Fantasy Football: How To Draft Top Stock Picks In Your Portfolio

Fantasy Football: How To Draft Top Stock Picks In Your Portfolio


okay hello everybody and welcome to
investing with IBD for September 4 2019 I’m your host Irusha Peiris with me
today once again is Justin Nielsen director of research at IBD thanks for
being here Justin thank you for having me this is gonna be a good one now on
today’s podcast we are gonna talk about the current markets and then in segment
2 we’re gonna get a little bit more fun and a little bit more related to what’s
going on this week this is football week and we are gonna talk about football and
fantasy football and then we will end the episode on current stocks yeah and
just to be clear it’s how fantasy football relates to stocks not just you
know oh we just drafted and here’s our team so Justin yeah it is football
season now or the NFL is about to start tomorrow
college football started really started this last weekend and and so we both
love football and and so we what we want to do is go with this team and really
talk about how there are a number of parallels between football and the way
we invest sure and just in case people want to know a little bit about the prop
that we have here were both in a fantasy football league and this was the trophy
from that league we actually borrowed it from our colleague Jack Pacheco he was
actually the winner of the season and this is one that kind of went through
the ringer in terms of shipping so if you’re wondering why the tape is there
in the holes and stuff that’s it’s a tough football it’s weathered builds
character so so let’s let’s talk about the character of the market the overall
markets right now we’re under pressure right we’ve been under pressure for the
last couple of weeks now we had a faltered and immediately was
met with distribution so we currently have five distribution days on the
Nasdaq for distribution days on the S&P 500 and it’s been a choppy market
the Nasdaq is under the 50-day and is kind of hanging around under the 50-day
for the last but for weeks now yeah what’s what’s impressive to me is that
with all of the headlines that have been out there between trade and recession
fears inverted yield curves all of these things I’m actually pretty impressed
with how resilient the motors been threats its you know I would have really
expected with all these headlines if it were a weaker market it would have
easily undercut that 76 62 area that it you know that it made it slow at the
beginning of August and that’s held so this rally is still technically intact
because we had the follow-through day and we haven’t undercut that low so
that’s that’s the good part the bad part is that 50-day moving average line is
acting like a very stingy defensive line that is not allowing any yards past the
line of scrimmage and you know each time the Nasdaq gets up to that line it gets
knocked right back down and just can’t make any progress and so we’ve seen what
like one two three four you know almost four times here each time it gets there
it gets knocked right back and it’s gonna be very hard for me to get much
conviction in the market until we are able to cross that resistance level at
least the 8,000 level is kind of an early level of resistance that it just
hasn’t been able to kind of maintain itself above that level for more than
you know a couple days at this point but even before that a couple weeks before
yeah yeah and and it’s it’s pretty amazing and how one day you’ll have it
the markets down big next a couple days later it’s up big and there’s no maybe
we’re out of it but nothing in the end nothing’s been resolved it’s still the
uncertainty will it truly get maybe it only gets resolved when you get more of
these larger macro events that that are happening that they’re actually resolved
and there’s a scary stuff I mean there between brexit and trade war and you
know a lot of times the markets been rallying on just like optimism it’s like
yeah oh maybe they’ll talk and then it’s like oh no they won’t or whatever so you
know there hasn’t really even the big moves up we really haven’t been on much
news at all it’s just been like oh maybe things are gonna go in the right
direction so again I think that speaks to the resilience of the market
I think it wants to go up and I think we’re seeing that with a lot of stocks
that really are setting up and want to go up but right now it just keeps on
running into again a very very heavy defensive line wait which yeah and and
speaking of defense you in this type of environment you you want to lean more
towards playing defense absolutely right you don’t want to be very very
aggressive here you definitely don’t want to be on margin in this because
your portfolio is gonna be whipping whipping around and it’s really these
kind of markets that are the more the ding the most dangerous price right it’s
not necessarily down trending market we know what to do in the down trying just
stay out of it it’s these in indecisive markets where nothing’s necessarily
conclusive just yet and and there’s still a chance and there are leading
stocks that are still hanging in there so it keeps tempting you in so you you
want to have some exposure in my opinion but you don’t want to be really pushing
it right because it’s not worth the easy money is made yeah and you know the easy
money if you just look it wasn’t that long ago January 4th when everything
kind of turned that’s where the easy money was and you saw it the indexes
