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- The Dividend Investor's Edge Newsletter - March 21st 2022
The Dividend Investor’s Edge is a weekly newsletter designed to give you the investor a full picture of where the stock market is, and to equip you with important information I came across during the week, and what to look for in the week ahead, all constructed in an easy to understand format.
This newsletter is designed for investors of all levels.
Each Week I will discuss:
• An update on the Stock Markets major averages
• Stock Market: On The Horizon
• Notable Upgrades/Downgrades
• Dividend News
📈 Quick Look At The Markets 📉
As a reminder or for those of you new readers, in the “Quick Look At The Markets” section I plan to give you a recap on the prior week for the S&P 500 as a whole as well as the top performing and worst performing sectors. In addition, I will touch on volatility and fear, which are important factors to consider when investing.
Great to be back with you after taking a week off due to a passing in the family. I wanted to take a moment to thank you all for reading this weekly newsletter, as many of you have reached out and expressed your appreciation and given me some ideas to improve the newsletter moving forward.
In terms of the market, the past week was the best performing week of the year thus far, so your portfolio should have clawed back some nice gains after what has been a roller coaster of a year through the first two and half months of the year.
Although the markets had a good week, consumers are still reeling from high inflation and extremely high prices at the pump. The Fed this past week made their first rate increase since 2018, with five to six more hikes expected on the year. I am not sure they will raise rates that many times, but they are hoping to slow inflation quickly.Either way, consumers are not expected to see much change in the near-term.
Looking at the heat map below, there was much more green acrosss the board than we have seen all. year, which was a welcome sign for investors. Year-to-date the S&P 500 is still down 7.0%, even after climbing 6.2% last week.
Here is the last weeks heat map for the S&P 500:
Top Sectors For The Week
Consumer Discretionary +9.27%
Information Technology 7.87%
Financials 7.14%
Worst Sectors For The Week
Energy -3.58% (Only sector in red last week)
Fear Factor
Volatility levels collapsed last week, which was evident in the big jump we saw from the S&P 500 index. After multiple weeks of high volatility, we are seeing the vix levels return towards normal.
Fear and uncertainty is often expressed in the stock market through volatility. One way for investors to understand where the market as a whole is in terms of volatility is by monitoring the CBOE Volatility Index (VIX). The VIX represents the market’s expectations for near-term price changes within the S&P 500 index. The index is derived from index options with near-term expiration dates, projecting a 30-day forward projection.
The VIX ended the week with a reading of 23.87 with the 50-day moving average finishing at 26.58. We have seen the 50-day MA move higher for five consecutive weeks now, continuing to show that investors remain fearful at least in the near term, although we did see the real-time reading lower this week, which is positive. A reading under 20 is when I consider things to be closer to normal.
Here is a look at the VIX chart with the 50-day moving average:
Another resource you can look at is the Greed and Fear Index that measures market sentiment based on the following seven factors: put/call ratios, junk bond demand, stock price breadth, market volatility, stock price strength, safe-haven demand, and market momentum.
When it comes the the Greed and Fear Index, things have really taken a turn as it currently reads FEAR. Currently, the index has a reading of 37, which is higher than we were a few weeks when the index had an Extreme Fear reading, with a prior weeks weeks reading of 37, indicating even higher levels of fear.
📰 Stock Market: On The Horizon 📰
In this section labeled “Stock Market: On The Horizon” I will discuss a variety of different topics that have gone on in the market and are on the horizon.
With all the major averages up a healthy amount this past week, investors were able to finally catch their breath. Although all the major averages are still in the red for the year, the market is looking to claw its way back, however, uncertainty around various topics such as the Russia/Ukraine war as well as the Federal Reserve’s plan for an aggressive rate hike approach will continue to keep volatility above normal levels.
Now that earnings season is in the rearview mirror, this section I will use to discuss five stocks or ETFs I am looking at in the week(s) ahead.
You can keep up with my Dividend Portfolio on YouTube where I provide regular updates. Here is my latest update:
Over the past few weeks, the stocks I have added to include:
Starbucks (SBUX)
Microsoft (MSFT)
Bank of America (BAC)
Starbucks shares dropped all the way to around $79 last week, and I was nibbling down to the low $80s. Shares rallied around 7% mid-week when news broke that former CEO Howard Schultz would be returning on an interim basis with current CEO Kevin Johnson retiring. This was great for the company and the stock, as shares have been reeling with the company in a fight with unions growing. There is no better person to lead them right now than Howard Schultz.
Microsoft is a behemoth that continues to have great growth potential as it looks to expand into the leader in cloud. The company is going through review of its acquisition of Activision Blizzard, which I believe to be a big positive for the company considering the growth in gaming we have seen over the years. Over the past five years, shares of MSFT have traded at an average earnings multiple of 30.2x and recently dipped to a forward earnings multiple below 28x, so I decided to add to a position I would like to grow.
The final position I would not mind adding to again, and recently have, is Bank of America. Rising rates are here and it will be a major boost for the company’s net interest margin, or NIM which is the difference between the interest rate they earn from loaning out money less the interest rate they pay consumers for savings accounts.
Let me know in the comments section down below the stocks you have added to recently or stocks high on your watchlist.
⏫ Stock Upgrades/Downgrades ⏬
In this section moving forward, I will add any notable analyst Upgrades or Downgrades I came across during the previous week.
McDonald’s (MCD) price target lowered to $280 at Oppenheimer. PT lowered to $287 at Morgan Stanley
Citi (C) price target lowered to $70 at Wells Fargo
FedEx (FDX) price target lowered to $300 at KeyBanc
Nike (NKE) price target lowered to $160 at Credit Suisse. PT lowered to $165 at Wells Fargo
Proctor & Gamble (PG) price target lowered to $173 at Deutsche Bank
Ventas (VTR) price target increased to $61.50 at Morgan Stanley
Tractor Supply (TSCO) upgraded to buy from hold at Oppenheimer
💰 Dividend News
In this section I will detail what I am watching and any Dividend related news.
Equity Residential (EQR) increases the dividend by 3.7%
Dollar General (DG) increases the dividend by 31%
Dicks Sporting Goods (DKS) increases the dividend by 11.4%
Other Resources
Here are a few of my latest YouTube videos to watch:
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Have a Great Week!
Mark
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