🐘 Hunting For Value In The Stock Market

We were stoked when TradingView reached out to partner with us!

In fact, they’re offering Daily Dough readers up to 45% off this week.

From watchlists to trading strategies and alerts - this platform has it all!

Traders, investors, and entrepreneurs use TradingView to follow the markets and find the next big opportunity!

What’s on the Menu 🍴

Ready to up your financial game? Today we're serving up a buffet of investing wisdom that'll have you rethinking the game.

Today, we're diving into market trends, hunting for value, and revealing a bet that could define your future.

Plus, tips to grow that hard-earned dough.

Let's get to it:

• Technical Analysis Update For S&P 500 📈

• Hunting For Value In The Stock Market 🐘

• A Million Dollar Bet on Your Future 🎲

• How To Earn, Keep, and Grow More Dough 💰

Today’s newsletter is a 5 minute read.

Technical Analysis Update For S&P 500 📈

The S&P 500 has kept investors on the edge of their seat as inflation & recession fears rise.

The fear/greed index has flipped from greed just 1 month ago to neutral.

So, should investors be worried?

The fundamental data seems to keep giving investors mixed signals…

And now the S&P 500 price is showing signs of this ambivalence.

We’ve talked about important index price levels to watch in prior Daily Dough posts, and surprisingly, the bulls are showing resiliency.

The key $4,200 price level has yet to be tested.

The S&P is holding a very important trend line of support (the red dashed line), and an important level of resistance (the green dashed line).

When price decides which direction it’s going to go, it could be a very explosive move. This is typically how coiling chart patterns work.

We think a breakdown of the red trend line to retest $4,200 would put the S&P in a healthy correction and a possibly be a good opportunity for dip buying.

There is still cash on the sidelines in money market mutual funds likely looking for a value in stocks.

With how difficult it has been for the S&P 500 to break to lower prices, it might set us up for a shallower correction than people expect.

For now, we wait for the market to pick a direction.

Hunting For Value In The Stock Market 🐘

Year to date the S&P 500 index is up 18% and the Nasdaq-100 is up a whopping 41%.

Valuations for large cap stocks have edged up towards the higher end of their historical range despite higher interest rates and concerns about the global economy:

This makes life more difficult for value investors and stock pickers.

But all hope is not lost!

Even in bull markets there are often laggards that haven’t participated in the rally.

Lately we’ve seen several interesting companies hit new lows for the year that could now be in bargain territory.

Here are a few laggards that recently caught our eye:

• Chewy (CHWY): the largest online pet focused retailer recently hit its lowest valuation ever as a public company; revenue growth has slowed this year but it seems there is a lot of opportunity to cut costs & improve profits

• Etsy (ETSY): the largest online marketplace focused on homemade goods is now trading at just 12X annual cash flow (lowest in ETSY’s history); the management team made some acquisition missteps in 2021 and growth has slowed post-pandemic, but the company is still expected to grow in the next 3-5 years; the company is repurchasing stock but ideally we’d like to see insiders also step up and buy some stock personally

• Payment stocks Adyen and Paypal (ADYEY & PYPL): these profitable payment stocks have suffered this year due to intensifying competition and slowing revenue growth; however, these companies sport high margins, benefit from higher inflation over time, and the stocks are finally in reasonable valuation territory (especially PYPL)

• Dollar Stores (DG & DLTR): dollar store stocks have had a bad year as rising costs have eaten into profits; however, if the economy tips into recession then dollar stores should gain market share and grow revenues faster; in fact, in previous recessions dollar store stocks have delivered strong relative outperformance; DG is now trading at the low end of its historical valuation range

• Media Companies (DIS, PARA, WBD): As consumers continue to “cut the cord” and streaming services steal revenue from cable, media stocks have suffered; in addition, actors and writers strikes this year have added uncertainty around content costs to an already uncertain business model transition; in the long term it’s likely that streaming services will improve their business models, and we’ve already seen price increases roll out this year; the question is when do the stocks find a bottom as reward outweighs risk?

These are just a few areas we’d like to research more in the coming weeks and months.

It also seems like the small cap universe of stocks could be good bargain hunting ground.

