I’m Buying These 3 Stocks at Peak Fear and Selling 2 at Max Greed

[00:00:00]One of these stocks looks absolutely broken, down 58% in a year. Analysts hate it, investors have given up, the CEO's family is changing their name.

[00:00:09]Another stock looks unstoppable, hitting fresh highs as everyone bets it can only go up. So, which one would you buy? I'm going to break down five stocks flashing some of the clearest fear and greed signals I've seen using the same triggers used by professional analysts, then show you why your biggest winners often start out looking like disasters, and why today's hottest stocks can become tomorrow's disappointments. I'll show you exactly what to look for, show you how to measure fear and greed in stocks as we go, but let's get started with our first stock being crushed under peak fear, D-Wave Quantum, ticker QBTS, down 40% in the last 6 weeks. And one way to measure fear and greed in stocks is with a relative strength index or the RSI. Now, ideally, a relative strength index or RSI below 30 is what technical traders consider extreme fear, while above 70 is a stock in which investors are getting greedy. QBTS is sitting at about 37 here, but those sub-30 readings are actually pretty rare. So, once you get into the mid-30s, I start paying attention. And it's here though that a lot of investors start losing money.

[00:01:13]They see a weak RSI and immediately assume the stock is cheap. That's not what RSI measures. The relative strength index simply tells us selling pressure has become intense over the last few weeks.

[00:01:25]It tells us investors are fearful, but it doesn't tell us whether they're wrong or not. And that is where the next step in these fear stocks is asking, "Why are investors selling?" Because buying an oversold stock without doing that deeper research is like adopting the first puppy at the shelter because it looked sad. But then if you zoom out, this doesn't look like a QBTS problem at all.

[00:01:46]Nearly every quantum computing stock has struggled recently. Rigetti and QBTS are still up over the last year, but down double digits in the last month. IonQ is down around 6% for the year, while Quantum Computing ticker QUBT has fallen more than 50%. So, this looks much more like Wall Street cooling on that entire Quantum theme than than investors abandoning D-Wave specifically.

[00:02:09]Of the four stocks here, I would say investors may think that QUBT has a bigger problem, maybe something worse under the hood, but the rest are ready to rebound when money flows back into Quantum stocks. Then, I go to the fundamentals. Revenue is still expected to grow about 73% this year and more than double next year. Earnings are still negative, so the biggest question isn't profitability yet, it's survival.

[00:02:32]Can the company fund itself until that growth does arrive? And that's where we see that peak fear building in these stocks. And it's actually one of the reasons why I like QBTS over maybe the larger IonQ. IonQ is the larger, more established company, but burned through over $400 million in operating cash over the last year and spent billions more investing in that capital expenditures.

[00:02:54]That $500 million in ending cash, that balance sheet cash it has available, that is barely enough to cover a year's worth of operating cash outflows, let alone the investments. So, IonQ is definitely going to need to raise money and dilute shareholders in the future.

[00:03:09]Now, QBTS is also still burning cash as well, spending $97 million in operations, but with roughly $337 million in that balance sheet cash, it has several years of operating runway.

[00:03:21]Honestly, Nation, this is one of the hardest investments for me. I hate buying companies that are still losing money. Maybe it's the analyst in me, maybe it's because growing up money always felt scarce, so taking risks with it just wasn't an option.

[00:03:34]So, if I am going to take a risk buying a company that's still in the red, I want to know it has enough cash to survive.

[00:03:40]I'm going to highlight a stock flashing max greed next, but understand, folks, this isn't about trying to time the market. It's about finding the best opportunities in stocks, and the stakes could not be higher.

[00:03:52]Investing is so often a battle against your own emotions. The market has a way of making you feel overconfident at exactly the wrong time and then terrified at another. Case in point, investors had given up on Netflix for dead in 2022 and were stampeding for the exits just before an 800% return over the next 3 years.

