Dear Reader,
People are loading up on junk zombie stocks because they love to "trade."
You've got to wonder if they love it when they're stuck holding the bag with an unprofitable electric vehicle charging company trading at 15 times sales with no real assets to salvage or sell at auction.
It's an ugly picture, but one you need to keep in mind if the market or even the entire economy goes sideways.
Shareholders will be the ones left with zero when some of these names go to zero.
Do you know the difference between bondholders and shareholders? Do you know who gets paid first in a crisis? More importantly - do you know who gets paid last?
If you're a company shareholder, act like one. Don't be distracted by junk and speculative crap in this environment.
Get your hands dirty. Own real things. Own the companies that bring them to market. Because you want to actually get paid if the company goes belly up. You want to be the one holding real, tangible assets if the economy goes off the rails.
We looked at hard assets this morning, so now, we're going to look at how to find the very best traded companies that extract, refine, transport, and otherwise provide those assets.
How to Find Great Stocks When Everything Is Terrible
Investing isn't that complicated. But Wall Street and the financial media make it so; they add even more noise to the financial markets on top of what's there already.
Investors need to be serious about investing, they need to be serious about beating inflation. We need to hedge against the crises unfolding today and those that'll unfold in the future.
And we can do that with a very simple strategy.
We want to own companies that have virtually no credit risk. So, we focus on companies with an Altman Z-Score above 3. The Altman Z-Score is a weighted analysis of bankruptcy probability. It accounts for company debt. It accounts for shareholder risk.
If you're under 2.6 on non-financial companies, be cautious.
Go above 3, and you'll find responsible management. We like to focus on other metrics like the Piotroski F-Score to assess management behavior. We use the M-Score to assess balance sheet manipulation. We use Book Value to determine how the stock trades against the value of its assets, and assess the Net Asset Value as well. Finally, we use the Graham Score to determine a defensive value for the long term.
This might sound complex... but it's really just basic math. It's a series of screens that we can run each day - which is exactly what we do over at Flashpoint Trader.
What I do is look at the biggest trend in the market and then, instead of trading the headline names, I reduce my risk. I find names that are cheap, have options, and then maximize my profit potential by selling put spreads - or trade these names based on where they sit in our reversion patterns.
Or I'll buy and hold stocks that are trading at dirt cheap valuations, with great management and great assets. These are companies that make the things we need to survive, and our society needs to function.
Names like PBF Energy Inc. (PBF), Intrepid Potash Inc. (IPI), NACCO Industries Inc. (NC), and Bridgford Foods Corp. (BRID).
These are the stocks to own. I mean, when the #@% hits the fan, do you want to own tech stocks?
Or do you want to own an energy stock trading for less than its auction value, with a claim to the actual oil and gas that it produces? Get your hands dirty. Get in the ground and own the stuff that is going to dominate our geopolitics for the next decade. Own the companies that bring us that stuff. We are experiencing a cost of living crisis, a banking crisis, a debt crisis - just to name a few. And there are crises on the horizon, too. Owning hard assets and the companies that deal in them is the best way to secure your financial future.
Today's Momentum Reading
WORLD'S BIGGEST INDICATORS
Broad Market: Green
S&P 500: Green
Recap: The World's Biggest Indicator (Momentum) is Green...
We're seeing lots of chop in a low-volume environment. The S&P 500 keeps making higher highs, but we're seeing some intraday movement that has me concerned that a rug pull is coming. Remember to exercise caution, and keep an eye on intraday momentum oscillators.
Our Next Flashpoint
The Commercial Real Estate Bust: A key term you need to learn is "mark to market." This happens when private investment groups must admit the value of their holdings, like real estate and other alternative investments, are worth less than what they've stated on their balance sheets. Typically, public investments must do this each day to give investors a proper accounting of the real value of their equity. But not so in the long-term investment world of pensions. That is... until people come knocking and cash flow is stressed. This is about to happen to several major pension funds and private investment firms in the near future. If interest rates stay elevated, venture capital firm Tiger Global may need to mark its holdings down by nearly one-third, while major pension groups are talking about writing down their real estate assets. This can quickly send shockwaves through the investment world and raise serious questions about liquidity in the system. (Capitalize from Extreme Market Volatility with me in Hyper Momentum Trader)
What You Missed
Let's get right to the point, as you're on the verge of missing our premier investment opportunity for the month.
This deal closes tomorrow. Meaning today is your last full day to invest in this company.
It's the same company that centers on the Department of Energy's $13 billion of financing to support US grids.
And an insider just revealed why this company could take the lion's share.
Per our last conversation, the founders have agreed to reserve a piece of their shares for folks who invest by April 20.
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Today, shares are going for just $4.38.
But this is only for investors who act today.
Stay Liquid,
Garrett
The post Get Your Hands Dirty with My Favorite Hard-Asset Stocks appeared first on Midday Momentum.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.