Marc Chaikin, stock analyst and Founder and CEO of Chaikin Analytics joins us to discuss names he is looking at and a general overview of the state of the market.
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00:00 Well, Mark, last time we spoke, you were, I think, pretty bullish. Are you still feeling
00:05 good about these markets? We've hit some turbulence. I have. Well, the Fed is driving
00:10 the bus. And yesterday we got some clarity from Waller into what Powell is really thinking.
00:15 They see no reason to rush the rate cuts. And so those wild forecasts of five to six rate cuts
00:24 this year are pretty much off the table. But sometime in the second half, we are probably
00:30 going to get three rate cuts. And that put a little pressure on the market. What's interesting
00:35 is tech stocks have not been pressured by the higher rates in the 10-year. And typically,
00:41 over the last 18 months, that's been a very direct relationship. 10-year yields move up.
00:46 Tech stocks get pressured because of PE valuation concerns. And that's not the case. You've got
00:52 a very strong rally going on, obviously, in semiconductors, AMD, and video is all making
00:58 new highs. And so I am still bullish. And it's the same support level that Joel and I talked
01:04 about two weeks ago. It's 40-- well, the 21-day average has moved up, which is what we bounced
01:09 off yesterday at 47.21 on the S&P cash. But the 46.80, 47.00 area is still where I think this
01:21 support continues to manifest. And we're up in the futures this morning, unless something's
01:27 changed radically in the last 15 minutes. And so they're going to give it another shot.
01:32 Got it. Well, Mark, are there any individual names right now that you've been watching that
01:38 you think could start driving the bus? Or are we kind of just all at the mercy of the Fed right now?
01:45 No, it's a stock picker's market. So biotech in the health care sector is just on fire. And I'm
01:51 looking at stocks like Gilead, which has been pretty dormant for the last two years. I'm looking
01:59 at the bigger names like Regeneron, where I think there's long-term visibility into their pipeline.
02:05 There are a lot of biotech stocks. You've got to do some picking and choosing.
02:11 But that's a fruitful area. Also, I think a stock you mentioned, CVS, is a buy here. We
02:18 recommended it last week in one of our newsletters. And I just like their business model. They got hit
02:26 initially when UnitedHealth reported a week ago. They're getting hit this morning because of the
02:33 Humana report. But they've got a really good business model with the retail, the Aetna,
02:39 and then their pharmacy benefit management program. And it's pretty much a third, a third,
02:45 a third. I think people, if you're in the Northeast, you think of it as painkillers,
02:53 prescription drugs. But they're almost a $400 billion company. And it's divided up between
03:01 those three segments. So I like CVS on this pullback. I like Triple M, which is pulling back
03:06 a bit. And software is not quitting. So I think there are a lot of names in software. And you
03:13 could almost throw a pin at the software names that are making money and make money. One that
03:18 I like, which has now a neutral plus power gauge rating, is Synopsys, S-N-P-S. They've taken a lot
03:26 of heat for this Ansys merger. These are two great companies combining. It had a bullish power
03:32 gauge rating until it dipped below its long-term trend line. But I think Synopsys is well positioned
03:39 to support the semiconductor market where they provide software for manufacturers of semiconductors.
03:45 And Ansys is a great company. And the debate about whether they're paying too much or not
03:51 will all dissipate over the next year. But I think Synopsys is a steal down here.
04:00 Got it. City, New York energizes me. I mean, this is not the country and birds singing in
04:06 the morning. This is like high energy territory. Mark, do you think 2024 is going to be more of
04:12 a stock picker's market here again? Because 2023 definitely was until the last couple of months
04:16 of the year when they decided to start buying everything. Do you think like, I mean, I look
04:20 at certain stocks like NVIDIA, AMD, new all-time highs here again today. This AI trade continues
04:26 to drive the bus. And then you look at the IWM breaking down pretty much the entire year,
04:31 made a new low yesterday. Dip did get bought. Dip is getting bought here overnight. Do we
04:36 eventually go into this market of buy everything again or is this going to be a stock picker's
04:41 market? Definitely a stock picker's market. You nailed it. And, you know, I think people need to
04:47 know that IWM is very sensitive to interest rates. Smaller companies are just not as flexible in
04:53 terms of capital raise and interest rates affect them more than the large cap sector. And I do
05:02 think it's a stock picker's market. And, you know, the power gauge has done a good job of figuring
05:08 out where the fundamental strengths are and where the group strengths are. So if you go with
05:14 financials, I think health care, you've got to split it. And you've been talking about that.
05:20 Biotech, very, very strong in health care. But the big providers, obviously under pressure and
05:27 tech. Beyond that, it's really a stock picker's market. When you get into industrials, which
05:34 may be breaking down, you look at the XLI. You've got to avoid defensive stocks. They're just
05:40 remembering that health care is a hybrid of part growth, part defensive. But staples, utilities,
05:49 are just out to lunch and likely to stay that way for quite a while.
05:54 So those are what you're avoiding. Anything else you're avoiding, Mark?
05:59 Not really in terms of group and sector, but definitely tuned into finding the strongest
06:08 stocks in the strongest industry groups. I mean, Dennis is absolutely right. It's not going to be
06:13 a buy everything market. That happened when people realized that rate hikes had finished
06:20 and they just threw money into the ETFs, the SPY and QQQ. But I'm a little surprised that it's
06:30 really in the large cap names. If you look at the 10 different ETFs that reflect the various cap and
06:38 style sectors, it's Dow Jones with a very bullish rating. It's the old 100 OEX. It's the S&P. And
06:49 it's definitely not small caps or mid caps right now. Any other stocks you're watching into
06:56 earnings this quarter that you think could really blow it out of the water when it comes to their
07:01 earnings report? Well, that's an interesting question. Yes, because the response, as it was
07:07 in the last quarter, last part of the last year to earnings reports has been very muted at best.
07:15 And it's basically sell the news in most of the cases. So I'm not really looking for stocks to
07:23 bust out based on a positive earnings surprise. Analysts were pretty mellow coming into this
07:32 quarter for the last seven quarters. They've been very negative and cutting their estimates. This
07:37 time they were much more measured. They cut but barely. And so I don't think the surprise factor
07:44 is going to be a big boost for any individual names here. I mean, occasionally, you know,
07:50 if an Apple comes through with a good report or any of the big names, you may see a pop. But
07:56 smaller names, I mean, one stock we have recommended for two years,
07:59 Progress Software, PRGS, reported two days ago and it had a really nice
08:05 response to the earnings report. But it's really looking for a needle in a haystack right now
08:16 in terms of earnings related pops. How about the reaction so far to Q4 earnings? JP Morgan,
08:22 pretty good report. I mean, that's always volatile off its reports, but made a new all-time high and
08:28 pulled back a little bit. So selling into the good news on that. Delta, on the other hand,
08:34 that had a nice run up to 42. And then, I mean, there's other things going on with the storms and
08:40 everything. But what do you think about the reaction, the overall reaction here from Q4
08:45 earnings season? Well, it's been sell the news if it's been good and, you know, hammer it if it's
08:51 been bad. So that's not a great prescription for trading into earnings reports. Although,
08:56 you know, we do occasionally see a stock that pulls back before an earnings report that has
09:02 a bullish power gauge rating and a history of earnings surprise that are positive. But
09:08 I just don't think this is the quarter to be trading earnings. I think this is the quarter
09:13 to be buying dips and some of the solid names we've talked about and position yourself for a
09:19 stronger second half. I don't think this is going to be a wildly profitable two or three months from
09:25 a trading point of view.