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2 bros that can help improve your odds of beating the market. Education, stocks to watch, market updates, & more. Fundamental, technical, and quantitative analysis, short and long term. Writers for Seeking Alpha and TipRanks.
Recent Buy Ratings: MEDP, NVR, DPZ; Here's Why
As the market continues to go down, there are more and more long-term opportunities opening up for buy-and-hold investors. Hands down, one of our favorite opportunities right now is INMD stock. $INMD reports earnings tomorrow, so we will most likely write about it very soon. It is currently one of our biggest positions.

However, our newest buy ratings are on the following stocks: $MEDP, $NVR, and $DPZ. These are not our core holdings, though. We only have relatively small positions here in MEDP and NVR, for now, and no position in DPZ yet.

Note: This is not professional financial advice.
Most of these Buy ratings are in downtrends, meaning that the chances for more short-term downside are high. The ratings are not based on technical analysis. Again, they are meant for long-term investors.

Here they are, these are free articles to read:
  1. **Medpace Stock: 43% Pullback; Time to Buy? (MEDP)

Medpace Holdings is a contract research organization (CRO). It essentially helps biotech/medical companies do clinical trials for new drugs, etc. It earns revenue from contracts. It is reasonably valued after a large pullback, very profitable, and growing consistently.

  1. Why NVR is a Top Homebuilder Stock

NVR, Inc. (NVR) constructs and sells real estate properties, such as single-family detached homes, townhomes, and condos. It also offers Mortgage Banking for its homebuyers.
We like the stock because it has a superb track record (highly profitable, growing) and is relatively undervalued compared to its past valuations.

Historically, buying big drops has worked on this stock. Check the chart above.

  1. Domino’s Pizza Stock: Focus on the Long Term (DPZ)

Pizza chain Domino’s has seen some inflation headwinds recently and will continue seeing them for the rest of the year. Also, the chart doesn’t look too pretty as it’s breaking down from a long-term uptrend.

However, DPZ has navigated through hard times before and can eventually bounce back. The company is still highly profitable and growing. This is definitely one for the patient investor.

Thanks for checking this out! If there are any stocks/topics you’d like us to cover, hit us up!
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Last Week's Buy Ratings & More: MDA, RH, IIPR, RY, WSM, plus JPM Earnings Analysis
Hey everyone,

Below are our most recent buy ratings from the past week, which are free to read.

Besides the buy ratings, check out our JPM article from last week titled “Using JPMorgan's Earnings Call For Recession Clues” where we break down the biggest bank’s earnings to determine if a recession is coming soon or not.

Note: This is NOT professional financial advice.

Most of these Buy ratings are in downtrends, meaning that the chances for more short-term downside are high (as traders, we know this to be true). The ratings are not based on technical analysis. They are meant for long-term investors that have a long-term time frame.

Anyways, here they are:

  1. MDA to the Moon, Literally (TSX: MDA)

MDA is an established Canadian space technology company with a long history of success and innovation. It’s been around for more than 50 years. We are bullish due to its successful history, high efficiency, and good valuation. It is roughly 50% off its all-time highs.

  1. RH Stock: More Resilient than Investors Think

$RH, also known as Restoration Hardware, sells furniture, lighting, textiles, decor, and more. It has been beaten down as well, currently 57% off its highs. This offers a decent entry point for long-term investors.

  1. IIPR Stock: Sell Short at Your Own Risk

Innovative Industrial Properties ($IIPR) is a triple-net-lease cannabis REIT. Essentially, it makes money from owning cannabis properties and leasing them out to other cannabis companies. It is HIGHLY profitable and pays a nice, quickly-growing dividend.

This stock has done very well historically, but now, it is about 45% off its highs. It got pushed down even lower by a short-seller report that is likely to not have much merit to it (similar to a 2020 short-seller report on the company).

  1. Royal Bank of Canada: Does Valuation Outweigh Headwinds?

Royal Bank of Canada ($RY) is Canada’s largest bank in terms of market capitalization. We believe that big Canadian banks have competitive advantages due to the oligopoly they enjoy, and we believe that RY stock is undervalued.

  1. Williams-Sonoma: Dividends, Buybacks Offer High Return Potential

Williams-Sonoma ($WSM) sells home products like furniture, bedding, lighting, rugs, and more. Currently 39% off its highs, we believe this is another good stock for the long term. Its low valuation allows the company to buy back many shares on top of having a respectable, growing dividend. It also has high returns on capital, steady growth, and record profit margins despite high inflation.