went up you know in a big way that first quarter 20% our indexes were doing well
I bt-50 doing well it was just everything was moving it’s a trend
following system and right now there is no trend and to that end you know you
don’t want to be shorting either because this isn’t there’s not a downtrend
establish so when you’ve got this sideways action and trend less you just
have to be kind of waiting biding your time and keeping your watchlist fresh
yeah that is absolutely a huge point because as Justin mentioned there are a
number of stocks that are hanging in there they’re shown tremendous relative
strength and when this is resolved and or when we get into the next uptrend a
lot of times those stocks that show the best relative strength are the first and
new highs and there are the new leaders of the next rally so let’s go a little
bit further into just football and fantasy football here because there are
interesting parallels that I mentioned before but you Justin you brought up a
good point one think that Bill O’Neil and you know the
founder of IBD has always said is in every bull market there are a number of
leisure stocks yeah that do well and so that’s a huge reason why you want to be
paying attention though some of these trends that are gets going on in front
of you right exactly and that’s I think something that a lot of people can more
easily grasp you know if you go back to like the Peter Lynch idea of kind of
knowing what you’re investing in and and you know again warren buffett doesn’t
make things too complicated either leisure is something that’s usually
pretty easy to understand you know oh i watch netflix okay that that makes sense
to me or Priceline that was a big mover you know a number of years ago hey cheap
cheap airfare you know hey that makes sense to me getting cheap hotels so
there’s a lot that’s easy to understand and kind of understand like when
something is moving and you know it’s you can see the sales growth you can see
all of those things kind of come together and it’s not something where
you’re like okay how does IT use this I’m not technical and I don’t understand
the technology or even like with biotech sometimes you know oh I don’t understand
exactly how this further is the field and in biotechnology Leisure’s usually a
lot more easy to understand and I’m in retail yeah and one really got a large
leisure kind of event that’s happened it’s really big become a phenomenon over
the last 15 years is fantasy football yeah right I remember probably 20 years
ago some of my roommates in college they were into it but no one else was into it
these days everyone’s into it well and it’s I think become a lot easier you
know because now you can get streaming real time points you know every day and
just be counted yeah everything’s easier with the technology yep I how would you
have done this like 30 years ago like you know exactly you know and just to
kind of bring this back to leisure you know there was a big difference in that
what was it like the 50s or 60s when bowling was becoming really popular and
one of the things that kind of revolutionized bowling was when you had
the pin setters that could automatically you know you didn’t have to have the
kids you know doing it anymore and you started getting the automatic scoring it
just made the game a little bit more fun and so Brunswick was one of the the
stocks that bill you know mentioned early on in the 60s and what was the
other one ay-ay-ay yeah it was like American something
pinsetter yes something but they were the pin setters so those types of things
it’s again very similar so you’ve had technology really enable this fantasy
football to get much more interesting and I think there’s a lot to learn about
this especially with stocks the it becomes easier for mainstream people to
start using it so also more and more people are into it now that spawns off
more industries right right or more businesses now all sudden you have all
these fantasy football experts out there so just just ask you know what have you
yeah exactly and so Justin I we have a we share of fantasy football team in the
in the league that were in and so this past weekend what did I do I went I went
on YouTube when I was watching some fantasy football’s of videos trying to
get up to speed on okay who are the players are we good and all this kind of
stuff and it’s just amazing and how many services are out there now right for for
this and and so it’s just this whole industry is growing first it was Yahoo
had their they were the kind of the leaders now then ESPN got into it then
NFL and so it is it kind of if you’re trying to understand how businesses
really grow or how an industry can grow you take a look at this one if this is a
football is something that you can relate to or if you’re playing fantasy
football just think about how many different companies have gotten into
this well into this world right now because it’s become a multi-billion
dollar industry at this point which was unimaginable years ago right mm-hmm
so the market continues to be volatile and it’s best not to push it at this
time remain cautious and remember to keep an eye out on trends in the leisure
category it’s amazing at how you can stumble on some good stock ideas by just
keeping your eyes open so let’s take a quick break but when we return we’re
gonna talk about how football and the way invest have more in common than you
think stay tuned hey guys if you really enjoy listening
in the podcast every week we’d love it if you could rate and review the show on
