Market pullbacks are a great time for it, especially during the "Woodstock of capitalism."
How to Prospect for Low-Risk Billionaire Stocks
This weekend is the big event: the Berkshire Hathaway annual shareholders meeting on Saturday, May 4, in Omaha, Nebraska. It's been called the "Woodstock of capitalism," when Warren Buffett and other Berkshire execs will hold the much-anticipated Q&A, which will be broadcast live on CNBC.
Buffett is, of course, the most widely recognized member of our TradeSmith Billionaires Club...
But the "Oracle of Omaha" is not the only billionaire with a bona fide track record of success. In fact, we closely track the stock holdings of some of the world's smartest investors – Buffett plus 26 other "smart money" investors – so we can bring you the Billionaires Club here at TradeSmith.
These billionaires are all legends of the investment world who have made plenty of money for themselves and for the savvy investors who were smart enough to invest alongside them over the years.
TradeSmith tracks these successful investors and their funds using the publicly available 13F forms, which the SEC requires anyone managing a portfolio of $100 million or more to file quarterly. And we've recreated their portfolios each quarter so you can track their moves.
To look through the idea-rich Billionaires Club portfolios, you'll need TradeStops Pro or higher. And to use our Best of the Billionaires filter as you search, you'll need Ideas by TradeSmith Premium or Lifetime. Both are available to Trade360, TradeSmith Essentials, and Platinum subscribers. If you don't see these tools in your TradeSmith Finance platform — and would like to — call 888-623-0858 to discuss.
Time to Update Your Stock Shopping List
Stocks are in the midst of a correction since the first of April (April Fool's Day ... go figure), as I've pointed out recently.
The magnitude of the pullback is still anyone's guess. But here's your silver-lining playbook: It's providing a good opportunity to add quality stocks to your portfolio while they're on sale!
In addition to prospecting for these opportunities in our Billionaires list, there is another Ideas by TradeSmith strategy ideally suited to a market like this: Low Risk Runners.
Low Risk Runners identifies healthy stocks that have pulled back in price more than halfway to their Health Indicator Stop Loss (hence the "low risk"). And like a rubber band that's been stretched to the limit, these stocks tend to rebound higher in the near term.
Combining Low Risk Runners with Best of the Billionaires gives you a great opportunity to find stocks that are:
Owned by some of the smartest billionaire investors on the planet, and
Are low-risk buy candidates likely to rebound quickly from the recent market pullback.
To find stocks that fit the bill, simply log in to TradeSmith Finance and click Invest on the top menu bar.
Next, click the Screener tab just below it, where we'll build a simple stock screener using our Low Risk Runners and Best of the Billionaires strategies.
We'll focus on blue-chip stocks found in the S&P 500, but you can widen your screener to include more stocks, both large and small.
The screenshot below shows how I set up this easy screener:
Here are the steps.
Click on + Manage Filters to add the following.
TradeSmith Strategies: Under All Strategies, click on Ideas Lab, then scroll down and select (only) Best of the Billionaires and Low Risk Runners from the list.
Also, be sure to toggle the button below this filter window from Any to All. This will give you a list of stocks that qualify for both of these powerful strategies.
Finally, add the Markets filter and select S&P 500 (SPX).
To qualify for our Billionaires and Low Risk Runners strategies, stocks must already be healthy and in the Green or Yellow Zone, so no need to add specific filters for those.
You can add other quant filters if you wish: perhaps Business Quality Score (BQS), Cycle Turn Area, Projected Price Change, or any of the numerous TradeSmith filters that are available to you depending on your subscription.
But, for this screener, let's keep it simple.
Now, be sure to click on Save As New next, which will save your work for later. That way, you can experiment with more filters but always return to this basic screener.
Finally, click on Run Screener to see the results. I screened for the top 50 stocks fitting both the Best of the Billionaires and Low Risk Runners strategies, and this screener gave me plenty of results. Shown below are the top 15 results, limited due to space constraints:
A few stocks caught my eye. One of Warren Buffett's favorite energy stocks, Occidental Petroleum (OXY), made the cut, along with another long-term Buffett holding, financial rating giant Moody's (MCO).
Mike Burnick's Bottom Line: A stock market pullback, like we have right now, is a great opportunity to go prospecting for new stock ideas to buy. And our proven Best of Billionaires and Low Risk Runners strategies can deliver stocks beloved by smartest money that also have limited downside risk for powerful new trading and investing ideas.
Good investing,
Mike Burnick Senior Analyst, TradeSmith
P.S. There's another indicator that, I'm told, market makers use to find lucrative trades.
Our newest corporate partner, Jonathan Rose, uses this indicator to find trades that go up 90.3% of the time.
As a Wall Street veteran myself, I know how valuable it is to make investing decisions based on many years of real-world experience in the markets. In Jonathan's case, he couples this indicator with experience on the Chicago trading floors dating back 25 years.
Jonathan ultimately became a Chicago Board Options Exchange (CBOE) market maker in the 2010s before launching his Masters in Trading community.
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