Do You Own These 10 Powerful Stocks?

Do You Own These 10 Powerful Stocks?

By Michael Salvatore, Editor, TradeSmith Daily

In This Digest:

This will be the worst investing “secret” you’ve ever heard…

It will sound way too simple. You may audibly scoff. You may even angry-scroll your way down to the “unsubscribe” button and never read this newsletter ever again.

That would be a mistake.

Because, simple as it is, most investors don’t follow this secret and won’t even after they hear it. That gives you an inherent edge that you should leverage.

Ready?

Buy fundamentally healthy companies…

…that go up.

This last point is where investors screw up.

They read too much Peter Lynch and Warren Buffett and decide the best stocks to buy are the fundamentally healthy companies that are “cheap” or, worse, getting cheaper.

The problem is they stop there and neglect the second crucial piece.

Buying healthy, cheap stocks that don’t go up a good way to end up lagging the market… And if you’re making a serious effort at investing and end up lagging the market, you’re just spinning your wheels.

A lot like the stocks that don’t go up.

There are so many fundamentally “healthy” companies that don’t go up. Look at my favorite punching bag, Intel (INTC), for the proof. It’s roughly at the same price as it was more than 25 years ago. This despite being the predominant CPU company in the world.

Look at Ford Motor (F). Household name. Profitable, cheap, got a dividend… yup. Also over 30 years of zero price action. I could’ve bought F as a newborn and still be disappointed today.

Shout “dividends!” if you like. But then go adjust them for inflation and tell me how much money you really made without the stock going up.

Long-term duds are the worst kind of duds. They waste your money and decades of your time.

So we deliberately design systems at TradeSmith that avoid them…

One of them is our Power Factor Rankings.

These are the stocks that are A) fundamentally healthy, but also importantly B) growing their business and C) growing their share price.

A/B/C are the Power Factors every investor must brand into their brain. We composited them into a score to make it easy to do that.

I get a report every day that shows me the top Power Factor quality ranking, anything above 60, with a twist… They’re also trading at a one-month high.

Funny thing about stocks trading at one-month highs in a bull market…

They tend to beat the market. By a lot.

Here’s the most recent Top 10 Power Rankings in my inbox. Look at the “One Month High” and “Past Year Gain%” columns, the latter of which this list is sorted by:

All of these stocks have beaten the market over the last year. They also rate well… and have had big moves over the past month.

You can also think about the top stocks as the serious, growthy outperformers… and those closer to the bottom, with smaller past-year gains, as those that are breaking out.

Do you own any of them? If so, congrats. If not, consider looking into them.

And if you want a constant stream of the best of the best Power Factor stocks, look into what Jason Bodner is doing at Quantum Edge Pro.

Jason takes names like the ones above and then checks for institutional-scale money flows, focusing on small- and mid-cap stocks. Those are the names to own in a new Trump presidency, for reasons we’ve discussed. And Jason’s all over the top names, recommending them to his subscribers.

More details on a membership here.

Now’s a good time to go shopping…

You might’ve noticed stocks are down a touch over the last few days, working off their post-election excesses.

We can zoom out and see the roots of this price action. It actually charts all the way back to the midyear correction… and the November 2023 bottom:

Back in August, stocks broke down through support established in November of last year and reinforced in April.

Then they found support at the April highs and have since established a new uptrend.

The previous November-based support, however, has acted as resistance. And SPY turned down from that resistance this week.

If we continue lower today, the lower bound (and target) is around $580 per share on the SPDR S&P 500 ETF (SPY).

The Relative Strength Index (RSI) gives us another clue here. We’re forming a lower high on the RSI despite stock prices being much higher than they were in July. In other words, momentum is fading.

Finally, there’s seasonal strength to contend with. We’re at one of the historically best periods for returns all year. But what we also have to consider is just how choppy that period tends to be:

SPY has returned on average of 5.57% from Oct. 25 to Dec. 9, with gains in each of the past seven election years.

But just look at the averaged-out price action. That’s a lot of chop. And the next trip has been lower… with the nadir at next Thursday, Nov. 21.

If you’re cautious of this, you want to raise some cash today and get ready to buy later next week. Because, as you can see, the next moves are much higher.

Inflation worries have reared their head again…

The inflation data this week was not so good.

The “core” Consumer Price Index (which excludes food and energy prices) rose 0.3% for the third month straight, marking a 3.6% annualized rate of increase. That’s actually rising faster than the broader Consumer Price Index.

The less-watched Producer Price Index was up too, by 2.4% from last year. And the sans-food-and-energy measure is clocking an annualized rate of 3%.

This tracks with our theory that inflation is finding a floor well above the Federal Reserve’s 2% goal. And the fact that the Fed is still cutting rates into this sticky inflation basically confirms that its third mandate, managing government debt, is taking priority over its stated dual mandate of price stability and full employment.

That brings me to the most important chart in the market, 10-year Treasury yields:

Observe the very clear uptrend in 10-year yields beginning right when the Fed began cutting rates in September. Ten-year yields are up 80 basis points since then, an invalidation of the Fed’s short-term rate cuts of 75 points so far.

Investors know that the Fed is trading inflation pain for economic gain and, most importantly, government solvency. That’s why they’re demanding higher real yields on government debt for the next 10 years.

The key takeaway is we should buckle up for more inflation. The odds are strong, especially with some of the key policy proposals of the incoming administration, that inflation will remain stubbornly high for many years.

But be aware: Gold isn’t the best inflation hedge…

It may not even be a very good one.

Look at this modified chart of the above:

Investors aren’t flocking to gold to protect them from inflation.

They’re flocking to productive businesses, small-cap and tech businesses especially, for protection.

None of these trades has been as good as shorting long-term Treasurys. But stocks are very good and far simpler.

And we should acknowledge we’re talking about benchmarks here. Individual stocks can and do go much higher, much faster, all the time.

These are the market-leading stocks you have to own. And it’s especially important when inflation is reigniting and stocks are the clear answer to that problem.

Over at our corporate partner InvestorPlace, 40-year quantitative stockpicking veteran Louis Navellier shares a strategy he designed to help you identify market-leading stocks.

Stock this powerful can post incredible long-term gains AND short-term gains. That’s what momentum is all about.

This system is so crucial to investing today, we’re integrating it into our software platform TradeSmith Finance so you can trade these signals yourself.

Louis’ system is tailor-made for the time we’re in right now.

And recently, TradeSmith CEO Keith Kaplan sat down with Louis to give a presentation all about why.

Watch it right here.

To your health and wealth,

Michael Salvatore
Editor, TradeSmith Daily

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