Stock Trends for 2018

If you thought my Stock Trends for 2017 list was boring (same old stocks), just wait until you see the creativity of this year’s list. I said this last January 1st:

“Perhaps this list is old and boring (Buffett likes boring) but we’re here to make money, not be sexy.”

So, let’s get into the mind of Buffet, which will explain why I am going to “let it ride” for now…

“There seems to be some perverse human characteristic that likes to make easy things difficult.”

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

“It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”

Many of the stocks that I profiled in 2017, were the same old stocks that I profiled in 2016 and 2015. Following the trend has worked well so why should I try to get fancy, chasing a few percentage points here and there while increasing my risk? The 2017 portfolio returned nearly 42% and the basis of the setup didn’t include any sophisticated buy and sell rules. It was a simple buy and hold strategy. I’ll take 42% any year, hands down!

The current market run from the bottom in March 2009 will reach nine full years in 60 days. It has been an amazing run with amazing stats along the way. At some point, the trend will end. Unfortunately, no one knows if that will happen tomorrow, sometime in 2018 or at some point beyond 2018.

Take a look at these amazing S&P 500 stats:

• The S&P 500 has had nine consecutive positive return years, tying the all-time record from 1991-1999 (we all know what happened in 2000).
• Every month was positive for the S&P 500 in 2017, setting an all-time record, the first time that has ever happened in the history of the index.
• In fact, the S&P 500 has been positive for 14 consecutive months, another all-time record.
• The S&P 500 has been positive 14 of the last 15 years with only 2008 showing a loss.
• The S&P 500 went 17 out of 18 years from 1982 to 1999, so perhaps there’s still room to run.

On the surface, the S&P 500 stats referenced sound like the end could be near but the famous quote:

“Markets can remain irrational longer than you can remain solvent”

keeps me from trying to guess. The “easy” thing to do is to continue playing until the market tells us otherwise. No one is smarter than the market and it will give signals when it’s over.

So, before I get into this year’s list, I once again suggest that 99% of all investors stick with low cost index funds and skip individual stocks altogether. Individual stocks are funny and carry too much risk for the casual investor.

*NOTE: the overall health of the markets must be positive for many these investments to do well.

Digital Currency & Blockchain:
Digital Currency has been on my list for several years and has worked well. I mentioned “blockchain and bitcoin” both in 2015 and 2017 but decided to ignore them as far as investments. Too bad for me as 2017 was the year of cryptocurrency.

Blockchain started to go mainstream in 2017 and I believe the mania will continue in 2018. The challenge with crypto currencies (coins, alt coins, tokens, etc.) is that 99% of the ones available today will not be here in the future, they are garbage or outright scams. Some may survive and new ones will be created but I suspect the leaders of these decentralized cryptos will start to emerge by the end of 2018. I am far from an expert on cryptos so please search elsewhere for advice on how and where to invest. The hope for crypto (and blockchain) is that the “technology” eventually supersedes the speculation and the intended benefits will be realized. (Disclaimer: as of this blog post, I own Bitcoin, Ethereum and Litecoin).

For a more traditional stock approach, these are the companies that I believe will continue to provide value and further upside through their stock shares:

• V: 114.02. I continue to ride and hold Visa personally as it remains the world’s largest retail electronic payments network and is one of the most recognized global financial services brands. The stock returned 47% in 2017 and has been in an up-trend, above its 50-day moving average since last January. The stock provided a much better entry in January 2017, from a technical standpoint, but I am including again this year. As I said last year: “as a long-term shareholder, I’m holding, until it proves otherwise.”
• MA: 151.36. Like Visa, MasterCard was also up over 47% in 2017 and has been riding its 50d ma since August 2016. The stock is currently trading sideways over the past several weeks, forming a base along the 50-d ma. My ideal buys are closer to the 200d ma but I will include Mastercard until it breaks down. Be careful buying any stock when extended.
• SQ: 34.67. Square, Inc. was the one that got away last year. I went with PayPal (stocked up on $PYPL shares personally and it paid off with an 86% gain, I still own 50% of my original position). Personally, I still like PayPal (the company) but feel that the stock is extended so I am not including this year. I am going to take a chance on Square, a stock that went from $13 per share to as high as $49 per share in 2017. The stock has pulled back over the past five weeks, violating the 50d ma on heavy volume so we have to keep an eye on that (red flag). An ideal area to grab shares would be at or near the 200d ma, as long as it holds support. A violation of the 200d ma would be a big red flag. With all that said, I am going to take a chance on SQ. It carries with it some risk so be careful if you decide to grab shares.

