TL;DR
- Lawsuits and regulatory issues can come out of left field, but make a big impact on stock prices
- This week has seen a raft of these rear their head, from Burger King facing allegations of false advertising, Elon Musk planning to sue the ADL and Amazon going up against the FTC again
- With GDP growth in places like the US and Europe slowing to a crawl, investors are looking to markets like India for opportunities over the next decade
- Top weekly and monthly trades
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Major events that could affect your portfolio
When investors look to assess whether a particular company is worth putting money into, they tend to consider a fairly standard set of criteria. It depends on the particular strategy being used, but it will generally be some combination of fundamental factors, like profits and market share growth, or maybe technical factors such as price momentum and volume.
Sometimes that analysis will be done on a broader level, looking at the potential for growth in a particular country or market sector.
Those are all super important when it comes to choosing investments, but there’s a major blind spot that many investors have when it comes to analyzing the risks that come with any individual investment.
That is, the legal system.
Lawsuits, court cases and regulatory hurdles can cause major problems for companies in any sector of the market. Just this week alone we’ve seen Elon Musk causing more bad press with his plan to potentially sue the Anti-Defamation League (for defamation…yep), Amazon is tangling with the Federal Trade Commission (FTC) and Burger King is facing a lawsuit alleging that the images of their burgers amount to false advertising.
But it’s not always bad news, with this week also seeing cannabis stocks gain on news the DEA may be looking to loosen its stance on cannabis, the FTC approving Amgen’s acquisition of Horizon and Chinese regulators approving the Baidu chatbot.
And of course, let’s not forget Johnson & Johnson’s ongoing class action lawsuit over their talcum powder.
For investors, it’s a potential blind spot that’s worth keeping in mind, particularly in high risk industries.
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It’s been a rough couple of years in ‘developed’ economies, with the US, Eurozone and places like Australia and Canada all seeing major impacts from Covid and rocky stock markets. The US in particular has rebounded well, but nevertheless the growth numbers aren’t all that exciting.
Projected growth rates for 2023 have the US with the highest expected figures in the G7 at just 1.6% while the UK (-0.3%) and Germany (-0.1%) are likely to see a shrinking economy.
With numbers like that, it’s no surprise that investors can be tempted by the high growth ‘developing’ economies elsewhere in the world. You might expect China to top that list, but with ongoing issues surrounding their real estate and financial sectors (as well as the issues that come with the government’s role in the market), it’s fallen down to second in terms of GDP growth in the G20.
Taking that top spot is India, with a current rate of GDP growth of 7.8%.
The country that just managed to land the first ever mission to the Moon’s south pole, is also expected to be the center of what S&P Global Insights believes will be the fastest growing region in the world over the next 10 years.
It’s these sorts of global trends that can offer potential returns for investors. Macro trends can be just as important, if not more important, than the picking of the actual underlying investments.
Top trade ideas
Here are some of the best ideas our AI systems are recommending for the next week and month.
EW Scripps (SSP) – The broadcasting company is our Top Buy for next week with our AI giving them an A rating in our Quality Value and Technicals factors. Revenue is up 2.88% over the last 12 months.
Arlington Asset Investment (AAIC) – The mortgage real estate investment trust is our Top Short for next week with our AI giving it an F rating in Technicals. Assets are down 24.64% over the last 12 months.
Powell Industries (POWL) – The electrical equipment company is a Top Buy for next month with our AI rating them an A in Quality Value. Earnings per share is up 344.6% over the last 12 months.
Sitime Corp (SITM) – The precision timing company is a Top Short for next month with our AI giving them an F rating in Quality Value, Growth and Technicals. Earnings per share was -$1.76 over the last 12 months.
Our AI’s Top ETF trades for the next month are to invest in science and tech companies and industrials, and to short inflation linked bonds and US small and mid caps. Top Buys are the Vanguard Information Technology Index Fund, the ARK Innovation ETF and the Vanguard Industrials Index Fund ETF. Top Shorts are the iShares TIPS Bond ETF and the Invesco FTSE RAFI US 1500 Small Mid ETF.
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