate = +39.94%
  • 3-year earnings growth rate = +65.72%

Number 4 on the list is ServiceNow, Inc. (NOW), which is a leading enterprise cloud computing solutions company. The shares have been in bull-mode the past couple of years.

When we decide on the strongest candidate for long-term growth, we consider many technical areas. ServiceNow has pulled back like many Tech names:

  • YTD performance (-16.93%)
  • YTD underperformance vs. software ETF (-13.05% vs. IGV)
  • Historical big money signals

Below are the big money signals NOW has made since 2015:

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

On top of the technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, NOW has been growing nicely:

  • 3-year sales growth rate = +32.73%
  • 3-year earnings growth rate = +.49%

Our last growth candidate is Five Below, Inc. (FIVE), which is specialty discount retailer. They have been growing rapidly for years.

When we decide on the strongest candidate for long-term growth, we consider many technical areas important to success with a few for FIVE being:

  • YTD performance (+5.56%)
  • YTD outperformance vs. discretionary sector (+.22% vs. XLY)
  • Historical big money signals

Below are the big money signals Five Below has made since 2015. You can see how powerful the performance has been:

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

On top of the technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. Five Below has grown over the past few years:

  • 3-year sales growth rate = +15.55%
  • 3-year earnings growth rate = +10.53%

The Bottom Line

SQ, CYBR, TTD, NOW, & FIVE represent top growth stocks for June 2021. Given the strong historical revenue & earnings growth, and multiple big money buy signals, these stocks could be worth extra attention.

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

Disclosure: the author holds a long position in SQ in personal accounts, but no positions in CYBR, TTD, NOW, & FIVE at the time of publication.

Investment Research Disclaimer

The $217 Million Dollar Pizza: Don’t Let These 3 Stocks Get Away Like Bitcoin

Price is what you pay, value is what you get.

The infamous Warren Buffett quote sums up investing vs trading perfectly.

The short-term trade is all about instant gratification. Take a pizza for instance. We all know it’s bad for us, but it tastes so good. Maybe that’s why Americans eat 3 billion pizzas and spend $38 billion on them each year.

Short-term trades feel great when we win, just like pizza feels great going down. But later, that pizza might not feel so great. And long-term, we know it clogs arteries and does all sorts of other damage. So, when we tee-up a quick trade poised to clip a profit, the greed center of our brains is hoping to get to the pleasure center.

Short-term traders are often looking for free money.

Maybe this was what Laszlo Hanyecz was thinking on May 22nd, 2010. He was hungry and bought two pizzas in Jacksonville, Florida. Only he made the first real-world bitcoin transaction paying 10,000 BTC for them. Surely, at the time it felt like free money – or rather – free pizza. Who foresaw bitcoin’s future?

Maybe the pizza seller did. Because now those two pizzas are worth $217 million each.

If ever there was an example of someone who likely regretted the short-term trade and wish they’d held for the long-term, it might be poor Laszlo.

There are two sides to every coin (except perhaps bitcoin). What the short-term trade offers in terms of quick excitement, the long-term trade severely lacks. Buy-and-hold investing has a stuffy stigma. Let’s face it, being patient and waiting years for monster gains is boring. Not many want to do it.

That is until one looks up 5, 10, or 30 years from now at someone else’s successful long-term investments.

Imagine you had sold 2 pizzas for 10,000 bitcoins 11 years ago. And then never did anything with the cryptocurrency. Naturally, you’d have forgone a fast in-and-out trade trying to clip a few percent. You also would need the long-term view on bitcoin’s potential. But had you done nothing, you would have turned roughly $16 bucks into nearly half-a-billion dollars.

That, my friends, is the power of long-term investing.

At MAPsignals, we see the investing-world through the lens of stocks: specifically, outliers.

What’s an outlier?

An outlier stock is a stock that makes insane gains, more than most other stocks. Professor Hendrick Bessembinder proved that for the past nearly 100 years, only 4% of all stocks accounted for 100% the gains above treasuries. That 4% represents the outliers.

If you missed the bitcoin boat, don’t worry- I did too. But I did catch some monster outliers that helped me get closer to my long-term investing goals. And today, you’re in luck, because I’m about to share 3 outlier stocks with close ties to bitcoin and cryptocurrency. These stocks represent a great way to own awesome businesses, and simultaneously get exposure to cryptocurrency.

Nvidia Corporation (NVDA)

NVDA is a Technology stock focused on specialized semiconductors. It has great sales and earnings growth and a juicy 62% gross profit margin. It has reasonable debt levels and a reasonable P/E ratio. Their chips are popular with bitcoin miners.