[00:04:11]And then we all remember GameStop, right? By mid-2022, investors assumed it could only run higher. The biggest opportunities and the biggest mistakes happen when your emotions become stronger than the facts. That next stock now in peak greed and where you should be a little worried is Molina Healthcare, ticker MOH, up an amazing 70% since March, but this is where that chart can be deceptive. And we see here Molina still under its top at around $400 a share and think this one could have a lot further to go. But this is where you can use that RSI signal. See that it's as high as 76 recently and again, anything over 70 here implies that the stock may have gone up too far too fast. So, you see that RSI and you need to start questioning the upside here against the risks.

[00:04:56]Here is a company in the healthcare services under Medicaid and Medicare, so very dependent on government reimbursements, which is always risky around elections and isn't a high-growth business anyway. Expected to see revenue shrink 2% this year and grow just 7% next year.

[00:05:11]Earnings are expected to halve this year to $5 a share, but even if they rebound back up to $10 or $11 a share in profits, this stock is getting very expensive.

[00:05:21]Here we see investors are paying $46 for every dollar of forecasted earnings this year. That's the PE ratio, the price to earnings. That's the $232 share price divided by roughly $5 a share in earnings expected.

[00:05:34]Even if profits were to jump back up to that $11 a share, stock is still at 21 times on that PE basis, which is way more expensive than it has been traded in the past.

[00:05:44]And folks, managed healthcare is not a high-growth industry, and cash flows are pretty easy to predict. This isn't a stock that should be getting investors excited, but that bump in the price has gotten greed and that exuberance running, but the downside risk is just building up.

[00:06:00]Now, looking for these signals in RSI is easy enough with most stock screeners, or you can just check the RSI on your stocks. Remember, anything under 30 is a sign of extreme fear in the shares, while above 70 means greed might have gone too far.

[00:06:14]Looking through the results though on a screener, I like to use this along with revenue growth and the PE ratio, that measure of value, just to see if there's a reason investors are excited and how expensive the stock has gotten.

[00:06:25]Now, another signal I watch for is the 52-week highs and lows. Here with medical device maker Boston Scientific, ticker BSX, plunging 58% over the last year and at a new low. Again though, nation, very important here, a couple of points to make that you're not just buying a stock because it's fallen so far. We want to use these as a signal to start our research to find the stocks that Wall Street has gotten wrong.

[00:06:47]Now, also though, even when you've found that stock that is sold off in fear that should be higher, you need to have the patience for that truth to come out. An example here, when I started talking about SoFi Technologies, ticker SOFI, in 2023, it hadn't gone anywhere but down and it crashed more than 70% in the year before. Now, I researched the hell out of that stock, recommending it as the next big fintech bank, but the shares still went nowhere for another year. I stuck with it though. I had the confidence in my research and ended up booking a 300% return, taking profits late last year.

[00:07:21]Ladies and gents, this is key if you want to be a successful investor. I see people rush to troll the comments every video if a stock I recommended hasn't made them rich overnight.

[00:07:30]Investing in these kinds of peak fear and value stocks, you have got to be ready to be uncomfortable in the short term. You need to be ready to wait for Wall Street to catch on to your analysis, or you're just going to end up panic selling before it rebounds. In BSX, I see a world-class medical device maker that has been the victim of its own success.

[00:07:50]At its peak, the stock had surged 155% on growth from new products and just became the healthcare stock to buy. Now, revenue growth has come back down to about 8% annually from that 16% pace last year. The business didn't change, expectations did, but the company is still growing.

[00:08:08]Even better is that management is leveraging that 8% revenue growth into higher 10% earnings growth. At its peak here, we see greedy investors were paying $80 for every dollar in earnings just to buy a share of this company. On lower growth forecast, that is wildly expensive, but the company always has a strong pipeline of products in development is going to keep that 8% growth pace.

[00:08:30]Now trading for a P/E ratio of just 12 times that $3.36 profits expected this year, that is deep value territory and ready to buy. We've got a stock hitting peak greed next, but some of you have noticed the new chair, so I wanted to thank E-Win Racing for sending it out.

[00:08:46]It's weird. I was telling Michael I needed a new office chair, and the next day E-Win reaches out for the offer. I got the Flash XL upgrade, a super comfortable PU leather with memory foam back support and head pillow.

