Laggards into Leaders?

Oct 13, 2021 08:52 AM 0 Answers
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Hi Marty!

One thing you preach is that the stocks that show relative strength will continue to show that strength as they lead us out the gate once we get hopefully get a FTD.  In this weird market, we have a bunch of stocks showing not only RS, but making ATH's.  I understand the concept of following RS in a weak tape but that always meant to me that a stock was showing RS by not going down as much as the rest of the market or the rest of its peer group or whatever context there might be to compare.  But with a stock like NET making ATH's, when (if) the market turns, won't some of the laggards like ROKU or SHOP or maybe the FANGS outperform as they play catch-up? Appreciate it thanks!

Good questions...

It will be difficult for the FANGS to outperform because they are so large the index moves with them. Or, in other words, they move the index. It is not reasonable to expect AAPL AMZN GOOGL MSFT FB to outperform going forward. If we are seeking alpha we need to take a little more risk and buy higher multiple stocks.

When (if) the markets start making new highs again I expect most stocks will turn higher. That will include stocks like ROKU and SHOP. ROKU and MRNA are 38% off their highs right now. SHOP is only 18%. If they are to make new highs then MRNA and ROKU will appreciate more than a stock like SHOP.

I am not opposed to buying quality stocks well off their highs like  MRNA ROKU or SHOP. But, they need to base and then show some form of accumulation.

Stocks like NET HUBS AFRM UPST DOCN  CELH DDOG ASAN PANW TEAM......etc... trading at or near new highs are showing leadership, and likely to outperform when (if) the markets resume their uptrend.

I hope this answers your question.




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