My Prime Inventory Choose For This 12 months | ChartWatchers

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Earlier this month, The Cash Present requested me to affix different inventory market consultants and submit my prime inventory thought for this yr. Whereas the markets have been in a sunnier place at the moment, I am sharing my response beneath, as I nonetheless imagine this inventory is headed a lot larger from right here.

In fact, I am going to must see the broader markets flip optimistic earlier than placing cash into my prime choose, as latest promoting pressures have me cautious on the near-term prospects of most shares. As you may see on the weekly chart beneath, the S&P 500 is now buying and selling beneath its key 40-week or 200-day shifting common. As well as, the RSI and Stochastics are in adverse territory.

WEEKLY CHART Of S&P 500 INDEX

These similar adverse traits have been in place at the beginning of the 2 most up-to-date bear markets and, till I see worth motion just like the January 2019 and April 2020 downtrend reversals (inexperienced arrows), I am going to hold this inventory on my Watchlist. My MEM Edge Report makes use of a confirmed system that has known as each market backside over the previous 25 years, and it makes use of a each day chart in addition to the weekly chart above.

Curiously, the each day chart of the S&P 500 is exhibiting some doubtlessly optimistic alerts as heavyweight shares comparable to Microsoft (MSFT) and Apple (AAPL) are rallying on higher than anticipated 4th quarter earnings outcomes in addition to optimistic feedback from administration relating to progress into this yr.

The present selloff within the markets has been sparked by fears surrounding excessive inflation, which is at the moment operating at a 40-year excessive. The primary reason behind this inflation has been provide chain points which can be pushing the price of supplies a lot larger. Wage pressures are additionally including to the underlying prices of doing enterprise.

During times of excessive inflation, firms that enhance their dividends essentially the most significantly have traditionally outperformed the broader markets. Of word, many high-quality firms routinely elevate their dividend payouts to assist hedge in opposition to inflation, which is one other bonus.

Many of those firms are a part of the Dividend Aristocrat group, that are 65 high-quality firms which have elevated their dividend payouts for no less than 25 years. One such firm is IBM (IBM), which gives a beneficiant 5.3% yield in addition to superior progress prospects. The corporate’s dividend is powered by its capability to generate free money circulation and, over the previous decade, IBM has produced over $10 billion in free money circulation.

Beginning in 2022, IBM expects excessive single-digit progress in free money circulation, persevering with via 2024 for a cumulative complete of about $35 billion. This progress comes from an estimated enhance in income of about $3 billion every year via 2024.

DAILY CHART OF IBM

Whereas many individuals take into account the 110-year outdated firm to be old fashioned, IBM has pivoted to a concentrate on the cloud and synthetic intelligence. The transfer into these progress areas, in addition to the corporate’s spinoff of their knowledge administration facilities into Kyndryl Holdings (KD), has IBM poised to be one of many massive turnaround tales for 2022, with their cloud and AI divisions including $4.4 billion to Q32021’s income progress. On Tuesday, IBM posted earnings and gross sales that have been above estimates, with administration guiding estimates larger for this yr because of sturdy progress prospects. The inventory rallied virtually 6% on an in any other case tough day for the markets.

Whereas I am optimistic on IBM, given the at the moment excessive inflationary interval in addition to the corporate’s sturdy progress outlook, as soon as the markets flip bullish, I will be turning my focus to oversold Software program shares, in addition to different Progress shares.

For individuals who’d wish to be alerted to when the markets flip optimistic, in addition to my prime picks in oversold Progress shares, use this hyperlink right here for a 4-week trial at a nominal price. Final yr, I proposed over 120 inventory picks in numerous sectors, and my win price was 75% with the losers having a median decline of 4%. You need to use this hyperlink right here for rapid entry to my twice weekly MEM Edge Report.


On this week’s version of StockCharts TV’s The MEM Edge, I assessment key earnings studies and the way they’re driving worth motion. I additionally share a view of promising strikes in Tech and one space you must steer clear of.

I additionally appeared on the January 2022 version of StockCharts TV’s The Pitch, alongside Joe Rabil and Jay Woods.


Warmly,

Mary Ellen McGonagle, MEM Funding Analysis

Mary Ellen McGonagle

In regards to the creator:
is knowledgeable investing advisor and the president of MEM Funding Analysis. After eight years of engaged on Wall Road, Ms. McGonagle left to change into a talented inventory analyst, working with William O’Neill in figuring out wholesome shares with potential to take off. She has labored with shoppers that span the globe, together with massive names like Constancy Asset Administration, Morgan Stanley, Merrill Lynch and Oppenheimer.
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