[00:08:58]Uh the one thing I did find out though is this is the XL chair, and your bowtie brother here is neither X nor L, just reaching about 5'7, so I'll probably give this one to Michael and get the Champion series for myself, which is a little bit closer fit.

[00:09:11]Check out both though, and E-Win always has some great discounts on their site.

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[00:09:20]Back to our list, and at the top of its 52-week price range, what could be the peak greed here? It's railroad operator CSX Corporation, ticker CSX, up 47% over the last year.

[00:09:31]That upside has been from booming gas prices and fees for trucking pushing companies to shift to railroads as an alternative. The problem here, folks, is the market isn't pricing in CSX for tomorrow's earnings. It's pricing it in as if today's shipping problems last forever, and that just isn't going to happen.

[00:09:49]Revenue is expected up 8% in the last quarter on that increase in customers, but look at what happens next year when it's likely that gas prices have come back down.

[00:09:58]Revenue growth is expected to fall to just under 5% a year. And that could be exactly what we saw with Boston Scientific, investors excited about a temporary revenue boom, then disappointed when reality returns.

[00:10:11]The investor excitement and expectations, though, have pushed this stock up to a price of 30 times its reported earnings, almost twice as expensive as the 16x valuation it traded at in March of last year. And way too expensive for an old-school transportation company.

[00:10:26]Now, one of my favorite fear signals is next, but finding these 52-week signals is just as easy as the RSI with any screener. You'll usually see a filter like 52-week range and can screen for stocks at the high or low end here. If we filter for those within 0 to 3% of their 52-week range, we find the fear stocks near the bottom. And here again, I'm looking for those with still solid revenue growth and low valuations.

[00:10:49]If then we filter for those stocks within 98 and 100% of the range, we find the greed stocks at the top, and I'm avoiding any that don't have that growth that justifies these highs.

[00:10:59]And that third fear signal, one that can flip to a massive boost in the shares, we see in Tempest AI, ticker TEM, which is flat over the last year, but where fear is still gripping this stock.

[00:11:10]And here we're looking for the short interest in a stock. That's the percentage of the company's shares that are borrowed and sold short by investors betting the stock price is going to fall.

[00:11:19]I'll show you how to find it, but here in the statistics tab on Yahoo Finance, we see short percentage of almost 34% for Tempest. More than a third of the company's shares are borrowed and sold short.

[00:11:31]That's important because eventually those investors that borrowed all those shares to sell will need to buy them back so they can return the loan.

[00:11:38]If that happens all at once, it's called a short squeeze and can force the stock price to skyrocket. Most stock screeners will have an easy short interest filter.

[00:11:47]I'd start lower, maybe around 20% short interested, work up until you narrow down the list. Then researching the companies with the strong revenue growth of 20% and higher.

[00:11:57]And what we're looking for here is not only a high percentage of that stock shorted, something like 20% or more, but also a high percentage held by insiders and institutional investors. Here we see 94% of the stock is held by insiders and those big money buyers.

[00:12:12]Now, those investors don't sell often, so ask yourself this, what happens when the price does start heading higher on any good news? Where are all those short sellers going to find the 33 million shares that they need to buy back to cover their loans?

[00:12:25]And the insiders and institutionals probably won't be selling, so it leaves a very limited number of shares available in the market. And the stock is going to boom if those short sellers are all forced to buy back fast.

[00:12:38]And this company is at the forefront of the shift to AI in healthcare information and is posting solid revenue growth of 20% plus this year and next.

[00:12:46]It's not profitable yet, but has enough cash to push through until it is.

[00:12:51]And Tempus has another upside catalyst going for it. I highlighted buying by both President Trump and Nancy Pelosi in a video last week. Pelosi bought call options worth 5,000 shares in January, while Trump also started buying this year. And these two agree on nothing else, but they agree on 10 stocks that they're buying. So, I'm going to link to that video below. Make sure you check that out.

[00:13:12]Check out that video, the 10 stocks Nancy Pelosi and President Trump are buying now. Don't forget to join the Let's Talk Money community by tapping that subscribe button and clicking the bell notification.