October 20, 2023 – They say the fall season is when the leaves turn to gold. While that may be true for those nature lovers enjoying the beautiful autumn, investors have not been in the same jubilant mood.
There was no gold in September for those investors holding traditional asset classes as the S&P 500 fell -4.8% and the TSX 60 declined -3.2%.
In contrast, the AlphaRank top-ranked stocks outperformed, and the bottom-ranked stocks underperformed in both Canadian and U.S. markets:
- While the Canadian benchmark dropped -3.2%, the Top Decile AlphaRank portfolio fell just -1.9%, and the Bottom Decile AlphaRank portfolio plunged -10.0%.
- In the U.S., the Top Decile AlphaRank portfolio fell -3.7%, outperforming the benchmark by 110bps, and the Bottom Decile AlphaRank portfolio nosedived -11.6%, underperforming by 680bps.
Clearly, factors such as value, quality, price momentum, operating momentum, and trend have been robust drivers of forward equity returns.
For October, we highlight one top-decile stock expected to outperform and one bottom-decile stock expected to underperform in this month’s AlphaRank’s Top Stocks.
OUTPERFORM: Booking Holdings Inc (BKNG) is a well-known online travel and e-commerce company that operates several popular brands in the travel industry. Some of the most recognizable brands under Booking Holdings include Booking.com, Priceline, Kayak, Agoda, and OpenTable. Booking Holdings provides a wide range of services, including hotel reservations, airline bookings, car rentals, and restaurant reservations, making it a one-stop platform for travellers. BKNG has been a long-term winner since the early 2000s tech wreck, with one of the best-performing stocks in the market over the past two decades due to its approximate 100-fold return to investors. Stockholders can expect BKNG’s outperformance to continue, given the company’s positive recent share price momentum, reasonable valuation, and high-quality business model, in addition to its share repurchases as it continues to outperform analyst expectations. (Disclosure: Long BKNG in HDGE).
UNDERPERFORM: Plug Power Inc (PLUG) is a company that specializes in hydrogen fuel cell technology, primarily for industrial and commercial applications. It focuses on providing hydrogen fuel cells and related solutions to power electric vehicles, material handling equipment, and stationary power systems. A beneficiary of the boom in speculative stocks during the central bank-stimulus-induced stock market surge several years ago, since peaking in early 2021, PLUG’s stock has been stuck in a 3-year skid as its fundamental business performance has not kept up with traders’ lofty growth expectations. Combining PLUG’s falling analyst estimates, negative share price momentum, money-losing business model, continued share issuance, and a recent quarterly “miss”, makes for a stock expected to underperform.
AlphaRank Top Stocks represents Accelerate’s predictive equity ranking powered by proven drivers of return. Stocks with the highest AlphaRank are expected to outperform, while stocks with the lowest AlphaRank are anticipated to underperform. AlphaRank assigns a numeric value to each security from zero (bottom-ranked) to 100 (top-ranked) based on selected predictive factors. All Canadian and U.S. stocks priced above $1.50 per share and $100 million in market capitalization are evaluated. In both the Accelerate Absolute Return Hedge Fund (TSX: HDGE) and the Accelerate Enhanced Canadian Benchmark Alternative Fund (TSX: ATSX), Accelerate funds may be long many top-ranked stocks and short many bottom-ranked stocks. See AccelerateShares.com for more information.
