Big cap rotation rotation to mid-small cap

Dec 01, 2023 11:21 AM 0 Answers
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Hi, Marty:

Today you mentioned to be cautious to buying the big cap untilled the institution starting to buy them, my question is " do we need to sell Big cap stocks to raise the cash?"




In a one word answer: YES! But, allow me to explain the thought process if you will.

That depends on your goals and time frames. If you own AAPL MSFT META GOOGL AMZN or other mega cap tech stock then your goals are not to hit grand slams and rather to own a slower growth stock. That is fine if that is your goal. I caution on buying dips and wait for the bounce as it shows institutions are supporting the stock and it does not matter if it is a large or small cap stock. Do not buy the dips until they bounce. Therefore, we buy the bounce and not the dip.

I believe we are seeing a sustainable rotation into mid-cap and smaller-cap stocks. That does not mean the mega cap stocks will all crash. But, they are likely to pause for a bit. Typically, as a new uptrend emerges the large cap stocks outperform at first as they are considered a "safe haven" or "safer" stocks to own.

As a new uptrend matures there is a point where smaller cap stocks start to outperform, and I believe we are at that point. These are the stocks that will double, triple and even 10 times if we select the right stocks. I want to hit some doubles, triples, and  home runs and that is why I sold Microsoft and bought into e.l.f. Crowdstrike Zscaler, Vertiv and Samsara. Are those stocks going to double or triple? I don't know! But, they have a much better chance than MSFT AAPL or GOOGL.  I will be posting some of the stocks that I believe have a good chance to double or triple in the coming months/years, and included many on the weekly review. Remember, most stocks have their "super growth cycle" in their first eight to ten years of existence.

This comparison chart shows the performance of the mega cap tech stocks (QQQ) versus the mid-dap stocks (MDY) and the small cap stocks (IWM) since the market lows of October 13, 2022. As you can see the QQQ has outperformed by a wide margin. But, I believe we are going to see a "reversion to the mean" trade in the coming months where the mid-cap and smaller caps finally start to outperform.

I hope this helps to answer your question!



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