Use These Tools to Cut 'Zombies' Out of Your Portfolio

The Federal Reserve knows a lot of "zombies" walk among us... [Chaikin PowerFeed]( Use These Tools to Cut 'Zombies' Out of Your Portfolio By Karina Kovalcik, senior quantitative analyst, Chaikin Analytics The Federal Reserve knows a lot of "zombies" walk among us... In fact, [as I explained yesterday]( the central bank estimates that around 10% of all publicly traded companies are zombies. These companies have unsustainable levels of debt. Most importantly, the Fed is about to go zombie hunting. It's about to raise interest rates. That will make it even more difficult for these companies to maintain their debt. You want to stay as far away from these companies as you can. And right now, keeping them out of your portfolio is more important than ever. But... how do you do that? Today, we'll look at some tools you can use to cut the zombies out of your portfolios. When a company grades poorly on these tools at the same time, it often spells trouble... Recommended Links: [80% Crash Coming?]( The senior analyst behind 24 different triple-digit winning recommendations (as high as 849%) just gave what he calls the most important interview of his LIFE. He thinks the market could be on the verge of an 80% collapse. He lays out all the proof... plus a detailed plan for exactly what to do. (And it doesn't require shorting... options... or perfectly "timing the market.") [You must see this interview today](. [Amazon's Terrifying New Plan]( Amazon is getting too powerful... and its terrifying next step could go beyond what any company should ever have the legal rights to do, threaten our way of existence, and squash many of our basic liberties. "This will affect anyone who owns stocks," says one expert who spent 50 years on Wall Street. [Get the facts for yourself here](. It all comes down to debt... We need to make sure a company generates enough money to cover the interest payments on its debt. And we must make sure that it can continue to make those payments. To do that, start with the debt-to-equity (D/E) ratio. It weighs a company's debt against the value that shareholders hold. In other words, this factor measures "leverage" – how much the company has borrowed versus how much it's worth in the market. A high D/E ratio means the company is in a risky position. Even a small change in the company's financials may influence its ability to afford its bills. I trust our Power Gauge system to do this work for me... It has decades of data and analysis built into it. And the ratio of a company's long-term debt to equity is one of the 20 fundamental and technical factors that the system analyzes. If the Power Gauge rates a company's D/E ratio as "bearish" or worse, I count that as a strike against it. But if you're looking for a rough measure, it's best to stay far away from companies with D/E ratios of more than 2. They're in the riskiest spots. Next, we must figure out how easily companies can afford their debt. Companies with high levels of unaffordable debt are at higher risk of defaulting. To do this, you can use the interest-coverage ratio. This factor isn't tracked directly in the Power Gauge. But it's a great added layer for hunting down zombie stocks... The interest-coverage ratio tells an investor how many times the money coming into a company (revenue) will cover its debt payments (interest). If this ratio is below 1, it means the company doesn't make enough money to pay its interest. That's a darn risky position. It's going to get even riskier in the coming months, too... Remember, the Fed is going zombie hunting by raising interest rates as soon as next month. So it's best to avoid companies with interest-coverage ratios less than 2. In addition to these two metrics, don't forget to look at a company's earnings growth. That's another factor built into the Power Gauge. If it's "bearish" in combination with the other factors we covered, you should definitely avoid investing in that company. Simply put, the cost of borrowing is going up. That means many zombie companies won't be able to cover the cost of their debt moving forward. So as an investor, your mission is clear... Whether you use the Power Gauge or not, avoid packing your portfolio full of zombies. Good investing, Karina Kovalcik Market View Major Indexes and Notable Sectors # Hld: Bullish Neutral Bearish Dow 30 +0.85% 9 19 2 S&P 500 +1.42% 113 329 57 Nasdaq +2.12% 13 73 13 Small Caps +1.91% 231 1117 522 Bonds +0.19% Communication Services +2.82% 3 13 7 — According to the Chaikin Power Bar, Small Cap stocks have become significantly more Bearish than Large Cap stocks. Major indexes are mixed. * * * * Top Movers Gainers [rating] OMC +14.19% [rating] ENPH +12.04% [rating] CMG +10.16% [rating] PAYC +8.93% [rating] FOXA +7.42% Losers [rating] CVS -5.45% [rating] INCY -2.56% [rating] CDW -2.46% [rating] ALL -1.97% [rating] HSIC -1.66% * * * * Earnings Report Reporting Today Rating Before Open After Close PEP CERN, DTE, DUK, K, KIM, KO, LH, LIN, MCO, MLM, PM, TPR BIO, DVA, EXPE, FE, FRT, HII, ILMN, IPG, MPWR, MTD, REG, VRSN, ZBRA GPN, TWTR DXCM, MHK, RSG No earnings reporting today. Earnings Surprises [rating] MGM MGM Resorts International Q4 $0.12 Beat by $0.09 [rating] FOXA Fox Corporation Q2 $0.13 Beat by $0.09 [rating] DIS The Walt Disney Company Q1 $1.06 Beat by $0.43 [rating] ACGL Arch Capital Group Ltd. Q4 $1.27 Beat by $0.27 [rating] ORLY O'Reilly Automotive, Inc. Q4 $7.64 Beat by $1.62 * * * * Sector Tracker Sector movement over the last 5 days Financial +2.93% Discretionary +2.23% Health Care +0.62% Energy +0.50% Information Technology +0.23% Materials -0.22% Industrials -0.25% Staples -0.62% Utilities -0.88% Real Estate -0.90% Communication -5.53% * * * * Industry Focus Semiconductor Services 8 32 0 Over the past 6 months, the Semiconductor subsector (XSD) has outperformed the S&P 500 by +2.24%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #3 of 21 subsectors and has moved up 4 slots over the past week. Top Stocks [rating] AOSL Alpha and Omega Semi [rating] MU Micron Technology, I [rating] ON ON Semiconductor Cor * * * * Chaikin Analytics LLC is not registered as a securities broker-dealer or advisor either with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. Chaikin Analytics does not recommend the purchase of any stock or advise on the suitability of any trade. The information presented is generic in nature and is not to be construed as an endorsement, recommendation, advice or any offer or solicitation to buy or sell securities or any kind, but solely as information requiring further research as to suitability, accuracy and appropriateness. Users bear sole responsibility for their own stock research and decisions. Read the full disclaimer at [(. You have received this e-mail because you subscribed to PowerFeed, published by Chaikin Analytics. To stop receiving PowerFeed daily, click to [unsubscribe](. For questions about your account or to speak with customer service, call +1 (877) 697-6783 (U.S.), 9 a.m. - 5 p.m. Eastern time or e-mail info@chaikinanalytics.com. Chaikin Analytics 1500 JFK Blvd Suite 220 Philadelphia, Pennsylvania 19102 United States +1 (877) 697-6783