Part 6

The market has been extremely bullish in the past 6 months since the huge sell-off took place all across the board caused by the coronavirus crisis. We have been helping our followers maximize their profitability at all times and are currently looking for more buying opportunities after the recent profit-taking correction that has recently occurred.

After analyzing the performance of the ETF pair (XLP-XLV), we have picked the two best stocks from each ETF that we believe have the chance for performing well in the near future and that would give a chance for our followers to maximize their profitability.

One of our top stock-picks from the XLP for the month of September is:

PepsiCo. Inc. (PEP)

Company Background

Founded back in 1898 in the United States, PepsiCo, Inc. is among the leaders in the multinational food and beverage sector all around the globe. Its complementary brands and businesses include Pepsi-Cola beverages, Frito-Lay snacks, Gatorade sports drinks, Quaker foods and Tropicana juices. As a global leader in the sector, PepsiCo servers customers in more than 200 countries around the world.

By looking at the financials of the company, we could see that PepsiCo has kept on growing its sales over the past 5 years. Moreover, the company has managed to keep its costs relatively low and has therefore been able to report solid net profit figures over the past 5 years as well.
Due to the COVID-19 pandemic and the negative impact on the economy, the company slightly missed the 1st quarter earnings expectations, delivering $0.96 per share, while the expectations were for $1.03. In the second quarter though we have seen an improvement. Even though the company slightly missed on the revenue expectations it managed to beat analysts’ earnings expectations of $1.25 by delivering $1.32 per share and that has given investors a lot more confidence in the stock and has proven that the company can perform very well even during such tough times of economic slowdowns and uncertainty in the economy and make money for its shareholders.

Furthermore, the company paid a dividend of $1.02 to its shareholders in the first week of June, showing a strong financial positioning even during the current economic slowdown caused by the pandemic.

By looking at the chart, one could see the huge bullish rally that has occurred since the end of March. PEP bounced from the lows at $102.87 on the 23rd of March and has been extremely bullish ever since. It actually increased 40% in less than 6 months to reach the $144 mark on the 23rd of September. Logically speaking, we have seen a profit-taking correction in the past week where the stock dropped towards the $133-$134 lows and it is currently testing the key support mark at $133, followed by the stronger support levels at $131.70 and the $130 where lots of buying pressure is expected. The technical indicators are heading closer towards the oversold area and will be soon giving further bullish indications. The horizontal and diagonal support marks match perfectly at around $133-$134 and we believe that is the key level where lots of buying activity is expected and the price is likely to start bouncing again very soon.

Chart: PepsiCo, Inc. (PEP)

We will start buying aggressively at the key support at $134. Should the price drop further, we will be looking to add more to our buy positions at the next key support at $132-$131.80, which would give us a chance to improve our average cost basis. On the way up, our initial profit-taking target is set at $139, followed by the next target at $145-$146 where will be fully cashing in our profits.

Pfizer Inc. (PFE)

Our next stock-pick for today would be Pfizer Inc. (PFE) The company is the 4th largest holding within the XLV with its 6% weight in the ETF’s portfolio.

Company Background

Founded back in 1849 in New York City, Pfizer Inc. is one of the world’s leading pharmaceutical companies. The company has seen a huge success for many years, which was further supported by the joint merger of its consumer healthcare division with the UK pharmaceutical giant GlaxoSmithKline. The company develops and produces vaccines and medicines for a variety of medical disciplines, such as immunology, oncology, neurology, endocrinology, and cardiology.

Pfizer has got eight blockbuster products within its portfolio that are expected to boost its revenues and profits for many years to come.

In fact, the stable financial performance of the company could easily be seen by looking at its financial statements. It has managed to keep on delivering stable revenue and net profit figures in the past few years, while keeping its costs and borrowing (long-term debt) quite low. Its current debt-to-equity ratio is only 0.56, which also adds more value to the company’s overall financial stability.

Pfizer has managed to decrease its costs and increase its profits during the pandemic of COVID-19 that led to a massive slowdown within the economy – a further indication for the company’s strong financial stability. Moreover, the company paid a dividend of $0.38 again in the 2nd quarter of this year, showing investors that the management remains very positive for Pfizer’s overall financial performance and expected growth in the future. That has also been seen very positive among investors that have been actively pushing the stock higher in the past few months after the massive sell-off that was caused all across the board when the virus started spreading all around the world.

By looking at the chart, we could easily see the huge bullish rally that has occurred since the sell-off caused by the coronavirus in February-March.

In other words, Pfizer’s stock bounced from the lows at $27.88 on the 23rd of March to reach the highs at $39 in the end of August. Since then, we have seen a profit-taking correction that sent the stock down towards the $35 lows. The daily chart shows the strong support mark at $34.30 where lots of buying pressure has taken place in the past and it is likely to motivate investors to start buying at that point again, which would in turn bring the price back up. Moreover, the 50% Fibonacci retracement level stays exactly at that point, while the RSI and Stochastics have already started pointing higher, giving further bullish indications to follow up on.

Chart: Pfizer, Inc. (PFE)

We will start buying PFE aggressively at the key support mark at $34.30 where lots of bullish activity is expected. Should the price break that level to the downside, we will be adding more to our buy positions at the next strong support at $32, which would give us a chance to get a better average price and further maximize our followers’ profitability to the upside. Our initial profit-taking target is at $39, followed by the next target at $42 where we would be fully cashing in our profits.

We at Dow Experts enjoy analyzing the market and helping our followers maximize their profitability by following our trading and investing ideas, which are always supported by our rational investment approach.

Sincerely,

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