Tom Yeung right here along with your Sunday Digest.
Final month, I wrote about five stocks to “buy the dip.” Our quantitative methods signaled April’s selloff had gone too far and that low costs could be sufficient to set off a market rally.
Since then, these 5 corporations have carried out splendidly, largely outperforming the S&P 500’s 8% rise.
- Salesforce Inc. (CRM) +16%
- Akamai Applied sciences Inc. (AKAM) +13%
- Superior Micro Gadgets Inc. (AMD) +16%
- Moderna Inc. (MRNA) +6%
- Celanese Corp. (CE) +13%
InvestorPlace Senior Analyst Luke Lango believes that is simply the beginning.
He predicts a serious occasion on Might 7 will set off a flood of money – as a lot as $7 trillion – to hurry again into U.S. shares. It’s a catalyst that might change all the market dynamic and create a brand new summer season “panic” of the kind not seen since 1997.
This is the reason he held a particular 2025 Summer time Panic Summit on Thursday. At this occasion, Luke defined why he believes this catalyst on Might 7 might be a game-changer. Plus, he revealed a brand new set of shares that he believes are primed to steer the following wave of progress. (You can watch a replay of the event here.)
Now, I can’t let you know what this catalyst is. You’ll should see it for your self in Luke’s particular presentation. But when this panic shopping for he describes does take off, a number of of my high long-term picks are sure to learn.
Let’s revisit two of them at the moment – and a brand new one as nicely…
The Leveraged Play
The primary is Sabre Corp. (SABR), one of many three corporations that run the world’s International Distribution System (GDS) for resorts and flights. Just about all journey brokers and on-line reserving methods use GDS to e-book flights because it’s the one platform with real-time information on out there seats, rooms, and costs. Which means business earnings are typically steady and really excessive. (Even Alphabet Inc. [GOOGL] didn’t create a rival system and now makes use of Sabre to energy Google Flights.)
That’s why non-public fairness determined to take Sabre off the general public markets in 2007. They noticed a money cow that may very well be loaded with debt to make giant earnings even greater. And it labored, at the least within the quick run.
Sabre returned to public markets in 2014 with 50% increased web earnings, and the inventory surged one other 70% the next 12 months as earnings continued to climb.
Then, two issues occurred.
- Covid-19. The once-in-a-century pandemic introduced air journey to a close to standstill, slashing Sabre’s revenues and making money owed inconceivable to service.
- Rising charges. The next 12 months, the U.S. Federal Reserve started mountain climbing rates of interest to stave off inflation, making it more durable for Sabre to repay current money owed and roll them into new offers.
That crushed Sabre’s share value, which has fallen 90% since early 2020. Its money owed at the moment are price nearly six occasions greater than its fairness… a scenario often related to near-bankrupt corporations.
But when Luke’s calculations are proper, issues may quickly flip round for this fairness “stub.”
Actually, for the reason that firm is so financially leveraged, a ten% enhance in enterprise worth will translate right into a 58% enhance in share value.
That makes Sabre an unimaginable “option-like” play. Within the worst case, the inventory goes to zero… however in the perfect case, SABR shares may rise 2X… 5X… and even 10X.
The Actual Property Kings
The Might 7 catalyst can even be felt amongst actual property corporations that depend on extra conventional debt financing.
My two favorites are on reverse ends of the chance spectrum. I’d suggest each as enhances.
- Realty Earnings Corp. (O). This actual property funding belief (REIT) is arguably probably the most conservative of its sort. Leases are made on a “triple web” foundation, which means tenants are accountable for nearly all prices, and the corporate attracts blue-chip tenants by providing minimal hire will increase. Its dividend is paid month-to-month and sits at a stunningly excessive 5.6%.
- Digital Realty Belief Inc. (DLR). In the meantime, DLR is likely one of the most aggressive REITs due to its single-minded pursuit of progress in AI information facilities. Gross earnings greater than doubled to $2.9 billion in 2024, and analysts anticipate one other 50% surge to $4.5 billion by 2027. Cloud computing corporations like Microsoft Corp. (MSFT) are nonetheless starved for computing energy, and Digital Realty has grown as rapidly as doable to service that want. Dividends are decrease at 3% to mirror this potential.
These two corporations are nicely run. Realty Earnings has performed the lengthy recreation by specializing in grocery shops (10% of its portfolio), comfort shops (9%), non-retail shops (i.e., industrial and providers) (21%), and different companies proof against e-commerce competitors.
