My research, which has been developed over two decades of Wall Street experience, strongly suggests that our Dunks Product can add significant value by supplementing the actively-managed part of your portfolio. By highlighting individual stocks with high-quality reward-risk ratios that over the medium/long-term raise the probability, you can outperform the overall equity market, without taking on excessive amounts of risk.

For those who are less risk-averse, we also present some higher-risk, but often higher-reward opportunities that will be included in the Mid-Range Jumper section of the overall Dunks. Both stock lists are derived by the models and techniques that I have been producing for professional institutional investors since the 1990s. For the first time ever, I’m now making it available to retail investors on FSInsight.com.

My investment and selection methodologies are grounded in proprietary quantitative analysis and methods that not only have stood the test of time but also have been evolving. Please be aware, that because I am using a quantitative model-based method, I’m not doing extensive fundamental and catalyst analysis on the individual names we land on. You should always do additional due diligence before adding a name to your portfolio to ensure it conforms with your individual risk tolerance and investment goals.

Click HERE to read the intro of Brian’s Dunks

Market Commentary

Well, I have been stating since 4Q21 that the first half of 2022 would be a rocky and tumultuous period for equity investors. Sometimes I really hate it when things play out as expected, especially when my research and views have shifted to less optimistic scenarios. There are several sources that have contributed to the increasing level of anxiety of equity market participants. The main culprits raising fear levels:

• Russia/Ukraine conflict continues
• Elevated energy prices and their potential effect on demand
• Inflation readings and its impact on consumer spending
• Rising interest rates
• A hawkish and action-oriented Fed

In previous notes over the past year, I have commented how weak market action or pullbacks in my preferred sectors and stocks would likely be dips that investors could opportunistically use to raise exposures. Well, that view has changed, and I’ve shifted from medium-term constructive and opportunistic to concerned, with lowering risk levels.

What caused this shift in my outlook? As readers should know, the two main drivers for my longstanding bullish views that began at the end of March 2020, were favorable earnings revisions/corporate profit backdrop and a friendly dovish Federal Reserve. It’s important to note that both supports are no longer positive. Thus, all my sector positioning is under review for changes that will likely occur in my upcoming update at the beginning of May. Additionally, investors should be mindful that our Dunks picks will likely be challenged to post short-term positive performance even though they are favorable in my research.

Thus, be mindful of your weightings and exposures to risk assets for the time being. If volatility does indeed continue to increase and you are one that finds turbulence and tactical paper losses stressful or problematic, then lowering your exposure might be more appropriate until my work begins to shift back once again to a more favorable backdrop. With that being said, I’ve kept my full Dunk and Mid-range jumpers in PLAY as the outlook for these highlighted stocks is for healthy returns over a 6-12-month horizon.

So, be careful and keep an eye on being opportunistic because if my new outlook is correct, there’s going to be an excellent point when we will be able to buy some great, high-quality stocks at attractive levels.

Changes this month

Summary

Analysis

Dunks

AMZN -0.22%  – Amazon ( PLAY )

ASM Indicator: The case from AMZN continues to remain on course as its key indicator remains positively sloped and hasn’t reached a level that would cause our process to be worried about a positive extreme. Further supporting the rising ASM reading: The red bars for AMZN continue to get smaller.

Brian’s Take: With the overall market and growthier stocks struggling, AMZN has been pinned in between $2800-3400. After reaching its relative performance peak during 2H20, the stock has been a significant laggard. My work suggests the bad news that was pressuring performance of the stock is in the price, and AMZN is likely to provide healthy returns over the next 6-12 months. Thus, I’m sticking with this giant in e-commerce and cloud services.

Commentary: AMZN is the undisputed leader in e-commerce and cloud services through its Amazon Web Services segment. We believe the competitive advantage will be hard for peers to match. The company will likely grow at above-market rates as the importance of cloud and e-commerce continues to increase.