Major Technology Brands:
I am sticking with the FAANG stocks because I believe they will remain leaders, until they’re not. Social media is an addiction and as long as people plaster their faces to phones and computer screens, the money will continue to pour in. I’ve detailed in the past why I like these tech titans so no need to repeat it here again this year. Bottom line, just about everyone uses the products and services of these companies (every day) so I am sticking with what we all know.

• FB: 176.46. Facebook returned 53% last year and has been a solid performer for several years now. The attraction of this stock is still the data collection and advertising revenues that come from this information. Other than Google, Facebook is the second largest digital advertising revenue generating company in the world. The stock was correcting at the end of 2016 but caught support at the moving averages and catapulted from $115 to as high as $184 in November. The stock is currently trading sideways and is struggling to make a new high. It crossed below its 50d ma and may revisit the 200d ma (currently near $163). This would be an ideal entry area, should it drop this low and hold support. It may need a breather but I still like the stock long term.
• BABA: 172.43. Alibaba was the top performing stock in the portfolio last year, returning 96%, while peaking at 118% in November. One can make the argument that BABA is the Chinese version of Amazon and Google wrapped into one. The stock is currently pulling back, below the 50d ma with some support near $170. The 200d ma is down near $154 so there is a chance it could drop further. The consolidation is welcomed after the big run-up in 2017. An ideal area to grab shares is above the moving averages. There’s risk to enter at the current price but I’m holding BABA for long term potential. Please keep in mind that the company operates out of China so the communist government of China is always a wildcard for unanticipated news.
• AMZN: $1,169.47. Amazon has been a leader in these yearly portfolios for years. Going back to 2015, the stock was trading in the upper $200 range, so it’s a 4x gain in 3 years. Last January, I mentioned that the stock was “consolidating near it’s 200d ma and if it holds, could be poised for the next leg higher ($750 to $1,000?).”. Well, it blew past $1,000 and gave shareholders a 56% gain. As of now, it’s not far from an all-time high and trading above both major moving averages. I prefer to grab shares at or near a major moving average (ideal area is $1,000). For now, Amazon is still a dominant player so we’re keeping it on the list, even at +$1,100.
• GOOGL: 1,053.40. Considering Alphabet does so much, digital advertising, wallet, pay, self-driving cars, etc., it’s a must on this list. Like Amazon, it’s trading above $1,000 per share and it is not far from a new all-time high, above both major moving averages. Alphabet has always provided buying opportunities at or near its 200d ma, which is currently down near $970. I would advise grabbing shares closer to that level but I like the stock long term (we must live with the volatility).
• AAPL: 169.23. Apple got back on its horse in 2017 and gave investors a 48% gain. The stock ran into some trouble to close 2017, dropping below its 50d ma but still remains well above the 200d ma (near $155). They always say “cash is king” so if that’s the case, Apple takes the cake with more than $200 billion of it. On the other hand, what does one do with so much cash? I’d tell them to buy Square, among other things. It’s Apple, so I like the stock long term until they screw something up [I’m still an Android guy].
• NFLX: 191.96. Netflix had another big year, returning investors 55% in 2017. The stock traded fairly close to its 50d ma most of the year but is currently under that line. The 200d ma is down near $173 and would be a better risk/return area to grab shares. In any event, keep an eye on the 50d ma, to make sure it doesn’t continue its direction downward. Netflix remains a staple in our house, from the kids, to my wife to me so I like it long term.
• TSLA: 311.35. Tesla makes the list due to the fact that some of its technology is cutting edge and some of its products are viewed similar to that of an Apple product, cult like. I’m a fan of Elon Musk, even though he’s volatile along with his stock. An investor needs a strong stomach to hold a position in this stock but long term, I believe it will outperform. Patience is key with Tesla.
• NVDA: 193.50. When I first profiled NVIDIA Corporation in the Stock Trends for 2015, it was trading at $19.96. Well, the stock has returned 10x over the past three years. One may argue that the stock is exhausted and doesn’t have any gas left in the tank. Perhaps, but I was told the same thing last year when I placed NVDA on the list at $106.33. It went on to gain another 82% and peaked above $218 per share. The stock has pulled back recently, trading below the 50d ma but still traded above the 200d ma. It’s been basing the past 4 weeks and may do so for a while longer which could provide an opportunity to add shares. The stock has been trending higher for 3 years and I’m not convinced its done until it says otherwise. Let’s keep riding it until the trend ends.
• SNAP: 14.61. Snapchat is the riskiest selection within this tech group. FB and Instagram are more mature within a profitable business model but there’s always room for two. After spending time with family and friends over the holidays, I realized how much the 10yr old to 25yr old generation uses this platform. I have never used the app myself and it doesn’t reside on my phone but something in my gut says it’s a buy in 2018. As a discretionary investor, let’s put some money behind that gut feel and see what happens. If it fails, I’ll sell and protect capital from a larger loss. In the case of this mock portfolio, we’re going to hold it for the year. I’m uncomfortable with the fact that they are not profitable yet but tech companies can get away with that while they establish their user base and products/services.

