Expect more headline related volatility as the summer trading season thins out volume, the geopolitical situation heats up and the algorithms keep chasing their own tails, explains Dr. Joe Duarte, editor of In the Money Options. and author of the highly recommended book The Everything Guide to Investing in Your 20s & 30s.
Our world is all about stock picking, risk management, grinding out profits, collecting dividends, and using old fashioned eye burning analysis of charts, SEC filings, and conference call transcripts.
The high frequency traders may rule the roost, but there are places where being patient may pay off. A perfect example of where patience paid off recently is Medtronic (MDT), a highly under rated medical equipment manufacturer which we have owned for the past few weeks.
More from Dr. Joe Duarte: Two Healthcare Diamonds in the Rough Equity Environment
Medtronic is a geeky medical stock which is best known for its pacemakers and heart valves; you know stuff that saves lives but doesn’t get much buzz in the algo world.
hat’s interesting is that very quietly, under the radar, the company has been diversifying its wares into orthopedics and spine surgery while shoring up its pain management division.
And the firm's recent earnings beat shows that the strategy is working as the surgical unit outperformed expectations and delivered a nice pop in the stock.
Perhaps what is still under appreciated is Medtronic’s pain management surgical product line, which should benefit from the opioid crisis and the likelihood of further reductions in prescription pain medications over the next few years. If I’m right, once the market figures that out, the stock should move higher for some time.
Another under-rated company is healthcare giant AstraZeneca (AZN), an old school, seemingly plodding pharmaceutical stock. AZN is far from sexy to the algorithm traders, but it has solid franchises in oncology, diabetic care, and asthma.
Furthermore, recent studies suggest that AZN’s cardiac drugs are making a big difference in diabetics with heart disease, a fact that should allow for label expansion on at least one current blockbuster.
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It’s not 5G but, just for a moment, consider the fact that you have to be alive to watch streaming video on your new cell phone, especially if you’re diabetic and you have heart problems.
Amazingly, likely due to “Medicare for All” jitters and high frequency trading hysteria, the stock has lost 14% since April 1, before bottoming out in mid May. Nicely the stock found support at its 200-day moving average and money is starting to flow back into the shares.
Barring an all out market massacre, if things continue as they are starting to go for AZN, the shares look set to recapture the lost ground, which would put the stock back above $40, perhaps in the next few weeks. I own shares in the company as well.
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