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4 Top Penny Stocks To Watch If You’re Bullish On Bitcoin In 2022

Bitcoin penny stocks to watch this year.
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Last November, the price of Bitcoin surged to all-time highs of over $69,000, bringing plenty of speculatively bullish momentum into the markets. Whether you looked at penny stocks or some of the top fintech stocks in the market, a risk-on approach to trading was prevalent. Things have changed significantly since then, but the latest activity in the digital asset arena has investors recalibrating expectations.

Bitcoin hasn’t gone to zero, as some perma-bears had warned. While BTC hasn’t rebounded to all-time highs, there has been an overly bullish tone in the stock market this week. Where are cryptocurrency prices today? Bitcoin has reclaimed its $23,000 level while Ethereum has bounced back above $1,640 for the first time since June’s gap down. Thanks to another consecutive day of higher highs, the risk-on feeling is slowly coming into the picture for digital assets and cryptocurrency stocks.

Best Penny Stocks For 2022

As we head into the second half of the year, there are plenty of things to account for. The markets have faced headwinds from ongoing pandemic issues, geopolitical threats, economic troubles, and supply chain issues; you name it. This has led to lower markets during the first six months of the year. Now, with another half of the year ahead, it’s essential to keep in mind those previous trends and what could be coming in the future.

Next week there’s plenty of data to digest, including second-quarter GDP, jobless claims, home sales, personal income, and the July Federal Reserve meeting. So are we out of the proverbial woods yet? Since there’s no August Fed meeting, either, most likely by this time next week, we’ll have a gauge on market sentiment for the rest of Q3.

Regardless of what happens a week from now, traders are likely weighing short-term trends and how they’ll influence penny stocks. Since Bitcoin, Ethereum, and many cryptocurrencies are rallying in the market today, this article takes a deep dive at top penny stocks to watch with exposure to digital assets & cryptocurrency.

Penny Stocks To Watch

  1. Bit Digital Inc. (NASDAQ: BTBT)
  2. Bitfarms Ltd. (NASDAQ: BITF)
  3. Hut 8 Mining Corp. (NASDAQ: HUT)
  4. Nu Holdings Ltd. (NYSE: NU)

Bit Digital Inc. (NASDAQ: BTBT)

Several names on this list of penny stocks have direct ties to the price of Bitcoin. That’s because they are digital currency mining stocks. Bit Digital, for instance, does precisely that. In its quarterly update from June, the company reported mining revenue of $8 million and earned 194.48 BTC during the quarter.

In response to the results, management explained, “The first quarter of 2022 marked the first full quarter in which 100% of our mining fleet was on North American soil. With migration complete, our focus remains to deploy our fleet while remaining a leader in sustainability.”

With the company’s current miner redeployment program in place, Bitcoin, BTBT stock has been one to watch this month. One word of caution is that cryptocurrency prices are incredibly volatile, as with all penny stocks on this list. With that, a drastic shift in price could directly impact the value of shares of digital asset mining companies, including BTBT stock.

[READ MORE] What Know About Buying Penny Stocks on July 22nd

Bitfarms Ltd. (NASDAQ: BITF)

cheap penny stocks to watch right now Bitfarms BITF stock

Bitfarms is also closely correlated with digital asset prices and, as such, should be treated similarly when it comes to volatile trading.

Bitfarms recently published its Juen 2022 production update. The company mined 420 BTC at an average of 14 BTC/day. It also completed the building structure for its first 50 MW warehouse in Rio Cuarto, Argentina. Emiliano Grodzki, CEO of Bitfarms, also mentioned. “With construction on schedule, we continue to expect production to commence at this first warehouse in Q4 2022, and our plan remains to complete the second 50MW facility in Q1 2023.”

As BTC prices remain elevated, BITF stock and others could be some to keep a closer eye on.

Hut 8 Mining Corp. (NASDAQ: HUT)

bitcoin etf sec

As the name suggests, Hut 8 is another one of the bitcoin mining stocks to join this list.

 In a July update, Hut discussed several highlights, including its Bitcoin holdings. Those increased by 328 through June 30th. Hut also has an “unencumbered” Bitcoin reserve of 7,406. At today’s price of roughly $23,000 per BTC, those reserves are valued at over $170 million.

The company also has several events later this year to keep in mind. The first is the timing of production at its new North Bay site. It was scaled up last month with roughly 5,800 miners, with additional scaling expected to continue.

Jamie Leverton, CEO of Hut, also emphasized the company’s long-term Bitcoin focus and said, “We are confident that our HODL strategy, coupled with the uncorrelated recurring revenue from our high-performance computing business, will allow us to continue to successfully navigate the current market.”

