Yesterday, the S&P 500 hit 3,000 for the first time ever and so far this morning it’s holding. Yet there are still too many skeptics on Wall Street. The media credited the rally to Federal Reserve chairman Jerome Powell’s testimony, but that’s only a small part of the story.
The only fact that really matters here for equity markets is not when will the Fed cuts rates, but rather that they will do so if we need it. So that is why I maintain my bullish bias here. All I need to know is that the Fed is there the catch us if we fall.
This environment makes the bearish thesis very difficult. In fact, as a few sayings go, “don’t fight the Fed” and “don’t fight the tape”. Here, we have a dovish Fed and a positive tape. So the easier path for stocks is up. But sentiment is still too bearish, which means that there are still way too many bears whose stop losses have not triggered. And when they do, they will create another short squeeze higher.
Regardless of what happens in the short-term, there are a few stocks that are worth owning for the long-term, even at these highs. These are controversial tickers, so they are definitely momentum driven and they move fast in either direction.
Today we examine Amazon (NASDAQ:AMZN), Box (NYSE:BOX) and Uber (NYSE:UBER). I like these stocks but for very different reasons. Two of them are fundamental and the third is speculative. Regardless of which of the three tickers I own, I expect to be nervous while holding them because of the nature of how they trade. But then again, this is a prerequisite when investing in wild stocks.
This is the original wild card and it is still the king of all them. The skeptics fought it for a decade but now they’ve given up. So the stock has been strong setting highs. AMZN has matured into a profitable business but has not yet lost its status as a startup. I know this statement draws chuckles, but it is true. Amazon has never stopped adding new businesses to its income stream so it still deserves the tag.
Over the years, its fundamentals have improved a bunch. So while it still sports a hefty price-to-earnings ratio of 80, it only sells at four times sales. And given the growth it delivers, Wall Street is right to allow it a higher multiple valuation. They are supposed to spend a lot to grow this fast. And this team does it with many cash cows like the AWS.
Moreover, this week, Amazon stock triggered a bullish pattern with a measured move that extends to $2,080. When I shared it with friends last week they laughed at me. It is over $2,025 per share this morning. So the breakout is indeed in progress and it’s up to pure momentum from here to finish the job.
I have no doubt that if markets are higher, then AMZN stock is in the lead. So this is a stock that belongs in every portfolio.
My second pick, Uber, is a baby Amazon. Investors erroneously see this one from a narrow scope. Amazon started as a one-trick pony and now is a master of all trades. Uber also started as a one-trick pony but has already learned three new tricks with many more to go and that’s the part that most investors miss.
Uber first started moving people, then added food, then more recently added freight. They also announced that they will be taking to the air in the next few years. The freight business alone should have tremendous upside within one year. Business clients are more profitable and stickier than retail ventures.
The potential for UBER stock is unlimited for as long as management continues to execute on its plans as they have been. Uber critics now predominantly worry over the ongoing battle with Lyft (NASDAQ:LYFT) over driver retention. But this is short-sighted because Lyft is a one-trick pony that wants to remain one for a while, not only from the vertical it operates in but also from the geography side.
Uber, on the other hand, is already global and will indeed become a giant in several verticals. This is a wild bet I like. What makes it even more tantalizing is the fact that the IPO was botched and the stock price did not run away like Beyond Meat (NASDAQ:BYND) or Zoom (NASDAQ:ZM). Meaning, even now, it is still a reasonable entry point for such tremendous potential.
This is the speculative stock of the three. Box has been in business for a while now and it competes against behemoths like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). And the fact that it is still holding its own, leads me to believe that it is either doing things very right and that the fruits of its management’s labor will pay dividends in the future, or that it will be bought out.
Either those two outcomes will result in profits if you buy the shares now. Fundamentally, BOX stock is not cheap. It trades at a loss and then 4 time sales. So it takes a lot of intestinal fortitude to own it believing it will soon grow into its valuation.
However, it does have a short-term technical advantage in the chart. Of late it has developed a trough pattern off $17 per share. If the bulls can breakout from $18, then they can retry their efforts at retaking the June ledge from which they fell hard around their last earnings report.