Seeker Newsletter - Week of Aug 10th 2020

Good Morning Seekers,

I hope everyone had a great weekend and is ready for the start of a new week! Today, you will be receiving the FIRST Seeker Newsletter on Substack since I made the transition. Let’s get started!

Stock Market Update

We are roughly 90% through earnings for S&P 500 companies and it has been a quarter to forget. For companies that have reported, earnings during the quarter have slipped roughly 40% from prior year, one of the worst periods since the financial crisis.

Here are the latest returns from the 3 major averages:

YTD: Previous Week:

Dow: -3.87% Dow: +3.8%

S&P 500: +3.73% S&P 500: +2.4%

Nasdaq: +22.72% Nasdaq: +2.5%

The end of the week we saw some major weakness in many of the high flying tech names that have led the charge for awhile now. Tech names such as FSLY, TDOC, and LVGO were all under pressure to end the week.

TDOC announced the acquisition of LVGO, which was part of the reason those two were under pressure. The company acquired Livongo for an estimated $18.5 billion.

A lot of uncertainty in the market with the US elections within three months and rising tensions between the US and China. Besides that, we continue to deal with a pandemic that has not slowed, yet the S&P 500 is valued at a P/E ratio of 28.8x.

The current S&P 500 valuation is at the highest level in the last decade. The average P/E ratio for the S&P 500 is 15x.

With Tech taking a breather, we saw a move higher for value related stocks and REITs to end the week. Let’s watch to see how things start today. During this rebound, we have seen the technology pullbacks to be very short lived.

Watchlist

Here are a few stocks on my watchlist this week:

1) AbbVie Inc. (ABBV) - AbbVie is a pharmaceutical company with the #1 selling drug in the world, Humira. The drug is patent protected in the US until 2023, but has already lost protection in Europe. However, the company has a strong pipeline of up and coming drugs, in addition, they closed their acquisition of botox inventor Allergan during the most recent quarter. The stock trades at a crazy Forward P/E of 7.6x.

2) Cisco Systems (CSCO) - Cisco systems is an overlooked technology name that could be benefiting greatly from this pandemic. CSCO has a similar product as Zoom video (ZM), which has taken the corporate world by storm. Cisco’s Webex was actually around before and was discussed in the company’s recent earnings call in May when CEO Chuck Robbins stated that Webex was running at 3x the capacity as they were in February. The company reports earnings on Wednesday 8/12 After the close. CSCO pays a 3% dividend and trades at an earnings multiple of 14.7x.

3) Simon Property Group (SPG) - For any of you that have followed me on Twitter for awhile now, you know I am a fan of SPG. Simon Property Group is the most well run mall owner in the world. The company is flooded with the top performing malls all over the US, which is why they will survive this pandemic one way or another. SPG reports earnings After the close today, so I will stay tuned to hear the results and see if we get a better buying opportunity on Tuesday. I have been buying small lots throughout the past few months. Simon pays a 8.4% dividend, and that is even after being cut a few months ago, and trades at a P/FFO of 5.3x.

Here is a look at the earnings calendar for the week:

US Economic Data

Here are some important economic data releases to watch this week.

8/12 - Consumer Price Index

8/13 - Initial and Continuing Jobless claims

8/14 - Retail sales

8/14 - Industrial Production

8/14 - Consumer Sentiment

Over the weekend, President Trump took Executive action to extend the unemployment benefits, but dropped the weekly amount from $600 to $400. Congress had been deadlocked on making a deal. President Trump has stated that 25% of the cost will come from the states. We will have to see how this impacts jobs returning.

Seeker Portfolio

The Seeker Portfolio was started at the beginning of August with $10K as a way for many of you to follow along on building a portfolio and the moves I am making.

• Additions this week:

Sold 1 8/21 $90 Put in shares of AbbVie Inc. (ABBV) at a premium of $0.70

I received a premium of $70 for writing the put. Let me briefly explain this move. Writing a Put is a bullish move, and what it does is the person buying it from me is paying me $70 for the option. The expiration date is 8/21. If the stock moves BELOW $90, the buyer of the option can sell me his ABBV shares for $90. However, if the stock stays above $90 through the expiration date, I keep the premium paid to me.

I am making the move because I like ABBV shares around $90 and I have no issue owning them there. Instead of waiting to see if shares fall that low, I used options to collect premiums in the case it does not.

BUY 24 shares of Cisco Systems (CSCO) at a cost of $47.25. This purchase adds $35 of annual dividend income.

BUY 5 shares of Crowdstrike (CRWD) at a cost of $101. This purchase adds no dividend income.

Here is an updated look at the current portfolio:

Chart Reading

Before I leave, I am going to drop a few charts for you to look at as I have been getting some questions during the week regarding chart reading. I plan on doing a Thread this week explaining more.

Here is chart #1 on ABBV.

The indicators I am using are RSI, which tracks momentum of the stock. A reading between 30 and 70 is usually a range you want to buy. This indicator can give you an idea on when a stock is overbought (above 70) or oversold (below 30).

Right now ABBV shares are trading at levels last seen in March with an RSI of 36. The middle box is the candlestick chart with EMA of 20/50/100/200 days. These track average prices for those days.

As you can see in the chart, above the big blue arrow I added, the stock is finding support along the 100 day EMA. If shares fall below that, next support levels would be around $89. The purple lines are support and resistance lines I added based on where the stock had found resistance and support in the past.

The final indicator you see in this chart is the MACD. This indicator is a trend following indicator between two averages. Right now the MACD is moving lower, which is more bearish, but if the stock truly finds support at the 100day EMA above, we could see the MACD swing. When I see the blue line crossover the orange line and start moving higher, this usually is a bullish indicator.

The next chart I will show you is that of CSCO.

In the CSCO chart we see the RSI at 55, which is about middle of the road, which is fine. MACD is also pretty flat and not really telling us much. Where I am getting a big hint is in the price chart.

As you can see, I have highlighted a red triangle based on how the shares have been trading. This pattern is better known as an ascending triangle. This is formed when a stock make higher lows while consistently meeting the same resistance, and that is what has been taking place. We are coming to a point where is the stock can break through the resistance level of $48.28, we could see the stock move back above $50.

Reading charts takes time, so do not get down on yourself if you do not fully understand. I am still learning different areas of reading charts and utilizing different indicators. If you have questions, please email or DM me.

Invest In Yourself

Looking to understand more on how I make my trades, check out my book on Dividend Investing where I breakdown the basics for new investors.

Dividend Investing: The Secret To Building Lasting Wealth

The book now has 18 FIVE STAR reviews.

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I hope you all have a GREAT week

As always, if you have any questions at all, please feel free to DM me on Twitter or simply email me at [email protected], I enjoy hearing from you and answering questions.

Regards,

Mark

aka Dividend Seeker