The stock market has manage to rally its way through May, putting fears of a "Sell in May, Go Away" phenomenon to rest. But if yesterday’s trading activity tells you anything, it’s that we’re not out of the water just yet. With the S&P 500 on track to post its seventh monthly rise in a row, many talking heads have been throwing around the "B-word" more than ever—bubble. In fact, a recent MarketWatch article found that tweets containing the keyword "bubble" have soared nearly tenfold in the past month alone!
So clearly there is speculation that the Fed’s asset repurchases are artificially propping up the market. While I don’t believe the money pump will be shut off anytime soon, as we saw yesterday, even just a hint of dissention in the Fed causes choppiness in the market. So this may make for an interesting summer.
Does this mean that now is the time to get out?
Not by a long shot. Let me tell you: the stock market is not the enemy. The real enemy is fear. It makes investors buy and sell at the worst possible times.
So instead of cashing out completely, the best way to prepare for seasonal volatility is by realigning your portfolio for maximum performance. If you want to avoid many of the headaches that come with summer trading, start by trimming the dead weight in your portfolio. Ensure smooth and steady returns by sticking with more conservative stocks.
And you can do this by checking your stocks in Portfolio Grader. When you run your holdings through this screening tool, take note of each stock’s Quantitative Grade (the current level of institutional buying pressure) and each stock’s Fundamental Grade (a weighted blend of eight financial metrics). Also check which of your stocks are rated as Conservative, Moderately Aggressive or Aggressive. Shoot to have 60% of your holdings in Conservative stocks, 30% in Moderately Aggressive and 10% in Aggressive.
I can’t stress this last point enough because aggressive stocks are the first one to take a beating in a correction, so you’ll want to limit your exposure to these “spicier” stocks. To get you started, here are 10 aggressively-rated stocks you’ll want to steer clear of in the coming months.
|ABX||Barrick Gold Corp.||F||D||F|
|CTXS||Citrix Systems Inc.||F||C||F|
|INFY||Infosys Ltd. ADR||D||C||D|
|NEM||Newmont Mining Corp.||F||C||F|
|NOK||Nokia Corp. (ADR)||D||D||D|
|TTM||Tata Motors Ltd. ADS||D||C||D|
|WIT||Wipro Ltd. ADS||F||C||D|
P.S.: Next month, I will be speaking at the San Diego Marriott La Jolla in La Jolla, California, on June 5 at 7 p.m. and then at the Irvine Marriott in Irvine, California, on June 6 at 7 p.m. You may attend at no cost, but please call 800-454-1395 to register. I will review where investors can achieve the highest yields in both bonds and stocks, as well my current market outlook, favorite stock picks and have an extensive question-and-answer session.