The sector rotation that is ongoing is being presented to retail investors as overbought and overvalued stocks that have had great returns such as MasterCard, Visa, Microsoft and many others being dumped by the large institutional investors for what are “low PE stocks” that are “more defensive” in nature and some even being called “conservative”.
I have seen this type of rotation many times in the past and in many cases it is not the truth. It is important when looking at a stock that is suddenly being picked up to check out the fundamentals.
Today for example I heard analysts talk about MasterCard Stock being overvalued as it trades at 44.2 time price to earnings while FedEx Stock (FDX) is “better value”. But the fundamentals would disagree in everything from PE to earnings prospects. The only real difference is that MasterCard was sitting at all-time highs and ripe for profit-taking while FedEx Stock (FDX) was oversold.
Make sure to use Fundamentals to setup a safety net before jumping into many stocks being touted as “more defensive” or “low PE”.
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Quick Comments on Using Fundamentals For Safety In Sector Rotations – Sep 11 2019
Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk.
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