Nu Holdings Ltd. (NYSE: NU)

bitcoin

The Oracle of Omaha, Warren Buffett, has emphasized caution regarding Bitcoin and cryptocurrency. Berkshire Vice Chairman Charlie Munger has even said it is “very likely to go to zero” in public forums.

[READ MORE] Penny Stocks To Buy This Week? 4 Under $5 To Watch Before Monday

But here’s the interesting part: not only does Berkshire own a stake in a penny stock, but the company it owns this stake in has exposure to digital currency. The most recent Berkshire holdings report shows the firm with a 2.3% stake in the fintech company.

Nu Holdings isn’t a bitcoin mining company like the other on this list. It is a digital banking platform. In its May Q1 report, Nu recorded strong customer growth of 61% over the same period last year. The average revenue per customer also jumped significantly to $6.70. What’s more impressive is Nu’s gross profit rose triple digits (131%) to $294.1 million while revenue for the quarter climbed 226%, year-over-year.

The Oracle isn’t the only one bullish on NU stock. According to the latest NU stock forecast from New Street Research, the firm has the penny stock at Buy with a $7 price target.

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Spread & Containment

Will Powell Pivot? Don’t Count On It

Stocks are rallying on hopes that Jerome Powell and the Fed will stop increasing interest rates this fall, pivot, and start reducing them next year. For…

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Stocks are rallying on hopes that Jerome Powell and the Fed will stop increasing interest rates this fall, pivot, and start reducing them next year. For fear of missing out on the next great bull run, many investors are blindly buying into this new Powell pivot narrative.

What these investors fail to realize is the Fed has a problem. Inflation is raging, the likes of which the Fed hasn’t dealt with since Jerome Powell earned his law degree from Georgetown University in 1979.  

Despite inflation, markets seem to assume that today’s Fed has the same mindset as the 1990-2021 Fed. The old Fed would have stopped raising rates when stocks fell 20% and certainly on the second consecutive negative GDP print. The current Fed seems to want to keep raising rates and reducing its balance sheet (QT).

The market-friendly Fed we grew accustomed to over the last few decades may not be driving the ship anymore. Yesterday’s investment strategies may prove flawed if a new inflation-minded Fed is at the wheel.

Of course, you can ignore the realities of today’s high inflation and take Jim Cramer’s ever-bullish advice.

When the Fed gets out of the way, you have a real window and you’ve got to jump through it. … When a recession comes, the Fed has the good sense to stop raising rates,” the “Mad Money” host said. “And that pause means you’ve got to buy stocks.

Shifting Market Expectations

On June 10, 2022, the Fed Funds Futures markets implied the Fed would raise the Fed Funds rate to 3.20% in January 2023 and to 3.65% by July 2023. Such suggests the Fed would raise rates by almost 50bps between January and July.

Now the market implies Fed Funds will be 3.59% in January, up .40% in the last two months. However, the market implies July Fed Funds will be 3.52%, or .13% less than its January expectations. The market is pricing in a rate reduction between January and July.

The graph below highlights the recent shift in market expectations over the last two months.

The graph below from the Daily Shot shows compares the market’s implied expectations for Fed Funds (black) versus the Fed’s expectations. Each blue dot represents where each Fed member thinks Fed Funds will be at each year-end. The market underestimates the Fed’s resolve to increase interest rates by about 1%.

Short Term Inflation Projections

The biggest flaw with pricing in predicting a stall and Powell pivot in the near term is the possible trajectory of inflation. The graph below shows annual CPI rates based on three conservative monthly inflation data assumptions.

If monthly inflation is zero for the remainder of 2022, which is highly unlikely, CPI will only fall to 5.43%. Yes, that is much better than today’s 9.1%, but it is still well above the Fed’s 2.0% target. The other more likely scenarios are too high to allow the Fed to halt its fight against inflation.

cpi inflation

Inflation on its own, even in a rosy scenario, is not likely to get Powell to pivot. However, economic weakness, deteriorating labor markets, or financial instability could change his mind.

Recession, Labor, and Financial Instability

GDP just printed two negative quarters in a row. Some economists call that a recession. The NBER, the official determiner of recessions, also considers the health of the labor markets in their recession decision-making. 

The graph below shows the unemployment rate (blue), recessions (gray), and the number of months the unemployment rate troughed (red) before each recession. Since 1950 there have been eleven recessions. On average, the unemployment rate bottoms 2.5 months before an official recession declaration by the NBER. In seven of the eleven instances, the unemployment rate started rising one or two months before a recession.

unemployment and recession

The unemployment rate may start ticking up shortly, but consider it is presently at a historically low level. At 3.5%, it is well below the 6.2% average of the last 50 years. Of the 630 monthly jobs reports since 1970, there are only three other instances where the unemployment rate dipped to 3.5%. There are zero instances since 1970 below 3.5%!

