You are seeing a lot a large-cap, blue-chip recommendations generated by the Alpha Algorithm.
This is no accident.
Over the past 12 months, low-volatility, blue-chip stocks have been outperforming high-volatility growth stocks.
This focus on low-volatility blue chips is reflected in this week’s Alpha Algorithm recommendation, as well.
Headquartered in San Francisco, California, Visa Inc. (V) is a payments technology company that provides its services under the Visa, Visa Electron, Interlink and PLUS brands. (Disclosure: I am a long-time holder of Visa, Inc. (V) in my personal investment portfolio.)
Visa Inc. (V) versus the S&P 500 over the past 5 years
Six Top Investment Strategies Betting on Visa Inc. (V).
1. High Quality Stocks
It is a U.S. stock that exhibits positive fundamentals, including high return on equity, stable year-over-year earnings growth and low financial leverage.
2. Large-Cap Growth
The stock is among the top 50 large-capitalization U.S. growth stocks generated through a rigorous 10-factor fundamental screening process.
3. Momentum Factor
The stock is one of the top 120 large- and mid-cap U.S. stocks exhibiting relatively higher price momentum, as measured by a specific factor which has historically driven a significant part of the companies’ risk and return.
4. Large-Cap Alpha
The stock is selected as part of a strategy that aims to outperform the S&P 500 by classifying securities as either growth, value or both, while discarding the lowest-scoring 25% to weight the strategy toward the top-ranked stocks.
5. Morningstar’s Moat
This stock is included in a strategy that tracks an equal-weighted index of 20 companies that Morningstar determines to have the highest fair value among firms with a sustainable competitive advantage or “moat.”
6. Hedge Fund Alpha
Based on publicly available disclosures, successful hedge fund managers are investing in the stock.
Note: Although it is not one of the Alpha Algorithm strategies we track, Warren Buffett’s Berkshire Hathaway (BRK-B) also increased its stake in Visa Inc. (V) in the first quarter of 2016.
Recommendation
Buy Visa Inc. (V) at market today.
Place your initial stop at $69.50.
Options
If you want to play the options, I recommend the Sep 2016 $77.50 call options (V160916C00077500).
Portfolio Update
Apple (AAPL) hit its stop price of $91.00 this past week and you were stopped out at a loss.
The smart money in the market is very much split on Apple’s future prospects.
On the one hand, Warren Buffett’s Berkshire Hathaway (BRK-B) just revealed a $1 billion stake in the company.
On the other hand, both Carl Icahn and David Tepper — a pair of hedge fund managers who have better track records than Buffett over the past decade or so — have sold their shares in Apple.
Despite its recent sell-off, Apple remains a holding in six Alpha Algorithm strategies, and is technically a “buy” candidate.
Still, I am holding off on recommending that you re-enter Apple. That’s because today Apple is very much a news-driven — and hence volatile — stock.
With the market now in the seasonal lull between May and October, I want to focus on the low-volatility blue chips that have been outperforming the market in the past year or so, as I have done with this week’s recommendation.
Sincerely,
Nicholas A. Vardy
