Last week, the major indices recorded their second consecutive week of losses (the third for the tech-heavy Nasdaq) as eye-popping data revealed that inflation rose at the fastest pace in nearly forty years. The consumer price index (CPI) rose 7% in December from a year ago, the fastest pace since 1982 and the eighth straight month in which inflation exceeded 5%. Although drastic, the increase was mostly in line with Wall Street expectations. The Dow lost 0.9%, while the S&P 500 and the Nasdaq lost 0.3%.
Financial shares came under pressure late in the week as big banks kicked off earnings season with disappointing Q4 results. JPMorgan Chase (JPM) and Citigroup (C) reported lower profits in the fourth quarter. The week to come will be a shortened one, with markets closed on Monday in observance of Martin Luther King Jr. Day. After the long holiday weekend, earnings season goes into full swing with more large-cap financial firms reporting.
Market watchers will also be monitoring a steady stream of housing data throughout the week. The NAHB/Wells Fargo Housing Market Index for January is set for release on Tuesday, and the National Association of Realtors will report December’s existing home sales on Thursday.
Our team has spotted a few attractive candidates for the week to come, including a data-as-a-service name at a bargain price, plus a lesser-known ‘micro currency’ that should be on every active investor’s list.
Lately, crypto enthusiasts have taken a shine to purchasing virtual assets like plots of land in a fictional gaming world. Virtual real estate deals are even outshining real-world deals. In Decentraland’s gaming world, a piece of land has exchanged hands for nearly $2.4 million worth in metaverse tokens.
Decentraland (MANA) is the token behind the virtual world of the same name where users buy goods and services, including land on which to develop and monetize content. The Ethereum (ETH) based project is a combination of blockchain gaming, non-fungible tokens (NFTs), a native token, and a decentralized underpinning with governance in the hands of its users. MANA serves as the native token and the governance token of the platform and is one of the largest traded Ethereum based tokens by volume.
Decentraland allows its users to acquire real estate on its metaverse, termed as ‘LAND,’ which generally sells at a premium due to the size of the lot and its proximity to the center of the metaverse. As the second-largest open-world metaverse based on Ethereum (the first is The Sandbox), Decentraland is likely to maintain its appeal.
With a $5.7 billion market cap, MANA proves that virtual real estate is a hot asset. Decentraland is up 2,800% over the past 12 months but has given back 52% since hitting its high of $5.97 in November.
Thanks to MANA’s relentless volatility, many active investors have turned substantial rewards. But the micro currency could also offer up significant long-term returns as we spend more and more of our time on the internet and the gap between the real world and our online identities declines. MANA price dipped below $3.00 briefly, twice this weekend, before enthusiastic buyers stepped in.
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After a recent selloff, Snowflake’s (SNOW) share price is near all-time lows, offering a possible attractive entry point, considering the company’s growth profile and scalability.
Snowflake provides cloud-based ways for companies to better utilize their data over the internet. The company offers cloud-based data storage and analytics, generally termed “data-as-a-service.” Snowflake’s platform offers Data Cloud, an entire ecosystem that enables customers to consolidate and share data. And now they are offering a tailored version of their Data Cloud, aimed specifically at the media and advertising industry.
Snowflake’s Media Data Cloud is a recent addition to their offering that enables organizations to be successful in the new advertising landscape by empowering them to easily access and collaborate on data without ever leaving Snowflake’s environment. The Data Cloud includes data clean rooms that enable any publisher, advertiser, agency, or ad tech organization to design their own privacy and collaborative data environment. This element was previously reserved for larger technology platforms.
Every company on the planet is chasing the cloud right now. Amid the ongoing digital transformation of almost every industry, the need for safe and efficient cloud platforms should drive the cloud industry’s growth. The cloud computing market is expected to grow at an 18% CAGR to $303.07 billion by 2025.
Considering SNOW’s share price has backslid 28% over the past two months, it’s one to keep an eye on for a possible entry over the coming weeks. Barclay’s Raimo Lenschow called Snowflake a “unique asset” given its “growth profile, scale, and importance to customers, which is reflected in its best-in-class retention rates,” as he pointed out in a note to clients that the stock’s valuation level is currently near all-time lows.
Lat up on our list is a diversified energy company with a successful history during Fed-rate-hike cycles that speaks for itself. The stock comes equipped with an 83% Buy rating from the pros that cover it, plus a sizable dividend payout.
Headquartered in Arlington, VA, the AES Corporation (AES) is one of the world’s leading power companies, generating and distributing power in 15 countries. The company’s diverse portfolio of thermal and renewable generation facilities and distribution businesses spans the Americas, Europe, the Middle East, and Asia. The stock has a history of outperforming the market following rate hikes.
The Fed’s most recent rate hike cycle began in 2015, during a time when inflation had fallen below the central bank’s 2% target, interest rates were increased 0.25% to 0.5%. In the six months following the hike, the S&P 500 saw a series of ups and downs but finished the period with a modest 0.3% gain. AES, however, managed to stack on almost 19% during the six months following the most recent rate hike.
Before that, Federal Reserve Chairman Ben Bernanke and his colleagues initiated an unprecedented two-year campaign in June 2004 to keep a lid on inflation following the recession of the early 2000s with a 0.25% hike to 1.25%. Six months after the initial rate hike, the S&P 500 had gained 6.2% while AES stacked on an impressive 37%.
Will history repeat this time around? There’s no telling, but the pros on Wall Street seem to see that potential. The stock garners an 83% Buy rating among the analysts offering recommendations. A median 12-month consensus price target of $30.50 represents a 26% upside from the last price.
Most recently, Goldman Sachs analyst Insoo Kin initiated coverage of the stock with a Buy rating and a $30 price target citing the company’s potential to take advantage of the material clean energy investment pipeline. The analyst predicts an approximately 8% EPS CAGR through 2025 that she sees as underappreciated at current valuations.
If you need another reason to consider AES, a quick review of its dividend history should inspire. The company has steadily increased its dividend over the past ten years while maintaining a sustainable payout ratio of around 70% throughout. AES raised their dividend 5% last month to $0.158 per share or 2.55%.
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