TradeSmith Presents: Red Light, Green Light

Mar 12, 2023

Editor’s Note: Market caps and other numbers were as of time of writing and may have changed since.

We’ve launched several new features since last summer to make your TradeSmith membership even more valuable, but our recent release of Red Light, Green Light received the largest response we’ve seen that you wanted to see something become a regular feature.

So we’re happy to say that you will be seeing this a lot more.

You can find the first issue here, but to give a quick recap in case you missed it, this is a series where we highlight three stocks that were recently stopped out and are considered stocks to stay away from in our Red Zone, and three that recently triggered Entry Signals and are considered “buys” in our Green Zone.

Let’s jump right in…

Red Zone Stock No. 1: National Vision Holdings Inc. (EYE)

Market Cap: $1.7 Billion
TradeSmith Risk Assessment: High Risk
Stopped Out: March 1, 2023

🔻 Company Snapshot: National Vision Holdings is the second-largest optical retail company in the United States and has over 1,300 stores in 44 states and Puerto Rico. Its brands include the online contact lens retailer AC Lens, America’s Best Contacts and Eyes, Walmart’s Vision Center, Eyeglass World, and Vista Optical. Despite the prediction that 49.8% of the world’s population will require eyeglasses by 2050, the short-term outlook has been bad for National Vision. It reported a $9.3 million net loss on March 1, sending the stock price down nearly 38% in a day. The company kept pointing to “macroeconomic headwinds” as to why revenue was negatively impacted, but that’s not going to cut it — every company is dealing with headwinds.

Red Zone Stock No. 2: Consensus Cloud Solutions Inc. (CCSI)

Market Cap: $754.63 Million
TradeSmith Risk Assessment: High Risk

Stopped Out: March 6, 2023

🔻 Company Snapshot: Consensus Cloud Solutions is the world’s largest digital fax provider, serving industries such as health care and finance that require the seamless and secure transmission of information. However, Consensus revealed that it had “unintentional errors” in its 10-K report for fiscal year 2022, which forced the company to report reductions in revenue from previous statements. While most tech stocks experienced a rally to start the year, CCSI is now down nearly 30% since the beginning of 2023, with shares falling off a cliff after the reported update about its finances.

Red Zone Stock No. 3: Aclaris Therapeutics Inc. (ACRS)

Market Cap: $491.19 Million
TradeSmith Risk Assessment: Sky-High Risk
Stopped Out: March 6, 2023

🔻 Company Snapshot: Aclaris is a biotech company that is working on treatments for immune-inflammatory conditions, such as rheumatoid arthritis, atopic dermatitis, psoriatic arthritis, and inflammatory bowel disease. The results did not go well, as the study did not meet its primary or secondary endpoints. This is the risk involved with biotech investing, as it can take a company many years and millions of dollars to develop a drug.

Now let’s take a look at our “Green Light” stocks.

Green Zone Stock No. 1: Dick’s Sporting Goods Inc. (DKS)

Market Cap: $12.24 Billion
TradeSmith Risk Assessment: High Risk
Entry Signal: March 2, 2023

Company Snapshot: The provider of everything from kettlebells to kayaks, Dick’s Sporting Goods is a one-stop gear shop for any athletic activity you want to embark on. The company views itself as a “necessity-based” retailer, as it offers products that people need to compete in sports and lead an active lifestyle. Dick’s reported same-store sales were up 5.3% in its last quarter, which was nearly double analysts’ estimates of 2.1%, according to FactSet. The DKS stock price has been on a roll in 2023, up nearly 25%, and shareholders received even more good news when the company announced that it would more than double its dividend. The DKS dividend currently has a yield of 1.48%.

Green Zone Stock No. 2: Universal Display Corp. (OLED)

Market Cap: $6.59 Billion
TradeSmith Risk Assessment: High Risk
Entry Signal: March 3, 2023

Company Snapshot: Universal Display Corp. makes sure that the images you see on all your smart devices are crisp and clear. Its technology is used in the displays for Samsung’s Galaxy series of devices and LG’s OLED TVs. As of February 2022, the company had over 5,500 patents issued and pending across the world. Universal Display also recently announced a dividend hike, upping its payout by nearly 17%. This is often a good sign that a company expects to have the steady or increased revenue that can support an increased dividend payout. Universal Display currently has a dividend yield of 1%.

Green Zone Stock No. 3: Citigroup Inc. (C)

Market Cap: $99.49 Billion
TradeSmith Risk Assessment: High Risk

Entry Signal: March 6, 2023

Company Snapshot: Founded in 1812, Citigroup offers financial services such as cash management, investment banking and advisory, and equity and income research. The company recently announced job cuts across its investment banking, mortgage underwriting, and technology divisions. Citigroup is in the middle of an overall restructuring, selling off operations like its consumer business in Mexico and refocusing on its strengths of investment and corporate banking and wealth management. Simplifying its business and finding areas to cut costs should give Citigroup the freedom to focus on more profitable areas of its business. With an Entry Signal appearing on March 6, our Health Indicator has found that now could be an opportune time to open or add to a position in C. Citigroup currently has the highest dividend yield in our list of “Green Light” stocks today at 4.03%.