Thanks for reading! If there are any stocks/topics you’d like us to cover, hit us up!
And subscribe to our free substack here, where we send out our buy ratings, market analysis, and more.
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Our GOOG vs. MSFT Article is Trending - Always Love Seeing This
Top Trending article on Seeking Alpha $GOOG $GOOGL $MSFT

Let's get this bread wooohooo!

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Alphabet vs. Microsoft: Valuation vs. Business
Hey everyone,

Ever wonder if you should buy Alphabet $GOOG $GOOGL, Microsoft $MSFT, or both?

Our newest article should help clear things up. Lots of info in this one, you don’t want to miss it.

We go over each company’s competitive advantage and provide a backtest we did to show how a basket of companies with a measurable competitive advantage returned 180% in the past 5 years vs. 88% for the S&P 500 (SPY).

We also explain why quality-factor investing is poised to outperform as we enter a mid-cycle slowdown. The iShares MSCI USA Quality Factor ETF (QUAL) defines quality as having a high return on equity, stable year-over-year earnings growth, and low financial leverage.

Both GOOG and MSFT are great and have reasonably predictable cash flows. One company has a better valuation than the other and we would consider it to be the better pick.

Since we aren’t allowed to post the full article here, find out which company we like better by clicking this link here

Have a good day everyone!
Warren Buffett Buys HPQ, Copies StockBros Research
Just three days ago we put out this article titled "HP: A Classic Value Stock"

Today, Buffett reveals a major stake in $HPQ

He must've read our work? Just kidding, we ended up giving HPQ a neutral rating, but it's a great company still.
Wow--WEB himself! No, he probably didn't read what you wrote but isn't this the best kind of confirmation that your thinking and process are on the right track?! Well done, @stockbrosresearch!
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Why Meta Platforms Stock Can Hit $400
Our new buy rating out 👇 $FB

Meta Platforms is likely one of the best opportunities in the market for investors with a long-term time horizon.

We talk about valuation, risks, website traffic trends, and more.

YouTube’s gross margin is not 45%. Their income statement does not recognize the 55% of revenue that goes to content creators from ads so their actual gross margin is far higher than what you claim
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Yield Curve Inversion: The End Is Near, Or Is It?
Summary points:
  • The inversion of the 2-year to 10-year spread is seen as a harbinger for recessions.

  • An inverted yield curve is an unusual event because logically investors should want to receive a higher return on long-term investments than on short-term ones.

  • Unlike the 2-10 spread which has been wrong twice, a 3-month and 10-year inversion has never been wrong so far.

There's currently a lot of commotion regarding the yield curve. With large investors focusing on the inversion of the 2-year and 10-year government bond spreads, it's worth discussing the importance of this event because the yield curve has been used for decades as a leading indicator of economic outlooks.

The inversion of the 2-year to 10-year spread – which is when the 2-year government bond yields a higher return than the 10-year government bond – is seen as a harbinger for recessions. This is because the inversion has predicted the previous recessions of 1981, 1991, 2001, 2008, and 2020 (although COVID-19 was the catalyst for 2020). Nonetheless, investors watching the curve would've been ready for a recession despite whatever the true catalyst was.

An inverted yield curve is an unusual event because, logically, investors should want to receive a higher return on long-term investments than on short-term ones.

However, when investors begin to have a negative outlook on the economy, it causes them to start parking their money in bonds which pushes the yields down. More specifically, investors start buying up longer-term bonds. The logic behind this is that recessions last an average of 18 months. Therefore, investors can at least theoretically guarantee an income over that period.

Furthermore, when looking at lending activities, financial institutions "borrow short and lend long," meaning they will borrow a short-dated loan because it should have a lower interest rate and lend at a longer time frame at a higher rate. The spread between the borrowing and the lending is the profit. A flattening yield curve reduces lending profits, which may lead to reduced lending activity.

Does an inverted 2-year and 10-year spread guarantee a recession? The answer is no because the yield has inverted twice without it being followed by a recession.

Why the 3-Month and 10-Year Spread is a Superior Indicator
Although most investors continuously watch the 2-and-10 spread, they often overlook the spread between the 3-month and the 10-year bonds.

Unlike the 2-10 spread, which has been wrong twice, a 3-month and 10-year inversion has never been wrong so far. All 8 of the recessions in the US since 1970 (up through 2020) have been preceded by an inverted yield curve (10-year vs. 3-month).

The reason for this is likely because the 3-month yield closely follows the Federal Funds Rate, which is the interest rate that banks charge each other to borrow or lend excess reserves overnight. For the 3-month yield to climb higher than the 10-year yield, it means the Federal Reserve has raised the Federal Funds rate above the 10-year yield.