iTunes your review and ratings really help out the show and we would love to
get your feedback thanks so much for listening Juston Nielsen’s our guest on investing
with IBD okay Justin so as I mentioned before on Thursday tomorrow Thursday
September 5th the NFL is starting again and so let’s take this talk a little bit
further and going a little bit more parallels on how football and investing
or really the way we invest they’re there they’re a really number of
parallels now the the first thing really is just the overall market now where
we’re seeing the market right now it’s under pressure it’s indecisive where you
can really make money in the stock market as we know is when you aren’t a
nice confirmed uptrend and the way I equate it is it’s when the football
season’s there that’s the only when the football season’s open when you’re there
from September to January that’s the only time when teams can actually score
points or you might even think of it as you know you’ve got Thursday Thursday
Night Football you’ve got Sunday you know and you’ve
got Monday you know everything else that’s when you’re doing your research
and you know you’re getting ready you’re preparing you don’t want to be doing
your research and like setting your lineup like on game day you want you
want to kind of do that stuff ahead of time now you might have to make some
adjustments on gameday and you know right before kickoff but you should have
your plan already in place you know and it’s kind of goes back to the thing that
we often talk about playing your trade trade your plan and that’s a that’s a
another perfect kind of lesson that really I learned over the weekend we had
our fantasy football draft this past weekend and as we’ve learned over the
years it’s very very important to prepare for this vote for these drafts
because also know the few players that you know that you’re they’re gonna be
gone we saw one person and in our in our
league he was not prepared at all and he completely panicked he started reaching
for players and he let his emotion start to kind of lead him though I know this
one player that did well five years ago yeah I’m just gonna draft him even
though he’s he was going for oh I recognize this name but you didn’t have
any stats behind it exactly and and likewise the same way when you’re
investing you really want to have those you want to be as objective as possible
you want to be able to use those ratings use those stats
and really let the market tell you what to do you know if the stocks are setting
up at that point you’re buying at a certain time you’re not buying because
you like the company or you you just can’t take it anymore you can’t let
those emotions those emotions I’m getting you I’m just gonna buy this stock
right right you’re being patient and it was really really interesting to see
that same kind of the same kind of motion to the stock market and fantasy
football during the draft this past weekend and you see that happens
sometimes in terms of that emotional component sometimes people will you know
just pick the players of the team that they like yeah and it’s like okay know
you’ve got all of these choices you know you have to look at who’s the best out
there you know and I don’t care if you hate the team you know it does kind of
make it interesting sometimes if you’re like oh shoot I’m like actually rooting
against my favorite team because I want my fantasy football player to do okay
and then the other the other point just having to do with especially for our
particular draft day is you have to be aware of your emotions and like you know
in your state of mind you know hey how much sleep did you get you know if
you’re not getting enough sleep you might not be making the best decisions
now I don’t expect most people to do this but we had alcohol available at our
draft you and I you know we kept it together I mean we kept our alcohol
content our intake low and I think that made us better at you know dealing with
the contingencies that we had to deal with namely that contingency plan that
we had where we both had our computers mine crashed over and over again yes but
we were able to go to your so we had that contingency plan so again another
thing that really helps with investing if you know things don’t go according to
plan how can you kind of backtrack and you
know make sure that you’re still acting appropriately yeah it’s always scenario
analysis that the reason why I brought because I was gonna depend on you man
knowing all that’s usually my thing Justin is the excel master and so it’s
like okay Justin you take care of this and I’ll look at the players and all
this kind of stuff and and but I was like let me just bring my computer just
in case right same thing in stocks you have to have an exit strategy you have
to know what what are you gonna do if the stock gaps down on you right you
don’t want to be going through those that thinking process when you’re
emotional you want to kind put that all down ahead of time and
known so that’s what I that’s what I did before we started okay with Justin’s
computer breaks we have my computer my computer breaks we have paper right
right so we went through all that kind of stuff and then kind of don’t think
about happen for us and the guy didn’t you know the guy that didn’t show up
with any paper we’re trying to grab your paper yeah granted that was our plan D
you know and apparently it wasn’t even his plan a he didn’t even get that far
