Weekly Recap: Investors Shift Gears as the Year’s Worst Week Unfolds
This is an excerpt from Tom’s guest article in the InvestorPlace Digest e-letter. To sign up for this newsletter, please click here.
Last week was a terrible, horrible, no-good week for stocks. Home Depot (NYSE:HD) and Walmart (NYSE:WMT) reported surprisingly downbeat guidance, and the Federal Reserve signaled more rate hikes to come. The Dow Jones Industrial Average is now in negative territory for the year so far.
This time, investors aren’t waiting for a turnaround. At InvestorPlace.com, we’ve seen a lightning-speed shift in reader interest toward dividend stocks and “meme” stock moonshots — anything to get away from the mega-cap tech firms that dominated January’s news.
1. Dividend Monsters Are Back in Vogue
It’s been a while since we’ve seen such a rapid shift in investor strategy. (Consider TSLA or crypto in 2021 and 2022, where investors rode their holdings all the way down.) This time around, investors are saying “to hell with Jerome Powell and his interest rates.”
InvestorPlace.com’s most-read stories last week included:
The shift is probably because investors are sitting on thinner capital cushions now. 70% of stocks in the S&P 500 lost value in 2022, reducing any capital gains. And investors are now far wiser to the lengths that Fed Chair Jerome Powell will go to tamp down inflation.
Why Does it Matter? These moves show that investors are now faster to dump shares in the face of negative economic news. Not even the “Big 4” tech firms – Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META) – have been immune. So, if you’re looking to build a position in a long-term, high-quality holding, there’s a good chance that “buying the dip” will be a better strategy than cost-averaging.
2. Animal Spirits Are Returning
On the other end of the spectrum, InvestorPlace.com also is seeing renewed interest in higher-risk bets. On Friday morning, a massive number of expiring Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA) options exchanged hands within minutes of the market open. Volumes for Nvidia’s expiring bearish $230 put options exceeded open interest by a 1.5-to-1 ratio, an unusually high figure that smacks of speculation.
Some Tesla options, like its bullish $200 calls, also saw similarly aggressive trading. By lunchtime Friday, volumes exceeded open interest by almost 3x. And no fewer than 45,000 InvestorPlace.com readers have now checked out Thomas Niel’s “Tesla Stock Prediction for 2025” since it published on Feb. 10.
These are all signs of investors “reaching for return,” at least among day traders. Also on Friday morning, for example, shares of Bridger Aerospace Group Holdings (NASDAQ:BAER) – a $350 million market cap aerial firefighting company – jumped 100% at the open on virtually no news.
There’s little doubt that other marginal firms will see similar spikes in the coming weeks. Perhaps it’s time to load up on AMC Entertainment (NYSE:AMC) shares as a gamble?
3. Ford Is Giving Up on Rivian
Electric vehicle stock stories also remain popular at the website.
We’ve always known that the relationship between Ford (NYSE:F) and Rivian (NASDAQ:RIVN) was a marriage of convenience. The legacy automaker needed to show investors it was doing something… anything… to catch up with Tesla and its upcoming Cybertruck. Meanwhile, Rivian needed cold, hard cash to turn its electric vehicle dreams into reality.
It’s a plot worthy of a daytime soap opera.
Still, Ford’s recent success with its electric F-150 truck seems to have gone to its head. Shares fell 10% after the Detroit automaker announced it was selling Rivian, compared to only a 3% decline in the smaller firm.
Why Does it Matter? In one InvestorPlace.com story, we show how the Biden administration has effectively underwritten the electric vehicle industry in its Inflation Reduction Act of 2022 with generous $7,500 tax rebates. And whether you agree with the policy or not, Ford’s and Rivian’s lower stock prices now provide more attractive entry points than where we were seven days ago.
As for InvestorPlace.com readers trying to decide between the two stocks, Luke Lango has some keen words of wisdom.
4. Earnings Season Continues Next Week
A clear pattern has begun to emerge from this earnings season. Retailers have generally disappointed investors with downbeat results, while energy stocks and airlines have asked, “What recession?” Tech has been a mixed bag.
On Friday, British Airways owner International Consolidated Airlines Group (OTCMKTS:ICAGY) announced it was profitable for the first time since the pandemic began. That comes on the heels of an 18% earnings beat from Priceline operator Booking Holdings (NASDAQ:BKNG). (As a reminder, several other airlines have now reported record fourth-quarter profits.)
It’s no surprise that diverging fortunes have pushed the VIX Index up 27% since the start of the month. No wonder Larry Ramer’s “7 Comeback Stocks to Buy Before They Soar Again” was a popular read on our site this week.
Why This Matters. Investors looking to establish long-term positions in retail stocks will likely want to wait until after earnings this week. Consumers are getting squeezed by inflation, as executives at Walmart noted, and corporate guidance is coming down. Meanwhile, it’s not too late to buy into energy stocks – a strategy that, as InvestorPlace Digest reader know well, Louis Navellier strongly advocates.
5. Taking ChatGPT for a Spin… With Weird Results
Finally, InvestorPlace.com’s editors decided to ask a burning question this week:
Could ChatGPT do our work for us?
Answer: Well… no. (Although the results were interesting!)
To start, the artificial intelligence-fueled chatbot was surprisingly reluctant to give any answer at all – a product of its carefully crafted guardrails. OpenAI’s bosses clearly don’t want their chatbot masquerading as a registered investment advisor.
But after some goading, ChatGPT was able to provide answers after our writers and I primed the AI with some cleverly crafted questions.
The results looked much like the average piece of internet advice, with growth stock “buy” recommendations ranging from the mostly obvious (META) to the very obvious (AAPL).
Why This Matters. The exercise shows us the clear limitations of today’s AI chatbots. These algorithms take information from publicly available documents (mostly from the internet) and create a rehash of their inputs.
In other words, ChatGPT sounds (and performs) much like the average investor.
Of course, these algorithms will only get better with time. Nevertheless, it could take years for foundation models to become proficient at long-term trading. Human nature, after all, is what powers the stock market.
On the date of publication, Tom Yeung held a LONG position in GOOG and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.