Relative Value Within each sector, some stocks score higher than others. For example, the highest rated stocks in the energy sector include Haliburton (NYSE: HAL), Marathon Petroleum (NYSE: MPC), and Phillips 66 (NYSE: PSX), each earning a perfect IDEAL score of 10. That does not necessarily mean they are certain to rise in value, but it does suggest that the odds are more strongly in their favor. Only two stocks from the consumer staples sector also earn an IDEAL score of ten: Altria Group (NYSE: MO) and Kraft Heinz (NSDQ: KHC). Of course, KHC got slammed five months ago when it took a $15 billion write-down. But now that its share price is 20% cheaper, this may turn out to be a great time to buy it. Somewhat surprisingly, the financials sector has the most stocks with the highest possible IDEAL rating: Ameriprise Financial (NYSE: AMP), Comerica (NYSE: CMA), Morgan Stanley (NYSE: MS), Prudential Financial (NYSE: PRU), and Unum Group (NYSE: UNM). In case you're wondering, those 10 stocks from just three sectors account for half of the entire S&P 500 companies with a perfect IDEAL score. The other half is spread across seven of the remaining eight sectors. That means there is relative value to be found in almost every sector of the stock market. Although the health care sector appears overvalued, there is one company within it - AbbVie (ABBV) - that earns a perfect IDEAL score of 10. But since ABBV's sector score is so low, now may not be the best time to buy it. Instead, I would focus on the 10 stocks above with perfect scores that are in sectors that also appear to be undervalued. Cashing In Okay, so now that we know where to find value in this market, how do we cash in on it? Of course, you could simply buy the stocks and wait for them to appreciate. That approach is fine if you have a long-term time horizon. Eventually, stocks with high IDEAL scores are recognized by the market. However, that process can sometimes take years to play out. I added Best Buy (NYSE: BBY) to my growth portfolio four years ago when it achieved a perfect IDEAL score of 10. Over the next 18 months, it declined in value while the overall stock market was on the rise. As you might imagine, some of my readers were getting antsy. Since then, BBY has more than doubled in value to vindicate my faith in it. It took the rest of the market to recognize the hidden value in Best Buy that I already saw. But once it did, the herd mentality took over and it has been a stellar performer ever since. You may not feel like waiting around for a year (or more) to see your investment pay off. In that case, I suggest you add a seasonality indicator to your stock selection process. My IDEAL system does not have that, but I know someone whose system does. My colleague Jim Fink runs a trading service with an uncanny ability to pinpoint investments that generate steady profits in up, down or sideways markets. Jim's investment system hands out a regular weekly payment to his followers, sort of like a "paycheck" that they can count on, week in and week out. We've just released Jim's new presentation. It explains how investors just like you can use one simple technique to earn steady income payments of $1,150, and $1,500, and even $2,800… every single week. Want to sign up for your paycheck? Click here now. |
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