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Hot investing tip inside of a hot stock market: Spot game-changing catalysts


This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:

Let me tell you something you probably already know: I have no clue what the stock market is going to do in April.

But I can confidently say two things.

First, this has been another amazing year for investors large and small (unless you invest in small caps, UPS’s shares, or short stocks for a living).

The S&P 500 could end up being 10% higher or more in back-to-back quarters for the first time since 2011 Q4 and 2012 Q1, according to stock numbers wizard Ryan Detrick at Carson Group.

From 1950 to 2023, April on average is the second-best-performing month of a calendar year, with a gain of about 1.5%, according to Detrick’s data.

For good measure, the Tantalizing Two — Nvidia (NVDA) and Meta (META) — are up an average of 66% year to date on AI mania.

Great stuff here.

I can also confidently say that you don’t have to throw a dart at trying to pick the next great AI stock to make money in this hot market. In fact, that is precisely what you DON’T want to be doing — picking up the scraps from someone else’s portfolio.

Want to find more lasting success in stocks? Seek out companies with catalysts.

I can offer up two new examples to get you headed down the right path.

One is Keurig Dr Pepper (KDP), the maker of Keurig pods, brewers, and Snapple iced tea. I hadn’t checked in with veteran food CEO Bob Gamgort in a while, but I recently chatted with him and his hand-picked successor Tim Cofer on Yahoo Finance Live (watch here).

I came away with a few potential stock-moving catalysts:

  • Keurig is poised to introduce several innovations within the next year, including an iced coffee brewer that capitalizes on the switch to iced drinks and sustainable coffee pods that may help quiet critics of pod waste. It’s also likely that the coffee business will bottom mid-year after a few challenging quarters.

  • The company is increasingly entering into lucrative new licensing deals, such as for energy drink C4 and Gatorade rival Electrolit.

  • Gamgort and Cofer have recently bought shares in the company, a sign of belief in their strategies and outlook.

  • Large institutional investor JAB finally stopped unloading Keurig Dr Pepper shares.

  • The company is looking to execute more on stock repurchases.

Tack on a 2.8% dividend yield and it’s worth doing more homework on KDP because of its catalysts.

Another company with catalysts is trading platform turned financial services super app Robinhood (HOOD).

I got to spend some time with Robinhood co-founder and CEO Vlad Tenev in the past year, and am impressed with how the business is evolving. It’s as if everything Tenev laid out in terms of new products on 2022 earning calls is now coming to fruition and starting to light a fire under the top and bottom lines.

A maturing Robinhood, if you will.

Within the past 12 months, Robinhood has launched 24-hour trading and, more recently, its first-ever credit card and an overhauled trading experience.

Tenev told me in the above video that initial demand for the credit card has been through the roof, and it could turn out to be a sizable business long term.

I expect Tenev to stay aggressive on the new-product front for the rest of 2024 and deep into 2025 — think more services targeted toward retirement as it aims to wrestle market share from legacy financial institutions.

In other words, Robinhood has catalysts.

And so do many other companies — go out and find them this weekend!

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.

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