Despite some recent signs of weakness, the labor market is historically tight. For example, job openings slipped from 11.85 million in March to 10.70 in June. However, as we show below, it remains well above historical norms.

jobs employment recession

A tight labor market that can lead to higher inflation via a price-wage spiral is of concern for the Fed. Such fear gives the Fed ample reason to keep tightening rates even if the labor markets weaken. For more on price-wage spirals, please read our article Persistent Inflation Scares the Fed.

Financial Stability

Besides economic deterioration or labor market troubles, financial instability might cause Jerome Powell to pivot. While there were some growing signs of financial instability in the spring, those warnings have dissipated.  

For example, the Fed pays close attention to the yield spread between corporate bonds and Treasury bonds (OAS) for signs of instability. They pay particular attention to yield spreads of junk-rated corporate debt as they are more volatile than investment-grade paper and often are the first assets to show signs of problems.

The graph below plots the daily intersections of investment grade (BBB) OAS and junk (BB) OAS since 1996. As shown, the OAS on junk-rated debt is almost 3% below what should be expected based on the robust correlation between the two yield spreads. Corporate debt markets are showing no signs of instability!

corporate bonds financial stability

Stocks, on the other hand, are lower this year. The S&P 500 is down about 15% year to date. However, it is still up about 25% since the pandemic started. More importantly, valuations have fallen but are still well above historical averages. So, while stock prices are down, there are few signs of equity market instability. In fact, the recent rally is starting to elicit FOMO behaviors so often seen in speculative bullish runs.

Declining yields, tightening yield spreads, and rising asset prices are inflationary. If anything, recent market stability gives the Fed a reason to keep raising rates. Ex-New York Fed President Bill Dudley recently commented that market speculation about a Fed pivot is overdone and counterproductive to the Fed’s efforts to bring down inflation.

What Does the Fed Think?

The following quotes and headlines have all come out since the late July 2022 Fed meeting. They all point to a Fed with no intent to stall or pivot despite its effect on jobs and the economy.

  • *KASHKARI: 2023 RATE CUTS SEEM LIKE `VERY UNLIKELY SCENARIO’
  • Fed’s Kashkari: concerning inflation is spreading; we need to act with urgency
  • *BOWMAN: SEES RISK FOMC ACTIONS TO SLOW JOB GAINS, EVEN CUT JOBS
  • *DALY: MARKETS ARE AHEAD OF THEMSELVES ON FED CUTTING RATES
  • St. Louis Fed President James Bullard says he favors a strategy of “front-loading” big interest-rate hikes, repeating that he wants to end the year at 3.75% to 4% – Bloomberg
  • FED’S BULLARD: TO GET INFLATION COMING DOWN IN A CONVINCING WAY, WE’LL HAVE TO BE HIGHER FOR LONGER.
  • “If you have to cut off the tail of a dog, don’t do it one inch at a time.”- Fed President Bullard
  • “There is a path to getting inflation under control,” Barkin said, “but a recession could happen in the process” – MarketWatch
  • The Fed is “nowhere near” being done in its fight against inflation, said Mary Daly, the San Francisco Federal Reserve Bank president, in a CNBC interview Tuesday.  –MarketWatch
  • “We think it’s necessary to have growth slow down,” Powell said last week. “We actually think we need a period of growth below potential, to create some slack so that the supply side can catch up. We also think that there will be, in all likelihood, some softening in labor market conditions. And those are things that we expect…to get inflation back down on the path to 2 percent.”

Summary

We are highly doubtful that Powell will pivot anytime soon. Supporting our view is the recent action of the Bank of England. On August 4th they raised interest rates by 50bps despite forecasting a recession starting this year and lasting through 2023. Central bankers understand this inflation outbreak is unique and are caught off guard by its persistence.

The economy and markets may test their resolve, but the threat of a long-lasting price-wage spiral will keep the Fed and other banks from taking their foot off the brakes too soon.

We close by reminding you that inflation will start falling in the months ahead, but it hasn’t even officially peaked yet.

The post Will Powell Pivot? Don’t Count On It appeared first on RIA.

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Spread & Containment

Why You Should Not Worry About Disney and Netflix Stock

The two streaming giants have struggled but investors should not be too concerned.

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The two streaming giants have struggled but investors should not be too concerned.

During the lockdown/quarantine days of the pandemic, we all apparently rode our Peloton (PTON) - Get Peloton Interactive Inc. Report bikes while binge-watching streaming videos. As soon as we finished that, we headed onto a Zoom Video  (ZM) - Get Zoom Video Communications Inc. Report call, presumably before ordering food delivery and later having a Teladoc (TDOC) - Get Teladoc Health Inc. Report appointment

That may not have actually been your direct experience, but it's how the stock market performed. People bought so-called "stay-at-home" stocks because we all were, well, stuck at home. Of course, at some point we weren't stuck at home, and sentiment on those stocks changed.