On its half, Digital Realty realized early on that cloud computing clients would wish dense colocation information facilities (the place powered, linked warehouse house is rented out to corporations that convey their very own servers) and rapidly moved to supply that service.
Which means each corporations ought to see a surge in shopping for curiosity on a Might 7 catalyst. Regardless of their variations, these REITs are economically delicate corporations. And if Luke is correct, a summer season panic may ship these kinds of corporations hovering.
The Healthcare Acquirer
Lastly, I’m including a brand new choose to my high checklist:
Biogen Inc. (BIIB).
This high-quality biotech agency was created in 2003 in a mega-merger of Biogen and automation firm Idec. Shares rose as a lot as 1,200% by way of the biotech growth of the mid-2010s as blockbusters like most cancers drug Rituxan and MS remedy Avonex got here onto the market. Biogen additionally proved fairly adept at buying and partnering with different biotech corporations, although a 2019 acquisition of Nightstar did finish with two medical failures.
Challenges started to mount after 2023 on rising analysis prices and excessive rates of interest. Instantly, new therapies grew to become far costlier to finance. A lackluster launch of Alzheimer’s drug Leqembi additionally spooked traders. So did current staffing cuts on the U.S. Meals and Drug Administration (FDA), which can enhance the time and obstacles for brand new drug approvals.
Biogen’s inventory has dropped 60% over the previous two years and trades at 8X ahead earnings, in comparison with a long-term common of 13.3X.
The Might 7 catalyst may change a part of that equation.
This summer season, we may see traders return to this beat-up inventory whose ahead price-earnings ratio now appears to be like extra like an automaker’s than a top-tier biotech’s. Biogen’s pipeline and several other new launches look fairly robust. Not too long ago authorised medication like Skyclarys, utilized in neurology, and Zurzuvae, for postpartum melancholy, ought to cut back the influence of expiring medication and Leqembi’s slower-than-expected success.
It’s additionally price noting that giant biotechs like Biogen have vital advertising and marketing and manufacturing scale that make them engaging companions, permitting them to snap up promising smaller corporations at a reduction.
In fact, a lot of Biogen’s challenges will stay. Biotech is an business that generates monumental paydays and equally vital flops. I’m additionally not anticipating a fast return to “regular” on the FDA.
Nonetheless, if you happen to had instructed me two years in the past that Biogen could be on sale at 8X ahead earnings, I wouldn’t have believed you. And now, it’s one thing price benefiting from.
The Summer time Panic of 1997
In Might 1997, the Asian Monetary Disaster was getting began. Foreign money speculators had been dumping the Thai baht, forcing that nation’s central financial institution to defend their foreign money change price with a dwindling provide of international reserves. By July, these reserves had run out, triggering a devaluation and market mayhem. It solely took a number of months for the disaster to unfold to South Korea, Hong Kong, and past. Asian inventory markets collapsed.
But, none of this affected the dot-com growth. Over the identical interval, the tech-heavy Nasdaq Composite surged 20% to a brand new document as American traders started recognizing the guarantees of the web. Retail traders had been extra panicked about lacking out than with some faraway monetary disaster.
Luke Lango believes we’re approaching a brand new model of this two-sided “panic.”
Immediately, bearish institutional traders are dumping tariff-impacted corporations as international macro fears kick in. Shares of Norwegian Cruise Line Holdings Ltd. (NCLH) have dropped 38%, whereas these of shoe retailer Deckers Out of doors Corp. (DECK) have sunk 45%.
In the meantime, retail traders are aggressively shopping for the dip each probability they get. On April 3, particular person traders purchased $4.7 billion of equities following President Donald Trump’s “Liberation Day” selloff. And on Wednesday, a damaging U.S. GDP report was rapidly buried as these similar mom-and-pop investors snapped up shares.
That’s as a result of there’s a lot of cash sitting on the sidelines. And there are a lot of bullish traders ready to purchase up inventory.
This might come to a head on Might 7, when Luke predicts an occasion will set off a brand new cascade of retail shopping for.
Understandably, everybody is concentrated on short-term strikes within the midst of a fast-paced market. However there’s one thing greater occurring behind the scenes…
Till subsequent week,
Tom Yeung
Market Analyst, InvestorPlace.com
