Bank of America Adds AES Corp to US1, Removes Ameren Corp.

On August 13, 2020, Bank of America added AES Corp., (NYSE: AES) to its US-1 List. According to the bank, the US 1 list is the collection of the their best investment ideas that is subset of their buy-rated stocks. The bank has now removed Ameren (NYSE: AEE) from that list.

AES has had a huge run since May 11, 2020. It has risen from $11.87 on May 11 to $17.67 on August 17. That's a 49% gain in three months.  It may be wise to wait for a pull back before adding the stock to your portfolio.  A good entry point may be around $14.39. Currently, the money flow indicator is in overbought territory and the stock is hugging the upper part of the Bollinger Bands.  

Exhibit: AES Corp., has had a huge run 

 (Source: Tradingview)        

Disclosure: I do not own AES or Ameren

What is wrong with 3M?

I am going to break the suspense and answer the question in the title: "There's nothing wrong with 3M!" Its earnings for the quarter that ended June 2020 was exception given the tough circumstances under which every company in the world has been operating this year. Its GAAP EPS was $2.22 for Q2 2020 against an estimate of $1.80. Its revenue of $7.18 billion missed estimates by just $110 million. Complete industries in this era of the pandemic are in a free-fall and here we are punishing an essential, iconic American company for missing revenue by an amount, which would be 1.5% of the $7.18 billion.

Exhibit: 3M Q2 2020 Sales Declined by 13.1%

(Source: SeekingAlpha)

Yes, there was broad weakness in sales across all their business segments. But the company has been aggressive in reducing costs and was able to improve adjusted EBITDA margin by 110 basis points to 26.5%. Their operating cash flow increased 15% year-over-year to $1.9 billion. The management even paid down debt by $1.7 billion since the March 31, 2020 quarter.

The stock has been punished after the earnings. It has dropped from about $163 and trades a little over $151 as of August 4th. 

Exhibit: 3M Technical Indicators are Flashing a Strong Sell on August 4, 2020.

(Source: Tradingview)

Currently, the technical indicators are all flashing a strong sell signal. The market seems to be giving-up on 3M. But the Bollinger Bands are tightening and this raises the possibility of a sharp price move in either direction. Given that the other technical signals are flashing sell, tightening Bollinger Bands could indicate a drop from this level.

Exhibit: 3M Bollinger Bands are Tightening.

(Source: Tradingview)

(Disclosure: I do not own 3M)

 

            

Boeing Lost Support at 50-Day Moving Average In a Bearish Sign For the Stock

Boeing has lost support at the 50-day moving average. This is a bearish sign for the stock.

Exhibit: Boeing's Simple Moving Average (Data based on Monday, July 27, 2020)

(Source: Secure Your Financial Independence - DJIA SMA Report)

Boeing is currently trading at $169.26. There seems to be support at this level. If it loses support here, then Boeing may drop all the way to $120 for the next support level.  Given the bad news at Boeing, it is entirely possible that it will touch $120 in the coming weeks or months. 

Exhibit: Boeing Has Support at $169. If it loses this support, it may drop all the way to $120. 

(Source: SeekingAlpha & Author Annotations)

    Boeing recently announced that it will delay its 777x jet by up to an year. Even before the pandemic, Boeing was dealing with the problems with its 737 Max jets. When the pandemic hit, it grounded the entire travel industry. It now seems like it may take years before the travel industry can fully recover. It may take a couple of years after travel gets back to 2019 level that Boeing will start to get new orders for jets. There's so much excess inventory of jets across the globe that airlines may put off buying new jets for years. Combine this with the problem of airlines going bankrupt and you have lesser number of customers to chase for new jet orders.  Given all these factors, it's entirely plausible that Boeing's stock could give-up much of its gain since May 2020 and retrace to $120. If it loses support at $120, it may test its lows below $100.

    This crisis is a real test of leadership. Boeing is such an iconic company that it's painful to see this downfall. I am confident that in 3-5 years Boeing will be in much better shape.

(Disclosure: I own Boeing)        

Simple Moving Average of All 30 Stocks in the Dow Jones Industrial Average

    Moving averages can be powerful momentum indicator for stock price movements. The simple moving average provides a way to find attractive entry points for stock. For example, the golden cross is a bullish signal for a stock when its short-term moving average breaks above a long-term one. For example, when a 50-day moving average crosses above the 200-day moving average. I have created a website that generates the simple moving average of all stocks in the Dow Jones Industrial Average.  This report will be generated daily after market close and can help you get ready for the next trading day. This report generates the 10-Day, 50-Day, 100-Day, 200-Day moving average of stocks in the DJIA.  It also compares the moving average price against the last price of that stock.  This gives you a perspective on where the last stock price stands in relationship to the moving averages.

                   Exhibit: Sample of the Simple Moving Average Report 

(Source: securfii.com)