Now, let’s take a look at the Big Money data. What’s that? We have a process that looks for high-quality stocks seeing buy activity in their shares. Only the best ones show up on our weekly Top 20 reports.

What we want to see is a repeat offender. Look how Nvidia has been a Big Money magnet over the years:

Times on the Top 20 since July 1st, 2014: 54

Outlier status: OUTLIER

First signal: 2000-06-05

Performance since first signal: +5433.85%

Here’s a chart of all of those rare signals:

 

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

Next up is PayPal Holdings, Inc. (PYPL)

PYPL is a Financials stock focused on Consumer Finance Services. It has great sales and earnings growth and a juicy 55% gross profit margin. It has reasonable debt levels and a reasonable P/E ratio. They also own the popular digital payments app, Venmo.

Recently, PayPal has allowed their users (and Venmo users) to transact in bitcoin.

Now, let’s look at the Big Money profile for PYPL.

BIG MONEY DATA:

Times on the Top 20 since July 1st, 2014: 45

Outlier status: OUTLIER

First signal: 2016-09-20

Performance since first signal: +520.53%

 

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

Lastly, there’s Square, Inc. (SQ)

SQ is a Discretionary stock focused on Retail Industry Software. It has great sales and earnings growth and a juicy 28% gross profit margin. It has high debt levels and a high P/E ratio.

They have point-of-sale technology for merchants and the popular Cash App. The latter allows users to transact in bitcoin.

Let’s look at the historical Big Money profile for Square.

BIG MONEY DATA:

Times on the Top 20 since July 1st, 2014: 12

Outlier status: MATURING

First signal: 2017-10-17

Performance since first signal: +535.82%

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

Here’s the bottom line: If you missed out on bitcoin’s massive run, there are stocks that are correlated to the cryptocurrency’s success. If you’re looking for stock exposure that can benefit from the rise in bitcoin, consider Nvidia, PayPal, & Square.

Disclosure: the author holds long positions in PYPL & SQ in personal accounts and PYPL in managed accounts, but no position in NVDA at the time of publication.

Learn more about the MAPsignals process here: www.mapsignals.com

Disclaimer

https://mapsignals.com/contact/

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

Will Earnings Season Bring Volatility To The Stock Market?

The Commerce Department last week reported that the U.S. economy grew at a +6.4% annual rate in the first quarter, slightly below estimates but still strong. If it would have come in real hot and much higher bears would have pointed to fanning the inflation flames even further.

This mindset of “bad-news-could-be-good-news” is helping to keep the stock market at or near all-time highs. If economic data somewhat disappoints it means the Fed stay dovish and accommodative for longer.

Fundamental analysis

That might be important to keep in mind as April data starting this week is expected to be extremely good. The April Employment Report is due next Friday and with upper-end of Wall Street estimates look for upwards of +1 million new jobs being added. Other key April data next week includes the ISM Manufacturing Index on Monday, and the ISM Non-Manufacturing Index on Wednesday.

employment

If the data comes in better than expected the bears will win the nearby battle and have the upper hand when talking higher inflation and the Fed perhaps tightening sooner than anticipated. So this week could be a bit tricky whereas “disappointing-data” could actually be digested as a win for the bulls and “strong data” a win for the bears.

The earnings calendar is packed again next week with big names including Activision Blizzard, Adidas, AllState, Cerner, Cigna, CVS, Dominion Energy, Enbridge, Etsy, Hilton Worldwide, Moderna, Monster Beverage, Nintendo, PayPal, Peloton, Pfizer, Rocket Companies, Square, TMobile, Wayfair, and Zoetis.

COVID-19

Checking in on U.S. progress against Covid-19, the number of adults that have received at least one dose is around 60%-65%, depending on the source. Global cases continue to rise led by India, where new infections have been hitting new record highs every day for weeks now. The country reported a staggering 380k new infections and 3,645 new deaths on Thursday while less than 10% of the population has been vaccinated.

Bottom line, the global restart will not be synchronized like many bulls had hoped would be the case and global growth may continue to struggle. At the moment the U.S. market doesn’t seem to care. It will be interesting to see if increasing inflation and continued global headwinds will eventually come home to roost.

SP500 technical analysis

SP500 earnings season

Earnings season can bring volatility to the stock market. At the beginning of May, cycles turn to the downside. Note, this is only a timing tool and it never shows the amplitude or strength of the move. When cycles are topping, it means we can expect a move down or choppy trading. This is it.

But relying on cycles only is not a good idea. Insider Accumulation Index shows bearish divergence on a daily chart. At the same time, Advanced Decline Line is still strong. The key resistance is around 4250 at the moment. I believe earning season can bring a profit booking to the stock market. If that happens, watch 4000 – 39500. It was a massive resistance and now it might turn into support. Intermarket Forecast is neutral. But if it turns to the downside, we will finally see a pullback in SP500.

