TradeSmith Presents: Red Light, Green Light

By TradeSmith Research Team

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Red Light, Green Light.

That’s the name of a popular (and innocent) kids’ game. It’s also the name of a brutal challenge in the breakout Netflix Inc. (NFLX) series “Squid Game,” which depicts a fictional tournament with bloody consequences for the 456 contestants who are competing for $35 million.

In the challenge, a giant, robotic, machine-gun-toting doll turns its back, covers its eyes, and says, “Green Light.” The contestants have a few heart-pounding minutes to make it past the doll.

But like most things in (real) life, this contest sounds easier than it actually is.

The doll randomly rotates to the front, says “Red Light” — and “eliminates” anyone who’s not frozen in place. And the folks who are eliminated lose something far more important than the game.

Fortunately, life isn’t as extreme as “Squid Game” — though in these stressful times it can sometimes feel that way. Take the stock market, where deciding whether to move or freeze can feel a lot like that “Red Light, Green Light” challenge.

It only takes one wrong move to watch your money get machine-gunned into rubble. And in the face of recession talk, inflation, new COVID-19 variants, political tussles here and abroad, stagflation buzz, war, and the actions of the Federal Reserve, you may well feel like you and your money have been teleported onto the “Squid Game” film set.

Even worse, there’s no one saying “Red Light, Green Light” to tell you when to move and when to stay in place. And let us tell you: There are a lot of hidden “Red Lights” out there.

We’re here to change that — starting today. Not only can TradeSmith’s proprietary Health Indicator tell you instantly whether a company is in our Green Zone, meaning it’s worth moving toward, but it can also spotlight companies in the Red Zone, meaning you should freeze in place, not move your money toward them, and just downright avoid them.

We’ll even do you one better to save you some time and stress. We’ll highlight three companies that were recently stopped out and are now in our Red Zone and three companies that recently entered our Green Zone.

Let’s start with those “Red Light” stocks that you should avoid.

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Red Zone Stock No. 1: Toshiba Corp. (TOSBF)

Market Cap: $13.35 billion
TradeSmith Risk Assessment: Medium
Stopped Out: Feb. 24, 2023

🔻 Company Snapshot: Headquartered in Japan, Toshiba is a massive conglomerate that’s involved in everything from renewable energy power systems to semiconductor manufacturing equipment. The company has been in the news for bad reasons, with it cutting its full-year profit forecast on Feb. 14 and its chief operating officer resigning because of an investigation into his expenses. TOSBF also received a buyout offer earlier in February.

Red Zone Stock No. 2: Foxo Technologies Inc. (FOXO)

Market Cap: $17.18 million
TradeSmith Risk Assessment: Sky High
Stopped Out: Feb. 17, 2023

🔻 Company Snapshot: Foxo Technologies uses artificial intelligence (AI) to offer new insights into diseases and aging that it says will “revolutionize underwriting and mortality prediction” for the life insurance industry. FOXO may have rallied 77% from its price of $0.31 at the start of the year, but it is still down nearly 95% from its high less than a year ago. While there will be a lot of money made in the AI space, our Health Indicator is saying to avoid this company at all costs.

Red Zone Stock No. 3: Buzzfeed Inc. (BZFD)

Market Cap: $221.22 million
TradeSmith Risk Assessment: Sky High
Stopped Out: Feb. 7, 2023

🔻 Company Snapshot: BuzzFeed is a digital media company that specializes in sharing time-wasting quizzes like “Which Disney Movie Should You Watch Next Based on the Crumbl Cookies You Order?” The stock price is up nearly 120% since the start of the year, mainly because of a report that Buzzfeed was laying off its staff and using ChatGPT to write content. But Comcast Corp. (CMCSA), like our system, isn’t seeing much value in BZFD right now, as it invested $400 million in the company between 2015 and 2016 but sold more than 11 million shares since Jan. 30.

Now, let’s jump into our “Green Light” stocks you can consider moving your money toward.

Green Zone Stock No. 1: Heineken N.V. (HEINY)

Market Cap: $58.54 billion
TradeSmith Risk Assessment: Medium
Entry Signal: Feb. 27, 2023

Company Snapshot: Heineken has over 300 brands available across 190 countries, including its signature pale lager Heineken, Red Stripe, and Amstel Lager, to name a few. The company is also focusing on going beyond beer with its cider offerings of StrongBow and Orchard Thieves. Heineken classifies itself as the No. 1 brewer in Europe and No. 2 brewer in the world. The company also indirectly caught the eye of billionaire Bill Gates. He just took a $902 million stake in Heineken Holding NV, which owns a controlling stake in HEINY.

Green Zone Stock No. 2: Cadence Design Systems Inc. (CDNS)

Market Cap: $53.21 billion
TradeSmith Risk Assessment: High Risk
Entry Signal: Feb. 23, 2023

Company Snapshot: The semiconductor industry is one we’ve been watching closely after the passing of the United States CHIPS and Science Act, and CDNS can be a big player in the market by making the software the semiconductor industry uses to design microprocessors. It just beat expectations for its fourth quarter, and it expects to bring in $4.03 billion in sales for 2023, while analysts expect $3.89 billion in sales.

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Green Zone Stock No. 3: NVIDIA Corp. (NVDA)

Market Cap: $587.44 billion
TradeSmith Risk Assessment: High Risk
Entry Signal: Feb. 21, 2023

Company Snapshot: Tying together the AI and semiconductor trends, NVDA beat earnings in its last report thanks in part to its data center segment. That segment includes chips for AI, which there will be an increasing need for as technologies like ChatGPT gain traction with consumers. Plus, Nvidia’s $10,000 A100 chip is considered the “workhorse” for AI professionals.

Before you go, let us know if you think highlighting companies in the Red Zone and the Green Zone adds value to your TradeSmith experience and if you would like to see this as a regular feature.

Tell us what you think.