FANG 1.56%  – Diamondback Energy ( PLAY )

ASM Indicator: Its key metric is still rising and has been accompanied with strong green bars. This uptrend portends that additional relative gains are likely for FANG’s stock price.appears to have been completed as its ASM is once again rising, which should provide support for upside gains.

Brian’s Take: The stock continues to grind and is working off its tactical overbought condition. With FANG’s indicator backdrop remaining supportive, my work strongly suggests that investors remain exposed to this high-quality energy name.

Commentary: This is a well-managed Energy name that should be able to outperform markets and peers and has a tailwind of being in an attractively-valued sector.

LYV 1.15%  – Live Nation ( PLAY )

ASM Indicator: LYV’s key earnings revision indicator appears to have completed its shallow “down-up” cycle and looks poised to resume its uptrend. As we move further into the Spring, my expectation is for its revisions to start moving noticeably higher.

Brian’s Take: The stock continues to remain range bound between $100-120 as the overall market battles with elevated inflation and the upcoming start of the Fed tightening cycle. But based on LYV’s indicators, I believe it will be able to weather the macro storm and push higher with COVID becoming a nonfactor.

Commentary: This company’s superior scale and operating expertise allow LYV to benefit from the ongoing normalization and return of live events, including concerts.

RTX 0.60%  – Raytheon ( PLAY )

ASM Indicator: Its new ASM cycle remains in the early stages, and I expect it to provide strong tailwinds for price gains in RTX. Additionally, its red bars are getting smaller, which fully confirms the uptick in its ASM indicator. This set up is historically bullish for any stock based on my methodology.

Brian’s Take: The stock has been acting well and has reached tactical overbought readings, which suggests RTX may need a bit of consolidation before another strong up leg. Hence, I would look to raise exposure on short-term pullbacks.

Commentary: Raytheon operates as an aircraft manufacturing company as well as leading defense contractor. Thus, RTX has a diversified mix of commercial aerospace and military exposure and has been increasing its global exposure as well.

CCJ 1.67%  – Cameco Corporation ( PLAY )

ASM Indicator: Its key indicator is clearly rising and fully supported by sizeable green bars. I reiterate my view that in the coming quarters CCJ is likely to have strong earnings revision tailwinds from the strong uranium pricing, inventory replenishment, and the continuation of Russian uranium by Western nations, as well as the ongoing expected resurgence of nuclear power as countries rethink their respective energy needs.

Brian’s Take: My view is that the longer-term investment case for CCJ remains in place, and notwithstanding tactical pullbacks along the way, the stock will reward investors for the next 6-12 months as nuclear power will likely be growing part of Western energy inputs over the next decade. My work suggests that investors should opportunistically raise exposure on tactical dips.

Commentary: The energy transition is happening, but what technology will eventually help bring down carbon solutions without sacrificing quality of the grid? Our research and analysis suggest that nuclear energy will become a more essential part of the world’s solution to evolving clean energy needs.

Mid-Range Jumpers

PM -0.58%  – Phillip Morris ( PLAY )

ASM Indicator: Its ASM indicator is working itself off a negative extreme low and continues to show early signs of “less bad” (i.e., improving). I suggested in my last update that the fears that Russia/Ukraine events would be a big negative were overdone, which was confirmed this week when PM released its earnings report.

Brian’s Take: After knee jerking down on the Russia/Ukraine events, the stock has rebounded nicely as the dip provided a nice entry point. With PM’s indicators remaining favorable, my process points to investors make this stock part of their portfolio. Moreover, since I have been moving away from my longstanding bullish views and expect challenging equity markets to continue for at least a couple of more months, investors can benefit from PM’s over 4.5% dividend yield.

Commentary: Phillip-Morris is the third-leading producer of tobacco products. The company has an 11.4% global market share and owns flagship brands such as Marlboro. In addition, PM is also launching an effort into less-harmful, heated tobacco products. This push has been largely unaffected by COVID and is expected to compensate for the declining global sales of cigarettes and tobacco bans.

