The Dust Has Cleared – Here's a Great Group of Stocks to Watch | | BY Keith Kaplan
CEO, TradeSmith |
When I originally wrote this essay on Tuesday morning, I had to consider whether we’d even know who the president is by now. The memories of the 2020 election are still very fresh. But thankfully, we got a definitive result by this morning. Donald Trump will return to the White House to be our 47th president, the first instance of a second non-consecutive presidential term since Grover Cleveland in 1892. As you probably know, we don’t delve into politics very much at TradeSmith. We are, after all, a data-driven software and research company. Politics should only be considered to the extent that it impacts markets. So, if you’re here looking for a personal opinion on who won the presidency, I’ll have to disappoint you. I come from an era where folks kept those thoughts to themselves, and I aim to keep doing that. My mission, along with all of us at TradeSmith, is to use the data in front of us to help you succeed as an investor, no matter where you are in your journey. So, instead of the presidential election result, let’s talk about something you can actually control. That might sound controversial. But the truth is, individuals have very little ultimate say in what happens in government. You and I are just two people out of 150 million who voted yesterday. Don’t get me wrong, our choice mattered… just, in a very small way. What probably mattered more was the hundreds of millions of dollars each candidate raised for their campaigns. So, whether your “team” won today or lost, you really shouldn’t let it bother you. Life gets a lot easier when you only worry about the things you can control. Investing is the same way. Lately, there’s been a lot of what I can only call “anxiety” in markets. Our TradeSmith Fear and Greed gauge has been plummeting lately, down to 41 on Tuesday – from 63 last week and 77 last month:
The reason why is clear: People didn’t want to be overly exposed to risk ahead of Election Day. So, they cashed in some chips. That’s one way to stay in control – to de-risk. It’s just not what I would recommend. Selling assets out of fear or anxiety alone is plainly irrational. We have TradeStops to tell you the right time to do that, and TradeStops doesn’t change just because it’s election day. You can’t control whether a stock is going to go up or down – that is, unless you’re a multibillionaire with a penchant for micro-caps. So, there’s not much use worrying about it. But you can control where your hard-earned money goes in the first place. And that’s what I want to talk about today. How to Screen for Great Post-Election Buys A friend of mine and a close contact in our network, Louis Navellier, has spent his 40+ year career developing tools to make sure investors put their money into the right stocks. His work in quantitative research led him to develop a grade-based system. It combines a company’s growth rates, its technical momentum, and other key metrics. We recently integrated Louis’ system into our TradeSmith Finance analysis platform for anyone who subscribes to both his work and ours. And today, as I was patiently waiting for the election anxiety to finally evaporate, I realized it’s a great tool for taking back some agency in your investment plan. You may not know what the market will do tomorrow or how your portfolio will react. But you can know, with Louis’ system, that the stocks you hold are quality. Let me show you one cool way to use it… We recently integrated Louis’ Stock Grader system into our own Screener software. I love this change because it lets you filter for specific kinds of high-quality stocks to buy once the volatility subsides. Let’s set up a screener using Louis’ system, along with a few of our own. We’ll look for: Stocks that rate an A (Strong Buy) on Louis’ Stock Grader system. Dividend payers, so we’re getting a little income as part of our investment. Stocks with positive earnings, so a P/E ratio greater than zero Stocks in an uptrend, as determined by our Smart Moving Average. We’re also going to screen for mid-cap stocks since those, as Lucas Downey recently pointed out, tend to produce the best returns post-election. And finally, we’ll screen for stocks in the Green Zone, meaning they’re well above the level we should consider selling them. If you’re a TradeSmith subscriber and want to follow along, here’s how I set that up:
And here are the top 11 results. (Since the Fox A and B shares both appear in the list, this is essentially the top 10):
These are sorted by how recently these stocks entered the Green Zone, with the most recent breakouts at the top. I don’t know about you, but this looks like a big list of compelling buy opportunities to pounce on while the market struggles to decide if it’s scared or not. These stocks have all the stuff you want to look for. They’re uptrending, they’re profitable, they issue dividends, and they rank highly both on growth and momentum metrics as determined by Louis’ system. These are also just 11 names out of dozens that popped up on this screen. That’s what I love about using quantitative strategies with our software: It lets you set your emotions to the side, even during some of the most anxiety-inducing market environments of the past year. You can cut through the noise and focus on the things you can control. You can control the places your money goes. You can ensure it’s only going to stocks like these, to take advantage of what’s shaping up to be an exceptional rally. The dust has cleared. America has chosen. And now, with all that uncertainty out of the way, we can finally get back to work uncovering the huge stock-market winners of tomorrow. Thinking this way will serve you well, whether stocks are up or down. All the best, Keith Kaplan
CEO, TradeSmith | 