Big Money Is Buying this Surprise Sector – Including this Stock
I like to know the “why,” but all I need to know is the “what.”
My Quantum Edge system tracks Big Money flows in individual stocks and the market as a whole. That’s the “what.” I can see where the money is flowing.
As to the why? Sometimes that comes later.
That’s where I am right now with the sector seeing a stunning surge in buying – a surprise sector at that.
Before we get to that, let me share some encouraging data about what Big Money has been doing in general the last few weeks.
It may not feel like it, but beneath the choppy surface, Big Money has started buying more than selling. You can see the rising green bars (more buy signals) and the rising red bars (fewer sell signals) over the last three weeks.
Source: MAPsignals.com
Drilling down a little further into the sectors, we see some odd and topsy-turvy leadership.
Energy, Financials, Industrials and Materials top my system’s sector rankings at the moment. Which is interesting because they are not the leading growth sectors that normally would be out in front, like Technology and Discretionary. They are kind of stuck in the middle of the pack.
The most fascinating right now is unquestionably Utilities, which rose like a phoenix from the ashes. It was the second weakest sector for a long time, and in just a few weeks it shot up to the fifth strongest. You can see the spike in buys (green bars) and the complete disappearance of sells (no red bars).
Source: MAPsignals.com
That’s pretty wild. Puzzling even.
Utility companies typically carry heavy debt, so why would Big Money be buying right now with rates at 30-year highs?
And why, when the fundamentals are generally poor. I averaged all Utilities stocks together, and here’s how they scored:
- Quantum Score: 46.3
- Technical Score 55.8
- Fundamental Score: 39.6
You can see from the scores that this is more of a technical rally than a fundamental one. It could be a short-term rotation as investors sought the perceived safety of utilities when volatility increased.
It could also be that investors anticipate lower interest rates, which means lower bond yields, which means solid dividend payers – as many utilities are – might eventually provide better returns.
And here’s the other possibility: The biggest investors on the planet may be getting ready for something they anticipate happening in the near future.
If that’s the case, my bet is on the spike in demand for power to drive the AI revolution. Large companies like Meta Platforms (META) and Alphabet (GOOGL) are reporting big spends in AI, and with that comes the need for more power.
Does this mean sales and earnings at utilities are about to spike with demand? It could. We just don’t know enough yet to make that determination.
That’s why I’m not looking to add Utilities at the moment, but I will definitely continue to monitor the data. If it starts to pick up stronger fundamentals in the sector, there will still be time to make good money.
Big Money Loves This Stock
If I were compelled to own a utility right now, NRG Energy (NRG) would be my top pick. It’s a broad-based company involved in energy generation and retail electricity from multiple sources including natural gas, coal, oil, nuclear, wind, and solar.
Source: TradeSmith Finance and MAPsignals.com
As you can see, its Quantum Score is in my preferred buy zone. But look at the fundamental and technical ratings and a cautionary tale emerges.
The score is top heavy with the technicals.
I love to see technical strength. Technicals actually weigh more than the fundamentals in the algorithms calculating the overall Quantum Score. That’s in part because the technicals are where Big Money shows up… and Big Money has been highly active in NRG this year.
Source: MAPsignals.com
This stock has two of the three Quantum Edge trifecta we look for – technical strength and Big Money inflows. We also look for superior fundamentals, and the data isn’t there… yet.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends