Seeker Newsletter - Week of Aug 17th 2020

Good Morning,

I hope everyone had a great weekend and is ready for the start of a new week! If any of you are from California like I am, I hope you stayed cool because it was an incredibly hot weekend.

The number of subscribers has grown exponentially each and every week, and I appreciate hearing from those of you that have emailed or messaged me on Twitter regarding the newsletter.

As we continue to grow, let me hear from you on what you would like to see more or less of in the newsletter and I will do my best to accommodate as I see fit.

OK, let’s get started!

Stock Market Update

We are now primarily through earnings season with some retail numbers set to come in this week. Q2 earnings were as expected, TERRIBLE.

How Q3 will be is the big unknown. You have many of the stay at home stocks cooling a bit in recent weeks and value stocks making some more noise.

The way things will play out this week could be anyone’s guess, but I am going to do my best to see if we can make you some money.

Here is the latest performance from the 3 major averages:

YTD/Previous Week:

Dow: -2.2% Dow: +1.8%

S&P 500: +4.4% S&P 500: +0.6%

Nasdaq: +23.1% Nasdaq: +0.1%

The middle of the week saw the Nasdaq drop as much as 2%, but it ended up recovering and finishing flat on the week.

Mega tech stocks Amazon (AMZN), Netflix (NFLX), and Facebook (FB) were all negative on the week.

Investors got a peak at what popular hedge fund managers were buying during the second quarter. Here are a few of the notable buys from some top managers.

Warren Buffett

Buys 5.8 million shares of STORE Capital (STOR)

Buy 3 million shares of Kroger (KR)

Sold ALL shares in Airline holdings (DAL, LUV, AAL, UAL)

Bill Ackman

Increased leading position in Lowe’s (LOW) by 4%

Increased position in Restaurant Brands International (QSR) by 66%

Sold ALL shares in Warren Buffett’s Berkshire Hathaway (BRK.B)

David Tepper

Bought $614 million in T-Mobile (TMUS)

Bought $274 million in AT&T (T)

Bought $162 million in Visa (V)

Bought $161 million in Mastercard (MA)

Bought $152 million in Paypal (PYPL)

Bought $134 million in The Walt Disney Co (DIS)

Sold 83% of Tesla (TSLA)

Sold ALL of Boeing (BA)

David Tepper was very busy during the quarter making some key investments in many dividend stocks, which was encouraging.

The S&P 500 still looks very stretched in terms of valuation with the P/E ratio now sitting at 29x. It is hard to see what the next catalyst will be to take another leg higher now that Q2 earnings are behind us.

The market has had an INCREDIBLE rebound, but in all reality, a breather is not only expected but necessary, it is the sign of a healthy market.

Just this past week and into the weekend, there were reports that China was not holding up there end of the trade deal. This will certainly not improve the poor relationship between the two countries as tensions have already risen again of late, due in part with what is taking place in Hong Kong.

Being with where we stand from a valuation perspective combined with the uncertainty surrounding us in Q3, ensure you do your full due diligence before investing. I do believe there are plenty of opportunities still in the value sector, but we have to search a little.

Watchlist

Here are a few stocks on my watchlist this week:

1) AbbVie Inc. (ABBV) - This stock is going to remain on our watchlist largely due to the technical setup we are seeing. We already know from a fundamental standpoint the stock is still relatively cheap trading at 7.8x forward earnings.

Here is the chart for ABBV along with my levels.

Right now the stock is trading at $95.07 with an RSI of 48 and a MACD about to converge. These are all STRONG indicators of a move higher.

Looking at the chart the purple lines going across are my “levels.” Levels are support and resistance lines. The next resistance level is right around $95.70, and if the stock can clearly push above that and hold, I expect ABBV to run back up to the $98+ levels.

If the stock breaks through resistance I think that is a great entry point.

2) Home Depot (HD) & Lowe’s (LOW) - I am grouping both of these stocks together as they are both expected to release earnings this week. HD releases Tuesday morning and LOW releases Wednesday morning.

Both of these home improvement retailers have benefited tremendously with many consumers stuck at home looking to make good on those home improvement projects they have been holding off on.

I will be more focused on Lowe’s being that they reported a STELLAR quarter the quarter prior as they continue through the transition under the leadership of former HD executive Marvin Ellison.

Both companies look expensive at current levels with HD trading at a P/E of 28x and LOW trading at a P/E of 25x, both above their five-year averages. The charts tell a similar story with both stocks being in overbought territory, indicating overvalued from a technical standpoint.

Here is the HD chart with updated levels.

As you can see, HD is trading at an All-Time High in terms of stock price and the RSI is at an EXTREME level of 78. This is a chart that is screaming for a pullback. Any disappointment in earnings or guidance could help us get the pullback we are looking for.

I cannot buy at current levels. I am going to be patient and wait for $150-$160 range, which is between the 50 & 100 day moving averages.

Like HD, LOW is also trading at an All-Time and an RSI above 70. The stock is priced to perfection. I am going to take a wait and see approach with earnings on tap, but I will be very interested in how the company performed during the quarter and what they expect moving forward.

US Economic Data

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

8/18 - Housing Starts & Building Permits

8/19 - Federal Reserve Minutes

8/20 - Initial & Continuing Jobless Claims

8/21 - Existing Home Sales

8/14 - Consumer Sentiment

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:

BUY 5 shares of Crowdstrike (CRWD) at a cost of $96.83. This purchase adds no dividend income.

BUY 22 shares of AbbVie Inc (ABBV) at a cost of $94.85. This purchase adds $104 of annual dividend income.

Here is an updated look at the current portfolio:

I have built the portfolio annual dividend income to nearly $500 already, resulting in a dividend yield of over 5% for the portfolio.

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 20 FIVE STAR reviews.

I hope you enjoyed the newsletter this week. Let me know your thoughts!

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

Regards,

Mark