January 31st, 2020 (Bull or Bear Report – Fantastic Five)

www.thebullorbearreport.com

By Karl Hormann

 

WEEKLY REPORT FOR

1/31/20

Trend: Downtrend (Confirmed)

 

 

I hope everyone is having a great weekend. On Friday markets closed at high fear levels. The algorithms started selling heavier as news broke of a new case in India and that US Airlines are cancelling flights to China due to low demand and the fear of the virus. Once moving averages start to break down the algorithm computer traders take over and start to sell enmass. Does that mean the sell off is correct and will get worse? No, just look at December of 2018 that took markets down -20% on “fears” of interest rate hikes and a recession. Today we have “fears” of a pandemic and recession once again due to that. Again, an overreaction and a buying opportunity for those that were accumulating cash.

 

Let’s take a look at this coronavirus in context. I was reading in the paper this weekend that the CDC estimates since this Fall, the Flu has infected over 20 Million people and have resulted in about 10,000-25,000 deaths. Compare that to the 11,000 infected with Coronavirus and 275 or more deaths to date. I think the fears are getting quite overblown about the scale or mortality due to this virus. It’s probably a stronger form of the flu that will affect elderly people and young children more seriously. Yes, precautions should be taken, but let’s not get hysterical. But markets do get irrational all the time, and that’s when we can take opportunities.

 

Just this morning I read that China is readying to inject 170 Billion dollars of liquidity into their markets for Monday mornings China open after the Chinese New Year market holiday. This should prop up markets and help stem the selling that might ensue on Monday due to panic sellers. They don’t want fear to take over in the market. I’m sure the Fed and other Central banks are taking notice and on watch also to help stem the panic selling if it starts getting out of control.  Last time during SARS, the markets bottomed when the WHO “World Health Organization” declared SARS a health emergency.  WHO just did that on Thursday also and now with the Chinese liquidity injection for tomorrow, I would be curious to see how we end up closing out the day on Monday. Will the buyers flood in trying to get in front of the turnaround, or will investors take a wait and see approach to see how this will effect companies in the first quarter?  Time will tell.  But if you see stocks you like slice through the 50- or 200-day moving averages, I would be taking advantage of the sale.  If it goes below the 50 DMA, buy a little.  If it later slices through the 200-day MA on extreme panic selling, I would starting buying aggressively with new or idle cash.

 

IVW just broke below the 20-day moving average on Friday and closed at 198.02. The 50-day MA is at 193.55.  Below that is 181.65 for the 200-day MA.  For us to fall to the 200-day MA would required computer algorithm selling to hit fever panic pitch and trend chasing to the downside. It would be a gift in my view, but short lived. The higher probability is to get to the 50-day MA.

 

Wynn Resorts (WYNN) did crash down to their 200 day Moving average on Thursday and bounced slightly on Friday to 126.16. I like adding Wynn to my portfolio for the dividend and growth exposure to leisure and gaming from their Macau exposure. But for me to initiate a position of 1-2% allocation, I would want to see WYNN get below 110. And if it did crater on worse news and broke down to $100 or below, I would be loading the boat with a full 5% holding.  It’s on my watch list along with Carnival Cruise (CCL) which also is another dividend play.  These are all companies I found through Financial Education as I have mentioned below. They are all getting cheaper now, and soon entering buy zones. CCL would be a strong buy under $40 dollars per share. Only a few bucks more to get there.  Let’s see if this sell off has more legs, or if China’s liquidity injection will invoke panic buying in a FOMO trade. Fear of Missing out, as they say.

 

Berkshire Hathaway, one of my major core holdings, along with IVW, CVY and a few others barely came off it’s all time high. Berkshire Hathaway is only -2.6% from it’s old high of 230 we hit just over a week ago. I continue to see Berkshire Hathaway as an awesome play going forward as a value play, and as a hedge against inflation. If we start to see major inflation due to all this liquidity injections and money printing, Berkshire will have the power to raise prices and raise revenue. Also, with all their cash sitting on the books, they can buy back more shares aggressively, or buy-out companies that get crushed. That’s why I don’t think markets will go down for too long, because there is so much dry powder or “Cash” sitting on the sidelines just waiting to pounce on bargains. They are all watching and lying in wait.

 

So, let’s see how this week unfolds. Will the irrational panic intensify causing algorithms to sell even more aggressively into the declines, or will the bargain hunters’ step in and try to get ahead of the bottom?  Time will tell.

