50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation
Companies / Tech Stocks May 02, 2022 - 07:44 AM GMTBy: Nadeem_Walayat
Dear Reader
The earnings bloodbath materialised that started on Tuesday with Google trading down to $2265, and ended on Friday with Amazon plunging down to a new low of $2425. With the two 'cheap' stocks Qualcom and Facebook rallying strongly post earnings. Virtually everything went according to the script of my last article i.e. "we could see Amazon trade to well under $2500, probably into the $2450 to $2300 support zone". The only odd one out was Apple that refused to budge much from $160, where my expectations remain is headed to below $142.
Stocks Bear Market Current State
My big picture remains as I have been iterating for the past 3 months in that I expect the Dow to target a volatile trend to below 31k.
5th Feb 2022 - We are in for a volatile trend with a downwards bias for much of 2022, as I wrote to expect on the 5th of Dec 2021 accompanied by revised trend forecast graph.
Following which my expectations were for the Dow to target a trend to $31k as illustrated below -
The Dow closed at 32977, the bull market peak was 37k, which currently puts the Dow at -10.8%. The target for the low is 31,000 to 29,000 for a 16.2% to 21.6% peak to trough bear market. So the Dow currently stands at 6% to 14% above it's final low where my expectations are for the final low to be nearer to 29k than 31k and that is the INDEX risk of accumulating stocks at a Dow deviation of 10.8% from it's high i.e. for an index draw down of 6% to 14% from it's current price. The only thing that is not clear is WHEN the Dow will bottom.
In terms of immediate price action then the Dow has done nothing to suggest that the trend I forecast last last week to Dow 32k is not going to soon become manifest i.e. that the Dow is targeting a trend to 32k. for a new bear market low.
(Charts courtesy of stockcharts.com)
In the meantime I am obviously seeking far greater deviations than that for the Dow to accumulate select AI tech stocks at as and when opportunities arise as the stealth bear market cycles through individual stocks just as we witnessed last week.
More in my latest just posted analysis - Why APPLE Could CRASH the Stock Market!
This article is Part 3 of 3 of my extensive analysis that filters through some 50 small cap tech stocks to indentiy those with the most favourable prospects trading at knock down prices due to the bear market panic.
World War 3 Phase 1 - Putin WINS Ukraine War!
What Putin Plans for Ukraine
JRS.L Capitalising on Russia's War CRASHED Stocks
THE 2020's INFLATION MONSTER!
Stock Market Trend Forecast Current State
Stock Market FOMO Gives Way to FEAR of Buying the Dip
AI Stocks Portfolio Current State With Updated Buying Levels
FACEBOOK Stock 45% CRASH - Game Over for META?
FACEBOOK RINSE AND REPEAT
INVESTING LESSON - HAVE A PLAN AND THEN EXECUTE IT!
HIGH RISK STOCKS - INVEST AND FORGET
High Risk Stocks Portfolio Revised Buying Levels
GROWTH STOCKS TO CAPITALISE ON THE PANIC OF 2022
1. Arrow Electronics - ARW - RANK 1 - $121.8, PE 7.8, EGF 38%
2. JBL - RANK 1 - $58.5, PE 9.9, EGF 30%
3. FLEX - RANK 2 - $16.7, PE 8.7, EGF 33%
4. Diodes DIOD - RANK 2 - $89.5, PE 17.2, EGF 23%
5. GLOBAL FOUNDRIES - RANK 2 - $49.7 - PE 196, EGF 188%
That was first made available to patrons who support my work.So for immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $4 per month. https://www.patreon.com/Nadeem_Walayat.
Part 1 - World War 3 Phase 1 - Putin WINS Ukraine War!
Part 2 - THE INFLATION MONSTER is Forecasting RECESSION
Whilst my recent in-depth analysis - UK House Prices Three Trend Forecast 2022 to 2025, peals away every layer of the UK housing market I could think of to arrive at a high probability of trend forecast.
