Good Stocks: Value Stocks Usually Fall under this category

good stocks

One would assume that individuals would be happy to invest in companies with solid fundamentals. One example among many companies is McCormick & Company, Incorporated (MKC). Business is Booming. In fact, they can’t keep up with demand, and yet, the stock is a laggard. It appears that market players want turbocharged results. They let their greed direct the companies they invest their money into. This phenomenon has always been present to some degree, but now it is being embraced hook, line and sinker. This story will have a horrible ending. But until that time, it also means that there will be some spectacular gains made by astute and disciplined investors. When this market eventually crashes, millions of paper multimillionaires will be reduced to dust. Only when these chaps lose it all will they realise the folly of their ways.

Higher quality stocks are trading at their largest valuation discount to the broad market since the dot com bubble of the early 2000s (see chart below), BlackRock CIO of US fundamental equities Tony DeSpirito said in a new research note. DeSpirito defines high-quality stocks as those of companies that generate profits and sport pricing power (so obviously, this excludes Special Purpose Acquisition Companies or SPACs). The companies manage their balance sheets and cash flows effectively, demonstrate strong accounting credibility and return capital to shareholders in a disciplined manner (most likely through dividends). Interestingly, despite the impressive fundamental features of high-quality companies, the stocks themselves have sucked wind going on for nine months.

DeSpirito’s research shows that quality stocks have underperformed since COVID-19 vaccine announcements came to the fore back in November 2020, sending their valuations lower. Instead of paying up to own quality companies amidst a global economic recovery (ones that could lift their dividends and share repurchase plans because of the macro rebound), investors have largely avoided or sold these stocks in favour of riskier bets that produced strong gains early in the recovery.


Good Stocks Buying Strategy

View volatility through a bullish lens as long as the trend is up. We are fast reaching the point where 4500-point pullbacks in the Dow will have to be viewed as minor aberrations. Once upon a time, anyone making such a statement would be considered to be a nut case.

Secondly and more importantly, only get into stocks you like. Why is this important? Because you don’t want to sit up at night asking yourself, oh, why the hell did I buy this crap the moment you start to feel some pain. In other words, don’t base your stock purchases on some silly expert like Cathie Wood or anyone else that is hyping a stock it does not fall under the good stocks category. If that is the only reason you are jumping into an investment, don’t cry when you notice you are missing a finger or two. Buying a stock based on hype is the same thing as chasing a stock. The outcome is almost always unpleasant. And at the Tactical Investor, we never ever chase a stock. There will never be an exception to this rule. Perhaps one exception, if they came out with a stupidity index that we could invest in. We would alter our views, for stupidity has been in a perpetual bull market.

One needs to understand that there will be times when some of your holdings will be down by 30% or more. But as we never deploy all our funds in one shot, if we are down 30%, we will view it as an opportunity to purchase even more shares. We have utilised this strategy very successfully over the years. The last time we actively put this strategy into play was during the COVID crash.

No market trends upwards in a straight line and the vast majority of today’s market participants are mindless momentum players. They use apps that gamify the experience. The gamification factor makes it all seem cool and fun, and yes, initially, it is fun. It will create a lot of paper millionaires, but very few will cash out in time. Greed knows no limits. When people who don’t know what they are doing think they know what they are doing, a whole world of pain waits for them. In the interim, these participants will drive volatility levels higher, which is why we are providing an advance warning that 4500-point pullbacks should be viewed as a non-event. Many traders will mistake these pullbacks for crashes and short the markets, and lose a fortune in the process.

It is pretty interesting to see so many individuals in the neutral camp. With the market surging to new highs, bullish sentiment should be north of 50, and Neutral readings should be below 25.00. This illustrates just how completely out of whack things are in the market today. The only thing that will provide the average player with an edge is Mass Psychology. One day there will be stories written about those morons chasing meme stocks and the Reddit groups that thought they were changing the landscape, but in the end, 90% of them will bite the dust. For the record, one of the reasons the SEC is not doing much about these Reddit Groups is because they are inadvertently helping speed up the demise of the Hedge fund industry. We stated a few years ago that the financial sector would be in for a world of hurt. Eventually, every industry that tried to squeeze their customers will face a severe backlash.

We will be cutting stocks from our pending plays lists faster due to the trend changes discussed above.

Other Articles of Interest

Splendid stock returns without 50/50 stock bond portfolio

Experts like Morgan Stanley and Barclays bank state investors should look forward to low returns only going forward.  These claims are ...
Read More

How to win in any market: 9 rules for success

Investing is not rocket science though many would have you believe this in essence it comes down to having mastery ...
Read More
stock market Trend

The Nyse Composite Index is signalling higher prices

Don't ever take a fence down until you know why it was put up. Robert Frost Updated July 2020 The ...
Read More

Dirty House of Saud, Cry baby Bibi, Insane Fed

After Oil House of Saud's Chief export is Terror “Everybody’s worried about stopping terrorism. Well, there’s a really easy way: ...
Read More

Denmark Anti-immigrant Ads and U.S. helpless against Russian hardware

Denmark places anti-migrant adverts in Lebanon newspapers warning that benefits will be cut by 50% and asylum Denmark has placed ...
Read More

Record corporate debt and China catches America off guard

Record $253bn in long-dated debt issued this year International companies and governments worldwide are issuing record sums of long-dated debt ...
Read More

IRS thieves, Wall Street Gangsters and Cyber gas thieves

IRS says thieves used agency website to steal tax info from additional 220,000 taxpayers An additional 220,000 potential victims had ...
Read More

Dr Copper, economy and stock markets no longer dance to the same beat

He who thinks he is raising a mound may only, in reality, be digging a pit. Ernest Bramah   Dr ...
Read More

Is Crude oil headed higher or lower?

All this talk and turmoil and noise and movement and desire is outside of the veil; within the veil is ...
Read More

Britain needs to leave the EU

‘The eurozone is a complete disaster and Britain needs to leave the EU’ Youths supporting the Greek Communist party burn ...
Read More

Micro apartments; China, Russia seeking their own Internet

Micro-apartments: a new concept in New York New York (AFP) - New York, a city of exorbitant rents with more ...
Read More

U.S. backed Coup in Ukraine, China wins, Russia resists and Insane McCain

U.S. backed Coup in Ukraine, China wins, Russia resists and Insane McCain McCain Joins Bolton, Invites Israel to Bomb Iran ...
Read More

what is the stock market doing today

What is the stock market doing today? May 2020 Update  One thing to keep in mind is when the coronavirus ...
Read More
Hurricane Matthew

Volatility Indicator & Market Trends

Volatility  Indicator This indicator is a measure of volatility.  It’s not like the VIX or any other indicator that simply ...
Read More
Google Finance

Google Finance: What’s The Long Term Outlook For Google

Google Finance:  Price Projections For 2020 Before we examine where GOOGL will be trending in 2020 and beyond, let's quickly look ...
Read More
Biotech ABMD

ABMD Stock Price Forecast for 2020 & Next Few Years

To believe in one's dreams is to spend all of one's life asleep Chinese Proverb ABMD Stock Price Forecast Let's ...
Read More
CHKP Stock Price Target

CHKP Stock Price Target: What To Expect From CHKP in 2020

Move on for it takes very little effort to stand still and do nothing. Sol Palha  CHKP Stock Price Target ...
Read More