By TradeSmith Senior Analyst Mike Burnick
When I was a newbie in the investment industry in the 1980s, famed Fidelity Magellan mutual fund manager Peter Lynch was the biggest rock star in the business. He is known for the investment phrase “buy what you know,” and as simple as it sounds, its profoundness is undervalued. For instance, just think about J.M. Smucker Co. (SJM).
It produces the Jif peanut butter and Smucker’s strawberry jam for the PB&Js in the lunchboxes of schoolchildren across the country. Its Folgers Coffee has an estimated 35 million drinkers, filling up their coffee cups to start the day or their travel mugs to power through the night shift. And its Milk-Bone biscuits are the treat of choice for many a beloved dog.
Thinking about the products and services you use each day is a great start in finding pockets of profitable opportunities, and at TradeSmith, we can help you take your research to a whole other level. Pairing what you know with what our Health Indicator says about the health of a company and what our Volatility Quotient (VQ) says about the risk levels of the investment is a powerful trifecta. Here’s the rundown on SJM:
- It’s in our Green Zone, meaning it’s considered a “Buy.”
- It has a VQ of 18.09%, classifying it as a medium-risk investment.
- It pays a dividend with a yield of 2.74% and was recently crowned a Dividend Aristocrat.
Beyond the SJM staples in your pantry, think about what other companies’ products and services you use each day.
Unless I’m traveling, my wife and I have a ritual of watching something on Netflix Inc. (NFLX) every night. It has one of the richest content libraries of any streamer, with 2.2 million minutes of available content as of 2020. “Stranger Things,” “Squid Game,” “Orange Is the New Black,” “Wednesday,” “Harry & Meghan”… If you’ve ever watched any of these shows, you were watching Netflix original programming. Now, much like the rest of tech since the end of 2021, NFLX has been pummeled into the ground from its all-time highs. Trading at $671.36 in November 2021, NFLX has dropped nearly 50% since then.
However, I did say in June 2022 that NFLX was the “buy of a lifetime,” and the stock price has been on the rise since the start of the year. Because Netflix is still in the Health Indicator Red Zone and has a high-risk VQ, I would wait to see more confirmation from our tools before considering buying this stock if you are using a traditional “buy and hold” strategy. But at the very least, it most certainly deserves a place on your watchlist so that when you see an Entry Signal, you can pounce.
Kicking back and watching a Netflix show at the end of a long day is certainly a staple of many folks’ wind-down ritual. But perhaps no two companies figure more prominently in people’s work and personal lives than Alphabet Inc. (GOOGL) and Amazon.com Inc. (AMZN). In my investment research, I must do over 100 Google searches a day to find out the latest news, earnings, and press releases that need to be on my radar. I’ve also converted from mall shopping to almost exclusively shopping online, buying 90% of my Christmas gifts on Amazon.
Like Netflix, both GOOGL and AMZN are in our Red Zone, and AMZN is a high-risk investment. (GOOGL just barely falls into the medium-risk category with a VQ of 29.29%.) If you’re planning on buying and holding these stocks, you may want to wait until they enter the Green Zone. But the big picture is that Google still processes over 99,000 searches every single second and 95 million people across the United States have an Amazon Prime account. The demand is massive for these services, and these are both innovative companies that know how to ingrain their products and services into people’s everyday lives.
Again, just like with Netflix, make sure GOOGL and AMZN are both on your watchlist so you’re ready to act when our Health Indicator gives the “all clear” signal.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.