UK House Prices Trend Forecast 2022 to 2025
THE INFLATION MEGA-TREND
WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING
High Inflation Forecast for Whole of this Decade Due to Rampant Money Printing
Fed Inflation Strategy Revealed
Russian Sanctions Stagflation Driver
RECESSION RISKS 2023
UK Debt Inflation Smoking Gun
Britains' Hyper Housing Market
UK Population Growth Forecast 2010 to 2030
UK House Building and Population Growth Analysis
UK Over Crowding Ratio
Overcrowding Implications for UK House Prices
UK Housing Market Affordability
UK House Prices Real Terms Sustainable Trend
UK House Prices Relative to GDP Growth
UK House Prices Momentum Forecast
UK House Prices and the Inflation Mega-trend
Lets Get Jiggy With UK INTEREST RATES
Is the US Yield Curve Inversion Broken?
UK house Prices and Yield Curve Inversions
Interest Rates How High WIll they Go?
Work From Home Inflationary BOOM?
Formulating a UK House Prices Forecast
UK House Prices 2022 to 2025 Trend Forecast Conclusion
Peering into the Mists of TIme
Risks to the Forecasts
US House Prices Trend Forecast 2022-2024
For immediate access to a high probability trend forecast of UK house prices, with US and global housing markets analysis to follow soon then do consider becoming a Patron by supporting my work for just $4 per month. https://www.patreon.com/Nadeem_Walayat.
HIGH RISK STOCKS - INVEST AND FORGET
If one does NOT invest and forget then one will BAIL out of a stock at 10% instead X10! Of course things are never black and white, but the more one spends time focusing on ones portfolio then the more one is likely to make huge blunders.
Do refer to my earlier article How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond so that one understands what Invest and forget means, as asking me every other day why a stock is randomly up or down is NOT INVEST AND FORGET! Once invested the price action should not be on your mind.
High Risk Stocks Portfolio Revised Buying Levels
Here is my High Risk stocks portfolio with revised buying levels, though most levels remain unchanged.
Table Big Image - https://www.marketoracle.co.uk/images/2022/Feb/NW-High-Risk-Stocks-Portfolio-18-2-BIG.jpg
GROWTH STOCKS TO CAPITALISE ON THE PANIC OF 2022
Following the CRASH in tech growth stocks surely there must be some now worth buying? Will after some 20 hours spent whittling down a screening list of 250 stocks down to a short list of 50 of which about 1/3rd were suggested by Patrons then here is the resulting analysis all condensed down into one table that lists the stocks in order of what's best and what's worst before I pick 5 to take a closer look at.
To keep things simple where PE / EGF ratings are concerned RED = BAD, BLACK = GOOD.
The stocks are ranked from 1 to 10 , where 1 is the BEST, 10 is the worst and those ranked CATHY WOOD are worse still!
Link to table big Image - https://www.marketoracle.co.uk/images/2022/Feb/High-Risk-Growth-Stocks-Opportunities-Big.jpg
Before I started this exercise I imagined that I would be lucky to uncover a couple of good stocks worth investing in, instead 14 stocks stand out as potentials i.,e. all those ranked 1 to 3. Of which I will first take a further look at the top 5 stocks, and come back to the other 9 in future articles.
Top 5 = ARW, JBL, DIOD, FLEX, GFS
The key to catching the 5 and 10 baggers is to select promising companies when they are relatively small, not too small that they could go bust i.e. less than $1 billion, but mot too large that they are already on the radar of most fund managers and thus have been bid upto high valuations i.e. less than about $20 billion.
1. Arrow Electronics - ARW - RANK 1 - $121.8, PE 7.8, EGF 38%
I cannot see any negatives with Arrow Electronics. The stock fly's under the radar of fund managers due to it's small market cap hence the low PE ratio..