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

Why Shares Of Square Are Up By 8% Today?

Square Video 31.03.21.

Square Shares Move Higher After Analyst Upgrade

Shares of Square gained strong upside momentum after KBW upgraded the stock. Digital payments companies have done well during the pandemic, and Square stock moved from the $60 level at the beginning of 2020 to the highs near the $280 level in February 2021 before pulling back towards $200. Currently, Square shares are trying to settle back above the $230 level.

The market expects that trends which gained strength during the pandemic will stay strong for the long-term, and is ready to pay a material premium for stocks in the growing industries.

Analysts expect that Square will report earnings of $1.22 per share in 2021 and $1.88 per share in 2022, so the stock is trading at 122 forward P/E. However, the market looks beyond 2022 and expects huge growth in the digital space, which provides support to Square shares at the current lofty valuation.

What’s Next For Square?

The market sentiment towards payments companies remains favorable. Established players like Visa, Mastercard and PayPal had a strong 2020 and started 2021 on a strong note, although the recent rise in Treasury yields has put some pressure on these stocks.

Square is trading at a significantly higher valuation than more established companies so it will have to show strong growth to justify current stock price levels.

It should be noted that Square invested $50 million in Bitcoin back in October 2020, and started a new round of cryptocurrency adoption by mainstream players. With Bitcoin near all-time highs, Square shares also attract traders who are willing to be on the rapid development of the crypto market.

At this point, rising Treasury yields present the main risk for Square in the near term as higher yields put notable pressure on high-flying tech stocks. In case Treasury yields stay near current levels, investor enthusiasm towards cryptocurrencies and digital payments in general will serve as a major bullish catalyst for Square shares.

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

Square Drops 10% Overnight

Square Inc. (SQ) reports Q4 2020 earnings after Tuesday’s closing bell, with analysts expecting a profit of $0.24 per-share on $3.1 billion in revenue. If met, earnings-per-share (EPS) will mark flat growth compared to the same quarter last year. The stock rallied nearly 23% after blowing away Q3 2020 estimates in November and has added another 39% in the last three months, carving a series of new highs.

Square Payment Solutions

The company provides digital payment and point-of-sale solutions used by Europay, MasterCard Inc. (MA), and Visa Inc. (V). The stock has benefited from the pandemic, with surging revenue as a result of contactless and tap-based technologies. It also offers a suite of small business software for point of sale, terminals, appointments, restaurants, invoicing, as well as loyalty and rewards programs. Last but not least, it’s benefited from a timely $50 million Bitcoin investment made in October 2020.

Deutsche Bank analyst Bryan Keane raised his target to $330 last week, noting, “Depending on the pace of the recovery and timing of incremental stimulus, we see potential in our upside model for gross profit growth to reach as high as 85% year-over-year in fiscal year 2021, which would represent 40% above consensus and our model (we are conservatively modeling the recovery in our core model). In 2021, we expect SQ to continue delivering strong operating leverage, offset by incremental investments for future growth.”

Wall Street and Technical Outlook

Wall Street consensus translates into an ‘Overweight’ rating based upon 24 ‘Buy’, 2 ‘Overweight’, 16 ‘Hold’, and 1 ‘Underweight’ recommendation. Three analysts now recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $140 to a Street-high $380 while the stock has opened Tuesday’s U.S. session less than $5 above the median $247 target.

Square fell to a two-year low during 2020’s pandemic decline and turned higher, breaking out above 2018 resistance at 101.15 in June. It’s been on a tear since that time, gaining ground within a rising channel that reveals intense institutional sponsorship. The rally paused above 240 in December while a breakout earlier this month posted an all-time high at 283.19. Many shareholders are taking profits ahead of the report, dropping price 10% overnight.

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

Disclosure: the author held no positions in aforementioned securities at the time of publication.

U.S. Market Wrap and Forecast for Tuesday

Weak price action targeted big tech stocks on Monday, dropping Nasdaq-100 to a three-week low. SP-500 posted smaller losses while the Russell-2000 retraced Friday’s trading range, with the outperformance consistent with positive seasonality.  The WTI crude oil contract surged above 61 after Brazil’s strongman installed an army general to run Petróleo Brasileiro S.A. (PBR), one of the world’s largest oil and gas multinationals. That stock fell more than 20%.

