In a troubled, volatile market, there’s one key thing we have in our corner: my proprietary Quantitative Grade, which reveals the stocks that are “in demand” on Wall Street…and the ones that decidedly are not.
That is, in fact, the single biggest factor in a stock’s long-term success or failure. Today, I’d like to make very clear the amazing impact it has for bear-market investors who target stocks that meet this criteria.
Even during bull market conditions investors get mediocre returns – again and again. In more than 40 years of investing, I’ve seen it happen many times. But you can beat the market for even bigger gains with the right investing strategy.
In a bear market, it’s downright crucial to choose your stocks wisely! Money always has to go somewhere…and the bond market has very little to offer, at this point, with yields that are ultra-low – even negative, in some cases. So, capital will flow into the high-quality stocks that can deliver growth in a difficult economy. Other stocks will be largely abandoned for months or years.
When we’re talking about the stocks that are in great demand among money managers, market analysts like to describe them as “under accumulation.”
Think of it like this: My proprietary system can “x-ray” the market and see stocks that are under heavy buying pressure, or accumulation… just like the unseen pressure building in an underground hot spring.
That was just as true in the last bear market as it was in the 10-year bull market that followed.
For example, a month and a half after the 2008 crash, a natural-gas fracking company called Southwestern Energy (SWN) was registering extraordinary fundamental qualities, like major earnings growth, expanding profit margins, and strong returns on equity. It also began registering very strong institutional buying pressure.
I recommended SWN stock on November 17, 2008; as you see below, it didn’t go straight up thereafter, but it did produce a 39% return by March 2010.
Or take Ebix (EBIX), for example. This B2B software company serves clients in everything from insurance to healthcare to online education.
In early March 2009, more than six months into the bear market, EBIX had something many stocks didn’t: incredible fundamental ratings along with strong institutional buying pressure ratings.
We were about a month away from the next bull market – but do you recall that the bear-market low actually occurred on March 6, 2009? That was the very day I recommended EBIX stock. One year later, we cashed out for a 187% profit!
By this point, you might be wondering exactly how we spot stocks under heavy accumulation by big money managers.
The analytical model behind my Quantitative Score is actually pretty simple. Let me give you a breakdown of exactly how it works. Let’s start with a key financial concept: alpha.
Alpha measures the performance of an investment against a market benchmark like the S&P 500. The investment’s return relative to the benchmark’s return is the investment’s “alpha.”
Alpha is quoted as a number. For example, if the S&P 500 rises 10% in a given year and a stock rises 12% during that same time, the stock has an alpha of 2. If the S&P rises 20% and the stock rises 25%, the stock has an alpha of 5.
Our proprietary system scans the market for stocks with alpha. We find stocks that tend to rise more than the market. But we don’t stop there. To base my recommendations only on alpha is far too risky, and I see no need to take on that extra risk.
You see, many stocks that exhibit alpha (or “beat the market”) are more volatile than the broad market. You’ve probably been told that in order to make market-beating gains, you have to take bigger risks and accept more volatility. But that’s just not true.
My research has shown that some extraordinary stocks beat the broad market while at the same time are LESS volatile than the broad market. These extraordinary stocks are things of beauty because they offer bigger returns, but with less volatility.
I rank stocks according to a combination of alpha and volatility. Those stocks that are going up the most with the least volatility are ranked the highest. Obviously, only the stocks that are enjoying very strong institutional buying pressure can manage to both beat the market AND be less volatile than the overall market. Only constantly flowing rivers of capital can allow stocks to behave this way.
Right now, SWN and EBIX are not on my list; this is a very different bear market than 2008-2009. I’m finding growth opportunities elsewhere – in niche industries like Chinese e-retail and oil tanker companies. Click here if you’d like to learn everything I’m recommending for growth investors at this time.
When an elite stock with incredible fundamentals and strong buying pressure reports earnings, that report often acts as the “catalyst” that draws in more buyers and sets off big price runs. (That’s why I’m so keen to see results, guidance and analyst revisions before I give the “all-clear” for growth investors to jump feet first into the market.)
This same analysis led me to recommend shares of Marvel Entertainment, the comic-book franchise now owned by Walt Disney Co. (DIS), at the end of October 2008. The stock gained 49% by September 2009.
My Portfolio Grader then identified buying pressure in Baytex Energy (BTE). I recommended it in December 2008. The stock then soared 61% for us in just five months.
My buying pressure analysis also led me to recommend Interoil stock to readers on March 6, 2009. The stock delivered us a 148% profit by the end of May 2010.
Considering that the broad market’s long-term (inflation-adjusted) return is around 7% per year, you can see how powerful these hyper-growth stocks are.
If you make 7% per year, it will take you about 10 years to double your money. A high-quality growth stock in “geyser” phase can double your money in six months. These stocks put you in wealth creation’s express lane.
That, in a nutshell, is the philosophy behind all of my stock picks, including the Model Portfolio I run at Platinum Growth Club.
And I can’t emphasize it enough: Earnings drive stock prices. The reason these stocks can attract big money on Wall Street and deliver such large returns is because they have such strongest earnings growth. I call these stocks the “crème de la crème.”
Growing companies are ones that are healthy and thriving. They have smart leaders who know how to run and manage a smart business. I don’t let any other stocks into, for example, my Platinum Growth Club Model Portfolio.
And I very much expect for us to be rewarded for that in this narrow stock market, with sharp contrasts between winners and losers.
Now, narrowing did happen at times during the 10-year bull market as well. We’ve weathered “earnings recession” and all sorts of scares before. And by sticking with my system, we found the best-of-the-best stocks.
I’ll keep recommending that to anyone who will listen. And as a result, I’m confident in expecting 45 double- or triple-digit winners in 2020. Not just because we had that in 2019, a year of all-time highs. But because we had even MORE of them in each of the 15 years previously.
If you’re a growth investor who’d like to follow my lead, then wait for the companies to release earnings and, preferably, forward guidance, too. Good stocks will bounce, as they always do. If they don’t…then a good earnings report should give you the chance to sell into strength.
Note: I’ll be fine-tuning my Platinum Growth Club Model Portfolio accordingly. So, if you try us out now, you’ll get that hand-picked list, plus invites to my VIP Chats. (I’ve also been recording podcasts constantly in this crazy market for subscribers to Platinum Growth Club and ALL my services.)