right now now another parallel that that that that we see is that and this is
kind of common sense right in football or any sport usually the best teams will
have the most will have more of the better players right right that they
have the star players on their team it’s the same thing with the stock market or
the way we look at growth investing you’re looking at the best industry
groups first right so you want to be in the best industry groups and then within
those English groups you’re gonna have a number of great stocks and ideal you
want to be in some of the best stocks in that industry group but if you’re in a
larger kind of secular trend that’s going on within the semiconductor group
or the software group like we were seeing this year
you just want having you want to make sure you have some exposure to that to
that group because there’s a really large trend and it’s carrying all those
stocks right and and that’s something that happens in football when these
trades happen and so now you’ve got Antonio Brown no longer on the Steelers
okay what does that do for the the QB on that team what does it do for him as a
receiver having another QB throwing to them you know so there are these things
that you know can maybe change how you are looking at you know these these
different stocks you know because again in that case it’s changed an industry
group and you know that doesn’t happen very often but one thing that it always
sticks out in my mind is Charles Schwab you know in 1998 when Charles Schwab was
acting like an online stock because you know all the brokers were doing you know
it was it was not acting like a brokerage stock all the brokers were
doing one thing it was doing the same thing and making the same pattern that
AOL was because Charles Schwab had gone online with their brokerage they were
you know very early on early adopters in that and they just were acting like
something completely different from their industry group you know and so you
just have to kind of be aware of you know okay when something is is it a lone
wolf in its industry group or is it really part of something else you know
those are things that you just have to kind of keep in mind yeah and you’re
talking about catalyst with with Antonio Brown it was one of the best receivers
in football being traded from one team to it to another team though those lead
to catalysts and so recognizing those trends those kind of larger trends
within industry groups and within stocks that that’s gonna make a huge difference
between helping you catch that rotation right and and that’s one thing that I’ve
noticed over the years even in wonder if he was playing fantasy football there
are rotations and it’s fascinating and the same way that in it that I see
mistakes and investing where if you’re not quick enough to adjust you’re gonna
start suffering and in stocks usually I’m pretty quick to get out of football
I’m like you know I kind of get a little lazy and don’t pay attention as much and
all the sudden all the others who are really paying attention to all the news
and stuff they’re they’re really adapting to those trends they’re
adjusting they’re grabbing those players that are now gonna benefit from from
this new trend that kind of happened midseason and I think that’s that’s one
place in which money can really make you focus you know of course with our
fantasy football there’s not much money on the line you know and and so that’s
not a big deal for us but in our trading accounts yeah you don’t want that money
can really make you focus and this is sometimes where people who are doing
paper trading can actually miss out on something because they’re able to apply
the rules and everything like that but they’re not getting a true sense of the
way the emotional impact can be when you do have money on the line real money and
paper trading is good you know I think that that’s useful for a lot of people
but you also have to be careful if you you know are kind of in that false
setting without the money on the line and without that emotional component you
might find a different story when you start doing real trading right and and
now concentrations another another concept that we always talk about in
investing you we concentrate more than most normal normal kind of systems out
there or kind of the traditional mainstream
investing that that you hear about the point you know I mean like most people
would never think to only own ten stocks right and we’re very comfortable doing
that yes so so you concentrate in that way but also we’ll concentrate we might
have a little more concentration on in one particular group now the one thing
you have to be very careful of though is don’t have too much concentration in no
more than 20% 25% in one industry group because all of a sudden if you have a
major catalyst like say you have 25% in a semiconductor group and Intel comes
out during the earnings report say you know what the whole industry is terrible
yeah that’s gonna destroy all of your stocks so if you had say 40% of your
portfolio in semiconductor stocks you’re gonna really be you’re just gonna take a
beating at that point I mean look what happened with the chips
you know the whole China trade war how does that affect the chips you know when
you know if Apple’s products are gonna be you know getting getting tariff
slapped on them and all of these things how does that trickle down to the
suppliers and everything like that yeah same same exact thing so now you
