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Frequent Contributor

Buy Strength or Weakness?

Looking at YTD returns for various sectors and regions, it's obvious that the divergences are huge:

  • Growth, Asia, HC, and Clean Energy have been soaring;
  • Oil & Gas, REITs, Finance, Industry, and Transport has been lagging badly.

Questions:

  1. Would you buy any of the strongest performers (high momentum) today?  Why?
  2. Would you buy any of the weakest performers (weak momentum) today?   Why?
  3. Where do you think sector rotation is most likely to occur?

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Frequent Contributor

Re: Buy Strength or Weakness?

I'm not sure that there's a good reason to, preemptively,  buy much of anything at present.  We're likely to get a 'pop' when (if?) we get an effective vaccine, but we seem to have plateaued here.  On one hand, we have all kinds of support from the government, on the other, we have serious damage to individuals and small companies which is unlikely to resolve quickly.  If we have a long time frame, then investing maybe makes sense.  What in?  Well, if the economy is wounded, I wouldn't look for us to be bailed out by things which have lagged; however 'due' they might be.  Can growth continue?  Why would things grow at this point?  Just a tough time...

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Frequent Contributor

Re: Buy Strength or Weakness?


@norbertc 

 

        Ditto to what’s been mentioned. We’re in a trading range controlled by headlines good or bad near term. When a new market direction is established that’s where you pick up cap gains or bargains. 
       
         Current bargains seem to have been at their best at the end of March. Maybe the next rotation will be to value stocks which have been forgotten due to possible dividend cuts once the dust settles after a vaccine.
         
          There’s a recent thread on changes in a well know fund’s top holdings. I’ve used that technique for at least the last thirty years following the smart money, professional investors. Right now growth funds are heavy with FAANG’s and MSFT. 

           I use VUG and TRBCX among others to see what they do, so I’am primarily invested in growth with a portion of our portfolio mostly tech right now. When the smart money plays follow the leader gains become almost automatic using their top pics. You can explore top value and core funds if that’s what you prefer.

           I don’t do foreign investments or really diversify much. We currently hold 24 positions. Early bets on WINTEL, AAPL at times after holding it the first 30 years and AMZN made our retirement. They all were smart money bets at the time. Three are part of the current “Rat Pack”.

 

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Participant ○○○

Re: Buy Strength or Weakness?


@norbertc wrote:

Looking at YTD returns for various sectors and regions, it's obvious that the divergences are huge:

  • Growth, Asia, HC, and Clean Energy have been soaring;
  • Oil & Gas, REITs, Finance, Industry, and Transport has been lagging badly.

Questions:

  1. Would you buy any of the strongest performers (high momentum) today?  Why?
  2. Would you buy any of the weakest performers (weak momentum) today?   Why?
  3. Where do you think sector rotation is most likely to occur?

@norbertc 

Not buying.  The strongest are too strong and the weak are well off their lows.  Thus I would wait for another significant drop before putting more money to work.  Meanwhile, cash is king.  

I don't play the sector rotation game.  Additionally, some sectors are so broad, individual stocks make more sense to me than the index.  For example, Transportation ... J.B. Hunt (trucking) is up 31% off its lows while airlines are (rightly) still in the toilet.  YMMV. 

ctyankee

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Frequent Contributor

Re: Buy Strength or Weakness?

There is a well-known saying for a good reason:  keep your winners, sell your losers.  

I also have been saying for years 1) Price is the ultimate indicator.  It is where buyers and sellers are willing to trade.  2) I don't buy bottoms or tops, I just join uptrends.  3) High tech has been the leader for decades and will continue for years to come.

So, looking at my cloudy crystal ball I would do the following.  SP500 is a great index why mess with it.  If I want to "gamble" I would invest a portion of my portfolio in QQQ.  I never like sectors or rotation.

When the Fed funds rate is at zero + massive support from the Fed and our government the price could be infinity...until someone rings the bell.  When that happens all stocks globally go down including value + lagging stocks + global stocks.

How do you avoid the big meltdown if you care? Put a trailing stop order at 5-8% (or another % you like) and let it run.

Another idea is Columbia Thermostat Fund Class A (CTFAX).  Just check the last 3.5 years(link). Better performance, SD, Sharpe, Sortino than W+W

PortfolioCAGRStdevBest YearWorst YearMax. DrawdownSharpe RatioSortino Ratio
SPY11.76% 15.66%31.22%-4.56%-19.43% 0.690.99
VWELX8.03% 10.01%22.51%-3.46%-14.09% 0.670.93
VWINX6.69% 6.41%16.39%-2.57%-8.59% 0.811.18
CTFAX9.84% 5.50%15.02%-0.13%-2.31% 1.455.75

 

Me? you already know what I do.

The Dr stopped by please send me 2 cents.

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Participant ○○○

Re: Buy Strength or Weakness?

It's times like this where the Boglehead strategy shines.

Our AA is set at 50/50. We will simply rebalance on in early Jan if our AA is 5% or more out of balance.

Everything else is just noise that we can easily ignore.

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Explorer ○○

Re: Buy Strength or Weakness?

Your Questions:

  1. Would you buy any of the strongest performers (high momentum) today?  Why?  
  2. Would you buy any of the weakest performers (weak momentum) today?   Why?
  3. Where do you think sector rotation is most likely to occur?  

 None of the above....
Most investors use their [on-going] individual analysis as a basis for investing [buying or selling]. Technically, the listing you showed is looking in the rear view mirror [no offense intended] for current investing....

 Looking at the very bottom of your list [as a example], KMF would not be on my "watch list" but HESM would be. Some of us took a nice CapGain late in the 2nd Qtr when we sold out with a report card grade of 82. This morning we bought it back at our original MktPrc that we had originally bought it at [report card grade of 74]. HESM just announced a increase in their dividend yesterday....

 Bottom line: look only forward [in time of where we are currently at and going] and, just as we have all learned from past mistakes, we should not fall in love with any one security [dangerous to losing our investment capital]....

One single opinion of the many I am sure....

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Participant ○○

Re: Buy Strength or Weakness?

We are all just guessing but I believe once we reach the other side of COVID 19 and our economy has recovered LCV will be a best place to be.  Financial Services, health care and energy will outperform.    I believe growth in general and TECH in particular will do well but LCV will be the bargain of the day with lots of room to grow.  LCG has a lot of hot money that will leave if better opportunities appear.

helmut 

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Participant ○○○

Re: Buy Strength or Weakness?

What do you recommend or are invested in for LCV?

Health Care - I have POAGX which is 35% health care.

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Frequent Contributor

Re: Buy Strength or Weakness?


@waffle wrote:

What do you recommend or are invested in for LCV?

Health Care - I have POAGX which is 35% health care.


If you are asking about VALUE why mention POAGX=PRIMECAP Odyssey Aggressive Growth Fund

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Participant ○○

Re: Buy Strength or Weakness?


@waffle wrote:

What do you recommend or are invested in for LCV?

Health Care - I have POAGX which is 35% health care.

@waffle I'm currently using RPV which I consider deep value. LINK

RPV is been pretty beaten up and is about 27% down YTD.  I bought it a couple of months ago When I got back into equities and I am pretty much even as we speak. 

It pairs nicely with EDV.  I'm not sure of the reasoning in comparing balanced funds with equity funds but look at this LINK.

No, I don't take a 6% distribution and no I don't hold RPV at 60%.  I'm just comparing the funds FD listed.

helmut

 

 


 

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