AI Model Favors These Stay-at-home Stocks 🏡; Short Bonds 📄

It has been a slightly better week for markets, as well as the economy, in comparison to recent weeks. Jobless claims has dipped below 800,000 – an all-time low since March. The FDA has approved Gilead Sciences’ COVID-19 treatment Remdesivir, which has been found to speed up the recovery. However, the indices were poised to end the week positive amid strong earnings and optimism about a stimulus, but hopes for a package passing faded on Friday.

While earnings have come in strong for several big companies, including Snap, AutoNation, and AT&T, that wasn’t the case for Netflix Inc (NFLX), which missed earnings but still managed to earn a Top Buy rating from our AI for the next 7 days. The stock has been assigned Q-Factor scores of B in Technicals, A in Growth, A in Low Volatility Momentum and C in Quality Value.

Target Corp (TGT), a clear favorite of our AI models this month, is another stock rated Top Buy over the next week. It makes sense why our AI is bullish about Target, as it carries Q-Factor Scores of B in Technicals, B in Growth, A in Low Volatility Momentum and A in Quality Value. On the other side of the coin, Cheesecake Factory Inc (CAKE) is a familiar name on our Top Shorts list and has Q-Factor scores of C in Technicals, F in Growth, F in Low Volatility Momentum and D in Quality Value. Restaurants are still being hammered by the pandemic, and with cases rising across over 40 states, it is expected to carry into 2021. 

The biggest name to land on our Top Shorts list for the next month is General Motors Co (GM), which has Q-Factor Scores of F in Technicals, D in Growth, C in Low Volatility Momentum and D in QualityValue.  It was an eventful week for the car manufacturer. It extended its recall on brakes, adding an additional 15,000 cars to an earlier recall of 3.5 million vehicles. It has also faced challenges with successfully producing an all-electric Hummer. However, with the Nikola partnership still on the table, things might turnaround for GM as it moves into EV.

Looking at ETFs, our AI models have identified iShares Silver Trust (SLV) and SPDR S&P 600 Small Cap Value (SLYV) as Top Buys for the next 30 days. There isn’t a lot of diversity with the sectors highlighted by our AI, and it’s clear that foreign currency and U.S. bonds are best kept for short-selling. 

Over the next week, Invesco CurrencyShares British Pound Sterling Trust (FXB) and Invesco CurrencyShares Japanese Yen Trust (FXY) are both rated Top Short. In fact, FXY has also been rated Top Short for the next 30 days. For bonds, iShares Core U.S. Aggregate Bond and Vanguard Short-Term Bond (BSV) are rated Top Short for the next week while the Vanguard Short-Term Corporate Bonds (VCSH) and Vanguard Total Bond Market (BND) ETFs are Top Shorts for the next month.

Some of our favorite options trades this week: 

Short Call Spread on Las Vegas Sands Corp (LVS) - offers downside exposure to one of our top short ideas for the month.  Rich implied volatility levels makes shorting Las Vegas Sands Corp (LVS) through options are more attractive risk-return as the rising cases of Coronavirus further impact the hospitality industry.  

Long Put Spread on iShares China Large-Cap ETF (FXI) - direct downside exposure to Chinese stocks.  Offers portfolio protection for those investors looking to hedge exposure to emerging markets in their portfolio.

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Value investing is ideal for investors who are looking to maintain stability during unpredictable times. This year has been under extraordinary circumstances, in addition to it being an election year, making these value stocks a safe bet for October.

After Salesforce reported powerful Q2 earnings, and joined the Dow Jones Industrial Average shortly after, the headlines have been rather minimal for the stock. According to our AI, the stock may not be worth chasing this month.

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