Matt’s picks are outperforming … Don’t expect the recent “rising tide” market to continue in the second half of 2020 … A tool that can help alert investors to impending bear markets
We begin today’s Digest with a word of congratulations to Matt McCall’s Early Stage Investor subscribers.
They just saw another 100% gainer (and still climbing). This one from a personalized healthcare company.
For Digest readers less familiar, Early Stage Investor is where Matt find small stocks capitalizing on big trends.
This is often an explosive combination …
After all, a smaller company has one massive advantage over a huge company — it can grow exponentially faster … which can mean far greater, and far quicker, gains for investors.
So, when an industry-leading small cap meets the trillions of dollars sloshing through the economy based on one of tomorrow’s world-shaping trends (think precision medicine, 5G, and artificial intelligence), the resulting gains can transform a portfolio.
To illustrate, I’m looking at the sub-portfolio that hosts Matt’s latest 100%-gainer, named the “Future of Healthcare.” Every recommendation is up double digits …
47%, 79%, 101%, and 119%.
Or there’s Matt’s “Genetic Testing” sub-portfolio. With five positions, it’s up an average of 103%.
Then there’s his “Artificial Intelligence” portfolio with three recommendations, up an average 83%.
Keep in mind, most times, these gains aren’t requiring years to develop. We’re talking months, even weeks.
In fact, if we zero in on Matt’s “Crisis and Opportunity” sub-portfolio which he launched in April, two of those recommendations have already doubled. Two others are pushing 50% returns.
Now, yes, we’re thrilled that Matt’s subscribers are seeing this kind of success. But I highlight them for a different reason — to remind readers of a point we’ve been making recently in the Digest …
***“It’s not so much a stock market as it is a market of stocks”
The quote comes from our CEO, Brian Hunt.
Here it is in broader context …
Around the InvestorPlace offices, we often say, “It’s not so much a stock market as it is a market of stocks.”
We say this because the stock market is made up of many different industries and many different companies. Various economic climates affect industries differently. Something good for one industry isn’t necessarily good for another industry.
For example, the early stage of the coronavirus crisis was great for grocery stores because people rushed to stock up on food … but it was terrible for cruise line operators and airlines …
Instead of thinking of “the market” as a monolithic entity into which you put money, we prefer to focus our attention on individual industries and companies. There’s quite a lot happening behind the curtain we call the Dow Jones Industrials Average.
It’s this company-specific focus that has enabled Matt to find his winners in recent months.
Keep in mind, this doesn’t just mean avoiding sectors that are meandering sideways. This means finding specific stocks within high-flying sectors that are outperforming sector averages.
For example, below we take the ETF, BOTZ, which is the Global X Robotics & Artificial Intelligence ETF. Artificial Intelligence is a massive trend, as well as a hot investment sector today.
We compare BOTZ to one of the small-cap artificial intelligence picks in Matt’s “Crisis and Opportunity” sub-portfolio. The start date is April 15, when Matt made the recommendation.
While BOTZ, with its many AI holdings, is up a strong 29%, Matt’s pick is up 119%.
Again, this is since mid-April.
We’ll say it again — it’s not so much a stock market as it is a market of stocks.
But a word of caution …
As we head into the second half of the year, expect this differentiation to become even more pronounced.
***The coming divergence of stock fates
Everyone knows the market has enjoyed an historic rally in recent months.
Since its late-March low, the S&P has exploded nearly 45% higher before pulling back in recent sessions.
While select stocks have posted far greater returns (like many of the small caps Matt has recommended), this broad surge has benefitted a great many stocks — some of which may not have climbed as high were it not for the widespread rally.
JPMorgan Chase doesn’t believe this “rising tide” dynamic is going to continue as we move into the back-half of the year …
From yesterday in Bloomberg:
Investors should be more selective in the next six months as asset returns are likely to diverge because liquidity “cannot paper over specific weaknesses indefinitely,” according to JPMorgan Chase & Co.
An “indiscriminate approach” to a portfolio would largely have worked in April and May, when most financial assets rallied — a typical result at a turning point in the cycle, according to strategists led by John Normand in a June 19 note.
They cited extreme positioning and liquidity dynamics, plus central-bank asset purchases, as contributing to increased correlations when economies enter recessions and then move to expansions.
“But typically these high correlations mean-revert to their long-term averages within a few months, in part because the pace of quantitative easing slows and in turn allows country, sector and company-specific factors to reassert themselves,” the strategists wrote. The second half of 2020 “should bring this sort of differentiation.”
We could rephrase more simply and succinctly by quoting Warren Buffett:
It’s only when the tide goes out that you learn who has been swimming naked.
Yesterday, Federal Reserve Bank of Boston President Eric Rosengren echoed this cautious outlook on the rest of 2020.
He noted that our failure to contain the COVID-19 outbreak means the second half of 2020 may be “more difficult than many people are anticipating” where “the economy is growing more slowly than we might have hoped a few months ago.”
This is the type of market in which only the top-performing sectors and best stocks within them will continue to surge.
In fact, going back Bloomberg, here’s what JPMorgan is saying about where to put money:
In stocks, choose Covid-19 “endgame winners” such as technology, communications and health care, as opposed to a broad preference for cyclicals or defensive shares.
It’s almost like they’re reading from the Early Stage Investor playbook.
***Now, it’s one thing to be more selective about your stock-selection, but are there additional defensive steps an investor can take in case another major market decline is in store for 2020?
It turns out, yes.
From Matt:
By now, we’re all familiar with how COVID-19 has wreaked havoc on the markets …
Regular readers know that I view crisis times like these as ones of tremendous opportunity.
That’s why I want to introduce you to my friend and colleague, Keith Kaplan …
(Keith) uses a revolutionary tool to get in front of major market moves — and the tool has been dead-on accurate about this recent market — as well as every major bear market AND bull market going back roughly 20 years.
In a recent update, Matt went on to explain how Keith’s tool could have accurately alerted investors about the dotcom crash in 2001 … and it could have pinpointed the exact moment to get back into stocks in 2003, before the market started to rise again.
He says the tool also warned investors of the 2008 financial collapse before it happened, and then located the exact right time to get back into the market in 2009.
Back to Matt:
I know those are huge claims, but tens of thousands of investors subscribe to Keith’s research. And the proof is in the numbers …
Today, at 4 p.m. ET, Matt and Keith are holding a special, joint event to discuss this tool. There’s no obligation. Feel free to tune in just to get more information. Click here to reserve your seat.
As we wrap up, we can’t expect the same robust broad-market gains in the second half of 2020. But that doesn’t mean specific stocks like Matt’s small-cap winners can’t continue to soar.
And wouldn’t it be great to combine big gains with a tool that could help you sidestep big losses if the market does fall again? Join Matt and Keith today to learn how they’re doing it.
Here’s Matt with the final word:
If you have any money in the markets and are worried if you’re doing the right thing with your investments, then please join us for the event.
Have a good evening,
Jeff Remsburg
