One Little Secret for Big Results by Kevin Matras – 09/20/2014

I’m going to share with you one of the most powerful things I have ever read. It made me believe that anything was possible. And that whatever success I wanted to achieve, I indeed could achieve it.

It would not be without hard work. But the concept was simple. And I instantly knew it to be true.

They called it a secret. In fact, it was literally called “the greatest secret in the world”. And that secret was this: the key to success was that you only needed to be a small, measurable amount better than mediocrity to succeed.

Is that really true? In its simplest form it is. The
book went on to tell of why this was true. And in short, they described how most people give up on the meaningful things they hope to accomplish.

Success

I, of course, knew that true greatness would take a lot more than being just a few steps ahead of the pack. And that if you wanted to be the Michael Jordan of your profession, it would take a lifetime of dedication and being born with the right genes.

But most people don’t need to be the Michael Jordan of anything in their life to have life changing success.

They only need to be a small, measurable amount better in the important things in their life.

Want to pass that test that will get you that promotion? Stick to your study times and don’t blow them off for some silly TV show and you’ll be better prepared to pass that test.

Want to lose weight? Have one less can of pop each day or one less sugary snack and watch how that can set in motion a metamorphosis.

Want to make more money in the stock market? If all you did was have one less loser each month, and replace it with one more winner, that could transform your portfolio.

You don’t need to be as good as Warren Buffett to achieve your investment goals. By simply making a few changes in how you pick stocks, the extra results can quickly add up.

But you have to know where to begin.

One Less Loser

Setting a goal to have one less loser may not sound exciting, but the results can be dramatic.

There are over 10,000 stocks out there. So be choosey. One of the best ways to put the odds of success in your favor is to focus on the top industries. Why? Because roughly 50% of a stock’s price movement can be attributed to the group that it’s in.

That’s why, oftentimes, even a mediocre stock in a top industry can outperform the strongest stock in a weak industry. In fact, in my testing I have found that the top 50% of Zacks Ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

If your last loser was in an underperforming industry, you were betting against the odds.

Instead, stick with the best performing industries and put the odds of success in your favor.

And when you do find yourself in a losing trade, get out sooner.

Nobody likes to take a loss. But don’t let your unwillingness to do so ruin your portfolio. Smaller losses are easy to overcome. But big losses, like -30%, -40%, and -50% losers can devastate your portfolio, not to mention your confidence.

If you found yourself driving the wrong way on a one way street, you wouldn’t keep driving the wrong way or speed up, you’d turn around and get off. Same thing with stocks. If you bought a stock expecting it to go up, and it’s now doing the exact opposite, get out before you crash your portfolio.

One less loser, or even just deciding to take smaller losses, will immediately set you apart from the typical mediocre investor.

One More Winner

Now if you can replace that one less loser with one more winner, you’ll compound your success even more.

First, stick with the investing style that’s right for you. There are many different investing styles out there. The four main fundamental styles are Momentum, Aggressive Growth, Value, and Growth and Income. You can also apply Technical Analysis to any of these styles, and others as well.

But make sure you employ proven techniques to get the most out of each style. For example, if you’re an Aggressive Growth investor; did you know that stocks with the highest growth rates perform almost as poorly as those with the lowest growth rates? It’s true.

This is because the companies with the highest growth rates are often unsustainable. And once those sky-high growth rates start to come down, even though they may still be spectacular, the price of the stock will fall back down to earth as well.

Stick with companies that have growth rates above the median for their industry, but less than 50%. That range has produced some of the best results.

If you’re a Value investor; do you know which valuation metrics produce the best results? Better yet, do you know what valuation ranges have the highest probability of success?

In my testing, I have found that the Price to Sales ratio (P/S) is one of the best valuation metrics out there. And that stocks with a P/S ratio of less than 1, by far, produce the highest returns. Between 1-2 still produce stellar results. And between 2-3 outperform the market. But once you get over 4, there is a higher probability of losing on that stock than winning.

That, of course, does not mean all stocks with a P/S ratio above 4 will go down. But if the odds of winning are greater below 1 (or at least below 3) and worse above 4, then by simply focusing on stocks in the optimum valuation range, you are now one step closer to having one more winner.