Since the 10-year yield is often used as a proxy for long-term growth expectations, an even higher Federal Funds rate means that the cost of borrowing is higher than the expected growth rate. In our view, this would suggest that the Federal Reserve has tightened too much, thus, eventually leading to a recession.

This leads to the expression, "Bull markets don't die of old age, but rather they're killed by the Federal Reserve."

Currently, the spread between the 3-month and the 10-year is very wide since the Federal Funds Rate is still 0.25-0.50%. At the time of this writing, the 3-month yield is 0.53%, while the 10-year yield is 2.38%. However, the market is expecting the Federal Funds Rate to climb very quickly based on the Fed Funds Futures contracts.

The market expects it to be 2.49% by January 2023 (calculated as 100 - 97.51), which is less than a year away.

Source: Yahoo! Finance

If the 10-year yield remains near its current levels, then we could see an inversion in January. With a lag time between 6-17 months from inversion to recession, we would likely see a recession by mid-2023 to mid-2024. However, that's if the inversion happens.

Final Thoughts
As a result, we currently don't see a recession in the cards for 2022. A more likely scenario is that we simply see a slowdown in growth, and that high-quality stocks that can perform well in all market conditions will likely outperform.

Thanks for reading. Hope you found this post useful!

Check out our free substack here!
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Buy Ratings: Adobe and Autodesk Stock Have Good Upside Potential
Hey everyone, here are our two newest buy ratings.

Buy Rating #1: Why Adobe Stock Can Easily Hit 600 (currently 432)

In a previous article on Seeking Alpha, we mentioned why we thought it might have been a good time for investors with a shorter time horizon to take profits on Adobe. Since then, the price of the stock has dropped significantly, shedding 34% of its value.

However, long-term investors who have held on through the volatility shouldn't worry, as we believe the stock can easily return to over $600 eventually. Thus, we are now very bullish on Adobe stock.

What’s good about Adobe is that it remains minimally impacted by macroeconomic events, and it generates reasonably predictable cash flows despite an uncertain backdrop. We also believe that the market is significantly undervaluing ADBE stock.

It is currently in a downtrend, so there may not be immediate upside, but we believe it will recover over the long term.

Find out why we like ADBE by checking our full article here (unfortunately seeking alpha doesn't let us post the whole article here)

Buy Rating #2: Autodesk Can Outperform Based On Macroeconomic Trends And Good Valuation

Autodesk (ADSK) is an industry leader that has seen its valuation drop significantly in the past few months, from a high of ~$344 to a low of ~$186 recently. It is currently at $212.
As we begin to enter the middle portion of this new business cycle, high-quality companies with high margins and returns on capital are likely setting up to outperform going forward (we explain this more in the full article linked below). As a result, we are bullish on Autodesk at these levels.

Quality-Factor Investing During the Mid-Cycle:

In the world of finance, investors like to break down stocks into groups called factors. These factors include value, growth, momentum, and quality, to name a few.
The iShares MSCI USA Quality Factor ETF (QUAL), which we reference in the full article, defines quality as having a high return on equity, stable year-over-year earnings growth, and low financial leverage. ADSK is a holding in the QUAL ETF.

Also, Autodesk is likely a good hedge against inflation and its current valuation is attractive.

Again, this is not necessarily a short-term play. The trend is still down for Autodesk, so it can see some short-term pressure, but the long term looks good.

See why we like Autodesk by checking our full article here

Happy investing everyone!
How to Tell When Stocks are in Big Trouble
There is a certain "yield spread" you could look at to determine if stocks are attractive or not. This signal has flashed red before major drops like the dotcom bubble & more.

Keep reading to learn more:

  • Investors should keep an eye on the spread between earnings yields and Treasury yields.

  • Market expectations are also important to monitor.

  • Are there any alternatives for investors to park their money other than stocks?

The market can be very volatile at times leading investors to get caught up in all the noise. However, we hope to cut through all the rhetoric by looking at the numbers in an attempt to simplify our decision-making process. We don't try to predict, but rather, we try to react to the current state of the macroeconomic situation. Hopefully, you find this article helpful in your decision-making process.

How Attractive Are Stocks?

To answer this question, we will compare the earnings yield of the S&P 500 to the risk-free rate of the 3-month U.S. Treasury Bill. The rationale for this is that if we wanted to move away from a risk-free asset, we should be compensated more for the additional risk. The earnings yield can be viewed as the potential dividend payment we would receive if 100% of earnings were paid out and no growth was expected. As a result, the earnings yield should be higher.

