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Markets dropped this week for consecutive days, instilling fear in investors that the remainder of the year could be much more choppy than predicted. Without a stimulus, there’s no telling when the economy will bounce back. This is further amplified by the unemployment data that came in this week. While not the worst on record, the number of first-time claims were worse than the week prior.
Although Facebook Inc (FB) underperformed on Thursday, dropping 1.88%, our AI models have suggested that the stock is a Top Buy for the next month. The stock has received Q-Factor Scores of B in Technicals, B in Growth, A in Low Volatility Momentum and B in Quality Value. Facebook is the only tech stock to have landed on our list of Top Buys and Top Shorts. Tech has seen a pullback this week, which led to major indices slumping, so that could be the reason for its absence.
Also noticeably absent are precious metals, which has been an ETF favorite of our AI models throughout the majority of Q3. Instead, it highlights a number of bonds, most of which are Top Buys. iShares Core U.S. Aggregate Bond (AGG) is a Top Buy for the next week while iShares 7-10 Year Treasury Bond (IEF) and SPDR Bloomberg Barclays High Yield Bond (JNK) are Top Buys for the next month. However, our AI has rated Vanguard Short-Term Bond (BSV) a Top Short for the next month. The main differentiating factor is due to the Vanguard ETF being focused on short-term bonds.
Other ETFs include iShares U.S. Consumer Goods (IYK), which holds a Top Buy rating for the next week and month, and ARK Next Generation Internet (ARKW), an ETF with a Top Buy rating for the next week.
Out of the Top Buy stock picks, there isn’t a single sector that our AI focuses on. Defense company General Dynamics Corp (GD), a Top Buy for the next week, received Q-Factor Scores of C in Technicals, C in Growth, A in Low Volatility Momentum and B in Quality Value. Sherwin-Williams Co (SHW), a paint manufacturing company, is a Top Buy for the next week and has scored an A in Technicals, C in Growth, A in Low Volatility Momentum and B in Quality Value. Keurig Dr Pepper Inc (KDP), a Top Buy for the next month, possesses Q-Factor Scores of C in Technicals, B in Growth, B in Low Volatility Momentum and B in Quality Value.
In the banking space, two companies scored Top Short ratings: Synchrony Financial (SYF) and Sterling Bancorp (STL). Synchrony Financial (SYF) holds a Top Short rating for the next week and month, and has Q-Factor Scores of C in Technicals, F in Growth, D in Low Volatility Momentum and C in Quality Value. Sterling Bancorp (STL) is a Top Short only for the next week and also received poor ratings of D in Technicals, D in Growth, D in Low Volatility Momentum and C in Quality Value.
Some of our favorite options trades this week:
Put Spread Collar on iShares iBoxx $ High Yield Corporate Bond ETF (HYG). Leveraged bearish trade on high yield credit. This is a great trade to introduce downside protection for US stocks with the correlation between iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the SPDR S&P 500 ETF (SPY) sitting at 0.813.
Put Butterfly on Peloton Interactive (PTON). Downside-exposed income/yield trade on one of our Top Shorts for the month.
Short Call Spread in iShares MSCI EAFE ETF (EFA). Bearish trade on a top short ETF idea for the month. Great way to introduce downside protection from a drop in international stocks without selling out of actual stock positions.
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