Don’t worry whether you’ve picked the best stock on the planet. In fact, the best stock on the planet today may not be the best stock on the planet tomorrow. But it doesn’t matter.

All you need to focus on are good stocks. Or just slightly better stocks than you’re picking now to start seeing the kind of success you’ve always wanted.
And one small better decision will set in motion other better decisions. And before you know it, you’ll be achieving your goals.

Thanks and good trading,

Kevin

Zacks VP Kevin Matras is our chart patterns and stock screening expert. He developed many of Zacks’ most powerful market-beating strategies and directs the Zacks Method for Trading: Home Study Course.

Annunci

Earnings Report Card = ? – 07/24/2014

Stocks are creeping higher towards 2000. That is because the Q2 earnings report card has now been filled out. It’s not an honor roll style A, nor a barely getting by C. It is more of a solid B which is good enough to confirm the bullish view already in place.

That is not just my view. That is what Wall Street is telling us by their actions.

Here is the proof. Stocks were pushing all-time highs coming into earnings season. That means expectations were elevated…and often those lofty expectations are hard to top. Since then stocks have nudged a bit higher.

If earnings season was an A we would have been at 2000 by now…and perhaps a spot above.

If earnings season was a C or lower, then we would have retraced to 1950…perhaps down to 1900.

But since stocks have even pressed a little higher, it indicates earnings have met or exceeded most expectations. And thus gets a solid B rating.

Best,

Steve Reitmeister ( aka Reity…pronounced “Righty” )

Executive Vice President

Zacks Investment Research

Trading Market Leading Technology Stocks

Tickers in this Article: RCL, WYN, SHLD, FNFG

Since May, the Technology Select Sector SPDR (XLK) has taken off, out-performing the S&P 500 SPDR (SPY) by several percentage points and establishing itself as the top performing sector over the last few months. These four stocks have led the charge, racking up more than 10% gains in the last month alone. As the S&P 500 SPDR and Technology Select Sector SPDR push to new highs, keep an eye on these stocks to see if their market leadership continues, resulting in outperforming returns.

America Movil S.A.B. de C.V. (AMX)

America Movil S.A.B. de C.V. (AMX) is up 22% over the last month, soaring past January resistance at $23.75.The stock has been range-bound since early 2013, so even though the high of the range has been eclipsed, it doesn’t mean a continued move higher is imminent. The range has been choppy, with many false breakouts already. Buying at these levels warrants some caution. The price has been making higher swing lows since March of 2013, indicating a major bottom may already be in place near the $19 mark. If this multi-year correction finally reverses and commences an uptrend, the first long-term target is $29, just below the 2010 high at $29.82.
SEE: Profiting In Bear And Bull Markets

Research in Motion Limited (BBRY)
Research in Motion Limited (BBRY) is up 21% over the last month despite a strong pullback on July 16. In 2013 the stock got hit hard, declining from a high of $18.32 to a low of $5.44. Since that low, the stock has been trending higher. Research in Motion should now be supported below $8, putting an entry point between $9 and $8 – a wide range for a stock at this price point because of the volatility. There is still significant resistance overhead, near $12 and then again at $13.50 to $14.50. Taking profits or exiting part of the position near these levels may prove prudent if the uptrend is unable to gain traction above those levels.
Intel Corporation (INTC)
chart
Intel Corporation (INTC) was trending in a consistent channel higher from late 2012 until June 2014. It exploded higher out of the channel and is up 12.6% over the last month. This surge to a recent high of $34.74 also broke through resistance between $28 and $29.27, which has halted all advances going back to 2005. With this major long-term breakout, the longer-term outlook is positive. A target near $40 or higher isn’t unreasonable. For those not in a position yet, wait for a pullback. Between $30 and $29 is ideal, but may not occur. The $32 area is another entry point, as it should also provide support based on a significant gap higher on July 16.
Skyworks Solutions (SWKS)
Skyworks Solutions (SWKS) has had a parabolic rise in 2014 after breaking out of a multi-year triangle pattern in late 2013. The target for that pattern breakout was $51, which has now been exceeded as the price jumped 14.09% on July 18 alone. While further gains are possible, the stock is very extended so waiting for a pullback provides a better risk/reward ratio. Major volume spikes over the last year, which have been smaller than the one seen on July 18, have resulted in the price declining or stabilizing at least for the short-term. Therefore, a lower entry point is likely to present itself in the coming weeks. Skyworks is in the same industry as Intel, and while the price trajectories of the two stocks have been similar, Skyworks has been moving stronly. Therefore, watching for weakness or continued strength in Skyworks is likely to provide clues as to the next moves in both stocks.
The Bottom Line
Technology is a top performing sector, and these stocks are leading the charge. That doesn’t mean jumping in and buying at any price is a wise decision though. Plan every trade. Look for an entry point that allows you to place a stop loss not too far from it, but that still allows for a good reward to risk ratio if the uptrend continues. Only risk a small percentage of the account on any single trade, as no matter how strong the trend is, it can always reverse. In this way, even a string of losing trades won’t significantly draw down the account. And by focusing on sectors and stocks that are outperforming – which should be monitored – the potential for finding good reward to risk trades increases.