know some of that will depend on your comfort level you know as you get more I
guess experienced and advanced you know you might be able to up your
concentration because you kind of know your discipline and know how quickly you
can move but you know so like for me you know sometimes I’ll have 20% in a single
stock you know so I can up my industry exposure sometimes but then you just
have to be aware that you do have that extra exposure and you have to be a
little bit quicker if you’re recognizing that there is a turn in the industry and
not getting like hung up on oh but I’ve made so much money I mean computer
software that was a big a big mover you know this this year yeah you have to
recognize when those things are turning and and so likewise in in football if
you’re you don’t want to concentrate all on just one team you don’t take all the
players from the New England Patriots because of Tom Brady went down or
something for for a while all sudden and all those players are gonna be affected
yeah so same way make sure about the concentration now IPOs now IPOs as we
spoke in my appeals a number of times on dirt during the podcast over a number of
episodes and there are obviously more risky they’re more volatile right and in
many ways kind of like the rookie players who are
coming into football where you haven’t necessarily seen how they handle the NFL
right but you know that okay they were pretty good in college but we don’t have
enough information just yet on them so you have to kind of sometimes take a
little bit of a chance on them but you don’t want to invest too much right in
IPOs and and a lot of times with IPOs you know our general rule is we don’t
trade on the first day now we’re always wanting to see some trading history in
the same way you’d probably want to see some trading history on rookie you know
and and in football you’d want to see you know granted you have his college
career and that’s almost like oh you have the fundamentals and everything
like that you still have the sales and earnings for the company before they
came public you know they provide that as part of the due diligence process but
you know there is how are they actually gonna trade you know what does the what
does the market actually value them at and until you get some of that trading
history where you can actually see it it’s it’s really hard to make too big of
a bet they’re balancing risk and reward now looking for stocks that so sometimes
a great stock might come to or what you think is a great stock might come down
give me an opportunity to get into hours building a base but it might have one
too many flaws in it maybe maybe it’s earnings per share rating is a little
roll or maybe though the base is a little too faulty a lot of times you’re
gonna pay for that you know when you know and Bill O’Neil has said there’s
many times if the stock doesn’t work there’s a flaw you missed there you know
in your analysis process same way with with in football and stuff of that we
had in during our fantasy football draft but one of the great players Todd Gurley
fell to us in the second round but we passed on him because there’s just a
little there’s not enough information whether his knee is healthy or not so
we’re okay let’s take something else has a little bit less flaws well we’ll go
with someone who’s a little bit quote-unquote safer because we have more
information on it so you’re kind of balancing that risk reward both in in
stocks in football the same kind of way you want to make sure you have enough
information there for you to make a decision you can really rather you can
sleep on yeah and in the same way you know injuries are something that
absolutely affect football a lot especially your running back
which is why that’s such a prized you know position in and fantasy football
but you know you have to kind of be able to recognize that in your stocks as well
when your stock gets injured when them Britain when the base has flaws you know
you have to be able to recognize that and say okay you know what it’s maybe
time for me to part company with it and it could be your favorite player in the
world or favorite stock you’ve made so much money on it but when you start
seeing it get injured you know and for us that might be a break of the ten-week
line on a huge volume something like that okay that’s that’s an injury that’s
like that’s like a terror you know or that that’s that’s something it’s gonna
take some time to recover from yeah and then you have the things where it’s you
know a little bit more serious and you know that you might just have to
completely get out so there are the times where you know it’s not always an
all-or-nothing where you know we have the benefit of putting something on our
bench he also with your stocks have the opportunity like maybe just trim a
little bit you know you don’t have to sell everything right and then if it
works out hey you know you can you know you can build it back up as it bases or
breaks out again but then some stocks hey you just want to toss it and get
something new yep and and a lot of times in the analogy that we use for investing
is when they get hit hard you ask yourself the question is is it a sprain
or is it a broken leg yeah right because that gives you an idea of how long the
stock could take before its back into new highs right how much longer do I
have to type my money right in the stock and if it’s obviously it’s broken maybe
you take your money out go to a new stock okay and then one more concept
