Three Negative Weeks In A Row.... Will We See Four?

Apple could come to the rescue as all eyes will be on their Wednesday event unveiling new products

Author

Mark Roussin
September 06, 2022

The Dividend Investor’s Edge is a weekly newsletter designed to give you, the investor, a better understanding on where the stock market is, and to better equip you with information to help you make more informed decisions.

This newsletter is designed for investors of all levels. Whether you are just starting out or a seasoned investor, it is our goal to deliver information in a format that is easy to articulate.

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Each Week I will discuss:

• An update on the Stock Market To Date

• On The Horizon: A Look At The Markets Ahead

• 3 Quick Pick Ideas

• 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 S&P 500 as a whole as well as the sector Leaders/Laggards from the prior week. In addition, I will touch on volatility and fear in the market currently, which are important factors to consider when investing.

The S&P 500 closed negative on the week last week, which was the third week in a row. September is upon us and as we discussed last week, September is historically the worst trading month of the year.

The momentum has certainly been negative with the S&P 500 and Nasdaq down 5.2% and 8.0%, respectively, over the past month.

During the week we got a relatively solid jobs report on Friday, which had the market climbing higher initially before selling off to close the week. Jobs are an important data point for the Federal Reserve along with CPI that is coming soon.

Rate hikes will continue and Quantitative Tightening will continue as well, meaning the Fed will continue to add pressure to consumers and markets in the near term.

The semiconductor industry was hit particularly hard, especially Nvidia (NVDA) which is technically a “Dividend Stock” but not really.

Over the past 5 days, shares of NVDA are down over 16%, on the backs of their earnings release combined with news that the US was restricting chip sales in China. This impacts Nvidia directly, but also increases the tensions between the two powerhouses.

Volatility is expected to remain high, but long-term investors may look to add a little at these levels. I may look to utilize an options play. See “Quick Picks” section below.

Here is a look at the heat map over the past week for the S&P 500. Year-to-date the S&P 500 is down 18.2%, after falling 2.8% last week.

Top Sectors For The Week

NO SECTORS in the green this past week

Worst Sectors For The Week

Materials -5.00%

Information Technology -4.98%

Real Estate -3.94%

Fear Factor

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 at 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 based on S&P 500 index options with near-term expiration dates, projecting a 30-day forward projection.

The VIX ended the week with a reading of 25.5 with the 50-day moving average finishing at 23.95. 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 Fear & Greed Index, which 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 to the Fear and Greed Index, investors are yet again becoming more fearful as the index has moved from Neutral to a FEAR rating this week. Currently, the index has a reading of 43. This reading comes after a split neutral rating last week when the index had a reading of 44.

📰 Stock Market: A Look Ahead 📰

In this section labeled “Stock Market: A Look Ahead” I will discuss a variety of different topics that face the market in the coming week(s) ahead. Remember that the stock market is forward looking , typically looking roughly six months ahead.

Looking at the futures at the time of writing this, we are moving towards a positive open, but how we have opened has not necessarily been where we have finished the day as volatility has been picking up of late.

An Apple (AAPL) a day keeps the Bears away! Exciting week for Apple and Apple Consumers as the company will be holding its annual conference in which they are expected to be unveiling their new products, including a new iPhone.

Given the healthy jobs report, the CME Fed Watch Tool shows a 61% chance of a 75 basis point hike coming in a few weeks. I believe 75 basis point hike is where the Fed will land, but given the healthy jobs and some data points pointing to inflation slowing, a 50 basis point hike is gaining some steam.

The August CPI data due in a few weeks will really shape the direction the Fed will go and the pressure they will apply in terms of rate hikes moving forward. Remember, higher interest rates can put more pressure on growth stocks or non-cashflowing companies.

This week is a short week for the markets as Monday was Labor Day, so the markets were closed. Earnings season is coming to an end, so those will not shape any moves in the markets any time soon. However, we do have Jobless Claims being released on Thursday September 8th.

SOme believe we could re-test the mid-June lows, and if that were to be the case, it is important to perform you due diligence early so you can pounce when opportunities present themselves. Do not worry about catching the exact bottom, instead take a Dollar Cost Averaging approach and buy multiple tranches at levels you are comfortable with.

With that being said, let’s take a look at our 3 Quick Pick Dividend Ideas.

💵 3 Quick Pick Dividend Ideas 💵

In this section, I will share 3 high level dividend ideas that are at the top of my watchlist. Please remember that I am not a financial advisor, so please perform your due diligence before investing.

Quick Pick #1 - Nvidia (NVDA)

Stock Price: $136.47

Current P/E: 35.6x

Forward P/E: 30.3x

5-Yr Avg P/E: 47.2x

Expected to grow 2023 earnings by 33% and the forward multiple looks quite enticing. This chip company has so many irons in the fire. Gaming, Auto, Computing, Gaming, AI, etc. They will be a dominant player in the space for years to come.

My play: I will be looking to sell the $125 or $130 puts roughly 30-45 days out. Currently, the October 21, 2022 $125 put would earn me a premium of $635. I sell the put and collect $635 per contract. IF the stock price dips below $125 prior to the expiration date, I would be obligated to purchase 100 shares per contract at $125. If the stock price stays above that, I just keep my premium as gain and do it again.

Quick Pick #2 - Simon Property Group (SPG)

Stock Price: $100.53

Current P/AFFO: 9.26x

Forward P/AFFO: 8.9x

5-Yr Avg P/AFFO: 14.5x

This is a play for those if you looking for high-yield and growth opportunities. SPG owns the BEST mall portfolio in the world and maintains an A- credit rating. Only a handful of REITs can say that. The company is trading EXTREMELY cheap and pays a 7% dividend yield.

Quick Pick #3 - Walgreens Boot Alliance (WBA)

Stock Price: $35.27

Current P/E: 7.05x

5-Yr Avg P/E: 9.57x

Strong CEO that is positioning the company in a similar fashion that CVS took by investing more into healthcare. CVS was in the news over the weekend as they agreed to buy Signify Health for roughly $8 billion. WBA is trading at a significant discount to both their 5-year average as well as CVS.

💰 Dividend News

In this section I will detail what I am watching and any Dividend related news.

  • Apple (AAPL) event on Sept 7th

  • Starbucks announced a new CEO, Laxman Narasimhan

Other Resources

If you have not done so yet, definitely check out my growing YouTube community where I publish weekly videos on Dividend Stocks I am looking at.

Here is a look at my most recent video covering 3 REITs Paying HUGE Dividends. Give it a view and a LIKE here:

Here are a few other YouTube videos to watch:

New to investing or looking for a new brokerage? Check out Webull where they have a special promotion where they will give you 12 FREE stocks valued up to $30,600. Sign up, deposit ANY amount of money BEFORE the end of the month and get your free stocks. Click HERE for the promotion.

That concludes today’s newsletter. I hope you all have a great week and wish you the best of luck on your investing journey.

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Have a Great Week!

Mark

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