 

I hope you all had a great weekend. Stay invested, stick to a disciplined monthly investment plan, and watch your portfolio compound to success!

Stay bullish on America everyone.

Best regards

Karl Hormann

 

 

My short-term trend oscillator has collapsed to “Downtrend” signal this week. From 1.33 last week to .96 on Friday. We have dropped into downtrend territory now. Based on this indicator we are not oversold by any means. I have seen this indicator go down to .6 easily. So be cautious, but not aggressive yet. Any reading below 1.00 indicates we are in a short-term downtrend. Anything above 1.0 indicates an uptrend (A reading of .30 extreme low, to 1.60 extreme high)

 

Our Fantastic 5 Portfolio is 100% currently.

 

As you know, I never advocate timing the market for the bulk of our portfolio. Our Fantastic 5 portfolio is the only mini portfolio I use that utilizes strict money management rules which generate an above average return, while minimizing risk.  Below are our current holdings.

 

Rules for investing I live by:

  • Save at least 10% of your income every month and allocate it to investing for your financial freedom. Your monthly “Mortgage Payment to Financial Freedom”.
  • Get out of personal debt and stay out of debt as much as possible
  • Always stay diversified in your investments, never putting more than 15% of your money into any one position unless it is an already diversified ETF.

 

Fantastic 5 Portfolio Update below.

100% Invested:

 

GOOGL (Alphabet Inc)              Purchase Date  8/05/19  @ $1,173.06   +22.14%

WBA  (Wallgreens Boots)      Purchase Date 7/17/19   @  $55.69         (-8.70% )

SHW  (SherwinWilliams)        Purchase Date 9/13/19  @ $536.11         +3.90%

CHTR  (Charter Comm)           Purchase Date 9/13/19  @ $425.52         +21.73%

CMG (Chipotle Mex Grill)      Purchase Date 1/10/20  @ $866.06          +.08%

 

 

5 POSITIONs. 100% Invested Currently

2017 Total Gains: +40%

2018 YTD Returns:  +11.98%

2019 YTD returns: +6.80%

 

 

 

Many other core holdings which I have in my personal portfolio continue to be:

IVW (S&P 500 Growth Fund ETF),  #1 core holding of mine.

DVY  (iShares Select Dividend ETF)

DIA (Dow Jones stock exposure)

BRK.B (Berkshire Hathaway),   buy under $200

BGCP (Real Estate play paying a nice dividend),

QCOM (Holding.  Pays a 4.3% dividend while you wait.) **SELL ½ at $94+, roll into CBS**

AA, ARCN (Alcoa & Arconic for recovering economy play)

GILD   (Gilead. Great future medical play that pays dividend.)  Buy under $78.00

AAPL:  (Apple Computer) Buy under $175.00  (pays a 1.76% dividend while you wait)

MO:  (Altria Group)  Buy under $46.00  (now pays a 7.72% dividend at $44.33 on 10/19/19)

NWL:  (Newell Brands) Buy under $20.00 (pays 4.2% dividend) rec 8/25/18

AMAT: (Applied Materials) Buy under $40.00 (Pays a 2.45% dividend) rec 8/25/18

X:  (US Steel)  Buy under $15.00 (Pays 1.04% dividend)  rec. 3/8/19

SNAP (Snapchat) Buy under $11.50   rec. 5/1/19    (target: $20+)

WBA:  (Wallgreens) Buy under $52.00.  rec 6/8/19  (Target: $75.00) pays 3.39%

ABBV: (AbbVie Inc.) Buy under $65.50  rec 8/23/19 (Target: $90.00) pays 6.49% (small position)

KHC: (Kraft Heinz):  Buy under $28.50 rec 9/29/19  (Target: $38.00) pays 5.75% (2-3% position)

UNH: (Unitedhealth Group): Buy Under $220 rec 9/29/19 (Target: $350.00) pays 2.01% (2-3% position)

VIAC:  (Viacom/CBS Corp)  Buy Under $38.15   rec 11/9/19  (Target: $57.00)  pays 1.89% div.

UBER:  (Uber)  Buy under $28.00,   rec 12/8/19   (Target: TBD as company turns profitable)

 

 

Thank you and have a great Weekend. Stay Bullish on America!

Best regards

Karl Hormann Jr.

Email:  karlsfantasticfive@gmail.com

1(914)668-5090 (office day)

 

 

 

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