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Oct. 5, 2022, 10:21 a.m. EDT

He nailed three big S&P 500 moves this year. Here’s where this strategist sees stocks headed next, with beaten down names to buy.

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By Barbara Kollmeyer

A Wall Street hat trick may not be on the cards, with stocks in the red for Wednesday.

A two-day rally was never a guaranteed exit out of the bear woods anyway, as some say signs of a durable bottom are still missing .

Enter our call of the day , from the chief market technician at TheoTrade , Jeffrey Bierman, who has made a string of prescient calls on what has been a roller coaster year for the index thus far. He’s also a professor of finance at Loyola University Chicago and DePaul University.

Bierman, who uses quant and fundamental analysis to determine market direction, sees the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.75% finishing the year between 4,000 and 4,200, maybe around 4,135. “Fourth-quarter seasonality favors bulls following a weak third quarter.  Not to mention most stocks are priced for no growth,” he told MarketWatch in a Monday interview.

In December 2021, he forecast the S&P 500 might see a 20% decline within six months, toward 3,900 — it hit 3,930 in early May. In June, he forecast a rally and recovery to 4,300 — the index hit 4,315 by mid-August.

Speaking to MarketWatch on Aug. 25 , Bierman saw a retest of around 3,600 for the index, citing an often rough September for stocks. It closed out last month at a new 2022 low of 3,585.

“I think we’re going to end up for the quarter. [The market is] deeply oversold and some stocks are completely mispriced in terms of their valuation metrics,” said Bierman, who is looking squarely at retail and technology sectors.

“The valuations on half the chip stocks are trading below a multiple of seven. I’ve never seen that ever…but what that means is when the semiconductor sector comes back, the multiple expansion is gonna be like a volcanic eruption to the upside,” he said of the sector known for its boom/bust cycles.

For example, he owns Intel /zigman2/quotes/203649727/composite INTC +0.39% , which hit a five-year low on Friday. Eventually, the company that has invested $20 billion in a new U.S. plant will come roaring back alongside rivals like Advanced Micro /zigman2/quotes/208144392/composite AMD +0.47% . “People will look back on this and go ‘Oh, my God, I can’t believe Intel was at five times earnings,’ which is insanity for this stock.”

For the S&P 500 as a whole next twelve months price/earnings is currently 16.13 times, so Intel’s would be less than half of the broader index, according to FactSet

As for retail, he’s been looking at Urban Outfitters /zigman2/quotes/208403734/composite URBN -2.17% , Macy’s /zigman2/quotes/201854387/composite M +0.09% and Nordstrom /zigman2/quotes/203902116/composite JWN -1.02% , all places where millennials don’t shop, but the middle class does, with the all-important holiday shopping period dead ahead.

“There are 100,000 people being hired to work part time at these companies, and their margins are not coming down at all,” with no markdowns and decent sales, he said, noting those companies are being priced at a multiple of 5 times forward earnings.

“It means that you don’t think that Macy’s can put together for the Christmas quarter a comparative quarter, year over year of greater than 5%? If you don’t then don’t buy it, but I do,” said Bierman. “That’s why I’m willing to stick my neck out and buy these things. I bought Abercrombie & Fitch /zigman2/quotes/206677024/composite ANF +1.94% at 10 times earnings…I’ve never seen it that low.”

For those who aren’t comfortable picking stocks, he says they can still get exposure through exchange-traded funds, such as SPDR S&P Retail /zigman2/quotes/206947004/composite XRT +0.92% or the Technology Select Sector SPDR ETF /zigman2/quotes/207444675/composite XLK +1.64% .

Bierman adds that investors need to be careful not to be overly concentrated in the top stocks, given “10 stocks accounted for 45% of the Nasdaq and the fact that 25% of the S&P almost accounted for about 50% of the S&P movement.”

“Everbody’s concentrated in 10 stocks that can still fall another 30% or 40%, like Apple and Microsoft. The idea of concentration risk is that everybody owns Apple, everybody owns Amazon,” he said.

And that could force the hand of passive and active managers heavily invested in those big names, driving a 10% drop for markets that “washes away all other stocks.”