Unlike most if it's growth stock brethren, ARW is only trading 12% off it's high. There is heavy support at $112 which is about the lowest I would expect it fall to. Whilst the current trend is targeting $117. Overall impression is that there is not much downside visible to this stock. Whilst the stock may not take off to the moon any time soon i.e. pending reaching critical mass for the fund managers to FOMO into,, nevertheless it's unlikely to do a Cathy Wood. I aim to start accumulating a position at $120. Therefore 1st buying level is $120, second at $113.5.
2. JBL - RANK 1 - $58.5, PE 9.9, EGF 30%
JBL another electronics stock that's firing on all cylinders.
JBL is down 19% from it's highs, currently trading at heavy support at $57.5, a break below would target $54, and then $51, so downside looks very limited. 1st Buying level would be $57.5, Second at $55. I will be looking to accumulate between $57.5 and $55.
3. FLEX - RANK 2 - $16.7, PE 8.7, EGF 33%
FLEX has been stuck in a trading range of between $20 and $15.5 since early 2021 i.e. unlike the Cathy Wood brigade there has been no 80% collapse this stocks hardly batted an eye lid, even for instance if the Russians invaded Ukraine FLEX would likely snooze through the war. Buying levels are at $15.60 and $14.1 which is where I will be seeking to accumulate whilst we wait for earnings to do their magic.
4. Diodes DIOD - RANK 2 - $89.5, PE 17.2, EGF 23%
Diode is down 22% from it's early 2022 high, with the recent low breaking below its $85 low of October 2021, which implies that the stock is heading for fresh lows, targeting a trend to between $75 and $70 which would be a 15% to 20% drop on its last close. Therefore the buying keels for DIOD are $75.2 and $70.5.
5. GLOBAL FOUNDRIES - RANK 2 - $49.7 - PE 196, EGF 188%
The chip maker IPO's barely 5 ,months ago In October 2021 at $47 per share, but don't be fooled this chip maker dates back to 2008 when AMD was defeated by INTEL and gave up the fight to fabricate processors, how things change! But the consequences is of lack of data i.e. only 5 months price history and the early eye watering PE ratio based on 1 quarters results. However, without risk there is NO REWARD! GFS is a wannabe TSMC .trades on an eye watering PE of 196! But this company is experiencing massive early growth courtesy of EXTREME demand for chips which means the PE is going to fall FAST over the coming quarters i.e. likely be well below 50 by end of the year, Which is what I seek in a high risk growth stock! FAST EARNINGS GROWTH TODAY not in some Cathy Wood delusion of growth some 5 years down the road! NOW! THIS YEAR! Of course he future is unwritten and we won;t know what's what until the earnings are reported but by then it will be TOO LATE! The stock will move higher to discount FUTURE earnings growth.
Given the chip shortage and companies scrambling to build chip fabrication plants then THIS IS THE COMPANY to be invested in RIGHT NOW, not just for growth but It's a sure bet that it's $28 billion Market cap is looking very appetising as a prospective takeover target, a goldilocks corporation, not too big so as to bring down the wrath of regulators and not too small that risks largely being an empty shell but just the right size for a tech giant to snack on. Of course there will be other GFS out there for instance my portfolio is already headily populated with SEMI's i.e. Intel, AMD, AVGO and so on. How are GFS's customers? Try Apple and Amazon and much of the auto sector..
See, I learned my lesson from the Coinbase IPO, and missed the bubble mania run up to $75! Instead patiently waited for the stock to fall BACk to the IPO price and began accumulating sub $50 only a few weeks ago! Like I say there is not much price history to work with, but of what there is clearly the main buying levels are $47 and $45. Personally I am scaling in small sub $50 with a larger buy at $45. Though DO NOTE this is NOT an TSMC, so my buys are relatively speaking LIGHT as the earlier Target Exposure graph illustrates that includes GFS as of a month ago. So I am not getting carried way, after all it is a high risk stock.
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Your Analyst
By Nadeem Walayat
Copyright © 2005-2022 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.
Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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