The S&P 500 is set to squeak by with another winning session, maybe. Watch for comments from Fed Chairman Jerome Powell to come and another Treasury bond auction to see if anything gets in the way of that.<\/p>\n
We\u2019re working toward that time of year when Wall Street wizards start rolling out equity forecasts for the year to come. Based on where the S&P 500
\n SPX
\n stood on Wednesday, less than half are going to be right, though they\u2019ve got nine weeks to turn things around.<\/p>\n
Our call of the day<\/strong> comes from the founder of the long-biased hedge fund ValueWorks, Charles Lemonides, who expects stocks to struggle \u201cfor the next number of quarters at the very least,\u201d having been in the grips of a bear-market rally this year. <\/p>\n Not that such a set-up scares Lemonides, who manages $300 million at ValueWorks. <\/p>\n \u201cIf you can identify really good assets, and you can find them at 50 cents on the dollar, that\u2019s going to work out well over time,\u201d he told MarketWatch in a recent interview. \u201cBecause we\u2019ve been in this challenged environment for so long, the number of those things that are really mispriced is large, and the ability to look through them, and find the best among them, is great.\u201d<\/p>\n The manager hedges his bets with varied picks \u2014 \u201csecurity-specific and very distinct [from] one another.\u201d One of his favorite stocks right now is small-cap holding Hyster-Yale Materials His view on Hyster-Yale is that \u201cvaluation is going to support today\u2019s price, regardless,\u201d and for that same reason he owns chip maker Qualcomm Lemonides also owns a \u201chandful\u201d of senior debt securities in retail and banking \u2014 that\u2019s the least risky kind of debt to own because the company must repay that money first if it goes bankrupt. He notes the yields on those became \u201cvery, very compelling, and it\u2019s not that we want to buy the yield \u2026 but we think the yield will go back down to the 8% range and we get a 50% capital gain on the preferred stock.\u201d<\/p>\n He\u2019s also invested in Joby Aviation Making money on this comes down to \u201cbeing able to discern which of these are real and which of them are fake and which of them will survive and which have been ones where the economic story has been real and where it\u2019s not,\u201d he said. <\/p>\n \u201cSo even if we think the market will be facing a headwind over the next six to nine months, some of these names are going to hold up just fine, and some of them are making money in the near term,\u201d he said. \u201cAnd if it turns out that this is the beginning of a new bull market, these things will all rally by 15% to 25% in six months.\u201d<\/p>\n On the other side of the hedging equation, he\u2019s poised to profit via short positions in \u201ca wide array of different companies.\u201d Among those is aircraft-parts maker TransDigm Lemonides has a short position in revenue-cycle management group R1RCM And he thinks Envestnet He\u2019s also got a short position on Mister Car Wash \u201cIt\u2019s a fine idea, but we don\u2019t think it\u2019s a $2 billion idea. And the growth on the company has all happened because they bought car washes and sold the properties then leased them out, and that is going to wash out,\u201d he said. <\/p>\n That brings him to another reason to short those stocks \u2014 that investors running out of patience near year-end with companies whose share prices have dropped sharply over the past two years.<\/p>\n \u201cIf you paid $30 a share for Mister Car Wash and it\u2019s $5, the tax loss is worth more to you half the time than any upside in the stock. And so we think a lot of these will come under tax-law selling pressure coming into the middle of December,\u201d said Lemonides. <\/p>\n Also read: <\/strong>\u2018$4 trillion of cash is sloshing around the sidelines,\u2019 says BlackRock executive<\/p>\n And:<\/strong> Beware of Wall Street\u2019s cash on the sidelines myth<\/p>\n
\n HY,
\n
\n a lift-truck and after-market parts maker, that he says is anything but small, with \u201c$5 billion\u2013ish in sales,\u201d though it trades at three times peak earnings. <\/p>\n
\n QCOM,
\n
\n and banking heavyweight Goldman Sachs
\n GS,
\n
\n JOBY,
\n
\n which delivered its first electric air taxi to the U.S. Air Force in September. \u201cThat could be a very exciting long-term growth story and \u2026 you\u2019re buying it for significantly less than they\u2019ve invested in developing their aircraft over the past 10 years,\u201d he said, adding that Joby is showing up as the leader in its field.<\/p>\n
\n TDG,
\n
\n which he notes has a \u201cvery significant debt load, is very levered and trades 10 times sales enterprise value,\u201d a metric that compares the total value of the company with its sales. The valuation is simply out of whack, he says. (TransDigm just announced a deal to buy an aerospace parts maker for $1.4 billion.)<\/p>\n
\n RCM,
\n
\n which does billing for hospital chains. He sees trouble ahead in the next year, noting its share price has lost ground in the past two. \u201cThey\u2019re not really at scale \u2014 they\u2019re small and have been built through acquisitions, and so there\u2019s a decent amount of debt outstanding, and the basic business has been challenged over the past couple of years.\u201d <\/p>\n
\n ENV,
\n
\n currently at $37 per share, is headed for $20. The fintech, which earns fees by getting in the middle of the money-management business, was a market darling for seven years but has been hitting fresh lows, he says. Its operating results have stalled in the past two years along with markets, meaning they\u2019ve likely burned through a \u201csignificant\u201d pile of cash and, given hefty management turnover, will \u201csuffer in a tough market environment,\u201d said Lemonides.<\/p>\n
\n MCW,
\n
\n which has \u201cleveled up car washes across the country\u201d and whose \u201cspecial sauce\u201d is all about getting people to pay for subscriptions and clean vehicles more often.<\/p>\nThe markets<\/h2>\n