BKNG 0.11%  – Booking Holdings ( PLAY )

ASM Indicator: As noted in my last update, BKNG has completed a shallow down-up ASM cycle and is slowly beginning to rise. The geopolitical headwinds remain for European travel, but it appears to now be priced in. I continue to expect robust summer vacation travel activity, which should bode well for BKNG.

Brian’s Take: I reiterate that both BKNG and LYV will likely benefit from economies normalizing and reopening. Survey data is still signaling a strong desire to travel, and the level of pent-up demand is high among consumers all over the world and should be a key driver for BKNG for the remainder of 2022.

Commentary: BKNG operates as an online travel company that allows users to make travel reservations with providers of travel services, as well as provides accommodation reservations, rentals cars, airline tickets, and vacation packages. BKNG operates six of the world’s leading online travel tools, and Booking.com is its namesake and top brand and offers online reservation services for nearly 2.4 million properties across over 220-plus countries.

ISRG -0.80%  – Intuitive Surgical ( PLAY )

ASM Indicator: The fundamental backdrop for ISRG remains healthy and is getting past the challenging period that was caused by the last COVID wave during 4Q21. One can see this in ISRG’s improving ASM indicator and it also released it profit results this evening that were strong in my view. The setup is in place for relative performance gains for the next 6-12 months.

Brian’s Take: The stock has been grinding higher following its price low in late January around $260. My work suggests the stock should be acting even better from it does get hit when higher multiple stocks get sold off. If/when this occurs, my works would view any of those pullbacks opportunistically and raise exposure.

Commentary: The Health Care sector is experiencing healthy disruptions and changes, and ISRG is one of the leading innovators in the space. The firm has products that utilize both robotics and augmented reality to positively impact the industry and get improved results for patients.

CME 1.40%  – CME Group ( PLAY )

ASM Indicator: The key metric for CME remains in an uptrend and is supported by green bars that are also growing. Thus, the healthy backdrop for the stock is providing fuel for additional gains.

Brian’s Take: The stock has struggled somewhat over the last month as it’s still working off its tactical overbought readings. Importantly, my work is suggesting this is nearing its completion and I recommend looking to raise exposure if there is any additional weakness into the $220 level.

Commentary: This company is a cutting-edge financial services name that’s a leader in the burgeoning area of derivatives. CME’s profitability will likely continue to increase as more investors use the firm’s comprehensive product offerings to manage risk.

AMT 0.82%  – American Tower ( PLAY )

New Addition

ASM Indicator: Its key indicator appears to have bottomed and has begun a new upcycle. Also, its reds bars reached a negative extreme and look poised to start shrinking, which would fully confirm its favorable ASM reading and my bullish view.

Brian’s Take: The stock was a poor performing during 2H21 as its ASM indicator rolled over and was quite weak. However, with it reaching a negative extreme and flashing a positive inflection, the stock looks poised to resume its longer-term uptrend that has been in place since 2016. The stock also has a nice 2.10% dividend yield that will help during the current challenging market environment.

Commentary: American Tower (AMT 0.82% ) is the second largest REIT in the S&P 500 and specializes in leasing multi-tenant properties for wireless providers. It has a real estate portfolio of over 200,000 communications properties. It is heavily exposed to fast growing 5G in domestic and foreign markets. It has steady dividends and has proven itself to be a quality compounder over time with secure revenue and above-average pricing power.

Changes

PYPL 0.98%  GM 0.04%  SBUX 0.93%  TSM 2.03%  (HOLD)

For now, PYPL, GM, and SBUX remain in the hold bucket as stated over the last couple of months. I’m now adding TSM, which was removed from MRJ’s this month.

All names have been struggling and have not acted in line with what my models have been forecasting. While this has been quite frustrating and disappointing to me, their setups point to gains over 6-12 months. However, for discipline, I am moving them out of the starting rotation.

The “HOLD” bucket is one in which a name is not completely kicked out. Longer-term investors with enough funds to keep holding these names and still able to buy our replacement picks may be well served to do so.