📈Recent Top Stock Performers
In reviewing the questions I get about the stock market the most common is: “Did the Stock Market bottom?” To answer that is too analyze using technical analysis and make an educated guess. Simply it’s the wrong question. We tend to simplify the questions we ask. Asking if we bottomed implies that if we bottomed stocks will simply push higher. The better question is to look at the current situation as a puzzle. The puzzle could be why are tech stocks underperforming or Why are home builders going higher. We then need to look for clues to answer that puzzle. If we can answer the puzzle then the probability of successful stock ideas increase exponentially. Over the years I have found those clues in previous periods. For example yesterday newsletter compared the significant similarities between 2H 2002 and 4Q 2022 to date.
Finding the ideas that are working gets much easier once you know what you are looking for. For example coming out of a rout investors seek stability. As GDP from India and China increase so will productivity.
Industrials do well in this environment BA and CAT are two names we are successful with and if the past is any indication we have a ways to go.
CAT was actually named by Goldman Sacs as one of the top stocks to have a positive earnings surprise. The recent weakness in the dollar helps industrials.
When coming out of a correction we see new leaders emerge. Those leaders usually have some kind of binary event that separates them from the pack. Inflows increasing move to these ideas. MDGL is a great example and one that still has a lot of potential
When the corrections happens they take everyone down. This presents opportunity in specialty companies. IDXX is a great example
For homebuilders we keep hearing about the impending crash yet past performance suggests something entirely different and why this sector is poised to rally significantly. TOL was our first addition.
Whether you call this a bear market, correction or a blueberry does not matter. What matters is understanding past cycles and how they can give indications to the present that can lead to outsized gains. Let everyone else analyze if and when the bottom will be. Focus instead on solving the puzzles you are able to solve. I hope this helps.
For more on why Homebuilders stocks could continue to rise watch the short clip below.
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Wishing Everyone Massive Success in 2023 🍾