Power Trends+: Look Here In Times of Uncertainty
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One thing is for sure: The market has been volatile so far this year.
A lot of that has to do with kneejerk reactions from scary headlines and uncertainty. We’re also at the end of earnings season, which typically creates some bumps in the road.
But would you believe that just last week the S&P 500 hit an all-time high? And that this earnings season has been a positive one, with 76% of companies beating expectations?
It’s important to not get clouded by emotions and instead focus on the data, and that’s exactly what we’ll do in today’s Power Trends+.
I’ll analyze some of your requested stocks and go over what makes a good… or bad… investment. One stock has nearly perfect fundamentals, but does that mean it’s a buy? Watch the video above to find out.
The stocks in this video issue are not currently recommended in my investing services, but we love hearing what stocks you want us to analyze and leverage our data to help you in your research.
Stay tuned for more Power Trends+ videos coming your way soon. As always, make sure to send in your tickers or any comments and questions to [email protected].
Transcript
Hey everybody, it’s Jason. It’s time for Power Trends+.
You write in the stocks, we score them using the Quantum Score, a method that I devised years ago and used for my own investing to find out the best stocks to put my money in with the highest probabilities of growing my wealth.
So, let’s just get right to it really quickly. I’d like to address some recent market volatility. Markets have been weak for a couple of days, looking ugly, sloppy starts, negative price action. Yesterday was very ugly. That was Monday, the 24th. Today started off ugly. We’re bouncing off of lows. I want to remind you though, just 4 or 5 days ago we were trading at all-time highs on the S&P. Since then, market breadth under the surface is weakening with more stocks going down and going up, indicating money flows out of stocks. I wouldn’t get too worried though.
We are near highs and we’re coming to the end of an earnings season, which is typically when volatility perks up. Less headline risk and moves things around. Also, on that note, this earnings season was very strong. You had 74% of companies thus far, S&P 500 companies beating earnings with almost 90% complete reporting and around 61-62% beating sales. The grand finale is Nvidia on Wednesday, so we’ll see what happens there. That could be a major market mover.
But earnings are good. The economy’s hot. I think a lot of people are worried about DOGE, government change, tariffs, you know, Trump’s normal MO of stirring up the hornet’s nest. There’s a lot of anxiety and nervousness out there. His past 4 years have showed us the playbook. Typically, things get a little nervous and then resolve themselves. As far as the market goes, he has committed to a strong stock market, low taxes, low interest rates, so I think medium to long term, we’re gonna be fine. Short term, we might sit through some bumps, but let me remind you, January through April is the second seasonally strongest period of time of the year going back to 1990. February was very strong, January was mediocre. I’m looking for a decent March and a strong April, so hang in there, folks. It might be a little bit bumpy, but I don’t really see major clouds on the horizon other than non-quantifiable anxiety. I don’t really place much into that. So let’s move on.
Let’s look at our first stock. Someone wrote in about DoubleVerify. This is an entertaining and programming provider. They developed software platforms for digital media measurement and data analytics. On paper, this thing is a monster. 77.6 Quantum Score with a fundamental score nearly perfect of 91.7. Technical score of 67.6. I’ll show you why that’s slightly lower.
On paper, phenomenal 1 and 3 year sales and earnings growth, high double-digit percent for both, a profit margin of 12%. They have plenty of free cash flow, about $100 million. They’re estimated to grow their earnings 24% next year and their sales 12.6%. They have very low debt. The company on paper is a monster. What’s punishing it?
DoubleVerify had a massive drop-off but is starting to climb back higher, which is rewarding its technical score, but that thing was a really low technical score with a really high fundamental score. Over 3 years, you can see the volatility. If you’re asking me if I would buy it, yeah, at the low end of the range, creeping up higher, why not? But man, just be prepared for a busy ride.
Somebody else wrote in about AppLovin. This is an enterprise management software company. They operate a platform for mobile application development for personalized experiences and campaigns for users. On paper, great looking company: 75.9 Quantum Score, a strong fundamental score of 70.8, strong technical score of 79.4%. Typically, I would like to see it the other way around because that means the stock’s probably a little bit overheated.
On paper, great sales and earnings growth. One-year earnings growth is 364%, massive, but three-year earnings growth is down 175%. They make a really nice profit margin of 33%. They’re estimated to grow their earnings 49% next year and sales 22.4%. They have $2 billion of free cash flow, less capital expenditures. This is a $127 billion company. If this trend continues, it’s a nice entry point, but I like to see a more established trend over time for a higher probability, so be prepared for volatility in AppLovin. But on paper, we love McLovin.
Let’s talk about WWD. This is Woodward. This is an industrial company. They design and manufacture energy control and optimization solutions. They’re really in the defense aerospace manufacturing space. Great Quantum Score: 74.1, fundamental 79.2, technical 70.6. This is what I like to see.
This is an $11 billion company. They grew sales last year 14%. They grew earnings 60% over three years. It was 14% for sales and 28% for earnings. They make an 11% profit margin, and they’re slated to grow earnings next year 19% and 8.6% for sales. Plenty of free cash flow. This is a great quality stock. I like WWD.
Now for some that are not so great. There’s Albemarle. This is a materials company specializing in lithium compounds for energy storage and plastic materials. 37.9 Quantum Score. I’m stepping aside. There are better fish in the sea. 45.8 fundamental score, negative sales and earnings growth last year. They don’t make money. Simple as that. One-year estimated earnings growth is negative 330%. They have no free cash flow, they’re in debt. This is not a company for me, folks.
Let’s talk now about GKOS, which is Glaukos Group. This is a healthcare company specializing in ophthalmic medical devices. Again, a weak Quantum Score 37.9, really weak fundamentals and mediocre technicals. I’m stepping away. This is not a company for me.
Last but not least, let’s look at OPEN, which is OpenDoor Technologies, a real estate company with a digital platform for buying and selling residential properties. It’s a billion-dollar company with a 31 Quantum Score. Not for me, I’m passing. Weak fundamental score of 33 and a weak technical score of 29.2%. They have $2.3 billion of free cash flow, but they are up to their eyeballs in debt with a 262% debt-to-equity ratio. This is one of those when-they-turn-the-corner stories, but for now, I’m stepping aside from OpenDoor.
So there you have it. We just went through 6 stocks using the Quantum Score to determine good and bad based on your questions. Please, if you have more questions, comments, and you like what you see, write in, ask for more stocks. We’re happy to do it. We love doing this stuff. Until next time, thank you for being on this journey with me. I will talk to you soon. Take care. Bye.
Talk soon,
Jason Bodner,
Editor, Jason Bodner’s Power Trends