WHERE TO ADD WEIGHT IN THE STOCKMARKET – SPECIAL ISSUE
OCTOBER 10, 2024
Hello everyone
I’m often asked where I should be adding weight in my stock portfolio.
In August, when we had that meltdown due to Bank of Japan raising rates, I suggested adding weight to Nvidia (NVDA) and Amazon (AMZN). Congrats to those that took the advice.
I put this list together yesterday, so you could position yourself well before the stock run into year end.
This is a Special Issue as I usually don’t publish on a Thursday.
Here’s what I think -
Once we get the U.S. election out of the road, the stock market can push all the uncertainty to one side.
(Even the conflict in the Middle East is not deterring the market thus far).
From that position, the market should become less volatile and power ahead on all cylinders.
Here’s what I suggest –
Add weight to all interest rate plays, as there should be more rate cuts in the short to medium term.
Additionally, add weight to those sectors/stocks that are China related. It is more than likely that China will continue to stimulate its economy. Xi- Jinping is very anti-capitalist, which has kept the economy, and the Chinese market subdued and stale, to say the least.
Emerging Markets – a play on falling interest rates
(EEM) iShares MSCI Emerging Markets ETF
Banks
(GS) Goldman Sachs
(JPM) JPMorgan
(If you don’t own any banks, either of these stocks is a great buy)
In a falling interest rate economy, which is good for business, there will be a rising demand for loans.
Utilities
(DUK) Duke Energy
(NEE)NextEra Energy
(VST) Vistra Energy Corp.
(XLU) Utilities Select Sector SPDR Fund
The AI revolution will need support from energy infrastructure, so utilities will be a growth sector going forward.
Home Builders
(DHI) DR Horton
(LEN) Lennar
(PHM) Pulte Group
(TOL) Toll Brothers
As interest rate cuts are very likely to continue, and costs subsequently decline, home builders should do well.
(If you don’t own any home builder stocks, I would be looking at DR Horton and Lennar)
Energy
(OXY) Occidental Petroleum
(XOM) Exxon Mobil
(PSX) Phillips 66
(CVX) Chevron
Energy is a hedge against inflation as oil & gas prices rise during inflationary periods. Energy stocks are a great way to play rising oil prices.
Consumer Discretionary
(NFLX) Netflix
Profitable streaming service – best in its class
Q3 earnings = October 17
Several analysts, including JP Morgan, believe Netflix can grow revenue in the mid-teens in 2024 & 2025 and low double digits in 2026. Additionally, it could further expand margins and drive multi-year free cash flow growth.
Catalysts = revenue growth from advertising.
Subscriber growth from a paid sharing initiative.
Commodities – China Play
As China is expected to continue to stimulate its economy, (FCX) and (CAT) should continue to see growth. (FCX) is a big play on copper. (But it is uncertain whether the China move has longevity).
(FCX) Freeport McMcMoRan
(CAT) Caterpillar
Healthcare
(XLV) Health Care Select Sector SPDR Fund
Assets over $40.95 billion. The Health Care Select Sector Index includes companies from the following industries: pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology.
Annual operating expenses for this ETF are 0.09% making it one of the least expensive products in the space.
12-month trailing dividend yield of 1.51%.
This year (XLE) has gained 7.03% and was up about 17.36% in the last one year (as of 03/25/2024).
Holdings: the ETF has heaviest allocation in the Healthcare Sector - about 100% of the portfolio.
Individual Holdings: UnitedHealth Group Inc. (UNH) accounts for about 9.85% of total assets, followed by Eli Lilly (LLY) and Johnson & Johnson (JNJ).
Top 10 holdings account for about 53.88% of total assets under management.
(I have already recommended Johnson & Johnson Another individual stock I would recommend would be Eli Lilly for the long term).
Precious Metals
(GLD) SPDR Gold Shares
(GOLD) Barrick Gold
(SLV) iShares Silver Trust
(WPM) Wheaton Precious Metal
I have been encouraging everyone to buy gold and silver stocks since last year. If you don’t own any of the stocks listed here, start scaling in now. Gold has pulled back, so it is a great time to add weight or scale in. If you own the above, add weight to any or all by scaling. Gold and silver are in a long-term bull trend.
The metals are seen as a safe haven/ insurance against market volatility and geopolitical conflicts. Additionally, falling interest rates will see gold prices rise. Gold is a hedge against inflation.
I introduced the notion of digital gold in the zoom monthly meeting on Sunday afternoon, October 6. Digital gold is like a token – a form of electronic money – that can be exchanged for physical gold. I will do a whole Post about digital gold soon.
Technology
(AMZN) Amazon
In August when the Bank of Japan raised interest rates and the market dropped, I suggested adding weight to both Nvidia and Amazon. I suggest scaling in and adding weight here too.
Amazon’s revenue growth grew by 540% in the last decade, with net income rising to $30-$42 billion in 2023 and projections over the next five years at 4.5x.
Some of the stocks listed above I have already recommended. If you have any of them, you could consider adding weight.
If you don’t own any stocks in a particular sector, I would suggest adding one stock suggested in that sector.
When I say add weight or buy a stock, I mean to scale in. Do not add all your weight at one buy entry. Spread out your entries over a fortnight or a month or so.
Any portfolio should be well diversified. You should have a cash element and some fixed income. You could look at (HYG) and/or (JNK), which are bond ETFs that now offer a good entry point.
Cheers
Jacquie