here that we’re going to talk about a few stocks make most of the gains yeah
so now what we’ll talk about first our fantasy football experience from last
year we drafted really well we ended up with Patrick mahomes – who turned out to
be the the best player in football and I can’t remember what round we got we got
in like the 11th round yeah so we ended up with a couple real really good
players and in the end it was those few players who really carried us you know
and we ended up doing really well in the season just because of those few players
like well it’s the same way with the way we invest in stocks it’s always a few
stocks if you manage them well they’re the ones are gonna make the
difference everything else will gets kind of even out the small losses and
the quick cutting losses really quickly and then sometimes you know those small
gains because they’re not working out and and just to share a study that I’ve
done you know on the IBD 50 looking back going back to 2003 April 2003 for the
IBD 50 it’s about 10% of the stocks maybe 10 or 11% of the stocks that you
can basically point to almost all of the out performance for the S&P 5 MC S&P 500
are attributable to 10% or sometimes less you know in terms of like in 2009
it was like Priceline it was CMG it was you know it was just by users yeah
exactly they just you know they stayed on the list they got on early they
stayed on and that is what really drove the big gains for for those index a lot
of our indexes you know and just for the record last year you know we had my
homes of course our other big player was Connor Rowe we actually picked up off
the waiver wire because our first number one draft pick that we had was Le’Veon
Bell who didn’t we decide not to play the whole year you know so here here was
a stock that we had to just mace basically cut and say okay what are we
gonna replace it with and we just so happened to do a trade where we replaced
him with some pretty pretty good someone else who could take the business right
if the one company went out of business there’s another company came in and took
that market share away same thing we just found the player who was gonna
benefit half of that so understanding how to narrow down your choices to the
best stocks or the best players it’s gonna help you score points in whatever
game you’re playing coming up next we will discuss a number of stocks that are
benefiting from the football season and they could be setting up on the chart
patterns to believe want to find stocks like the ones on
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Justin let’s talk about some current stocks that are benefiting from the big
business of football yeah now the first one on our list is
Microsoft and this is a really cool this is a really cool one because Microsoft
made a deal with the NFL a few years ago and now back in like 2013 or something
like was it that long yeah it was I was I was reading about this because I was
trying to like remember the chronology and then sometimes it’s really easy to
kind of you know it all blends together like long ago was apparently yeah I mean
you know the iPhone just you know that came out in 2007 yeah I feel like didn’t
we always have iPad you know came out a few years after yeah exactly
and so and the Sun was the surface was kind of the Microsoft Surface was kind
of their answer to it and that NFL Diego deal really kind of got a lot of
publicity for you know because you look at the sidelines and they’re carrying
surface you know Microsoft Surface tablets all the time yeah yeah all the
coaches are carrying it and it says surface on right when you look at the
all the yeah just the commentators they all have the surface tablets it says and
also it wasn’t just with the surface tablets Microsoft made a deal with NFL
on the Xbox and and their exclusive kind of footage that you can get through for
the NFL through that and and so this was really one of those things that
Microsoft’s try to do to start to appeal to to to a larger audience at least or
to the NFL audience where they said hey you can you take buy the Xbox you can
get all this exclusive stuff help manage your fantasy football team better
because we were given with all these stats on it so it was a way to try to
appeal to to this very very specific audience here now on the chart you know
this was you mentioned 2013 now 2013 was around the time where they had a change
in CEO yeah right and that’s when the whole culture kind of changed there too
right they were more software software culture at that point they kind of
expanded right they started coming out with a surface the
hardware and really branching into more kind of consumer devices to to start
competing with Apple and really over that time during that time Dave they’ve
outperformed Apple yeah it’s really incredible cuz if you look at a long
term Microsoft chart of course they had the phenomenal run in the 90s and then
they topped in 2000 along with most tech and it was really about 13 years you
know that right around 2013 is where they finally kind of got back to their
old highs that they made in 2000 and that was really when things really
started turning around for Microsoft and as you as you mentioned they’ve been a
big out performer since yeah and so much like when you can get a new coach that
comes in can change the whole football team around same thing here they got a
new CEO who changed the whole cult amazingly changed the whole culture on
because Michael has such a large company yeah but he’s pulled it off as it’s been
