General Motors and GlobalFoundries, which charged into buy range last week as a surprisingly soft CPI inflation report sent market interest rates tumbling, lead this weekend's watch list of five stocks near buy points. Improved hopes of a soft landing for the economy and dive in the 10-year Treasury yield is good news for both interest-rate sensitive cyclicals like GM stock and the valuations of tech stocks like GFS.
A somewhat brighter economic outlook and a valuation boost from a lower 10-year Treasury yield hit the accelerator on a rotation into cyclical and growth stocks. That trend also has construction products giant Builders FirstSource and solar stock leader Enphase Energy near buy range.
Yet "growthy" defensive play Acadia Healthcare, which operates behavioral treatment centers, largely bucked that rotation this week, earning the fifth spot on this weekend's watch list. All of the stocks on the list have reported earnings recently, removing one risk factor from the equation.
Follow The Money To GM, GFS, ENPH, ACHC
There's also another big trend boosting four of the stocks on the list: public funding increases. Bernstein analyst Toni Sacconaghi has said that production incentives for EV battery cells and packs made in the U.S. could amount to $3,000-$4,000 per vehicle for GM, as well as Tesla and Ford. That doesn't include the impact of $7,500 tax credits for purchasing EVs, which may not apply for some time.
Enphase is another winner from Inflation Reduction Act incentives. The company said on its Oct. 25 earnings call that it plans to open four to six manufacturing lines in the U.S. by the second half of 2023. The law, which extended a 30% tax credit for residential solar investments for another decade, also included a tax credit for domestic microinverter production of 11 cents per AC watt.
In September, BofA Securities analyst Vivek Arya called GlobalFoundries his "top pick on the emerging themes of U.S. chip reshoring, supply assurance, and a potential 'hedge' against rising U.S.-China tensions." GlobalFoundries is expected to be a big beneficiary of the CHIPS Act for spurring domestic chip manufacturing. The company recently announced $30 million in federal funding to advance development and production at its facility in Vermont.
Acadia Healthcare's revenue per patient day rose 6.9% in Q3, highlighting "increasing funding support for mental health from (govt & commercial) payors," Jefferies analyst Brian Tanquilut wrote in an Oct. 31 note. "With opioid settlement funds starting to flow to various state entities and demand for acute mental health services remaining high, we expect elevated rate growth to remain over the next several quarters."
GM Stock
GM stock rose 3.5% to 41.12 on Friday, a day after Thursday's 4.4% gain had the automaker break above its 200-day average in a significant way for the first time since January.
Thursday's move saw GM stock clear a 40.20 buy point from a cup-with-handle base, then close just below it. But Friday's action has GM stock back in a buy range that runs to 42.21.
GM has an investor conference on Nov. 17 to discuss key performance metrics for its EV ramp over the next few years.
While lower interest rates are a positive for auto demand, a soft landing is far from guaranteed. Some analysts are concerned that the drop in used car prices, which helped drive inflation lower in October, may be a precursor to weaker new vehicle pricing.
IBD's SwingTrader added GM stock to its portfolio on Thursday.
GM stock was IBD Stock Of The Day on Thursday.
GFS Stock
GFS stock rose 3.3% to 64.77 on Friday. That lifted GFS stock out of range from an early entry point around 61.24, just above its Oct. 25 high.
Now GFS stock is closing in on a new entry point at 66.06, just clear of its Aug. 12 high.
Ideally, GlobalFoundries stock would pause, letting the 50-day line regain some ground.
The relative strength line for GFS stock, the blue line which tracks its progress vs. the S&P 500, is just below its all-time high in March for the chipmaker, which came public in September 2021.
GFS was IBD Stock Of The Day on Tuesday.
BLDR Stock
A falling 10-year Treasury yield has pulled the 30-year fixed-rate mortgage below 7%. It might take a significant further easing to put a floor under the housing market. But Builders FirstSource continued to put up strong EPS growth of 53% in Q3, even as revenue growth slowed to 5% amid commodity price deflation.
That reflected a nearly 20% rise in sales of its higher-margin, value-added products. An example is its pre-cut Ready-Frame package to speed up home construction.
BLDR stock added 1.2% to 65.88, following a 14.1% jump on Thursday. The prior day's move lifted BLDR stock above its 200-day line for the first time since August. The move above its 200-day and past prior resistance at 65.18 offers an early entry point.
Arguably, Builders FirstSource is in a bottoming base since the start of August.
ENPH Stock
Despite the tech stock rally that caught fire at the end of the week, ENPH stock tumbled 5.6% to 292.01 on Friday, ending up just 3.4% on the week.
Enphase's weakness wasn't groupwide, though First Solar slipped 4.2% on Friday. But SolarEdge rose 1.85%.
On Tuesday, B. Riley analyst Christopher Souther touted SolarEdge, while noting its discounted value relative to ENPH stock.
Enphase stock briefly crested a 299.58 cup-with-handle buy point on Friday, before closing lower.
ENPH stock is part of the IBD Leaderboard portfolio of elite stocks.
ACHC Stock
Acadia Healthcare stock slipped 4.5% on Friday, back just below its 50-day line. But ACHC stock still managed to close up 2.8% on the week amid an investor presentation and news of an acquisition in the Atlanta area.
ACHC stock has an official buy point of 86.85. Clearing Thursday's high of 85.16 could offer an early entry.
