Finding Investment Profits in today’s Volatile, Non-Volatile Market

Is today’s market volatile or non-volatile? The answer is … yes.

In fact, it reminds me of the famous Schrodinger’s cat experiment. That’s the one where Austrian physicist Erwin Schrodinger suggested the cat involved could be perceived as both alive and dead … at the same time.

Consider this: The CBOE Volatility Index, or VIX, surged to around 16 last Tuesday from 11 just a few days earlier. A separate index that measures the volatility of volatility itself (yes, there is such a thing) exploded more than 52% since mid-March, hitting a five-month high.

Those volatility moves resemble what we saw around the time of Donald Trump’s election in November … the Brexit vote in June … and the oil/China-driven market meltdowns at the beginning of 2016. In all of those past instances, we also saw major moves in the stock market.

The Dow Industrials plunged around 2,300 points in early 2016, marking its worst start to any year in its 121-year history. Meanwhile, S&P 500 futures swung wildly both up and down in June and November — around 135 points in just a day or two.

But not this time around! The Dow is only about 500 points off its March high, and it has been a plodding, begrudging move lower rather than a major “whoosh.” As for the S&P futures, the biggest intraday range so far has been around 39 points. That’s nothing in the grand scheme of things.

I don’t know what will break us out of this pattern. Stocks have already shown they can withstand saber-rattling over North Korea, a U.S. missile strike in Syria, uncertainty over French elections, and more. But I do know that having a stuck-in-the-mud market … one that’s oddly both volatile and non-volatile at the same time … means you have to search even harder to find stocks that can break the overall pattern and deliver handsome gains.

Some of my favorite Business Development Companies (BDCs) certainly fit the bill. These lender/asset-manager hybrids that pay out hefty yields continue to dominate, with a handful of the top sector names hitting new highs just this week. You can find out everything you need to know about them in my just-released, comprehensive, 87-page investor intelligence guide The 10.8% Solution: Five High-Yield Stocks for a Rising Rate World It’s available for immediate download here.

But which other stocks are shrugging off the market malaise? Let’s turn to the Weiss Ratings to find out.

I created a Stock Screener called “Spring Breakout Stocks” using the tools available to Weiss Platinum members. (Click here to join if you’re not yet on board)

I started by eliminating any stocks with less than a BUY (“B-” or better) Rating, and those not based in the U.S. Then I got rid of stocks with less than $50 million in market cap, 50,000 shares in average daily trading volume, and a closing price under $5.

Next, I weeded out those with negative total returns over the past year. Finally, I sorted the list in descending order by 1-month returns. My goal? Show which stocks managed to buck the volatile/non-volatile market environment we’ve seen since March and rally anyway. Here’s what the resulting list looked like just before the long holiday weekend:

Data Date: April 12, 2017

Panera Bread (PNRA, Rated “B-”) topped the list with a 1-month return of 33.8%. It’s a special case because the bakery and sandwich chain just received a $7.5 billion buyout offer from JAB Holdings. Virginia-based furniture company Hooker Furniture (HOFT, Rated “B”) came next, with a 31% return driven by a very strong quarterly earnings report.

Retail natural gas and electricity provider Spark Energy (SPKE, Rated “B-”) took the #3 spot, helped along by a general uptrend in utilities shares, while KCG Holdings (KCG, Rated “B-”) secured fourth place. The high-frequency trading firm got a $1.3 billion takeover offer from Virtu Financial (VIRT, Rated “C-”).

I generally don’t like chasing takeover-driven stocks. After all, unless they can negotiate higher prices from their potential buyers or another bidder comes in, they don’t have much room to keep running.

But my Screener turned up 436 different stocks that met all of my criteria. So there are plenty of companies for you to sort through, and consider adding to your portfolio – even if the market can’t break out of its volatile/non-volatile state!

Until next time,

Mike