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By ANDREW KEENE, Special Contributor, Money Morning • August 20, 2020
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Dear Red Alert Reader,
One of the best things about my trading is that it gives me the freedom to work an hour or so per day, doing what I have to do so I can do what I want do to the rest of the time.
Plenty of my 1450 Club Members following along are getting the chance to do the same thing.
Don't get me wrong: It's great when you can work at doing what you love... but it's also great when you can draw a big, fat line between "work" and "life."
Big surprise, but a lot of my "work time" is dedicated to looking at stocks.
If you've been with me for a while, you'll know I trade the same seven well-known big-cap stocks just about every day, but there's a lot more: I'm looking for any "option-able" shares that meet my special criteria for making recommendations.
To help me do that, I develop a kind of "watch list" every week, so I can narrow it down; I don't have to track 1,000 companies, but only between six and eight. Much more manageable.
And I'm not sacrificing a nickel of profit potential by narrowing it down, either.
I can point to just five stock trades that gave my readers a crack at a combined 1,091% in gains. Put another way, not a single one of these five trades was closed out for less than 200% in profits.
So you see, targeting your moves carefully beats throwing darts at a huge list of stocks.
Here's My Current Watch List
Now, just to be clear, these aren't stocks I'm looking to hold for any length of time, though there are usually some pretty outstanding companies that end up on my lists.
Instead, I'm looking at these stocks because I'm seeing unusual options activity on them - activity that suggests uncommon profit potential.
That's where my proprietary S.C.A.N. algorithm comes in. It's complicated (I mean, it is an algorithm, after all), but, in a nutshell, S.C.A.N. crunches data on millions of seemingly random, unconnected trades looking for clusters that may in fact be connected.
Latest: This strategy could help you make your portfolio “recession-proof.” Learn more.
When the numbers are right and S.C.A.N. "lights up," so to speak, I send an alert to my research service subscribers. I do the heavy lifting for them, and today, I'm sharing my watch list with everyone here on Money Morning.
In no particular order, here's what my list consists of...
Stock No. 1: JOYY Inc. (NASDAQ: YY) runs a massive Chinese social media network called "YY.com." By massive, I mean more than 300 million users. It uses an addictive "virtual currency" feature where users can earn by making, for instance, karaoke videos - a whole bunch of different things. Users can cash in "virtual roses," as they're called, for cold hard cash. Variety reports the top earners can pull down $20,000 a month or more... Nice work if you can get it. Growth in the Chinese market in general, and YY's voice and video streaming verticals in particular, make this stock a must-watch.
Stock No. 2: Cerus Corp. (NASDAQ: CERS) has an intriguing mission: safeguarding the world's blood supply and making cutting-edge blood products. The world right now is absolutely desperate for blood products made from blood donated by folks who've survived and recovered from the novel coronavirus. Convalescent plasma can help sick people beat the virus. Specifically, Cerus sells the INTERCEPT Blood System which is said to keep blood products safe from pathogens.
Stock No. 3: Element Solutions Inc. (NYSE: ESI) is a chemical company that manufactures specialty compounds for everything from consumer electronics to oil production and drilling. Nothing earth-shattering there, but the board just closed out a senior notes (that is, bonds) offering worth $800 million. These bonds are usually attractive to big, institutional buyers because they're safe. The new paper pays what is these days an astronomical 3.8% a year. Institutional money moving in and around a stock is often good for a bump.
Stock No. 4: Equity Residential (NYSE: EQR) is a residential real estate investment trust founded by the legendary Sam Zell. It owns or has a stake in something like 309 properties with nearly 80,000 apartments in Southern California, San Francisco, Washington, D.C., New York, Boston, Seattle, and Denver. Most of those real estate markets are melting down right now, hemorrhaging residents fleeing a high cost of living and COVID-19. Equity is exposed in a pretty big way.
Stock No. 5: Tapestry Inc. (NYSE: TPR) is a luxury fashion holding company, home to biiiiig brands like Coach, Stuart Weitzman, and Kate Spade. Why even consider luxury when we're near 10% unemployment? Well, the hard truth is, while millions of Americans are teetering on the edge, the wealthiest Americans have already recouped whatever "COVID Crash" losses they may have incurred in March. In fact, courtesy of a roaring stock market, they're generally up on the year. TPS shares are down nearly 50% from February highs, but momentum has been building for a breakout. I'm aiming to multiply that momentum with the right options play.
Stock No. 6: American Superconductor Corp. (NASDAQ: AMSC) designs and builds power systems and superconducting wire. It built the first superconducting transmission cable on Long Island back in 2008, and ASC is a huge player in the "Tres Amigas SuperStation" project. The project has had its ups and downs, but Tres Amigas aims to take the United States' and Canada's three separate electrical grids - the Eastern, Western, and Texas Interconnections - and unite them with "three five-gigawatt superconductive high-voltage direct current power transmission lines." This should make the old, creaky grids more reliable and allow faster, more widespread adoption of renewable power sources. American Superconductor is an old hat at superconductor projects, and success here could mean its best days are ahead of it.
Like I said, there aren't many household names on these stocks, but each one is a stock I'm expecting to be "in play" over the next few days, and they're all worth watching very closely.
When everything looks good, and the S.C.A.N. signals are there, I'll send my subscribers an alert. You can click here to learn how to get all my alerts, plus access to my Live Trading Room that's packed with my best research.