All along we discussed this recent stock market decline as being nothing more than a correction and not the start of the next bear market. The main reason for that was a clear eyed view of the fundamentals which continue to point to an expanding economy, higher earnings and thus higher stock prices.
However, corrections can form at any time for any reason…typically when you least expect them. This makes it hard to say with 100% certainty that the worst is behind us. So lets read the tea leaves and see what they say about the road ahead.
Fundamentally speaking the market does not need any fresh catalysts. GDP continues to clip along at a healthy pace. GDP Now has Q4 estimated at +2.9%. Readings for manufacturing are very good. So is unemployment at a 50 year low. And the services and retail sector look especially robust. This all says bottom should be in.
Technically speaking we have run a long way in a short while. An 8% rally from 10/29 bottom is going to have some traders take profits off the table. Now we are wrestling with the 200 day moving average at 2763.
Stocks broke above that resistance with gusto after the mid-term elections. But in the two days since we have given back some of those gains calling into question whether the breakout is for real.
Typically closing 3 days above an important trend line like the 200 day moving average confirms that the breakout is in place. Meaning that higher stock prices should be soon in hand. In fact, we still have plenty of time for a Santa Claus rally to kick in and we retest the highs once again before the year is out.
That is what I am banking on as I snap up more quality companies at discount prices. But the discounts from fair value won’t last for long. That is why I think now is a great time to consider adding shares of our…
Stock of the Week: TD Ameritrade (AMTD – Research Report)
Their business model is showing very impressive results. In Q3 trading revenue soared 46% as existing clients became more active and they added a healthy crop of new investors to their trading platforms.
The most impressive stat from their Q3 earnings announcement was the 70% year over year gain in interest income. Most folks don’t realize how big a component that income is as brokerage firms sweep the majority of interest income from client cash positions into their own pocket. So the higher interest rates go…the more income they collect.
No doubt you are aware that we are in a rising rate environment as we have a reversion to the mean after several years of historically low rates. The Fed has been abundantly clear that the rate hike train has left the station with higher rates as certain to happen as night following day.
AMTD gives us a great way to capitalize on these rising rates through that interest income component. Plus the added benefit of increased trading activity as the bull market rolls on. Let’s check out the rest of the positives from a TipRanks perspective:
Several top analysts are pounding the table on AMTD. None harder than 5 Star rated Patrick O’Shaughnessy at Raymond James expecting a rise to $74. More Analyst Details Here.
Financial Bloggers we track are unanimous in their praise of AMTD these days which is a positive indicator. More Blogger Details Here.
Some high profile Hedge Fund Managers are also loading up their portfolios with AMTD shares. More Hedge Fund Details Here.
Insiders have been adding ample shares for the past few months. That is one of the strongest statements on AMTD at this time. More Insider Details Here.
We can thank the correction for pushing shares down to current levels. However, quality companies like these don’t stay on the discount rack for long. So do explore AMTD now to see if it is right for your portfolio. Continue your research of AMTD here.
Wishing you a world of investment success!
Steve Reitmeister
Editor in Chief
TipRanks Smart Investor
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?
