Hello TipRanks Members,
(Please remember that after today’s market commentary I share my “Stock of the Week”.)
Yes, it is true that September has been the worst month of the year for stocks. This trend has been firmly in place since 1950 according to the Stock Trader’s Almanac. And it certainly seems that ghosts of scary September past have come to haunt investors so far this month.
Now for a healthy reality check.
Stocks still rise about 50% of the time in September.
The average decline in September is only -0.5%.
And last year September stocks gained +1.93% on the month.
Not so scary after all.
As we all know. The market does not go straight up or down. And it most certainly does not move in a predictable pattern in the short run.
That is why a long term view is best. And it is hard to have a bearish long term view given the slate of strong economic reports this week including surging results for ISM Manufacturing, ISM Services and Redbook Retail Same Store Sales jumping to +6.5% year over year results (the best showing in 13 years).
Buffett had it right when he said to be “greedy when others are fearful.” Perhaps that applies now as well.
Stock of the Week: Alibaba (BABA)
(Before I share insights on BABA, I just wanted to clarify the nature of this stock highlight commentary. Yes, this may be called the “Stock of the Week”…but that doesn’t mean it is a timely stock that will rise this week. Rather I am sharing stocks that I believe will outperform over the next 12+ months. So please keep that long term nature in mind when it comes to your consideration of these shares.)
You all know this stock…the one that many refer to as the “Google of China”. If that is true, then we need to treat this stock in the same way as Google when it has a bad quarterly earnings report.
Let me be more specific. Tech giants like Google and Amazon often have 1 to 2 bad earnings reports per year. Typically it is because of massive investments in new areas that raise costs and lower profits in the short run. However, in the long run we see how often those large investments pave the way for accelerated future growth. Investors have grown used to this pattern with Google and Amazon leading to a very mild reaction after any weak earnings results.
In the case of BABA, investors have not been so kind after the recent earnings miss with shares down from the $180 range. Even worse is how far the current price is from the 52 week peak of $211.70. To my way of thinking this spells opportunity to pick up shares at a discounted price.
Here are the other positives in place for BABA from a TipRanks perspective:
- Strong Buy consensus with many 5 Star analysts pounding the table on the growth and value story. More details.
- Financial Bloggers continue to post quite bullish comments on shares. More details.
- Hedge Fund Confidence Signal is pointing to positive indications with billions of dollars in recent buys from 4 and 5 Star fund managers. More details.
Let me leave you with this notion. We all appreciate why the FANG stocks should be cornerstone investments in many of our portfolios. I believe Alibaba is every bit a member of this group and should be a staple in most long term portfolios.
If you need one more reason to push you over the edge, then let’s talk about value. At this stage of the bull market there are very few large cap value stocks. Yet this mega cap stock can certainly wear that value label proudly as the average target price stands 50% above the current price of $242.
Wishing you a world of investment success!
Editor in Chief
Disclaimer: In general, I own the stocks that I highlight in commentary. When you think about it…why would you ever take advice from an investment professional who wasn’t willing to put his money where his mouth is?