Tesla Breaks Down

Tesla Inc. (TSLA) broke support near 780, completed a double top breakdown, and closed below the 50-day EMA for the first time since November. Dow component Apple Inc. (AAPL) fell nearly 3%, dropping into negative 2021 returns. Boeing Co. (BA) initially shook off the 777 grounding, squeezing short sellers after dropping more than 9%, but still closed in the red. Royal Caribbean Group (RCL) acted like a momentum play despite a billion dollar loss, surging to a 52-week high.

Gold had a strong session while Bitcoin faltered, lifting the yellow metal to the highest high in a week. Bonds slumped at 11-month lows while the 10-year Treasury note lifted above 1.3%, renewing anxiety about surging inflation. Kohl’s Corp. (KSS) rose over 6% as activist shareholders tried to take over the boardroom, just ahead of department store earnings that should confirm miserable conditions in America’s shopping malls.

Homebuilders on Tap

Tuesday’s Home Depot Inc. (HD) earnings will set the tone for mega-caps, with the housing boom likely to translate into a strong quarter. NVIDIA Inc. (NVDA) volatility is surging ahead of its Q4 release later this week. Bears could have the final say, given sell-the-news reactions after other chip reports in the last month. Square Inc. (SQ) could also generate fireworks after its report, with the stock glued to an all-time high after massive upside in the last 11-months

Home Depot will provide just one metric in a week chock-full of housing catalysts.  Home price data will also be released in Tuesday’s pre-market, followed by mortgage applications, January new home sales, and Lowe’s Cos. Inc. (LOW) earnings on Wednesday. Existing home sales wraps up the data flood, telling market players to keep close watch on SPDR S&P Homebuilder’s ETF (XHB), which is trading at an all-time high.

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

US Stock Market Daily Recap: The Yield Harbinger for Stocks

That correction I’ve been calling for weeks could have potentially started.

While I don’t foresee a crash like we saw last March and feel that the wheels are in motion for a healthy 2021, I still maintain that some correction before the end of Q1 could happen.

Bank of America also echoed this statement and said last week that “We expect a buyable 5-10% Q1 correction as the big ‘unknowns’ coincide with exuberant positioning, record equity supply, and as good as it gets’ earnings revisions.”

But rather than looking at the past, let’s take a look at what’s on tap this week to get you ready for what could potentially be a volatile week ahead.

This coming week, be on the lookout for the January leading indicator index, durable goods orders, and personal income and spending.

On Tuesday, we will also receive the February Consumer Confidence Index; on Wednesday, the Census Bureau will release upcoming home sales. On Friday, the University of Michigan will release its Consumer Sentiment Index.

Of course, as we’ve seen in weeks past, jobless claims from the previous week will be announced on Thursday too. After outperforming the last few weeks, the jobless claims announced last Thursday (Feb. 18) grossly underperformed and reached their worst levels in nearly a month.

Earnings season has been outstanding but is winding down now. Be on the lookout this week for earnings from Royal Caribbean (RCL) on Monday (Feb. 22), Square (SQ) on Tuesday (Feb. 23), Nvidia (NVDA) on Wednesday (Feb. 24), and Virgin Galactic (SPCE) and Moderna (MRNA) on Thursday (Feb. 25).

We have the makings of a volatile week, and as I mentioned before, a possible correction.

Look. Don’t panic. We have a very market-friendly monetary policy, and corrections are more common than most realize. Corrections are also healthy and normal market behavior, and we are long overdue for one. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017), and we haven’t seen one in a year.

While it won’t happen for sure, I feel like it’s inevitable because of how much we have surged over the last few months.

A correction could also be an excellent buying opportunity for what could be a great second half of the year.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and the end of Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market, will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

Will the Russell 2000 Overheat Again?

Figure 1- iShares Russell 2000 ETF (IWM)

The Russell 2000 popped on Friday (Feb. 19) after seeing a bit of a pullback since February 9. Between February 9 and the close on February 18, the Russell 2000 lagged behind the other indices after significantly overheating. I switched my call to a SELL then on the 9th, and it promptly declined by 3.40% before Friday’s session.

I foresaw the pullback but cautiously saw a rally and switched to a HOLD call before it popped over 2% on Friday (Feb. 19).

I do love small-caps for 2021, and I liked the decline before Friday. However, I feel like the index needs a minimum decline of 5% from its highs before switching it to a BUY.

As tracked by the iShares Russell 2000 ETF (IWM) , small-cap stocks have been on a rampage since November.

Since the market’s close on October 30, the IWM has gained nearly 47.56% and more than doubled ETFs’ returns tracking the larger indices. If you thought that the Nasdaq was red hot and frothy, you have no idea about the Russell 2000.

Not to mention, year-to-date, it’s already up a staggering 16.38%.

