Seeker Newsletter - Week of Sept 7th 2020

Good Morning,

I hope you all are having a great holiday weekend here in the US. The US markets are closed today (unfortunately), but it gives us an extra day to prepare ourselves for the big week ahead.

We are coming off a week in which we saw the Volatility Index (VIX) increase over 30% to a reading over 30, suggesting rougher waters are ahead for the markets.

With many new investors in the market the past few months, this will be the first test of volatility they go through, which could add fuel to any sell-off we may see.

Let’s dive into the market ahead.

Stock Market Update

The stock market has been running hot the past few weeks with valuations looking more and more stretched, as I have discussed in my weekly newsletter. The S&P 500 has historically traded at a Price to Earnings multiple of 15x and is currently trading at a multiple of 29.5x, nearly double its historic valuation.

In last weeks newsletter I discussed the Tesla & Apple stock-split that was officially taking place during the week. During the week, we saw shares of TSLA and AAPL fall 5.6% and 2.4%, respectively.

Many ultra growth technology companies sold off during the week, names that have been running straight up since the pandemic hit the US. Even with the pullback, many of those growth names are still trading at a large premium, which makes me think more weakness is in store this week.

We have a few big growth names due to present earnings this week in Slack Technologies (WORK), Lululemon (LULU), Chewy (CHWY), and Peloton (PTON).

The focus of investors will be on these few earnings releases as well as Washington DC, as Congress returns from recess. Congress is still at major odds in terms of more coronavirus aid to the millions still on unemployment and business still struggling to stay afloat. Any agreement on additional aid would be a catalyst for the markets to once again turn higher.

My advice this week is to keep your watchlist tight and look for opportunities on strong pullbacks. Layer into the positions via dollar cost averaging.

With that being said, let’s take a look at the market performance for the major averages.

YTD/Previous Week:

Dow: -1.4% Dow: -1.8%

S&P 500: +6.1% S&P 500: -2.3%

Nasdaq: +26.1% Nasdaq: -3.3%

As you can see above, the Dow Jones fell back into negative territory for the year and the Nasdaq fell 3.3% in the week, which was attributed to some strong pullbacks from the technology sector.

Here are a few high-growth stocks that had sizable pullbacks the last three days of trading last week:

Crowdstrike (CRWD): -17%

Zoom Video (ZM): -23%

DocuSign (DOCU): -22%

Fastly (FSLY): -23%

Tesla (TSLA): -19%

Salesforce (CRM): -13%

These are just a few of the names that saw sharp pullbacks to close the week. The crazy part is the fact that 3 of these names ended the week in the positive, ZM, CRWD, and DOCU.

We did see some transition from growth to value, but still not a HUGE rotation that many economists have been calling for. REITs that I own and follow did see a nice bounce during the week, which tells you investors are looking for yield and some safety heading into the fall.

Much uncertainty surrounds the markets right now, which is never good. We currently have an upcoming election which seems to be a dead heat currently. We have uncertainty surrounding the next stimulus package. We have uncertainty around another rift with China.

We will still be watching to see if a sale of Tik Tok takes place this week either. BIG (short) week ahead. Keep your charts up to date, your watchlist ready, and be ready to jump on opportunities you see fit.

I will be discussing opportunities that work for me in my Quick Picks segment tomorrow morning, so be on a look out for that.

Watchlist

Here are a few names I will be watching this week.

$JNJ $ABBV, $CVS, $RTX, $LMT $GD, $T, $TDOC, $MSFT, $V, $NNN

The Defense sector continues to look undervalued to me and will most likely remain this way until we get clarity on the Presidential election, which most likely won’t come until election day. However, this continues to be a big area of investment for our country and allies and will remain pillars for years to come.

ABBV and JNJ are looking intriguing at current levels, both being strong dividend stocks. CVS is a name this is trading below recent historic valuation levels and the chart looks solid, I will be taking a closer look at this name with you tomorrow.

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. I transferred another $10K into the account two weeks ago, so we are up to $20K now. This past week I was actually quite busy adding some positions to our portfolio.

• Additions this week:

BUY 12 shares of Avalonbay Communities (AVB) at a cost of $161.06. This purchase adds $76 of annual dividend income.

BUY 23 shares of Vanguard High-Yield ETF (VYM) at a cost of $83.15. This purchase adds $77 of annual dividend income.

BUY 43 shares of iShares Dividend Growth ETF (DGRO) at a cost of $41.00. This purchase adds $43 of annual dividend income.

BUY 31 shares of AT&T (T) at a cost of $29.38. This purchase adds $64 of annual dividend income.

BUY 8 shares of Teladoc Health Inc. (TDOC) at a cost of $195.00. This purchase does not add any dividend income.

• Positions Sold this week:

SOLD 5 shares of Crowdstrike (CRWD) at $143.75, which netted us a profit of $235.98. The stock had run up so strong, I decided to take a little off the table and raise some cash to make some of the purchases we made, prior to CRWD reporting earnings last week. The timing proved to be perfect in the near-term, but I still like the company long-term.

Here is an updated look at the current portfolio:

I am liking where we are at with the portfolio. The portfolio is well diversified between ETFs, Dividend stocks, both high-yield and dividend growth stocks, and growth names with the likes of TDOC and CRWD.

I have $600 available to use right now, so I will need to see if I can free up some more cash to transfer in since I believe we will see some good opportunities this week.

The portfolio is now projected to earn $823.70 in annual dividends and has a portfolio dividend yield of 4.14%. My goal is to reach $1,000 in projected annual dividends by the end of this month.

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

Have a great week!

Mark