Find Opportunity in This Lousy Market
|By Mike Larson|
Nineteen. Only 19 stocks ...
That’s all that made the initial cut as potential recommendations for my Safe Money Report this month.
And of those 19, I only found one I wanted to include in the next issue that’s hitting members’ inboxes at noon Eastern this Friday.
Sure, my investment screening methodology is tough. It’s designed to be. Nothing but the best of the best, income-focused, higher-rated names get a shot at ending up in the model portfolio.
But you know what’s most noteworthy here? How much the list of potential candidates has shrunk!
A year ago, 38 stocks made the cut. In August 2019, before anyone had heard of COVID, 77 did.
You can see the same trend in our broader-based Weiss Ratings data.
Only 5.8% of the more than 10,600 stocks in our coverage universe recently earned “Buy” grades.
That’s down from 7% a month earlier and 10.9% this time last year.
Translation: It’s not your imagination …
It’s a Tougher Market
It’s not just the major averages, either.
They sometimes rise or fall based on how a relatively small group of mega-capitalization stocks are performing, as we saw when the FAANG companies were all the rage.
However, this is a period of broad-based weakness, with many individual stocks performing poorly behind the scenes.
Looking at the 11 sectors that make up the S&P 500, only two are up year to date — the other nine are in the red, and the index itself has shed over 13% so far this year.
The Dow’s barely faired better, having shed over 10% YTD. And the Russell 2000? Down nearly 15%.
What Can Investors Do?
Foremost, investors need to narrow their focus. Zero in on a select handful of sectors and stocks, and avoid the ones that aren’t performing well … like communication services, the only S&P sector that’s not in the green over the past month.
Additionally, don’t give your losers too much leeway. Cut ‘em loose sooner and move on. We’ve found success in Safe Money with more defensive, higher-yielding names, for instance.
Those Safe Money stocks are in sectors like healthcare, consumer staples and utilities. They’re tailor-made for an economy that’s either in recession or close to it, as they provide people’s needs, not their wants.
It’s no surprise, then, that the Utilities Select Sector SPDR Fund (XLU) is UP around 5% this year, or that the VanEck Pharmaceutical ETF (PPH) is essentially unchanged.
No, that’s not knock-your-socks-off performance ... but it sure beats the 13% YTD loss for the SPDR S&P 500 ETF (SPY).
The recent oil and gas sell-off is creating bargains in the energy sector, too. You can find high-quality producers spinning off market-crushing dividend yields, while racking up those coveted “Buy” grades from our Weiss Ratings system.
Naturally, I can’t share the names of my favorite companies to target. That wouldn’t be fair to members of my service, Safe Money Report.
But you can easily join them by clicking here before the new issue arrives this Friday.
If you’re not ready to take that step, consider some of the exchange-traded funds or mutual funds targeting the sectors I mentioned.
After all, yes, it’s tougher to find winning stocks today … but not impossible.
As always, make sure to do your own due diligence before entering a trade.
Until next time,