This morning I added my first new position to the Speculative Trading Program!
The market opened with some extra volatility on Tuesday, gapping higher at first and then selling off.
Investors are trying to figure out what direction the market will head in this new year. And while uncertainty is certainly high, one stock caught my attention.
While most stocks were fading lower, Meta Platforms (META) actually held its ground.
The stock is up 3.3% as I write this note. And that’s a significant victory given the bearish market backdrop.
Here’s why I’m placing a bet on META — and why I think the stock deserves a spot in your portfolio right now.
Two Catalysts for a Higher Stock Price
After losing more than two-thirds of it’s peak value, META shares are now starting to look much more attractive.
Sure, the company has its problems. Investors are worried that CEO Mark Zuckerberg’s focus on the “metaverse” could lead to neglect for the company’s more profitable social media platforms.
And recent privacy policies implemented by Apple could keep META from harvesting helpful information about its users. This in turn could hurt META’s core advertising business.
But now that those risks are more clearly understood, there are some positive catalysts on the horizon that could help turn META’s slide around!
First, any indication that Zuckerberg is pulling back on metaverse investments could be very positive for the stock.
And while I don’t expect “Zuck” to completely abandon this initiative, he could scale back how much money is spent on the metaverse. This would lead to more profits in 2023, helping to boost investor confidence.
Second, a ban of Chinese social media platform TikTok could also be a major catalyst for META.
Even tighter restrictions (instead of an all-out ban) could help drive more customers to use META’s Facebook and Instagram platforms. And policies against TikTok could also give investors more assurances that META’s platforms will continue to be relevant for years to come.
“If It’s Working, Buy More!”
Here’s one of the best pieces of advice I got from my hedge fund boss more than twenty years ago…
“If it’s working, BUY MORE!”
Over the span a few decades, Bill created a tremendous amount of wealth for his clients — and for his own family as well!
Bill didn’t use sophisticated computer models or high-tech algorithms to generate profits.
Instead, he kept a close eye on trends. And when certain stocks were “working,” he built sizable positions to profit from the situation.
META’s outperformance today would have caught Bill’s eye. It’s clearly a stock that is “working” in today’s market — despite pullback for many other stocks.
Wall Street analysts expect META to earn $7.95 per share this year and grow profits by 24% to $9.86 the following year. And while those numbers certainly could be revised, META is trading at an attractive price compared to these expectations.
If you buy shares today, you’ll be paying less than 16 times expected profits for next year.
That’s an attractive value compared to many other growth companies — and certainly lower than what investors paid for META over the past several years.
Using Options to Boost Returns
My Speculative Trading Program bought in-the-money option contracts for META today.
These contracts should perform very well if META can continue to trade higher.
And using option contracts allows us to control more shares of META for less up-front capital.
Of course, this is a more aggressive way to profit from a rebound for this stock. And because of the risk, I never recommend buying option contracts with cash you can’t afford to lose.
But taking a reasonably-sized position in these call contracts can help accelerate profits if META trades higher.
And balancing bullish exposure like this META trade with some bearish plays on other tech names helps to reduce overall risk.
To see this position — and all the other speculative trades I’m placing with my own family’s money — consider subscribing to my Speculative Trading Program.
For just $147 a month, you can track the open positions in this model, receive alerts before I make the trades with my own family’s money, and review all historical trades over the past year.
I’d love for you to check out this investment model and see if the trades are right for you!
Remember, “If it’s working, BUY MORE!”
Here’s to growing and protecting your wealth,