It pains me not to recommend you to BUY the Russell just yet. I love this index’s outlook for 2021. Aggressive stimulus, friendly policies, and a reopening world could bode well for small-caps. Consumer spending, especially for small-caps, could be very pent-up as well.

But we just need to hold on and wait for it to cool down just a little bit more for a better entry point.

HOLD. If and when there is a deeper pullback, BUY for the long-term recovery.

For more of my thoughts on the market, such as the streaky S&P, inflation, and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

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

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Bitcoin – The Surge, The Outlook, and The Beneficiaries

Following greater regulatory oversight and disclosure, Bitcoin has drawn the interest of private and public companies in addition to traders and investors.

A number of companies currently have sizeable Bitcoin holdings. Not only have they benefitted from the 2020 breakout but will see even more impressive gains should Bitcoin hit 6 figures this year.

The Beneficiaries

According to Bitcoin Treasuries, a large number of public trading companies have benefited from holding Bitcoin.

These include:

Microstrategy Inc. (“NADQ:MSTR”) – A U.S entity, with a reported holding of 70,470 BTC.

Galaxy Digital Holdings (TSE:GLXY”) – Canadian entity that purchased $134m worth of Bitcoin on 30th June 2020, equivalent of 16,651 BTC.

Square Inc. (“NADQ:SQ”) – U.S entity, with a reported holding of 4,709 BTC.

Hut 8 Mining Corp. (TSX:Hut-8”) – Canadian entity, with a reported holding of 2,953 BTC purchased in Q2, 2020.

Private Companies

MTGOX K.K – Japan private entity, with a reported 141,686 BTC holding.

Block one – U.S private entity, with a reported 140,000 BTC holding.

The Tezos Foundation – Swiss private entity, with a reported 24,808 BTC holding.

Stone Ridge Holdings Group – US entity, with a reported 10,889 BTC holding.

In addition, there are ETF like entities holding Bitcoin, where institutional and private investors have benefited from the Bitcoin surge.

The largest Bitcoin holders include:

Grayscale Bitcoin Trust – A U.S entity holding a reported 572,644 BTC

CoinShares / XBT Provider – An EU entity holding a reported 69,730 BTC.

Ruffer Investment Company – A UK entity holding a reported 45,000 BTC.

While some entities are established and directly involved in the crypto markets, other Bitcoin holders are not.

With Bitcoin price stability having returned after the slide to the 2020 low of $4,000, the upward trend has drawn sizeable institutional money.

In considering the more than 700% surge since the March low, balance sheets for these entities would have seen marked improvement.

Looking ahead, the number of entities is likely to increase. Existing Bitcoin holders are certainly well placed to reap greater rewards. Existing holders will also benefit from a significantly lower risk of being Bitcoin holders.

Looking Ahead

There have been plenty of Bitcoin price projections for 2021 flying around. When considering the upward surge from last year’s low of $4,000, $100,000 would be a conservative price forecast for 2021.

The largest reported public company Bitcoin holder, Microstrategy Inc., would see its Bitcoin holdings of 70,470 surge in value to $7.05bn. As of the end of 2020, its Bitcoin holding was valued at approximately $2.04bn.

Galaxy Holdings, the 2nd largest public company Bitcoin holder would see its $134m BTC investment hit the dizzying height of $1,665.1bn. With a current market cap of C$1,014bn, a Bitcoin visit to $100,000 would double the companies market cap. Not a bad return for shareholders…

Private companies have an even more impressive exposure to Bitcoin and have seen unprecedented rewards from their Bitcoin holdings.

Japan’s MTGOX K.K., would see its Bitcoin holdings rise from $1.1bn to $14.2bn should Bitcoin reach $100,000 in the year ahead.

Finally, looking at the Bitcoin ETFs, Grayscale Bitcoin Trust reportedly holds 572,644 BTC. A Bitcoin jump to $100,000 in 2021 would give Grayscale and its investors $57.3bn in Bitcoin investment income.

Investor Returns

For investors that have no direct exposure to Bitcoin, indirect benefits to Bitcoin’s newfound strength will boost returns.

Shareholders may also look to pressure companies to rejig balance sheets and have some exposure to Bitcoin. Short and long-term bonds and cash holdings may not cut it anymore.

There are fiduciary obligations, however. So, we may not see public and private companies purchase Bitcoin in the numbers seen to-date.

Few shareholders would complain about the likely dividends that would result from a Bitcoin surge to $100,000.

Downside risks are ever-present, however, and the more risk prudent investor will be mindful of the impact of any Bitcoin meltdown.

The good news, for the companies discussed above, however, is that Bitcoin would need to take quite a hit to give them a Bitcoin loss.