Weekly Market Look
For Institutional Investors Only
January 30, 2020
Glenn Williams Jr; CMT
215.280.8308
Glenn Williams Jr LLC
glenn@glennwilliamsjr.com
Preview:
· Following a brief summary of general market thoughts, we will be looking at tickers TDOC, TTWO, BYND, and MC recommending long positions in TTWO and MC respectively.
· Our stock selection process occurred on 2 fronts, the first being derived from a trading system, whereby we allocate capital to 10 stocks on the basis of value and momentum. The initial period for the backtest of this system began on Jan 1 2003, and we continue to monitor results through present day. The names that we have listed are what the system would be long as of 1/28/20. In this particular system we assign higher ratings to those securities that show a lower EV/EBITDA ratio, essentially testing it as a value factor.
· The second of our processes is discretionary in nature, involving the screening of stocks on the basis of revenue growth and debt, while including the crossing of the 10 and 100 day moving averages as a “long” signal. The signal is also contingent on the 14 period RSI moving in conjunction with prices.
· You’ll find the listing and rankings (on the basis of momentum and volatility) on page 2, with a brief discussion of TDOC (ranked #1 on the basis of momentum) on page 3
· Our discretionary based ideas are spoken about on pages 4, 5 and 6 respectively
· Finally, individual charts and general market data begins on page 7
Market Thoughts:
· On a macro level, our market regime filter (i.e. the SPXT) remains above its 200 day moving average, and as such we feel comfortable recommending certain long positions at this time. We do however note what we would consider to be a flattening in recent momentum. We contend that any prolonged divergence between price and momentum would signal a potential downturn. At that point we would likely be looking to reduce exposure on the long side, and begin looking for short opportunities
· Market breadth indicates continued strength when looking at the advance decline lines for the NYSE as well as the S&P 500 index. Of note is the 85% of S&P 500 names trading within 20% of their respective 52 week highs, reaching levels similar to those reached in January of 2018 and March 2017.
· Notably, markets during that time period continued to trade higher. In short, while we would anticipate an eventual decline in markets, current strength in and of itself, is not a reason to expect weakness today, in our view.
· From the vantage point of “headline risk”, the biggest issue appears to be uncertainty surrounding the Coronavirus and its continued spread in China. Were it to continue, we would be leery of emerging market stocks, while gaining a potential interest in both Healthcare and Consumer Staples names.