With a second round of stimulus checks on the way, which stocks could see a boost from Americans having some more cash on hand?
Direct payments of $600 started going out across the country on Tuesday, Treasury Secretary Steve Mnuchin wrote on Twitter. The move came shortly after Senate Majority Leader Mitch McConnell blocked an attempt by Senate Minority Leader Chuck Schumer to pass a bill raising them to $2,000 per person, an amount requested by President Donald Trump.
One trader expected recipients to turn to the market. Data from May showed that investing in securities was one of the most common uses for the last round of stimulus checks across almost all income brackets.
“Where are the Robinhoodies going to invest their newfound wealth?” Mark Tepper, president and CEO of Strategic Wealth Partners, asked on CNBC’s “Trading Nation.”
“Of course they’re going to buy a 10th of a share of Tesla. Of course they’re going to buy a sliver of bitcoin. They’re not going to move the large institutional names, but they can move the small-cap names,” he said Tuesday.
Tepper had his eye on the stock of Silvergate Capital, which calls itself “the leading bank for innovative businesses in fintech and cryptocurrency.”
Calling it “a derivative play on bitcoin,” Tepper emphasized that Silvergate is “not your grandparents’ bank.”
“You can just go to their website. It looks more like a tech company than a stodgy old bank and they serve all the clients that no other banks want to touch — fintech and digital currency companies like Coinbase and Kraken, big-time companies,” Tepper said.
“Maybe in the past, you’ve thought, ‘Well, I want to invest in crypto, but I’m worried about the lack of regulation.’ Well, here’s your answer,” he said. “You get the best of both worlds because it is a bank.”
Shares of Silvergate have climbed over 336% year to date, with a majority of the surge happening in the fourth quarter. The stock plunged briefly in Tuesday’s trading session, but recovered to close up nearly 4%.
“With Silvergate, in my opinion, you’re getting a great company here in a brand-new industry with a huge first-mover advantage. I think this thing’s got a long runway over the next few years,” Tepper said.
Investors could also go for more popular stocks that stand to benefit from greater retail consumption, said Bill Baruch, founder and president of Blue Line Capital and Blue Line Futures.
“I like things that are working and going higher and making new record highs,” he told “Trading Nation,” pointing to a chart of Apple, which hit a fresh all-time high in Tuesday’s session.
“There’s no doubt in my mind that they’re going to benefit from stimulus checks,” Baruch said. “You get a stock split like we’ve seen here earlier this year, and it really leads the way to gains of 20-30% over the next year. And that really gets close to aligning with what my target to the upside is over a little bit of an intermediate to longer term of $170 for Apple. So, I’m going to stick with Apple.”
He also flagged the stock of video game maker Activision Blizzard, which has hit highs not seen since the 1980s.
“[There’s] no doubt in my mind that you’re going to see money go into those, especially in lockdowns,” Baruch said. “On a technical basis, it is breaking out and I think we could see that stock get up to $105 … in very the next couple weeks.”
Activision shares closed on Tuesday at $91.37.
“I’m looking for that one to really benefit and move here in the very near term,” Baruch said.
Disclosure: Tepper owns shares of Silvergate Capital. Baruch owns shares of Activision Blizzard.