The markets

Stocks /zigman2/quotes/210598065/realtime DJIA +0.55% /zigman2/quotes/210599714/realtime SPX +0.75% /zigman2/quotes/210598365/realtime COMP +1.13% are in the red , and bond yields /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -0.40% /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y +0.56% are up, along with the dollar /zigman2/quotes/201196669/composite DXYN +2.36% . Silver /zigman2/quotes/210315219/delayed SI00 +0.66% is retracing some of this week’s big gains, and bitcoin /zigman2/quotes/31322028/realtime BTCUSD +0.32% is also off, trading at just over $20,000. Hong Kong stocks /zigman2/quotes/210598030/delayed HK:HSI +0.74% surged 6% in a catch-up move following a holiday. New Zealand’s central bank hiked rates a half point , the fifth increase in a row.

/zigman2/quotes/210599714/realtime
US : S&P US
3,963.51
+29.59 +0.75%
Volume: 0.00
Dec. 8, 2022 5:07p
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/zigman2/quotes/203649727/composite
US : U.S.: Nasdaq
$ 28.44
+0.11 +0.39%
Volume: 28.49M
Dec. 8, 2022 4:00p
P/E Ratio
8.78
Dividend Yield
5.13%
Market Cap
$116.92 billion
Rev. per Employee
$574,236
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/zigman2/quotes/208144392/composite
US : U.S.: Nasdaq
$ 70.47
+0.33 +0.47%
Volume: 56.73M
Dec. 8, 2022 4:00p
P/E Ratio
42.22
Dividend Yield
N/A
Market Cap
$113.09 billion
Rev. per Employee
$1.47M
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/zigman2/quotes/208403734/composite
US : U.S.: Nasdaq
$ 28.41
-0.63 -2.17%
Volume: 1.41M
Dec. 8, 2022 4:00p
P/E Ratio
15.99
Dividend Yield
N/A
Market Cap
$2.68 billion
Rev. per Employee
$206,212
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/zigman2/quotes/201854387/composite
US : U.S.: NYSE
$ 22.98
+0.02 +0.09%
Volume: 6.62M
Dec. 8, 2022 4:00p
P/E Ratio
4.79
Dividend Yield
2.74%
Market Cap
$6.22 billion
Rev. per Employee
$289,319
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/zigman2/quotes/203902116/composite
US : U.S.: NYSE
$ 17.55
-0.18 -1.02%
Volume: 5.82M
Dec. 8, 2022 4:00p
P/E Ratio
8.76
Dividend Yield
4.33%
Market Cap
$2.84 billion
Rev. per Employee
$218,000
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/zigman2/quotes/206677024/composite
US : U.S.: NYSE
$ 24.17
+0.46 +1.94%
Volume: 899,421
Dec. 8, 2022 4:00p
P/E Ratio
56.87
Dividend Yield
0.00%
Market Cap
$1.16 billion
Rev. per Employee
$116,168
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/zigman2/quotes/206947004/composite
US : U.S.: NYSE Arca
$ 65.47
+0.60 +0.92%
Volume: 4.77M
Dec. 8, 2022 4:00p
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/zigman2/quotes/207444675/composite
US : U.S.: NYSE Arca
$ 131.72
+2.12 +1.64%
Volume: 4.48M
Dec. 8, 2022 4:00p
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
33,781.48
+183.56 +0.55%
Volume: 0.00
Dec. 8, 2022 5:07p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,963.51
+29.59 +0.75%
Volume: 0.00
Dec. 8, 2022 5:07p
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/zigman2/quotes/210598365/realtime
US : Nasdaq
11,082.00
+123.45 +1.13%
Volume: 4.32B
Dec. 8, 2022 5:16p
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/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
3.47
-0.01 -0.40%
Volume: 0.00
Dec. 8, 2022 8:59p
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/zigman2/quotes/211347045/realtime
add Add to watchlist BX:TMUBMUSD02Y
BX : Tullett Prebon
4.31
+0.02 +0.56%
Volume: 0.00
Dec. 8, 2022 9:03p
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/zigman2/quotes/201196669/composite
US : U.S.: Nasdaq
$ 1.09
+0.03 +2.36%
Volume: 10,098
Dec. 8, 2022 2:50p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$15.69 million
Rev. per Employee
$243,767
loading...
/zigman2/quotes/210315219/delayed
US : U.S.: Nymex
$ 23.40
+0.15 +0.66%
Volume: 2,087
Dec. 8, 2022 8:53p
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/zigman2/quotes/31322028/realtime
US : CoinDesk
17,232.92
+54.74 +0.32%
Volume: 0.00
Dec. 8, 2022 9:02p
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/zigman2/quotes/210598030/delayed
HK : Hong Kong Exchange
19,594.22
+143.99 +0.74%
Volume: 549,678
Dec. 9, 2022 9:48a
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