Update - August 4, 2020
It’s a Trader’s Market
Are you a buy-and-hold investor?
The textbooks tell us you should be.
Investing greats like Warren Buffett say it’s the recipe for success.
And, yes, average everything out and it’s clear the strategy works.
But does this conventional strategy still hold water in a very unconventional economy?
After all, Warren Buffett is having a hard time keeping up with the market these days. And some of his most lucrative moves in recent years were short-term plays he made in the thick of crisis.
There’s fresh evidence it’s time for something different.
The Wall Street Journal ran a piece this morning about the record returns just made by the nation’s public pensions. They just wrapped up the best quarter in history.
We all know why. After slamming to a bottom in March, the market has soared higher over the past four months.
But the recovery created two distinct sets of investors – those who merely recovered some of their losses… and those who made a whole bunch more money.
From the Journal:
Mr. Bowen credits his fund’s 17.1% return in the second quarter in part to stocks bought on the cheap while the market was crashing. During the four-week period ending March 24, the police and fire fund bought and sold $500 million in stocks, compared with $180 million during the previous four weeks.
“Normally we’re very buy-and-hold, but when this presented itself we moved pretty fast,” said Mr. Bowen of Bowen Hanes & Co., the fund’s sole manager. “The moves that we made then set us up for why we’re having a very good fiscal year now.”
This is why I say if you’re fine getting what everybody else gets – the definition of mediocrity – do what the textbooks tell everybody to do. Buy and hold.
But if you want more than what others have – the definition of being rich – then you must do what others don’t do.
Right now, that means taking advantage of every opportunity the market hands us.
And there are a lot of them right now, including…
- Massive amounts of free money
- Deeply discounted stocks
- Industry-specific stimulus
- Zero interest rates
- A huge surge in buying volume
- Favorable tax laws.
Buy and hold won’t do you wrong. But it’s a stock picker’s market right now.
That’s why I want you to pay very close attention to the latest issue of Manward Letter and the stock I detailed – Alarm.com (ALRM).
Shares are cheap today… but they won’t stay that way for long.
An Odd Partnership
If you’ve been watching the stock, you know it had a rough day yesterday. But the action wasn’t the fault of the company. In fact, I could argue that Google’s fresh stake in ADT is actually quite good news. It makes good on the opportunity I highlight in the issue… It will bring this new technology into more houses.
Remember, ADT is not a competitor of Alarm.com, as the market seems to be thinking. It’s a customer. With Google now taking a small (6%) stake in ADT, it amplifies the opportunities in the industry.
Shares of ADT surged on the partnership, while our shares dipped. But it was largely a knee-jerk reaction as the market contemplates the true effects of the deal. Now that the dust has settled, Alarm.com is trading nicely higher today, while ADT has slipped.
Yesterday’s dip created a tremendous buying opportunity… the kind outlined in that quote above.
If you haven’t yet bought shares of Alarm.com, today is the day to do it.
And if you do own shares, continue to hold… and use this dip to pick up a few more. They’ll be back to recent highs in no time.
This is ultimately a small event for all companies involved. The big story will be the increased attention Google will now bring to the industry.
That could be huge.
Elsewhere in the portfolio, things are looking quite good. In fact, after a strong earnings report, shares of Scotts Miracle-Gro (SMG) surged higher… hitting yet another all-time high.
And just this morning, CME Group (CME) confirmed our investing thesis by announcing trading volume boomed once again in July.
Equity option and futures volume surged 82% from the same time last year. Nasdaq futures volume jumped 53%. And silver futures volume rose 36%.
The stock jumped higher on the news.
The surge in volume is more evidence it’s a trader’s market.
Take advantage of it.
Be well,
Andy
P.S. As proof that I think this market represents one of the greatest moneymaking opportunities of our lifetimes… I’m giving away some of my best research this week entirely for free. I’ll send you a link to it all tomorrow – including a ticker symbol of a hot stock you should buy right away. Stay tuned.