Have you ever heard of Black Monday? If you’re a big football fan like me, then it’s probably a day you watch very closely. If not, then trust me: Black Monday (yesterday) is just as ominous as it sounds. Put simply, this is the day that NFL upper management will start firing just about any underperformers – and no player or coach is safe. It’s a firing bloodbath!
This happens because football management wants to “fine-tune” its team for the next year by cutting any underperformers and adding new talent. Then, hopefully, they’ve put together a team so good that it’ll make it to the playoffs, and even the Super Bowl.
If you think about it, investors do the exact same thing. We watch our stocks, see how they performed throughout the year, and then sell off any laggards to reduce our tax burden and, most importantly, position ourselves for big profits for the next year. This may mean cutting the poor performers, scooping up new stocks or adding to current positions. We just don’t dedicate one day to that.
Now, while this was a strong year for the stock market, not every stock was a winner. Five of the very worst performers were Adamas Pharmaceuticals (ADMS, -56%), Abiomed (ABMD, -48%), ANGI Homeservices (ANGI, -47%), TripAdvisor (TRIP, -44%) and Macy’s (M, -43%). In comparison, the S&P 500 and Dow ended the year up about 28% and 21%, respectively.
The chart below sums the performance up well here.
If we were playing “investing Black Monday,” these stocks would be cut from investors’ rosters.
However, if you’d been tracking these stocks in my Portfolio Grader, then you would’ve known to stay far away from these stocks to begin with.
As you can see below, every stock is listed as Sell. (In fact, all but ADMS are Strong Sells.) They all earn an F-rating for their Quantitative Grade, which means that the “smart money” won’t touch these stocks, so buying pressure has all but dried up. These companies’ fundamentals are all very weak, too.
So, it’s no surprise the Total Portfolio Grade receives a measly D-rating, too.
Draft Day for 2020
Now, if you’ve been following me recently, then you know I expect 2020 to be a stunning year for the stock market. But, as I’ve shown you today, there will still be underperformers even in a strong market environment. And if you happen to invest in all of them, then you’re going to miss out on all the potential upside.
The bottom line: The Power Portfolio 2020 holds the winning stocks – ones with solid fundamentals, earnings and sales growth, and strong buying pressure. In other words, they’re well-positioned to benefit from next year’s burgeoning trends that are sure to keep them trekking higher throughout the year.I don’t want this to happen to you. So, I teamed up with my friend and InvestorPlace colleague Matt McCall to create the Power Portfolio 2020. Using Matt’s “top down and boots on the ground” approach and my quantitative analysis, we drafted 10 stocks that are sure to be in the playoffs next year. We added 9 stocks on December 10, plus a bonus pick on December 19. These stocks are off to an incredibly strong start, with one already up more than 15%!
Before I go, I want to wish you a safe and happy New Year! The stock market and InvestorPlace offices will be closed tomorrow, so I will be back in touch Thursday afternoon to talk more about my 2020 outlook.