What is up with all the dancing videos?
Can someone stop the dancing videos? There are dancing videos on TikTok… LinkedIn… videos from last night’s hockey games.
What did I say when Momentum turns red in the market?
Seriously. Stop dancing…
The music has stopped for now. We’re back in heavy cash as the Federal Reserve prepares for its rate decision tomorrow…
When the music turns back on – and it will – we want to have a list of stocks to buy and trade when momentum turns green.
That’s why I recommend the following list…
Our Perfect Stocks for May 2023.
The Perfect Plays
The S&P 500 momentum is negative…
Broad momentum is negative.
So, we don’t actively make trades during this period.
But we want to have a list… and we start with these three rules.
- The Piotroski F-Score
- The Altman Z-Score
- A valuation rank
What are they?
We start each screen by focusing on improving financial growth and low debt exposure – and the F-Score tells both. This is a score created by former Stanford/Chicago Professor Joseph Piotroski.
The F-Score (or Piotroski Score) is a NINE-POINT system that rewards each company for meeting a certain criterion on its balance sheet.
If the company meets all nine criteria, it has an F-score of 9.
Then, there’s the Altman Z-Score.
It’s a weighted average of five metrics to determine whether a company might go out of business.
So, if a company falls below 2.6, it has a risky balance sheet. Why is it risky?
There are large debt loads or weak cash flow. Simple as that.
As always, I want to find stocks with a Z-Score of 3 or higher. I don’t know what’s coming in 2022, let alone 2023. I want to ensure that I’m protected if a major credit event transpires.
They tell us RIGHT NOW what is working in the U.S. economy.
Finally, I add on a quick valuation score. We want stocks trading at cheap buyout multiples… It’s as simple as that.
So, let’s get to the list. What do you say?
Perfect Stocks for May 2023
Here we go…
The downturn in energy prices on Tuesday has spooked a lot of investors from jumping back into the names like XOM, COP, VNOM, VLO, and MPC.
But these companies are exercising incredible shareholder support and financial discipline in this difficult environment. They’re buying back stock, increasing their return on assets, reducing debt, and doing everything necessary to maximize shareholder value.
Elsewhere, we’re seeing housing and fertilizer companies exercising the same restraints in challenging economic circumstances.
When momentum turns positive (and we see a solid rebound in the equity markets), these will be among the names that experience a sharp uptick of institutional flow.
We’ll discuss how to trade these names tomorrow – especially in a negative momentum environment. In addition, I’ll join Don Yochem live tomorrow at 11am ET to discuss the state of the markets during “Roundtable.”
Tomorrow’s Agenda
Tomorrow, we’ll break down the speculation around a possible “Market Crash.” I know Don’s talked about it. But Scott Welsh has a very simple indicator that has predicted every major turn for a bear market. He’ll show us what it is and what it means.
Around the globe, economic growth is terrible. The IMF has reduced its outlook for growth at less than 3% for the year. It shows that printed money isn’t a solution to crisis.
Tomorrow, I’ll talk about the current debt ceiling debate and what the future holds for the central money printers trying to pull the world out of a possible global recession.
Finally, we have to discuss the state of banks, hedge funds, and the Fed Open Market Committee.
A 25-point hike is likely, but there is a debate brewing about the timing of cuts (or another possible hike).
We’ll talk about the coming wage report on Friday and how it will impact the Fed’s policy decisions moving forward.
Join us for “Roundtable” at this link at 11am ET sharpish: https://prosperitypub.com/roundtable
Looking forward to seeing you there.
To your wealth,
Garrett Baldwin
*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
Market Momentum is Red
Momentum turned negative on Monday, and the markets experienced a dramatic downturn that saw support around the 4,090 level for the S&P 500. We remain hedged as hedge funds continue to engage in a brutal short assault on the banking sector. That said, banks look rather secure – and it’s just a matter of time before we emerge from this crisis.