Using the current earnings yield is best for investors who aren't interested in forecasting and would prefer to look at the actual numbers from the most recent quarter. As a result, the 3-month T-Bill is the most logical comparison since a quarter is 3 months long. At the time of writing, the spread between the two yields is 3.32%, meaning that stocks are still relatively attractive.

Below is a chart of the historical spread:

As we can see from the chart above, there were periods of time when the spread was actually negative, meaning investors were getting a better yield from risk-free assets than from stocks.
What's interesting is that these negative readings came before the significant market declines of Black Monday, the 1990 recession, and the Dot-com bubble. In addition, it came very close to turning negative before the Great Recession.

Thus, it appears to be a very good gauge of when markets become out of control and also helps explain why 2020 and 2021 saw strong upside after the COVID-19 crash. With bond yields being so low, there was nowhere else for money to go except into stocks.

What's also interesting to note is that the periods of market declines were preceded by a sharp increase in the 3-month Treasury yield. This is important because T-Bills follow the Federal Funds Rate very closely and thus would imply that the Federal Reserve had hiked rates too fast during those time periods.

Therefore, investors need to monitor what the Federal Reserve does because it could potentially push yields high enough to the point where risk-free assets provide higher returns than stocks.

Don't Forget to Focus on Expectations
It's important to realize that while increasing treasury yields and increasing stock prices reduce the spread, earnings decline also plays an important role. This was the case in the 1990 recession, the Dot-com bubble, the Great Recession, and during the beginning of the pandemic.

If earnings begin to decline, the earnings yield drops, and investors begin to sell stocks. Therefore, it's also important to monitor the market's expectations, especially since it's forward-looking.

To do this, we will use the expected earnings of the S&P 500 and Fed Funds Futures contracts (assuming that the 3-month T-Bill will be similar to the Fed Funds rate) to calculate the forward spread.

Currently, the market expects the trailing 12-month earnings for June of 2023 to be $221.10 per share, implying a forward earnings yield of 4.87%.

Looking at the Fed Funds Futures contract that matches the time of the earnings estimate, it is currently implying a rate of 2.68% (calculated as 100 minus the price of the contract)

Thus, the forward spread is 2.19%.

However, keep in mind that the spread between the 3-month T-Bill and the actual Federal Funds rate tends to be within 1% of each other, at least for the most part, as pictured below:

Therefore, we can estimate that the forward spread will likely range between 1.19% to 3.19%.

​Although we call it the "forward spread," it's important to distinguish that we ourselves are not really forecasting because we are simply looking at what the market is expecting at the current time and reacting to the changes in its expectations at the end of each trading day.
Final Takeaway
The bottom line of this article is that investors should consider how much more they are theoretically getting paid over risk-free assets to take on the additional risk of equities. Although markets can become irrational at times and lead to outsized gains in price appreciation, they tend to eventually revert back to the fundamentals.

The key is to logically and objectively assess when markets have become too irrational and reduce exposure to speculative stocks when it happens. Furthermore, because the market is forward-looking, it is also important to stay on top of the market's continuously changing expectations and adjust your positions accordingly.
Although it's impossible to perfectly time the market, there are always clues for avoiding the worst parts of a large downside move. Nonetheless, as things currently stand, stocks are still attractive at the time of this writing as there really is no other alternative for investors, and the spread is still relatively high.

​Thanks for reading. Hope you found this post useful!

Check out our free substack here
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Buy Rating - Best Buy: High-Quality Stock, Low Valuation
As many may know, Best Buy $BBY is a consumer electronics company that sells consumer tech products and services in North America. We are bullish on the stock.

BBY may seem like a boring business, and it is, to be honest. But, that doesn’t mean you can’t make money off of it.

From one of its low points in 2013, BBY stock has returned close to 1,000% compared to about 250% for the S&P 500, as you can see below.

Of course, those results are from a low point; you’ll never catch an exact low. Also, BBY was a different business back then (declining revenue, lower profitability). However, in the past few years, it has started to grow steadily while increasing its return on invested capital.

It even has higher returns on invested capital than many investors’ favorite mega-cap tech stocks like Alphabet and Meta Platforms (Facebook).

Currently, Best Buy is about 29% off its highs. So, we could be closer to a low point than a high point. This is especially true when considering its already-low valuation (about 10x P/E ratio) and expected future growth. This isn’t like one of the unprofitable, high-flying tech stocks that got beat up after increasing 5x in a year.

This is a real company with real earnings that has been able to remain competitive in a world where companies like Amazon exist.

Read our full TipRanks linked here to see why we like BBY stock at its current valuation! (we're not allowed to post the full article here)

Also, feel free to check out our Substack here
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