Time to buy aggressive growth stocks

August 12, 2022No Comments

Hello, and welcome once again to the ValueTrend Wealth Management’s Smart Money Dumb Money Show. And I am your host, as usual, Keith Richards. I am the president and chief portfolio manager of the company. And today we’re going to take a look at growth stocks. Now, recently, if you read my blogs or watch these videos, you know, that I’ve covered the NASDAQ a few times. The NASDAQ actually has a pretty good chart right now. But I wanted to dive a little deeper and look at a little bit more of the aggressive side of the growth stock world and ask whether we should be looking for signs of stepping into that side of the high tech high growth type stocks. So let’s get started. I’m going to go to a PowerPoint presentation and we’re going to just look at some charts I’ve put together just for your interest, and hopefully we get some ideas out of this.

 

So let’s go right to my little presentation here. So the question is, should we be buying growth stocks? And I’m focusing really on the hardcore growth stocks as it were. So we’ve talked about the NASDAQ a few times before, but what I want to do is just do a quick revisit. The NASDAQ, you know, had been the market leader on the downside in this recent bear market. It broke its neck line right here. It moved above the 50 day moving average. It’s still below it’s 200 days so I can’t yet call it a truly turned around market, but it definitely looked interesting. You can see that it’s not too far below it’s 200. So who’s to say what’s going to happen over the next month or two, but the setup is very, very good for the NASDAQ. In fact, because it broke its neck line, in my opinion, it could just pull back to that neck line as a support level.

And then that might present a good buying opportunity. But the question is, again, you know, are we going to be looking at other types of growth stocks than just what are contained inside the NASDAQ? Because as you may know, the NASDAQ is not just the traditional technology type stocks. It’s got biotech. It’s even got other sectors like consumer discretionary, et cetera. So we want to ask ourselves what about the pure growth stocks? So just a quick look though, at the NASDAQ. You can see this red line is the NASDAQ, blue line is the S&P 500. This is a comparable growth and you can see the NASDAQ has been outperforming by quite a bit over the past two months, okay, where it was not up until about June.

 

So I’m going to focus on probably the iconic growth stock manager and that is Cathy Wood who runs the ARK ETF. Now, Cathy Wood’s a pretty smart person. She’s a very good portfolio manager, but she’s in a contained world. And that is of the mega high growth type stocks. Now these guys, they can go up a lot and they can also go down a lot as investors in the ARK ETF, which was really the darling of the investment world during much of the past two or three years prior to the market correction/crash this year. So it’s been where the action has been. So my question is, is that action over for the truly aggressive growth stocks? So I want to start off by taking a quick look at what’s in the ARK ETF. And this is not, specifically talking about the ARK ETF, I’m using it almost as an index.

So don’t take this as a suggestion if you like the chart that I show you, or if you don’t like the chart that you should buy or sell or avoid or look at the ARK ETF, although you might, but it’s really just to analyze how growth is doing. So you can see it’s number one position is Tesla and that’s at almost 9%. Zoom, which I’m on right now recording this, is almost 9% as well. And then Roku, which is a neat little device. I actually just got one for my own TV. My son gave it to me and you can turn a normal TV into a smart TV. You can watch all your Netflix and all that cool stuff right on your regular TV. It’s a pretty big position, 7%. And then we go down to like Block and then, so on down the line. A lot of these names you’ll be familiar with. Block used to be called Square by the way.

So these are all, you can see, I’m gonna mostly focus on these four and that really represents about 25%, let’s call it, of the portfolio. So that’s a pretty big chunk in those four stocks. The fund itself has a lot more than that, but obviously there’s a pretty big concentration in the top 10 and most certainly in the top four. So let’s take a look at these top four just to see where we stand. Before I do that though, I’ll just take a quick look at the ARK chart itself. You can see it was in 2020 into 21, it was the darling. It kind of went sideways for a bit, but really it had a great year in 2021. Literally went from 35 to like 150-160 bucks. That’s what I call a return.

 

Gosh, some days I really wish I had bought that ETF during that period of time, but I didn’t. So the question right now is because you can see there was a base back before 2020 where the, the fund would kind of meander and it seems to be back into that zone, doesn’t it? So there might be a little bit of resistance here where there used to be resistance in the same level back in 2019. And it’s done a nice little formation where it bottomed and it’s done, like what I like to call the Bart Simpson haircut. If you have ever seen the show The Simpsons, he had hair like that. And it looks like sort of a Bart Simpson haircut, and then it broke out. So far so good. But remember when we were looking at the NASDAQ and how far above the, or below, I should say the 200 day moving average/40 week moving average the NASDAQ was. It was pretty close.