The challenge for investors is sorting out the real narrative from the false one. 

At-home-exercise bikes were never going to replace gyms once people could go out again, and the audience for a premium-priced product was limited when gym memberships can cost as little as $10 a month.

Telemedicine has a bright future, but it has limits and it may prove an area where the brand name does not matter.

Streaming video is different, however, and while Netflix (NFLX) - Get Netflix Inc. Report and Walt Disney (DIS) - Get The Walt Disney Company Report stock are down roughly 40% and 55% respectively over the past 12 months, there are a lot of reasons shareholders need not be concerned.

Netflix/TS

Netflix Has a Correctible Problem  

While Netflix grew steadily for a long time, no product has an endless upward trajectory. The company lost subscribers in its most recent quarter, but that comes after it added more than 36 million customers in 2020 and another 18 million in 2021. Even with its Q2 2022 drop of about a million subscribers, the company still has 220 million paying customers.

That's a huge number and it's not likely to get all that much bigger or all that much smaller over the next few years. The reality is that Netflix has left its growth phase and has moved into its fiscal responsibility phase.

Now, instead of producing $200 million movies and throwing them at the wall, the company has to be smarter about its content investments.

"So our content expense will continue to grow, but it's more moderated as we adjusted for the growth in our revenue," Chief Financial Officer Spence Neumann said during the company's second-quarter-earnings call.

"And we think we've gotten a lot smarter over the last decade or so being in the originals business as to where we can direct our spend for most impact, highest impact, and highest satisfaction for our members." 

Nobody at Netflix wants to say "we're going to make fewer shows and focus on having hits," but Netflix has reached the retention stage of its business. It needs to have enough content its customers want to see coming up to keep people from quitting.

That may not be an easy transition, but it's one the company is likely to make, where it can be comfortably profitable around its current customer base. 

Disney Has Nothing to Worry About     

Disney is obviously much more than a streaming company, but Disney+ has been a massive driver for the company. Its growth was accelerated by the pandemic, but every family and any adults who like Marvel and Star Wars were always going to subscribe.

Fans of the company's huge franchises are simply not going to skip the biggest shows coming out of those universes. 

Disney, unlike Netflix, does not have a too-much-content problem. It knows its customer base and understands that while "Falcon and the Winter Soldier" might draw a bigger audience than "Ms. Marvel," both drive audience to the service.

Disney may struggle with what's a theatrical release and what goes to streaming, but it has hit franchises that have stood the test of time. That's not going to change just because lockdowns have ended and we have other entertainment choices.

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Stocks

Bed Bath & Beyond stock should be worth $4 only: Baird

Bed Bath & Beyond Inc (NASDAQ: BBBY) has been on fire over the past couple of weeks, but that “frenzy” is unlikely to last for very long, says…

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Bed Bath & Beyond Inc (NASDAQ: BBBY) has been on fire over the past couple of weeks, but that “frenzy” is unlikely to last for very long, says Justin Kleber. He’s a Senior Equity Research Analyst at Baird.

Bed Bath & Beyond stock could tank 55% from here

On Tuesday, he downgraded the Bed Bath & Beyond stock to “underperform” and reiterated his price target of $4.0 a share that represents about a 55% downside from here. In a note to clients, Kleber said:

This frenzied move has been driven by non-fundamentally focused market participants. With market share losses accelerating and BBBY burning cash, fundamental risk/reward looks unattractive.

The meme stock, he added, has to sharply improve its EBITDA to justify its current $2.30 billion enterprise value – but that’s unlikely to happen in this macroeconomic environment.

Versus its year-to-date low, Bed bath & Beyond stock is currently up more than 100%.

Why else does he dislike Bed Bath & Beyond Inc?

In its latest reported quarter, the American chain of domestic merchandise retail stores lost $2.83 a share (adjusted) – more than double the $1.39 that analysts had expected. Kleber is also bearish on the Bed Bath & Beyond stock because:

Supply chain disruptions have exposed BBBY’s antiquated infrastructure and wreaked havoc on the business at the same time the company’s pivot toward owned brands has not resonated with customers.

The retailer will likely remain challenged as demand for home goods continues to normalise following two years of pandemic-driven boost, he concluded.

In June, the Union-headquartered company named Sue Gove its new CEO (interim) tasked with fixing the liquidity concerns. Most recently, Bed Bath & Beyond was reported considering private loans to optimise its balance sheet.

The post Bed Bath & Beyond stock should be worth $4 only: Baird appeared first on Invezz.

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