Tomorrow is quadruple witching Friday. Wall Street experts tell us that we should be terrified. The explanation as to why is pretty convoluted. Basically, it is because a whole lot of money will move from one bucket to another. In addition, Tesla will join the S&P 500. The stock having a $600 billion market cap adds another potential wrinkle. Investors are spooked and hold back from finding stocks to buy ahead of such uncertainty. In reality, it doesn’t matter over the long term.
Today we will focus on three stocks to buy now that don’t depend on short term overall market action. These three tickers that stand on their own with proper bullish fundamentals. Investors often focus on the overall picture and mistakenly pass up great opportunities. 2020 has been an incredible year with a lot of drama. Our goal is to not let this crisis go to waste.
As bad as it was from the human perspective, a lot of good things will come out of the pandemic. For example, the digital revolution went into hyper mode. When the lock down happened everyone realized how important it is to plug in. Going online was no longer a choice, it became a necessity. Even those who have been skeptics all along had to bite the bullet and do it.
This means that we now have several themes with at least a decade worth of upside momentum. Within those we find today’s three opportunities:
First, artificial intelligence (A.I.) will be the center of almost every technology going forward. Therefore every business will need it. Secondly, the cloud is where most business and even day-to-day life will happen. Thirdly, gold will be king forever. It’s importance will grow as governments continue to devalue currency.
Stocks to Buy for 2021: Palantir (PLTR)
Palantir stock has very enthusiastic fans on Wall Street. The company’s services will be essential to a wider audience going forward even though for now it seems a bit of a niche. I’m not saying that it’s small chump change because they have over a billion dollars in revenues. The commercial side is budding, and the government side is thriving.
The management team has earned the respect of experts and for good reason. They are confident in their business plan and seem to be executing it well. The price action in PLTR stock has been phenomenal to say the least. Year-to-date it’s up more than 300%.
I wrote about the upside opportunity in October and it has not disappointed. This is a stock to own for a long time.
In the meantime, there are support zones below and resistance above. The active trade has been to get long it near $25 and exit near $28 per share. This narrow range presents burst opportunities. As soon as price breaks through either of these two edges the stock will carry momentum in that direction. It is entirely possible for it to reach $50 by next summer.
This is the type of stock that would do well with a buy-write options strategy. Buy the shares for the long term and immediately start selling covered calls against them. This creates synthetic dividends that provide short-term hedges.
Salesforce.com was slaying giants way before it was hip to know what the cloud was. Two decades ago, it went up against Microsoft (NASDAQ:MSFT) and crushed it. CRM essentially created the cloud and opened the eyes of the world to it. Now every company is on it, and if not they are aspiring to be.
Amazon (NASDAQ:AMZN) saw the potential and created Amazon Web Services (AWS). With it they quietly owned “the cloud.” Now the others like Microsoft, Alphabet (NASDAQ:GOOGL,NASDAQ:GOOG) and Alibaba (NYSE:BABA) are playing catch up. There is enough business for everybody to win.
The subscription model was so great that CRM stock rewarded its investors handsomely. Recently it fell on hard times because they are trying to do what they’ve done all along. In their pursuit of growth they made a bold move by making a bid to buy Slack (NYSE:WORK).
Management under the leadership of Mark Benioff has earned the benefit of the doubt in my book. Apparently Wall Street does not think the same because they punished the stock down 25% from the highs. Salesforce.com stock now sits in between two ranges and I bet the one underneath is a solid base for the future. In the long term it will make for a fine investment today.
They don’t ring bells at tops and bottoms but at this level I highly doubt that buying CRM stock here is going to be a major financial mistake. It is not cheap, but growth stocks rarely are, at least the good ones aren’t. Bold strategic moves from competent managers usually deliver great results. This major dip is definitely an opportunity to buy.
SPDR Gold Shares (GLD)
As excited as I am about the digital trend, I am worried about what the central banks are doing to the value of money.
Since the 2008 financial crisis the U.S. Federal Reserve has been in panic and perpetual QE mode. They tried under the leadership of Jerome Powell in 2018 to end it but they failed. The stock market crashed into Christmas that year so they raised the white flag. We now have zero rates with no end in sight to the loose monetary policy. In addition, they are buying record amounts of assets, including ETFs.
This has demolished the value of the U.S. dollar as it’s been in a death slide for over a year. On the other hand, they tell us that there’s no inflation because the CPI cannot measure much of any. In real life we all know we’re paying a lot more for stuff. A burnt cup of coffee at the local convenience store costs $2.50.
I remember the days when saying the word “billion” meant something. Now we say “trillion” in regular conversations. The value of cash has gone to the birds and it’s not going to improve anytime soon.
Investors need a better way to store value outside of the control of the governments. Gold is one and Bitcoin is another. I’ve made the argument for GLD stock for years; this year it set new records. The rally took almost a decade to happen so it’s not done yet.
An easy way to trade the shiny metal is through the GLD ETF. Buying the physical gold is the best way but would require special handling. Investing in GLD is the more practical alternative. It is never too late to add gold to the portfolio. Years from now it won’t seem like chasing. Gold is rare and getting harder to extract. Most importantly, people want it.
In two of the cases today there is extrinsic risk from the overall level of the stock market. The indices cannot stop making new highs in spite of the harsh economic conditions that we have. The virus may be coming under control once the vaccine hits the streets. But for now, states like California and New York have reverted to restricted businesses.
If the stock market falls, CRM and PLTR stock will temporarily suffer. Gold on the other hand could actually catch a tailwind. Often enough when equities correct other asset classes like gold and bonds catch bids.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.