Like it wasn’t over the 200 day yet. It was getting there. In ARK’s case, it’s nowhere near. We’re talking the ETF itself as of today’s trading date and today is the 8th of August that I’m recording this. It was around 51 bucks and the moving average around 65. So that’s has quite a ways to go before it even touches that 200 days. So the other thing is that it doesn’t really appear that like this down trend is over. So we’ll see. It’s not a bad looking chart. There are some positive factors. We can move down the chart. You can see that the stochastics, which is a fast moving indicator, is moving up. RSI is coming off of a very oversold condition. Even this, the comparable versus the S&P 500 is starting to arc up.

 

That’s the red line is how the ETF is doing and it’s on a comparable basis. As you can see, ARK versus the S&P 500. So you can see that there is, that’s a moving average of this line. So you can see it’s just on the cusp of possibly breaking the moving average and sorry, I keep rolling it to the next slide. And MACD looks like it may have crossed over. So there’s some positives on this chart, and that’s why I’m bringing it to your attention. It’s very early. It’s definitely not for conservative investors. You just saw what’s in the fund. And if you really look into the entire list, there’s a lot of pretty aggressive growth stocks in there. But when the market pops, this is the kind of thing that may just move and it is setting up, so far, pretty nicely.

 

So now we want to look at the guts. We want to look at those top four positions. So this is Zoom. It was the second largest position. I’m on Zoom right now using it to record this. You can see that it is based and it is not broken out. You know, we go back to the ARK chart, it has broken out but Zoom most certainly has not. Some positive money flow here. There is money going back into Zoom, as you can see here. It had been free falling since the beginning of 2021. So interesting chart, I probably would not even look at Zoom unless it broke 125 from a technical perspective. It’s reasonably close to its 200 day moving average though. Tesla, which is the largest position, although it only outweighs Zoom by maybe three quarters of a percent in the portfolio, it’s been moving sideways.

Actually, this has been not a bad stock to own during the crash. On a percentage basis, it’s draw down hasn’t been as bad as the market. And more importantly, it’s really found a nice support level, which is where it has sunk to in the past, in early 21, around 600 bucks. And it seems to be, you know, playing off of that 200 day right now. So it’ll be interesting, but Tesla isn’t a bad looking chart. Still, it hasn’t broken out the way I would like. It has broken a small cluster here, so that’s positive. But I would like to see, you know, these lower highs and lower lows discontinue by a new breakout through the 200 day and possibly a takeout of the last high. Whatever the case, it’s a sideways looking chart, and that’s not bad as far as the ARK ETF goes and as far as Tesla itself goes.

Now Roku, the wonderful little element that I had installed on my TV by my much smarter, technically smarter son. This stock is still in free fall. There’s no accumulation of the stock, as you can see on money flow. The moving average is sloping down and it’s quite a bit below that. There’s no sign of any kind of turnaround whatsoever on this stock. And remember, it’s a pretty decent size position in the ETF. It’s also another benchmark of, you know, these high risk growth stocks. Square, they do payment systems and other data stuff that I’m not completely familiar with, but they’re definitely in the high growth area, high PE and all that sort of stuff. And this company is, this stock is just testing a neckline right now at around 88 bucks or so. Will it break? Who’s to say, but so far I would say it’s a wait and see stock.

 

So when we look at all these stocks and, I’m going to go back to the regular screen, when we look at these stocks, when we look at the RPTF, it’s in my opinion, a little early to be thinking about the high growth sector. I’m still waiting for the S&P, which is of course the broader index to prove that the bear market’s over. There are some signs. And if you read my blogs, I’m saying that there’s a possibility that we’re maybe entering into the bottoming phase of the market right now, but I’m not gonna be buying growth until I’m pretty darn sure that we have formed that bottom. And we see some sort of a confirmation. And if you take my online technical analysis course, which I do encourage you to do if you haven’t done so already, then you’ll know that there are certain things you need to see before you can, as a conservative investor, buy into this market.

 

And we’re not seeing them yet. If we see the market break out into a new bull market then, yes, we should start looking at things like the higher risk growth stocks as maybe a piece of our portfolio. At this point, I can tell you that ValueTrend is not in these positions, does not hold any growth stocks whatsoever, or technology stocks. We have no positions in these right now. That could change two, three weeks from now, months from now, whatever. But at this moment, on August 8th, we’re not exposed to any high risk, high growth tech type stocks. So there you go. It’s food for thought though, because the charts are looking interesting and I thought you’d like to see them. So I hope you enjoyed this video and we’ll be back next week. Thanks for watching.

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