ITT vs. MMM: Which Stock Should Value Investors Buy Now?
When market players were unsettled and pretty emotional during the "flash correction" of early February, many sold stocks and waited for signs of the all-clear.
Unfortunately, Mr. Market doesn't give you a lot of time to analyze all the news and data points, make up your mind, and get over your fear.
By the time the worst news is priced-in, he's already made some serious capitulation lows and is riding the value train to price-in rising earnings estimates in a strong economy.
See my article on how some of us played the fear and bought the lows last week in the Nasdaq 100 triple leveraged ETF (TQQQ)...
Forget the CPI, Look at the "W" Bottom
In short, BTD (Buy the Dip) is still working because the fundamentals are still stronger than the worries like rising rates, rising inflation, and rising valuations (in some industries).
Tech and Growth Lead the Charge
The Dow was getting extremely overheated last month and due for a fall as I told Zacks Ultimate members in a special Strategy Session on January 16. It actually continued to rise for two more weeks until it reached 7.5% above its 50-day moving average.
And now that convoluted price-weighted index, which was led by Boeing, 3M, Goldman Sachs, and UNH, is having trouble getting back above its lofty 50-day MA.
It's still leading the broader S&P 500 for the past three months with a +6.5% performance, roughly tied with the Nasdaq Composite as of February 20.
But the real leader is still big-cap Tech, Biotech, and Consumer stocks as represented by the Nasdaq 100 (NDX), which is up more than 7.5% for the past three months...
As I put this article and charts together at 11am ET on Wednesday Feb 21, I am watching to see if the NDX can overcome the last two sessions of "topping tails" at 6840.
And here are some of the leaders of big-cap Tech growth that are helping...
NVIDIA (NVDA) is meeting sellers at $250, but now trading under 40 times forward EPS, it should see higher levels soon. See my recent NVDA: Bull of the Day article for all the details and logic.
Alibaba (BABA) trades on the NYSE, not the Nasdaq, but it's a business model emblematic of the digital, global retail ecosystem. We don't call it the "Amazon of China" for nothing as it seems to have leverage in all the same segments and industries. As I've been telling members since November, we can play the big expanding range here over time and be buyers near $165 and trim some profits above $200, while we hold core for the long-term.
Lam Research (LRCX) made a double top at $220 after another strong earnings report in late January. This Zacks #1 Rank saw estimates rise sharply after a great outlook from the company that confirms the global Semiconductor cycle is not topping. I'd like to see this one build a new base above $185. See my recent LRCX: Bull of the Day for more insight on my "Tech Super Cycle" and analyst reactions to the Lam report, with the average price target rising above $240.
Apple (AAPL) shares fought off the bears worried about "peak iPhone" demand and are back above their post-earnings levels. Technically, the stock has really held on to the big gap above $170 from Feb 15 and looks poised to go higher. In my view, large investors are holding and accumulating because they are looking past the iPhone to Services growth and "what comes after" in terms of Augmented Reality technology.
See my special report for Zacks Confidential, The Technology Super Cycle, for more details or hear my August podcast Why the Apple Ecosphere Could Own Augmented Reality.
Bottom line: Stick with Tech and growth this year!
Disclosure: I own shares of BABA, LRCX, NVDA, AAPL, and TQQQ for the Zacks TAZR Trader portfolio.
Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the TAZR Trader service. Click Follow Author above to receive his latest stock research and macro analysis.
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