Marcus' Friday big buys

It's Friday, and that means we're coming into what is typically the weekend high of the US markets. I'm here to tell you what to buy this week.

4w ago

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So after Thursday's session on the US markets, traders discovered that we're still in a bit of a September rout. Selloffs are continuing and while there's more confidence in the US markets this week than in previous, there's still a lot of ifs and buts. But to the astute trader and observer cogs were moving during the week. Things happened behind the scenes that are going to make huge waves during October, and I'm here to tell you what to buy right now during this market rout so you can heap on the funds gaining momentum into the end of the year.

For starters, here are the things that are still affecting the US markets:

Banks triggered the selloff and now the casual trader is scared

I talked last week about how Japanese tech investment conglomerate triggered the massive tech correction in early September thanks to their overly zealous profit-taking. But the problem now is that casual (and sometimes idiotic) trader is way too scared to go balls back in on tech. And it actually makes zero sense. The same banks that triggered the selloff in early September are now busy re-rating their positions in the blue-chip tech stocks and they're all rating the stocks with a buy and raising their targets (which were previously rated pre-selloff).

Adobe (ADBE) for example lost over 15% of value during the initial selloff and a ridiculously strong earnings call on Tuesday did very little to help the company recover. It's currently trading at $474 where at its peak it was trading at $534. In the past days, banks like Credit Suisse and Bank of America have upped their original hold targets from $440 to over $570. Anyone with half a brain can see that the EPS on that stock when from $2 to over $2.5 which means the stock has a hell of a lot of growing to do before the value catches the price to purchase.

Jerome Powell made a speech and said literally nothing

The typical American right now is in a holding pattern. It's mostly thanks to a ridiculous State V Federal battle that the entire country is locked into. US State's continue to put swathes of people in lockdown (and most likely based on the earlier lessons learned in New York, this is warranted) and resultingly send them out of work whereas the US Government is sitting on its hands regarding a second stimulus package to lead America out of COVID19.

This was exemplified with Jerome Powell's address on Wednesday when he gave an update from the US Federal Reserve. Basically the reserve is keeping cash rates on hold and upgraded the short term economic outlook, while simultaneously being pessimistic and announcing nothing in relief to the US people. And not surprisingly, it's making people nervous.

Mergers are back and better than ever

Market crashes are opportunities not just for the typical investor but for companies as well. Coronavirus seems to be one hell-of-a crash. While we've seen a massive rally in the past 6 months post COVID19 crash, the market is only recouping gains that it would've made already. With that in mind though Jim Cramer from CNBC made a good point earlier in the week about valuations on the US market. They're not just determined by the typical trader, they're also determined by what business is prepared to pay for other business. And that was no more evident than when NVIDIA announced a $50 billion ARM acquisition from Softbank on Monday. The monstrous deal makes it obvious and crystal clear that the current selloff isn't representative of what the market is actually valued at.

So here goes nothing, what are Marcus' big buys for mid-September?

Herman Miller (MLHR)

This bloody stock annoys the hell out of me. I bought Herman Miller during the March crash and made a little bit on the rebound. I knew that in a pandemic people would be sent home to work at the home office market would boom. I knew that people needed chairs, desks and it would probably be for the long term. But at the time? I needed the equity that sat in this stock. I needed it because other opportunities presented themselves and the stock had already made a neat little profit.

What was also evident at the time is Herman Miller felt like it was going nowhere. The most recent sales outlook for Herman Miller prior to Thursday's earnings call was grim. They themselves said they hadn't capitalised on the home office market and weren't sure why. This was as soon as last month.

And then yesterday's earning call came and it turns out they'd blown the second quarter out of the water. As I predicted, home office furniture boomed and people were preparing for a huge shift in consumer attitudes. The result is Herman Miller's stock soared 33% this week to $34. Now, this valuation feels slightly blown out for the right here and now of September. So I think it'll either correct tonight (Friday the 18th of September) or next week. But when it does? You should buy and you should have more confidence than I did to hold. Banks have rated the median price target for this one at $50 long term.

Apple (AAPL)

Anyone who says Apple stock is still overvalued right now is a muppet. Please, come down to the comments section and call me a bull on this one, I welcome it. At its low on Thursday Apple traded at $108 down from it's August high of over $130.

That is utter and absolute crap. We're talking about a company that is valued at over $1.5 trillion and unalike Tesla they have almost 40 years of proven hardware and software prowess. This stock has traded down this week because the naysayers of the world were pissed off that Apple didn't announce the iPhone 12 on Tuesday. But guess what? We knew that. We knew the iPhone was delayed until October. And yet you idiots took the small gain and sold it off.

I'm here to tell you that your focus on this stock was way off the mark. The most important products announced by Apple this week was not the new iPad Air, or the new iPad or the two new Apple Watches. Because while those things are nice, they are not where Apple's future is. Oh no, the two products I was interested in was Apple Fitness+ and the Apple One subscription package. I have been predicting the latter for almost 2 years and it's a stroke of genius from Apple to shoo away competitors in all of its services segments.

Let me tell you why the Apple One subscription is going to become the most valuable feather in Apple's cap. The first reason is Spotify are scared of it. So much so that they released a statement shortly after the Tuesday event:

"Once again, Apple is using its dominant position and unfair practices to disadvantage competitors and deprive consumers by favoring its own services. We call on competition authorities to act urgently to restrict Apple’s anti-competitive behavior, which if left unchecked, will cause irreparable harm to the developer community and threaten our collective freedoms to listen, learn, create, and connect."