The QQQ (Nasdaq) to IWM (Russell 2000) ratio, often seen as a proxy for large cap tech relative to small cap stocks, is nearing it’s highest level since the dotcom boom:

Even in bull markets we seem to fill our plate with more stocks to research. 🤓

Not every stock we own is a “deep value” play, but having a contrarian mindset can payoff huge in financial markets.

Plus, building a shopping list and preparing for opportunities ahead of time is the best way to feast when other investors are panic selling during the next market decline!

A Million Dollar Bet on Your Future 🎲

The million-dollar question—literally.

You find a genie who offers you $1 million worth of a single asset.

The catch? You've got to lock it up for a decade.

In a recent Twitter poll, a whopping 65% of you said you'd go all-in on Bitcoin, while 23% opted for the S&P 500, and only 3% opted for good ol' USD.

Some other comments mentioned silver, gold, stocks like Tesla, and even Ethereum.

When it comes to storing wealth, there are two primary goals:

• Goal #1: avoid permanent capital loss.

• Goal #2: increase in value faster than inflation.

Let’s take a look at the risks, rewards, and possible outcomes of the different asset classes:

Playing It Safe with USD?

Let's start with the dollar, the least sexy pick.

Sturdy? Sure, for the most part.

But don’t forget about inflation—the silent assassin.

The historical average inflation rate in the U.S hovers around 2-3% annually.

That means your million bucks could erode by approximately $200,000 over a decade. Ouch!

The Bitcoin Rocket Ship & Rollercoaster

You've seen the headlines: "Bitcoin reaches all-time high!" and then, "Bitcoin crashes!"

The key metric to look at is CAGR (compound annual growth rate), and for Bitcoin, it's been astonishing.

However, you've got to stomach those 80% drawdowns and sleep like a baby. Do you have that much Pepto-Bismol?

Bitcoin's high-risk, high-reward nature delivers mouthwatering risk-adjusted returns, making it the ultimate thrill ride in the financial amusement park.

Old Faithful: Stocks

The S&P 500? A classic, like grandma's apple pie.

Data for the past 50+ years shows a CAGR of about 10%.

It has its ups and downs, but it's got the most impressive track record for outpacing inflation over long periods of time.

Stocks are like that friend who may not always be the life of the party but never lets you down.

The Golden Ticket: Precious Metals

Gold and silver are the OG assets— trusted for centuries. These bad boys have been around since people were bartering sheep and slinging arrows.

They're the Ron Swansons of the financial world—solid, reliable, and a little old-school. But are they still relevant in a digital age?

Gold has been a fantastic hedge against inflation over the millennia. While its CAGR isn't going to blow anyone's socks off—it hovers around 1-2% over the long term—it's as stable as a veteran tightrope walker.

Silver's a bit more volatile but offers similar inflation-hedging benefits.

The Takeaway

In a world as unpredictable as a cat on a hot tin roof, diversification usually wins the day.

But if you had to choose one, weigh your risk tolerance against your FOMO.

• Want stability but okay with modest gains? Go S&P 500.

• Willing to weather storms for potentially massive rewards? Maybe Bitcoin's your jam.

• Don’t mind losing 20% over a decade to inflation? USD's the one.

• If you love old-school stability, polish those gold coins.

Just beware: the only guarantee with money is that inflation will eat away at its value unless you put it in something productive.

How To Earn, Keep, and Grow More Dough 💰
(We Talk Money - Episode 121 🎙️)

We’re back in the studio this week answering some questions that can change your life!

• Are you looking to retire early?

• Want to build a lifestyle business?

• Looking to get out of debt and build wealth?

In today’s We Talk Money episode, we unpack some of the most popular money questions on the internet.

Click here to watch - We Talk Money episode 121

We also give a rundown on why we think the S&P 500 and Bitcoin could be poised for explosive moves soon.

Delicious Bites 😋

• Visualized: Inflation rates around the world

• U.S. debt is nearly $33 trillion

• 150 ways to earn money without a traditional job

• Minority Report? NYPD using AI to “predict future criminals”

Food For Thought 🧠

"It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for."
- Robert Kiyosaki

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.