The broader U.S. market averages gave back gains made on Monday and Tuesday to end the week fractionally lower. Communications and Consumer Discretionary names led the way lower, while Energy stocks rallied.
One reason for this week’s volatility likely centered around the quarterly event of “quadruple witching” options expiration. For those investors with an eye toward technical indicators, it’s a potentially bearish sign that the S&P 500 closed below its 50-day moving average of 3,343 on Friday.
The FOMC left interest rates unchanged on Wednesday and reiterated its strategy to keep rates lower for longer. The Fed raised its 2020 GDP expectation but cut forecasts for the next two years.
In other economic data, August retail sales grew slower than expected and the weekly jobless claims fell. According to various press outlets, the two sides on Capitol Hill remain about $700 billion apart from negotiating another round of economic stimulus.
Coronavirus Update
While it may no longer be the top news story in the financial press, the coronavirus pandemic is still with us.
On Monday, Pfizer (PFE) said that it plans to have conclusive results from vaccine trials by the end of October. Any positive news would be welcome on this front, as the U.S. crossed the tragic milestone of 200,000 deaths from the disease on Tuesday.
If the pandemic continues to spread, it could hamper the positive trajectory of economic recovery reported in recent months.
What to Expect Next Week
Consumer names Autozone (AZO), Costco (COST), General Mills (GIS) and Nike (NKE) headline the earnings calendar next week.
On the economic front, we’ll get a couple of looks at the state of the housing market. August durable goods orders will also be reported on Friday.
Following the snap-back recovery in stocks the past few months, we believe that investment gains will be harder to come by in the second half of the year.
As a result, deciding what and when to buy can be challenging for any investor.
However, the fact remains that attractive investments are out there, if you’re willing to dig a little deeper.
One such Alternative Energy name is worth a closer look and is our Stock of the Week.
Stock of the Week: Bloom Energy (BE)
The company produces a stackable energy generator that utilizes solid oxide fuel cells. The technology takes natural gas and converts it to electricity, with half of the carbon dioxide emission.
The stock gained more than 27% this week. We believe this positive momentum can continue throughout the remainder of 2020. Here’s why:
Firstly, Bloom Energy has strong operating momentum and is on the verge of generating sustainable profitability for the first time.
Empirical data and our own anecdotal experience, suggest that investing in a business at this stage of its growth trajectory can be lucrative as some institutions pass on businesses that aren’t profitable.
The company demonstrated progress toward that goal in July, when management posted second-quarter revenue of $187.9 million and exceeded expectations.
Bloom Energy estimates that it has an addressable market of $175 billion; from which it is expected to generate $1.07 billion of revenue in 2021. With its operating scale improving, we believe that management can generate a small profit next year that could continue to grow over the next several quarters.
Insiders agree the stock holds value at these reduced prices. According to SEC filings, a member of the Board of Directors bought $1 million worth of Bloom shares in August on the open market.
In addition, it’s worth noting that the stock carries a Smart Score of 9/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.
On top of the positive aspects mentioned already, the Smart Score indicates that the company has seen improving sentiment from analysts, investors (both professional and individual) and financial bloggers.
FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.