pretty remarkable and Microsoft spending this great great uptrend for a while and
it’s forming a flat base right now and it’s it’s was when you look at the
Microsoft chart it micro saying what we’re going through an uptrend under
pressure what I wonder pressure yeah so Microsoft is only 2% off of its high
right now it’s a 52-week high it’s barely
corrected at all it’s maintaining itself pretty much above the 50-day moving
average so whereas the market is having trouble getting back above its 50-day
moving average Microsoft is pretty much remaining above it it’ll test it it’ll
go down a little bit but then it comes right back so it’s it’s really again
showing a lot of resilience and you see that with the relative strength rating
you know that relative strength rating is is very high and the relative
strength line has been pretty high lately as well yeah and so the the pivot
point for Microsoft with this flat base is 141.68 so it’s definitely one to keep
an eye on I do own shares of this stock and table add 10 cents to that and you
would add 10 cents that’s over 141.78 would would be the buy point and the the
reason why I’ve kind of favored Microsoft over all the other large tech
stocks it but on the chart it has it hasn’t really corrected that much
versus all these other large tech stocks they’ve been building these huge huge
bases they haven’t really participated in the in this uptrend during 2019 yeah
and just to kind of bring it back down to the ratings and this is it again you
know one of the things we look at with fantasy football we’re always looking at
the stats and everything like that the composite rating for Microsoft is 97
yeah so this is you know I like to kind of look at the ones that are 95 and
hired those that’s where the leaders tend to be and this is obviously one of
the leaders now we always make the kind of caveat that it’s not just the brand
name recognition that makes a leader it’s the earnings growth and a sales
growth you know Microsoft just happens to have both you know they are an
earnings leader they are a relative strength leader and they have huge brand
recognition perfect now let’s go into the second stock here and really the
next two or maybe three stocks that that we go over they are all alcohol-related
the first one is Diageo ticker symbol de o and now these guys have quite a number
of brands here Guinness Johnnie Walker Crown Royal
Bailey’s Smirnoff Captain Morgan Captain Morgan and Don Julio yeah okay oh I
didn’t know that was about Don Julio weeks which that was one of the the
things that we tasted this weekend right exactly and and you know again Arusha
you showed such restraint it was very good but but this is this is one out of
the the beverages these guys have just recently built a cup it recently let’s
say you let me go the daily you know you have your beer or maybe your or maybe
you’re high high great tequila like Don Julio well I was gonna say if you’re you know not
doing the carbs if you’re kind of you know trying to stay away from that if
you know you got the keto plan going you need to stay away from you know the the
high carb beers and stuff like that then I yeah you can you can switch to de o
for for your for your choices and so they they’ve formed a cup they just
broke out today out of this cup pass to 176.07 pivot so they didn’t really I
guess oh you actually did God want the buy
point was what would be 176.17 so it reached a high of 176.22 today yeah
volume was 65% above average so not bad absolutely on and they had and they’re
also previously they had a really nice strong uptrend before so something’s
going on with this stock right now and it’s a appealing to Wall Street their
their earnings and sales aren’t necessarily great or impressive right
but it is in the beverage industry so you kind of have to keep that in in into
context too but uh but when you look through the beverage industry when
you’re looking for ideas right now these guys were probably the one of the better
performing well and just kind of scanning through the list the the chart
really jumped out at me you know it was the set up that really jumped out at me
on this one but you know that group has been moving up and you know right now
it’s the number 19 out of 197 you know an industry groups so again beverages
alcoholic just you know there’s a lot of these names that just keep on coming up
on my screens I don’t know if that’s a good thing for the overall market or not
of the beverages right start start moving up because that can be a
defensive industry and also maybe it could be a play that a maybe things are
gonna get worse and people gonna be drinking a lot right right yeah but I
mean it kind of makes sense right now that there is a little bit more of a
defensive kind of you’re seeing some of the more defensive plays do a little bit
better right now um but again we’ll see if this holds right now this is you know
even disregarding what type of industry it is the chart still looks pretty good
it’s a nice base and again it’s it’s showing pretty good relative strength
our third stock is Constellation Brands ticker symbol stz and now this is
another large beverage company here and they have more than a hundred brands in
their portfolio and a few that you might recognize Corona Pacific oh and Robert
Mondavi the wine so there’s another company that’s obviously well positioned
to do to benefit from the football season and many people go into bars to
watch the games and of course keep in mind you know football season happens at
