Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
Summertime, and the living is easy. The fish are jumping, but stocks are all over the place.
Sure, there are days like Thursday when blockbuster economic data sends markets to new highs, but even during the best of times, there's an element of seasonal weakness to U.S. stocks in the warmer months.
All that "sell in May and go away" stuff? The "summer slump?" There's more than a little truth to it. And in a red-hot, inflationary economy where investors are highly prone to freaking out about the Fed, well... The way forward isn't so straightforward. Picking stocks and making money aren't necessarily the easiest things right now.
But I've got three charts on three stocks I want to show you. These are three strong winners that'll put cash in your pocket until the weather cools down again - and judging by the strength of these, probably a lot longer.
Pick up these three names before the first of next month...
Three for Your Buy List
These stocks have strong performance and momentum - that's tempting enough. But interestingly, each of these three stocks has heavy short interest, meaning lots of pro investors are betting the stocks will go down somehow. I don't see that in the cards, and in fact, this setup could ignite a fast, profitable "short squeeze" scenario, though that's not necessarily the main reason to buy; think of it as the "cherry" on top of the technical "sundae."
Brookfield Asset Management Inc. (NYSE: BAM) is the first on the list. I have been mentioning the real estate investment trust (REIT) play for my paid subscribers for a long time now.
There's a good reason why. As the entire world opens back up, all those empty buildings will once again be filled with customers and patrons. It's only a matter of time before all the buildings in the world are operating at pre-pandemic levels, making REITs one of the most predictable profit plays of the entire post-pandemic recovery.
And out of all the REIT stocks available right now, none are showing as many bullish signals as BAM. Not only is it a REIT, but this company also has exposure to renewable energy investments and immense upside volatility.
Its 50-day moving average (MA) is also trending upwards, and volume shows that investors are trading with interest. I am extremely bullish on this stock. The yield is a negligible 0.48%, but its share price, not dividend, is why people need to be in this stock.
Likewise, Carlyle Group Inc. (NASDAQ: CG): Although Carlyle shares are tip-toeing overbought territory, that's okay because, as you can see on the chart below, both the 20-day and 50-day moving averages are moving up.
Whenever this happens, slightly overbought stocks usually rally higher.
Not to mention, Carlyle is enjoying very solid trading volume, which is yet another sign that this stock is about to pop off into a steep bull rally.
Carlyle's operations also add a bullish dimension to this play, which pays a modest 2.2% in yield.
The company is a private equity firm that makes money by buying other companies, improving them, and profiting off the better margins.
Right now is an absolutely great time to invest in this sort of company because the market is topping out.
Its ability to increase profits when profits are scarce makes this one of the best stocks you can buy right now.
GET OUR BEST STOCK PICKS
Learn how you can get our best stock picks delivered to you each month.
GET OUR BEST STOCK PICKS
Learn how you can get our best stock picks delivered to you each month.
Host Hotels & Resorts Inc. (NASDAQ: HST) is another "get out there" stock with a bright near- to medium-term future. It's the other REIT on my buy list right now, with interest in 80 upscale hotels with around 46,000 rooms between them. That adds up to around $12.3 billion in assets.
Like a lot of good REITs, Host Hotels & Resorts pays shareholders back in the form of a fat dividend, around $0.20 a share in this case, which adds up to 4.57% in yield. That absolutely crushes U.S. Treasury 10-year paper, which is paying less than 1.4% right now; it's not even pretending to keep up with inflation.
Pent-up demand is exploding in the hotel sector. Most folks book vacation home-shares in April, but this year, those bookings began spiking in February. Vacancies at hotels and resorts coast to coast have plummeted. It seems like everyone who skipped a vacation last summer is making up for lost time, often with a little (or a lot) of extra "padding" to the vacation budget. Turns out most people just rolled their vacation funds over.
HST has been moving sideways but has constantly been trading above its 50-day moving average.
Right now, a silver cross is forming. A "silver cross" happens when a stock's 20-day MA crosses above its 50-day MA. I love to see them shape up, because it's one of the most bullish signals there is.
As we approach the 4th of July, people will be out enjoying the holiday, and this company will begin its summertime season of profits.
Come for the share price appreciation, and stay for the short squeeze potential. Like I said, there are no guarantees that'll happen in these stocks, but the picture looks favorable.
If you're not familiar, short squeezes happen when short-sellers are forced to close out and cover the shares they've borrowed; if they don't cover, the losses can be steep. So, a short squeeze is bad news if you're a short-seller, but if you're long on any one of these stocks, the profit potential can be nothing short of incredible.
My colleague, Andrew Keene, has a proprietary algorithm he uses to identify what he thinks are the two strongest indicators of a possible short squeeze about to happen. When he sees the signal, he lets his Super Squeeze Profits subscribers know to move with entry and exit instructions and even profit targets. You've got to see how it works - click here to check it out.
Follow Money Morning on Facebook and Twitter.
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Penny Hawk. He also contributes to Money Morning as the Quant Analysis Specialist.
hst looking to buy the call. but i look at Schwab trade probability, then i check out yahoo finance to see how many bought the calls. y.f. shows that now its a bear for 2wks then like you said it shows bullish… might buy jan calls and later dates on the calls… but i like your picks.