The market indices ended the day mixed, with bond yields dropping, and a slowing in service sector growth.
The stock market indices ended the day with a mix of red and green. The story is quite the opposite of last week, with the DOW and S&P closing in the red while the NASDAQ took it’s turn ending the day in the green.
One factor dragging the market may be yesterday's report about the bond yields dropping. This could mean investors are wary of the future. Another analysis to consider is the Institute of Supply Management Services Report. This indicator gauges the service sector's growth. May held a record high of 64%, but ISM’s June report today shows a slowdown in growth to 60.1%. There is still a strong upward trend, but this may be a sign that growth is peaking and investors didn't like that possibility.
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Tom Gardner, co-founder of The Motley Fool, shares some of his “high conviction” stocks, including Paycom (PAYC) and Docebo (DCBO)
During the long weekend, I was scrolling through Twitter and came across a thread by one of my favorite investors, Tom Gardner. Tom is one of the co-founders of The Motley Fool, and he shared five of his high conviction stocks. Several hundred investors chimed in and shared their ideas. While the responses below his tweet are great as well, I found his top picks very interesting. Two of the stocks are not very well known tickers that I thought you'd be interested to learn about.
Paycom (PAYC) is one of his picks. This company is one of the first to bring payroll systems completely online. As you can see on the company's Stock Card, the company operates in a few high growth markets such as Workforce payment products that is expected to grow by more than 10% in the next few years. As I scroll further down, I notice Paycom's strong operations. Last fiscal year revenue growth was 14%, and the company is expected to grow more than 21% this year. It's profitable and has a strong balance sheet and generates free cash flow. I love it, and am going to follow the stock to learn more in the next few weeks.
The next high conviction stock from the Twitter thread is Docebo (DCBO). Docebo provides digital training platforms and programs to employers. Even if employees go back to physical offices, employee training is one of those activities that can be conducted fully online. Just like Paycom, the company boosts a solid growth potential and strong, cash-generation operations.
Both these stocks are worth following and adding to your watchlist. One thing you may have noticed is that both stocks have two green boxes or growth potential and operations, but unknown past performance and valuations. This is quite common among younger companies and recent IPOs that have a lot of potential.
So, let's create a 2-greener watchlist for companies similar to Paycom and Docebo.
I go to the Screener page, start a new filter, and choose “high growth potential” and “strong operations” filters. I also make sure the past return and valuations are unclear just like those two stocks, and finally, look for companies with overexcited investors. And, viola, I have a list of 37 stocks that could be your watchlist for your high-conviction, less known companies.
Get the list 2-greener high conviction watchlist by clicking here!
U.S.-listed Chinese stocks take a hit from fears over government regulator investigations. DiDi Global (DIDI) and Pop Culture Group (CPOP) closed with big losses.
For the loser stocks of the day, let's talk about last week's news that the Chinese government is investigating the brand-new IPO DiDi Global (DIDI) for data security concerns. DiDi is known as "theUber (UBER) of China." In the process, they barred any new customers from downloading the app, and shares unsurprisingly plummeted. This of course led to many investors rethinking how safe their money was in U.S.-listed Chinese stocks. Fearing that the crackdowns would be applied to other companies, the sell-off spread to other listings.
The government cited possible issues with illegal stock trading and data privacy between these companies and other countries. Pop Culture Group (CPOP) is also one of the newer IPOs affected by this panic selling, losing nearly -41% by the end of trading today. Because the company is focused on building international relations with the U.S., it may be an investigation target.
This may give us opportunities to pick up shares of Chinese stocks, if we can tolerate high volatility that hits these stocks every now and then. Type in "China" in the search bar and get the list of all companies listed in the U.S. that are head-quartered in China to start your research.
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