the same time every year and with earnings you know that seasonality is
taken into account so of course you know I don’t want
people to think oh don’t you know how earnings are done yeah we know that it’s
gonna be compared to same football season same way toy companies or you
know Christmas is compared to Christmas of the last the last year but you know
again what we’re really kind of pointing out here is the strength of the industry
as well as you know these are stocks that have you know pretty good sales you
know there there was a some negative or slowing growth for first stars you know
the last quarter hour too so it’s it’s not phenomenal in that regard but you
know it’s it’s still one of those that’s been holding up well and you know on on
these types of stocks you kind of have to understand what is the industry group
typically doing you know so this is not one like tech where you see the earnings
growth of 20% and more right this is tends to be a little bit more muted you
know like with a lot of your big big-box retail stores as well where the margins
are a little bit thinner and you know they’re trying to do it on volume yeah
and and they just emerge out of a couple with handle this week and so something
that keep an eye on rs ratings in 84 it’s gonna be obviously a little bit
slower mover but as Justin mentioned it’s it’s it’s been starting it’s
starting a look a little bit more appealing versus a lot of the other
stocks in the in the market and you know just you know one more that’s we should
mention because it’s strong is Boston Beer Company they’re the maker of Samuel
Adams ticker symbol sa MSIM and you know this one
it’s it’s not in position really you know it broke out of a base in fact it
got 20 percent from its last base so that might be a place where you are
taking profits if you’re getting 20 percent in this market hey you know be
happy and you know take those profits or in this case we we do see it pulling
back to the 50-day moving average line you know I don’t know that I’d be
wanting to initiate you know off a 50-day moving average line here on
something that’s been up so much but it’s um you know it’s again one of the
stronger looking stocks out there and the relative strength of 95 and
composite rating of 96 and one more stock Wingstop w ing and now Wingstop
out of all of them have the these guys have consistently been coming through
our our screens IBD 50 they drilled through 50 for a couple
years now yeah right and this is a recent IPO this is the IPO was back in
2015 so it it kind of you know and again this is one where it went down
significantly lost you know almost almost half of its value you know very
quickly but then it formed a nice base base after base after base as it kind of
built it’s it’s you know kind of trading history right and then really in 2017 is
when this started really kind of coming alive and looking very strong and it
really hasn’t stopped since stills it’s it’s essentially it was like a player in
the in the NFL who’s been there for two to three years right and now they’re
really starting to hit their stride because they got used to the speed and a
lot of play and all those kind of stuff or maybe hey they just they just got to
be the starter now that’s true and it has been really since a since it really
got going back in late 2017 this stock has been a rocket ship it’s been a
dramatic high performer and they’re they’re doing something that you know
you’ve seen a lot of industries they’re starting to build a brand name in one
specific industry in the chicken wing business right and they’re consolidating
it right before you have all these chicken wing stores out there now you
start thinking oh I want chicken wings a wing stop right it’s that that brand
recognition is is there and they’re definitely benefiting from it and Wall
Street’s rewarding the stock now the stock is extended yeah at this point
another one that’s kind of pulling back to the 50-day moving average looks like
it got some support there not much volume on the bounce
today on Wednesday but yeah well we’ll see if it can you know maintain itself
above the 50-day moving average and this is one that has been doing that you know
these these are the greatest stocks to have when they just maintain themselves
above the 50-day moving average because you can just kind of hold them and you
know almost forget about them you know this is your this is your football
player that just performs your week out a week and you know just keeps on
putting points up on the board and you don’t have to worry about injuries and
stuff because yeah they’re just they just keep on going and they’ll carry
your portfolio to a championship exactly so there are a number of companies that
benefit from football so you definitely want to
take a look at them and consider adding them to your watch list and you know
hopping on them when they actually give you the opportunity to do so
thanks Justin for being here today yeah it was a lot of fun that’s it for this
week on investing with IBD coming up next week we will have Evan Harvey the
global head of sustainability at NASDAQ we’re gonna talk about the evolution of
environmental social and governance reporting and why you want to consider
including the ESG ratings into your stock analysis and so that’s it
I’m Irusha Peiris and thanks for listening and for this week’s notes and
charts make sure to go to investors.com/podcasts where you’ll find details
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