It has been a quiet week, not much in terms of news, and quarterly earnings have been few in far between. Not surprising – we are in a seasonal time of year which has traditionally been quite slow. Not that this is a bad thing, as we’ve seen volatility start to subside. But as always, we’ve got a jam packed e-mail for you today!
Earnings aren’t expected to ramp up for another month or so, but this week keep an eye out for Foundational Stock Alimentation Couche-Tard (TSX:ATD.B).
It is a very popular stock among Stocktrades Premium members and the company is scheduled to report Q4 and year-end results after the close this coming Tuesday (June 29).
A quick note on some paid Youtube promotions
If you’ve been a member with us for a reasonable amount of time now, you’ll know that we do like to warn members about paid promotions on Youtube. We did so with Nexe (NEXE.V) and Very Good Food (VERY.V).
Thankfully, we got ahead of these and warned members before the stocks had collapsed, but as you can see by the NEXE chart below, it has resulted in some devastating losses for shareholders.
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The stock being promoted heavily now is Kits Eyecare (KITS). In fact, if you go to Youtube and search “KITS stock”, aroud 90% of the videos on the first page, especially if they’ve been released in the last week, are paid promotions.
We highly doubt the reaction will be the same as NEXE and VERY, for a couple reasons. More and more viewers are catching on to these paid promotions, and investing videos and hype on Youtube have just calmed down in general.
We don’t and never will call out the channels. However, it’s important that members know this kind of stuff is still going on.
Two large caps approaching golden cross indicators
If you’re looking for new ideas, it may be worth taking a look at Metro (TSX:MRU) and Wheaten Precious Metals (TSX:WPM).
Both of these large caps are on the verge of a Golden Cross, a bullish technical indicator in which a short term moving average (50 day, blue line of the chart) crosses a long term average (200 day, gold line on chart). Of note, if you do want to know a bit more about moving averages, check out our guide here.
Keep in mind, if you can’t see the chart below, make sure your e-mail client allows it.
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While it is never a guarantee, the golden cross has proven to be a pretty reliable bullish technical indicator.
The last time Metro benefited from a Golden Cross was back in December of 2018. Following that technical event, it made higher highs and lower lows for the next six months.
Wheaton Precious metals last formed a Golden Cross in February of 2019. That was followed by an immediate short-term double-digit gain (+21%) in the month that followed.
While we don’t advocate trading on technicals, we do like to keep an eye on certain technical events
As we’ve discussed many times before, we use RSI fairly regularly and while not as effective, the Golden Cross still has a decent success rate. Research has shown that from an Index perspective, it results in positive gains 60-64% of the time.
One takeaway from that research? The Golden Cross does not always result in a big rally, but all big rallies begin with a Golden Cross.
Looking at MRU and WPM’s 10-year technical charts lends support to this statement. MRU had two big, long-term uptrends – one beginning in 2014 and another in 2018, both followed a Golden Cross.
Same goes for WPM, the last two long-term rallies followed Golden Crosses in 2016 and 2019.
Top 20 and HDI’s big acquisition and analyst upgrade
Our Top 20 last week underperformed slightly, and there is somewhat of an anomaly over the last month or so as two miners, Centerra Gold (TSE:CG) and Equinox Gold (TSE:EQX) have both been hammered in price due to events outside of investors control.
Because they were inside of the lists, those weeks are lagging the TSX in terms of returns. Case in point? This list from April 30th, Centerra and Equinox are the only two stocks in the red.
One thing we like to keep an eye on is stocks “popping” up into the top results of our screener
Our screener analyzes over 20 different data points to produce its rankings, but we like to explain its process with 3 core elements. The safety of a company, the valuation of a company and the expected growth of a company.
So, when a stock launches up on our screener, it’s very likely it has been either hit hard in price, or estimated growth for the company has increased.
With Hardwood Distributions (TSE:HDI), which made an appearance in this weeks list, it is definitely an increase in expected growth.
Analysts just boosted expected earnings and revenue growth next year based off a huge acquisition the company made of Novo Building Products.
The news of the acquisition was very well received, as it is supposed to be immediately accretive to the company’s earnings.
2021 expected revenue of $1.7B and earnings per share of $3.25 would mark year over year growth of 42% and 58% respectively, a significant uptick from prior numbers.
If they do hit targeted earnings this year, at its current price ($37.19) it is only trading at 11.44 times forward earnings, which would be below its 3, 5 and 10 year median averages.
Keep in mind, the cyclical nature of Hardwood Distribution’s business would likely keep it off our Bull List as a long term (5+ year) option.
But if you’ve been looking at a short term play to take advantage of a booming housing market both here and in the United States, it’s certainly one to look at.