Wild Card Stocks:
Because the first twelve stocks on this list are mostly repetitive (with the exception of SQ & SNAP), I’ve decided to throw in a couple of wild cards. I removed the cyber security stocks as they have under-performed over the past two years. I will not be including metals, banks or oil/gas based stocks (although the oil/gas based stocks look poised to perform well in 2018). The wild cards will consist of a clinical stage bio-pharma stock and a marijuana based stock. Both stocks have had considerable growth over the past year but if these yearly stock trend portfolios have proven anything, it is that an object in motion continues in motion…

• IMMU: 16.16. Immunomedics, Inc. is a bio-pharma company that focuses on the development of products to treat cancer, autoimmune disorders and other diseases. The company has several treatments in stage 2 and stage 3 trials, with initial data looking favorable. The company is small, not profitable and relatively unknown but is poised to grow and become profitable, should a treatment or two get approval from the FDA. Disclaimer: I grabbed shares under $10 and I am looking to add to the position. As on now, the stock has jumped more than 50% over the past month so I’d like to gauge the action heading into the New Year. It’s extended from both the 50d and 200d moving averages. Any hold of support on the $14 range would be an ideal location to grab shares.
• WEED.CA: 29.74. Canopy Growth Corp. produces and sells medical marijuana in Canada. The company offers dried, oil, and softgel cannabis products and also sells its products online. The stock has exploded in price recently due to the anticipated legalization of recreational marijuana in Canada in July 2018. California legalized recreational marijuana today (1/1/18) so the momentum train has left the station. Eight states currently allow recreational marijuana in the USA but I believe this figure will double over the next couple of years. If that’s the case, this stock and others should be setup for strong growth. Specifically, the stock is extended after breakouting out above $21 just before the New Year. Let it digest and form a new base before blindly buying shares.

If the list above doesn’t quench the thirst, I have another 22 stocks over at this thread, many of which are also outperforming the market: My Wife’s Stocks Outperforming 3 Years Later

The Wife’s Stocks Outperforming 3 Years Later

Repeating wisdom from Peter Lynch:

“The key to making money in stocks is not to get scared out of them.”

“All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.”

Wishing you all continued success in 2018!

$V $MA $SQ $FB $BABA $AMZN $GOOGL $AAPL $NFLX $SNAP $TSLA $NVDA $IMMU $WEED.CA