Large Cap Money Flow Newsletter 1904/22

Extreme Pessimism can drive stocks higher. Nothing else can explain the vertical rally one can see in S&P 500 today. The rally is coming on the back of lower volumes. Fundamentals continue to look ugly. The 10 Year yield now stands above 2.9% and is approaching the 3% mark for the first time since December 2018. 

Is PLUG a buy on this newsflow?

Plug Power PLUG, a leading maker of hydrogen fuel cells, announced a delivery agreement with Walmart. Under the agreement, Plug Power has an option to deliver up to 20 tons per day of liquid green hydrogen to power Walmart lift trucks across its distribution and fulfillment centers in the U.S. The news confirms the direction of the industry. The stock has small resistance to jump and if the stock does that – near term rally to $32 cannot be ruled out.

Hewlett Packard: Never Get excited at the Point of Resistance

Warren Buffet Berkshire Hathaway picked up more than an 11% stake in HP and everybody got excited but the stock went off the news cycle pretty quickly because there is nothing to be excited about it now. HP stock now trades below the resistance and nobody seems excited now.

On fundamentals, yes the stock looks cheap despite a huge rally from the lows. On a trailing-12-month basis, HP’s price-to-earnings ratio is just 6.9. There are two ways to look at it – Cheap or Peak Growth? Global PC sales fell in Q1 and with too much sales that happened during the pandemic, there is a view that peak growth is priced in. As long as the stock trades below $40, there is nothing to talk about the stock.

Netflix ~ Value or Value Trap

Netflix stock used to trade near $700 just six months and now trades at $350. Now, for anybody who loves to buy the dip or value seeker, this looks like an attractive buying opportunity but is it a Value buy. Well nobody knows the answer to this question.

Netflix stock is showing signs of forming a bottom at $330 levels and today’s bounce of 4% should be seen from that context. It looks like a Value buy but the company is expected to announce earnings today after the market close and nobody knows how the market would react to earnings. Buying just ahead of earnings is always super risky.

What’s working today?

Lifting off the mask mandate is helping Home Away stocks be it Airlines, Cruises, Casinos, or Hotels. The ETF benefiting – JETS, AWAY. I have covered them this month as a buy.