AI Favors These Big Tech 🖥 and Retail Trades 🛍

The FDA being expected to approve Pfizer and BioNTech’s COVID-19 vaccine was not enough to counteract sentiment this week and things are looking grim for markets. Going into Friday, the Dow was down 0.7%, the S&P 500 was down 0.8% and the Nasdaq was down 0.5% for the week. At this time, a COVID relief package does not look likely to pass this week although discussions have continued.

Similar to last week, our AI has identified several large cap tech stocks. Microsoft Corp (MSFT) and Paypal Holdings Inc (PYPL) are both rated Top Buy for the next week. Microsoft, which is also rated Top Buy for the next month, received Q-Factor Scores of D in Technicals, B in Growth, A in Low Volatility Momentum and C in Quality Value while PayPal scored a B in Technicals, B in Growth, B in Low Volatility Momentum and C in Quality Value. 

Rounding out tech, recently acquired Slack Technologies (WORK) earned a Top Short rating for the following week. Its Q-Factor Scores are C in Technicals, D in Growth, D in Low Volatility Momentum and F in Quality Value.

Another prevailing industry on the Top Buy list is retail – specifically, large retailers with a strong online presence. Target Corp (TGT), a Top Buy for the next month, scored a B in Technicals, B in Growth, A in Low Volatility Momentum and B in Quality Value. Walmart Inc (WMT), also a Top Buy for the same timeframe, has been assigned scores of B in Technicals, C in Growth, A in Low Volatility Momentum and C in Quality Value.

Our AI continues to favor oil & gas funds and has rated United States Oil Fund LP (USO) Top Buy for the next week. SPDR S&P Oil & Gas Equipment & Services (XES) and United States Natural Gas Fund LP (UNG) are both rated Top Buy for the next month. On top of the industry shifting towards renewable energy, the oil and gas industry has suffered this year due to COVID-19. Analysts suggest that demand will bounce back over time, making now the time to buy.

Bond ETFs, on the other hand, have all earned Top Short ratings. Next week, iShares Short Treasury Bond (SHV) and Vanguard Short-Term Corporate Bond (VCSH) are rated Top Short, while iShares TIPS Bond (TIP) and iShares TIPS Bond (TIP) are rated Top Short for the next month. While bond ETFs tend to offer instant diversification, our AI suggests now is not the time to invest in this type of security long-term. 

Some of our favorite options trades this week: 

Short Call Spread in Nordstrom (JWN) – Bearish trade on a major department store retailer.  Great way to introduce downside protection in a portfolio against a potential disappointment in holiday retail sales.  Keep in mind, this trade is a “net credit” trade which means time decay is your friend. 

Long Put Spread in SPDR S&P Retail ETF (XRT) – Bearish trade on the US retail sector and another great way to introduce downside protection in a portfolio against a potential disappointment in holiday retail sales.  Unlike the Short Call Spread in Nordstrom (JWN) above, the downside in this trade is capped. 

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Growth stocks have been at the forefront of the COVID world and is an ideal pick for investors who are hungry for solid returns. These are the top growth ETFs to buy this month.

Update: The beta version of the Forbes AI Investor investment discovery platform is now live! It’s a simple, easy to use, jargon free platform that helps users discover new investments using AI. Our goal is for investors to kickstart their research with Forbes AI Investor so that they spend less time finding ideas and more time on optimizing their decisions. The platform takes guesswork out of investing and provides AI driven high conviction stocks and ETFs ideas. We opened up the platform to the first 100 users. Investors who are part of our investing slack channel will get priority access.

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Due to the holiday schedule, we will not be sending the newsletter in the last two weeks of December. We will resume in the new year.