Charts courtesy of Stockcharts.com
Disclosure – At the time of writing, the author did not own shares of any company mentioned in this article.

Are You Ready for Judgment Day? – 07/17/2014

Stocks are valued based upon their ability to generate profits now and into the future. Thus, there is no day on the calendar more vital to where your stock is headed next more than when they report earnings. Truly, that is judgment day.

Too many investors close their eyes and cross their fingers hoping for the best. However, there is a better way to success at this critical time. Both to own more stocks likely to beat and sell those bound to disappoint.

Best,

Steve Reitmeister ( aka Reity…pronounced “Righty” )

Executive Vice President

Zacks Investment Research

2000 = What happens now? – 07/07/2014

The Government Employment situation sang a sweet song of job growth. Not only was June well above expectations, but also there were positive revisions to previous months. This got stocks in a jubilant mood early on leading to yet another record close at 1985.

My guess is that stocks coast up to 2000 thanks to the strong economic catalysts already in place. Then Q2 earnings will take center stage.

The problem with making new highs is that it also makes for lofty expectations. Often that leads to disappointment with the early earnings results and stocks pullback.

That is why I am looking for spots to take some profits on my most aggressive shares as we approach 2000. And then wait for a better reentry point to enjoy the continuance of the long term bull rally which is still firmly in place.

Best,

Steve Reitmeister ( aka Reity…pronounced “Righty” )

Executive Vice President

Zacks Investment Research

The Consolidation Dance – 06/11/2014

More and more this looks like a consolidation period with shares having a hard time getting above 1950. That is because stocks bolted higher Monday, but closed back at the mark. Then on Tuesday we saw the flipside with stocks tumbling in the am only to climb back to breakeven at the finish.

What a consolidation period tells you is that the market wants to stay with a bullish bias for the long haul. It’s just time to take some profits off recent winners and rotate it to other stocks. This creates sideways action for the overall market even though there are some extreme winners and losers each day. Once this process is complete the broader market usually gets back on the upswing.

I find the best way to survive these periods is to ignore most of the whiplash effect from the daily movement of your stocks (i.e. don’t read too much into the ups and downs). As long as the fundamentals are unchanged, then likely they will continue their upward trajectory once the consolidation period ends and new highs are generated.

 

Best,

 

 

Steve Reitmeister ( aka Reity…pronounced “Righty” )

 

Executive Vice President

 

Zacks Investment Research

It’s also a great time to snap up some new picks on sharp, unnecessary dips. So be sure to build up a wish list of stocks you would love to own on any attractive pullback. Perhaps the articles below will help you discover some fresh ideas to help you profits in the days ahead.

My Secret Trading Weapon by Kevin Matras – 05/24/2014

Let’s be clear, nobody knows which way the market will move over the next 1-3 months. Anybody who insists they do is just guessing.


Some say up, with the historic uptrend continuing. Others say down (temporarily or otherwise), believing the 5 year bull market has run its course. And still others say sideways, as the market consolidates while waiting for new information to provide direction one way or the other.

