Hey There Income Hunters,
I always felt the worst thing for the markets was uncertainty …
Uncertainty causes fear of not being able to efficiently manage financial risk …
It ignites a “risk off” mentality that can fuel liquidation of positions …
I think the hard-to-borrow activity we saw this week with GME, etc. will ultimately be a good thing and could possibly reduce the gap of inequality … which would be a victory for the warriors who fought for change!
Now, let’s see how YOU can capitalize on the lower prices of companies we know will benefit in the months ahead from the Blue Wave stimulus …
Let’s first take a look at the technical damage done to the SPDR S&P 500 ETF (Ticker: SPY) this week …
Next week will be very important.
We need some reassurances from the Fed (and, more importantly, the Administration), meaning Janet Yellen on stimulus …
Or we need good economic news — and my concern is we may get the opposite there.
Non-farm payrolls for January come out next Friday and they look like they are getting ready to head south again …
Check out this two-year graph of monthly non-farm payrolls.
I think this is the most important economic number…
Remember the Fed’s mandate … their job … is to create jobs, and we are a long way from getting back to pre-covid levels as you can see above.
On the bright side, this may be exactly what the Fed and administration need to get them moving on what’s important instead of the same old politics …
So, what’s the play? I am still focused on ENERGY.
Crude has been very stable the past couple of days and I think that’s a good sign for further increases in the price of oil, which is extremely beneficial for energy infrastructure companies like Energy Transfer LP (Ticker: ET) …
Plus, we will get a double win of more demand and less supply toward mid-year.
Here’s the Trade
I like ET. (And I don’t mean the movie.)
A lot.
It’s trading near $6 …
It’s volume has been picking up in options …
And it’s a 5-star rating at Morningstar with a $20-dollar fair value price…
Hell, if I can pick it up at $6, I’d be happy with half that!
I like these fast charts because they give you a lot of valuable information with a two-year forecast on earnings as well …
2021 will be a great year for ET… check out the $1.13 earning per share (EPS) forecast for this year in the red circle. That number is not even pricing in Goldman’s forecast of a $65 dollar oil price by year’s end.
Now, according to Morningstar, there is a 50% probability ET will lose $700 million in revenues on the likely Dakota Access Pipeline closure …
However, they have over $50 billion in revenues and Morningstar’s $20 fair value price has the $700 million loss built in …
So I like playing this one with an outright call purchase …
I’d like to see ET drift a little bit lower so I can buy the $6 strike call under $1…
Then if ET goes to $10, I’ll double my money.
I think we may get many great opportunities in this correction to get set up for the Blue Wave rally in Q2 …
Have a great weekend everyone and as always,
Live and Trade with Passion,
Griff