Generac: In the Eye of the Storm

08/29/2019 5:00 am EST


Joe Duarte

Editor, Joe Duarte In the Money Options

U.S. stocks are poised on a razor’s edge, as the U.S.-China trade war and the sour relations between President Trump and the Fed escalated to new levels, raising doubts about the continuation of what seemed to be a fledgling rebound in stocks, explains Dr. Joe Duarte, editor of In the Money Options.

Thus, the question to be answered is whether the current market will snap out of the increasingly scary volatility and rise or whether we are in for a repeat of the Q4 2018 massacre.

Investors should start looking at consumer and industrial related data more closely now as the potential for an acceleration of the slowing in the U.S. economy seems more likely.

The stock market seems to be headed for some turbulence just as weather forecasters focus on the first storm of August, Dorian. Still there is one company whose seasonal trading pattern toward gains seems to make sense during both a tough market and what could be an awakening of hurricane season.

Certainly if the Atlantic literally heats up and hurricane season does indeed arrive in full, generator manufacturer and general power solutions company Generac Holdings (GNRC) is well positioned to deliver needed supplies to those stricken and profits to shareholders.

The stock has already had a good run after its most recent earnings report and upgraded guidance. But as we head into September, the so called “tropical red zone” where the odds of major hurricanes rise, the stock looks set to move decidedly higher.

Indeed, GNRC shares have been waking up after their recent consolidation, while steadily trading above support at the $70-$72 price area. If the shares continue to hold up, even in a tough market, they can be bought, especially if the market does not fall out of bed altogether.

If you already own it, it may be worth holding on to it as long as long as it stays above key support, as the odds of a positive price response should there be a major storm are likely above average.

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