If the biggest music subscription service on planet earth is taking aim at what the trader deems to be a worthless announcement than people should be listening. The second is Apple has a history of value-adding. The iPod coming out shortly after the Macbook and both requiring the native OS software. The iPad shortly after the iPhone. The Apple Watch and the next-gen iPhone. So tell me, why shouldn't this work the same with Apple One?

Banks have rated this stock at a median target of over $140 and for the short term, I agree. But then again? The stock is up 100% this year alone, so who says this can't be higher?

NVIDIA (NVDA)

For those of you who don't know what NVIDIA do, they're a semi-conductor company. They make graphics cards for video games but more recently they've been dabbling in artificial intelligence, data centres and mobile processing units. NVIDIA share values are up 175% this year, but here's the thing, I still think they're undervalued. I made a nice slice of cash on NVIDIA earlier in the quarter when they revealed their new product the RTX3080 and undercut the entire market (including themselves) whilst bringing a whole new world of next-generation technology to graphics processing.

Then on Monday NVIDIA announced the purchase of ARM. The same ARM who are going to be assisting Apple in the creation of the new Apple silicon semiconductors, the same ARM who design 80% of the worlds mobile processing units. And the result was a LEAP in share price. That leap has settled in again with the rout and NVIDIA are trading back at $498 after being up at over $530 earlier in the week.

But with all the fuss over the ARM acquisition traders on NVIDIA missed something else. The aforementioned RTX3080 went on sale this week and subsequently sold out in under 30 seconds. This is a $1200AUD product which is a value add to your computer system and it sold out in under 30 seconds. The RTX sold out faster than the Playstation 5 which happened just 1 day prior.

This stock is so undervalued it's eye-watering. I've told all of my friends to buy NVIDIA as much as possible during this rout and watch it grow. The banks obviously think so too, Needham and Jefferies have both announced re-valuations this week of NVIDIA and have raised their median targets from just under $600 to $700. That's a $200 difference between today's value and what's to come.

So what's coming next week?

A stimulus package from the US Government I hope? But I doubt it. A more realistic want from the coming week of trading is IPO galore. The Snowflake IPO should complete and the price should settle allowing you to purchase the non-shilled price of under $150 and watch that stock fly. UNITY (a gaming engine which powers the majority of the world's modern video games) is completing their IPO tonight and Corsair is due for an IPO next Tuesday (all with massive upsides if you buy at the right dollar).

Also being the back end of September expect the tech selloff to end (not so much abruptly) and bring about a new rally across sectors. This will especially happen if the US Government announces new stimulus. But don't stress too much if we're down again early week. Traders know that stocks don't always make money. If you're confident of the stock then be confident and patient enough to hold it.

(Marcus has holdings in Apple (AAPL))

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Comments (8)

  • Paul Gambles of MBMG says that there is currently no real safe place to park money in the stock market.

    He is therefore holding 25 % of his portfolio in cash .

    Mr. Gambles suggests caution.

    He has been selling gold , getting out of it and also he has been selling most of his silver.

    He is holding only 5 % of his portfolio in precious metals .

    The mini mill was introduced in 1982 in America for steel production, replacing the blast furnace , and it reduced the cost of producing steel by 80 % .

    I have wondered what the consequences of this might be .

    I’ve been observing the crashes in the last few years in bauxite , aluminium, coal, gas and crude oil.

    Sure , there’s been a few dead cat bounces , but there always will be.

    A bit of cooling off in these commodities markets , could provide more time for golf, bbqs, fishing , dog walking , or family meals, and at the moment , the world could probably use a bit of down time .

    Speaking of down time , economics researcher P.J.O’Rourke suggests a general cure all would be a 3 day weekend:

    He suggests, at the most we , should only work Monday to Thursday .

    Taking Friday as a permanent holiday would leave people more refreshed for Monday.

    An extra day for family meals , would suit me just fine .

    It might be interesting to see what would happen if stock markets were only open 4 days a week.

    Maybe there would be more time for charity work ?

    Take it easy , and have a good weekend everyone.

    PS

    happy 65th birthday to this lovely TR3 , with the electric overdrive.

    Signed :

    Your friendly neighbourhood wet blanket .

    Which would be kind of handy when there is a fire in the engine bay , wouldn’t it ?

      1 month ago
    • You see I rebuke the bears currently in the market. And the comment about commodities interests me. Why you ask? The mining sector in America is going gangbusters at the moment and especially since this second tech rout. Caterpillar for...

      Read more
        1 month ago
    • Caterpillar should have a decent future if the US Interstate system can be privatised , which should incentivise and ensure , and possibly insure , ongoing maintenance.

      But the last few decades of US Interstate privatisation has only...

      Read more
        1 month ago
  • While Nvidia may be a safe, smart choice, I believe that AMD has more growth potential. The stock is currently valued at about $79.00, but has reached $86.00 in the recent past. I would say, based on its previous steady growth that AMD will be a $125.00 stock by mid-2021.

      1 month ago
    • We’re in a bigger, faker tech bubble than in 2000: Strategist

      As reports suggest that SoftBank was the buyer of billions of dollars in U.S. technology company options in the past month; Paul Gambles of MBMG Group warns that the market seems...

      Read more
        1 month ago

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