Our June 2023 stock and ETF watchlist with entry points, sector analysis, and market outlook.
Market Overview
Welcome back to The Wealth Catchers' watchlist. For the month of May there was only one bright star amongst indices and that was the NASDAQ (5.92%). The S&P 500 barely made it into positive territory, it was up 0.29%. The Dow Jones (-3.36%) and Russell 2000 (-1.11%) proved to be the laggards in the month of May. This past month had an extreme focus on all things AI and what I would like to call "fake worry" about the debt ceiling. Spoiler alert, it was resolved before the June 1st deadline. Now there are still some things to iron out but for now we are no longer at risk for defaulting. As mentioned above the NASDAQ had an extremely impressive month but this has led to some caution amongst investors. As you know, the NASDAQ is heavily concentrated in the tech sector and within that tech sector there are a good handful of mega-cap names. These are names like Apple, Microsoft, NVIDIA, Google, etc. Essentially the market is being held up by a few companies and we are in what could be viewed as concentration risk. The bull run, if you want to call it that, has not spread out throughout the rest of the market. You have indices like the Dow Jones (-0.50%) and the Russell 2000 (-0.18%) in the red YTD. The NASDAQ (24.40% YTD) is in a lead that it most likely won't give up. The S&P 500 (9.15%) is the closest but we have to take a deeper look into that. When looking at the holdings in the ETFs like SPY and VOO which track the S&P 500 you can see the same theme in their top holdings, heavily skewed towards tech. So again, another factor that proves the gains we are seeing are heavily concentrated and that doesn't bode well for the future outlook of the market. We want to see these gains dispersed healthily amongst other sectors. Now when we take a look at another ETF named RSP (this is the equal-weighted S&P 500) we can see that YTD it is down -1.30%. This gives us great insight that with all things being equal the overall market is actually down right now with only 9-10 companies really holding the market up. This leads to some fears that one bad earnings report or some piece of bad news by one of these companies can send the market tanking.
Crypto & Digital Assets
Moving away from the concertation risk, a huge theme in the month of May was AI. NVIDIA which is viewed as the holy grail when it comes to this space rocketed to the upside after smashing earnings and also probably to some heavy speculation that briefly placed it in the trillion dollar market cap club. NVIDIA seems like it is the best company in this space due to the fact that it has it's hand in everything and their GPUs are extremely valuable to the generative AI market. It's safe to say that NVIDIA is trading at future valuations, probably like 2-3 years down the line. You will see with my price points listed below for the company I am looking for it to pullback. That's not cause I have a negative outlook on the company, it's simply due to the fact that it's run too fast to high in my opinion. It is definitely a $450-$500 stock I just think it'll need to more time to justify that valuation. All in all I am definitely long NVIDIA.
Fed & Monetary Policy
Also don't forget we still have worries about rate hikes even though there's a 73% probability that there will not be a hike. The next Fed meeting is slated for June 14th, 2023. Other dates to look out for:Friday, June 2nd: Jobs ReportTuesday, June 13th: CPI Now for the watchlist I took it upon myself to remove some companies and one ETF that I feel like have run their course or have met an obstacle that has diminished their value. Listed below are the companies I removed and my reasoning. Stocks Taken Off Watchlist:Zillow: Just have to call it quits here. Has had a great return YTD but this stock is down tremendously from the time it's been introduced to the watchlist. The discontinuation of the IBuying has proven to be devasting now that we are well over a year removed from that announcement. Revenue has fallen drastically. Though other things on the financial side of things look good (beating earnings the past few quarters, positive working capital) I think it's just time to let this one go or reduce it greatly in the portfolio. Will check in every now in then to see how it's doing. Blending tech and real estate hurt when it came to this company.PYPL: Taking this off this list based on the outlook on the banking sector. I like the fintech space which is why this is on the list. But seeing the muscle that a company like JPM has when it can come in and buy up these banks makes me think "They can make themselves a fintech superpower whenever they want." I just feel like there is too much to lose when it comes to opportunity cost.ChargePoint: Was originally placed on this list due to the fact that it was the leader in terms of universal EV chargers. Now that Tesla has opened its network to allow other EVs to use it charging network ChargePoint's value drastically diminishes. It is capital intensive to build out these networks and companies like ChargePoint, Blink, and Tesla have went to great lengths to build out their networks. But only one of them have a great moat going for them and that is mindshare. Tesla is what comes first to mind when you think of EV charging and EVs in general. Their only negative was the fact that only Tesla vehicles could use the network. Granted Tesla's network does need to fix some tweaks here and there with this universal push, but it's safe to say that they will be the leader in this charging network space.ARKK: Have been following this for quite some time in hopes of a turnaround. Paying the expense ratio and recieving this deep negative return has soured my outlook on this ETF. Also coming across the realization that Cathie Woods dumped NVDA stock months ago before this run makes me question management of the fund. Also doing a deeper dive into the holdings i've reached a consensus that there is more potential out there without paying the fees.
Monthly Performance
At the close of month here are how the indices performed:Dow Jones (-3.36%)S&P 500 (0.29%)NASDAQ (5.92%)Russell 2000 (-1.11%)At the close of the month of May the VIX was at 17.94. At the close of the month the "Fear and Greed" index was at 62 indicating greed in the market.
Index Performance
| Index | Performance |
|---|---|
| Dow Jones (May 2023) | -3.36% |
| S&P 500 (May 2023) | +0.29% |
| NASDAQ (May 2023) | +5.92% |
| Russell 2000 (May 2023) | -1.11% |
Top Sectors
Bottom Sectors
Stock Entry Points
| Ticker | Daily Entry | Weekly Entry |
|---|---|---|
| NKE | $101 | $89–$94 |
| ABNB | $95–$104 | $87–$111 |
| MSFT | $261–$276 | $239–$264 |
| AAPL | $153 | $126–$155 |
| GOOGL | $101–$104 | $91–$100 |
| MCD | $266–$270 | $231–$258 |
| WMT | $140–$143 | $128–$136 |
| TSLA | $125–$165 | $91–$149 |
| SBUX | $84–$104 | $72–$93 |
| V | $214 | $196–$207 |
| PG | $137–$143 | $123–$138 |
| WM | $149–$159 | $138–$149 |
| IIPR | $69–$73 | $67 |
| SHOP | $41–$52 | $41 |
| ADBE | $348–$362 | $288–$326 |
| AMZN | $88–$109 | $82–$103 |
| CRWD | $124–$134 | $95–$145 |
| NVDA | $199–$250 | $135–$198 |
| COST | $475–$488 | $450 |
ETF Entry Points
| Ticker | Daily Entry | Weekly Entry |
|---|---|---|
| VUG | $235–$242 | $221–$237 |
| VGT | $352–$369 | $307–$337 |
| VOO | $365 | $330–$349 |
| SMH | $114–$124 | $95–$106 |
Key Takeaways
- →May 2023: NVDA hit ATH $419.38 (+159% since Nov 2021) on AI/ChatGPT frenzy.
- →Removed from watchlist: Z (revenue decline), PYPL (banking concerns), CHPT (Tesla competition), ARKK (poor returns).
- →SMH underwent 2-for-1 split on May 5, 2023.
- →Dow -3.36% while NASDAQ +5.92% — AI theme creating extreme divergence.
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