Each side makes compelling and lucid arguments. After hearing one side, you can be totally swayed. Until you hear the other side, of course. And so
you have the current state of the market.

Critical Information?

As an investor, knowing which way the market will go is typically a critical piece of information in order to make money. A critical piece that nobody knows.

But what if it didn’t matter?

What if, you could make money whether the market goes up, down or sideways? Put on the same position and profit regardless of which way it goes? And not even care
which way it goes because your profit potential would be the same either way.

Instead of one way to win, you’ve now got three ways to win, dramatically increasing your odds of success.

You’d probably feel like you had a secret trading weapon. And you would.

But it’s no secret. Granted, most investors don’t know about these strategies, let alone employ them. But these are strategies the pros use all the time to consistently make money in the market whether it goes up, down, or somewhere in between.

Calm Confidence

When so many individual stocks began rolling over last month, I’ll admit, I was just as concerned as anybody.

We all got used to the market going straight up. It was easy money. And who wouldn’t want to see that continue?

But whether it continued up or not, the writing was on the wall. The market was about to change. By that I mean the cake-walk of 2013 where almost everything went up was going to be replaced with a more trying market where fewer stocks will go up, plenty will go down, with most flitting back and forth in a volatile manner.

The media was ablaze with stories of doom and gloom. And for a few weeks, I’d even say there was a tiny degree of panic for some investors. Many felt helpless as the market seemed to go up and down for no apparent reason.

For me however, I felt a calm confidence instead.

What the market does is beyond our control. But it doesn’t matter. I knew how we were going to make money in this kind of market. And it was time to get to work.

Game Plan

Picking a stock that will trade within a broad range is much easier than picking a stock that MUST go up or down in order to make money.

The strategy to do that with is an iron condor. It’s a favorite of professional traders and one of the ways they make money in virtually any kind of market.

It’s classified as a neutral strategy because you don’t have to rely on just one direction. Instead, the price can go up, down or sideways — anywhere within that range — with any one of those three scenarios resulting in the same exact maximum profitability.

This is a low risk, high probability trade that can deliver consistent and impressive returns.

Flexibility

A calendar spread is another strategy that gives the investor tremendous flexibility when it comes to direction and timing.

Not surprisingly, it’s also a favorite of professional investors. It can go up from where you got in, down from where you got in, or just sit there, and you can still make money. You can even be wrong about which way you expect the market go and still be profitable. It’s no wonder this strategy is sometimes referred to as a ‘second chance’ spread.

This too is a low risk, high probability trade that can yield impressive returns, and is yet another way to profit in an uncertain market.

Classic Opportunities Made Better

Of course, there will be plenty of opportunities to make money on the most bullish of stocks by buying calls or bull call spreads. But this way requires only a fraction of the money needed vs. buying the stock, thereby significantly lowering your risk.

There will also be plenty of opportunities to make money on the most bearish of stocks thru puts and bear put spreads, without ever having to short a stock, thus providing a small and limited risk at all times along with big profit potential.

And there will also be opportunities to play both sides of the market on the most volatile of stocks with straddles and strangles, where a big move is expected in either direction. You don’t have to guess which direction it will be in. Either one can be just as profitable as the other.

Combined with the Zacks Rank, it’s easy to align the right stocks with the right strategy.

Peace of Mind

As you can see, options give the investor numerous ways to make money in the market, and in any direction. There’s great satisfaction and peace of mind that comes from knowing you no longer have to rely on a bull market to make money.

If the bull market continues, that’s great news. It’s wonderful when everything is going up. But the success of your investments doesn’t have to depend on the whims of the market.

If you’re new to options, that’s ok. These strategies are easy to put on and easy to understand. All with limited risk. Once you place your first trade, you’ll wonder why you haven’t done this before. Soon, they will become a mainstay in your investment arsenal, and you too will have a secret weapon like the pros.

And your portfolio will thank you for it.

Thanks and good trading,

Kevin

Kevin Matras is our world-class research expert who has developed more than 30 market-beating strategies using the Zacks Rank. He also directs the portfolio service that combines Zacks Rank timeliness with the best professional options techniques, Zacks Options Trader.