Two investors tell a tale, which one are you?
Gladly, the books are closed on 2022, with the S&P finishing lower by -19.4%. It was the market’s worst performance since 2008, when it was down by more than -38%.
Although, it should be known that in 2009, the S&P rallied by 23.4%. It was a huge rebound in any case.
Are you looking for something similar in 2023?
The odds are that it is.
The history of the market shows that there is a high chance for huge gains after a down year.
Then add in the favorable seasonal tendency which shows that year 3 of the 4-year Presidential cycle (that’s 2023), is the best year of all 4 years. Since 1950 stocks have increased in the year following midterms with an average 12-month forward yield of 18.6%.
If the stats are correct, 2023 might look very different from 2022.
And that’s why it’s so important to make sure you take full advantage of it.
Last year was difficult. However, stocks rose and made new highs.
There were also many investors that beat the market.
Too many people are underperforming.
The market was down by -20%. However, investors were suffering even more.
One of the reasons why so many people are not seeing the kinds of returns they want is because they don’t know of new stocks to get into. They find themselves in mediocre stocks because they don’t know of anything better instead.
I think for some, their knowledge or ‘universe’ of familiar stocks is relatively small and this limits their opportunity of getting into better ones.
Which Half are You in?
Over the last 52 weeks, more than half (62%) of the companies in the S&P are beating the index, with nearly two-thirds of those companies showing positive returns.
That means ‘only’ 38% of the stocks in the S&P underperformed the index.
Statistically, this means that it was easier than to outperform the market.
But with so many big-name companies underperforming, it’s easy to see why so many people underperformed as well.
Even ‘good’ companies like Amazon; they’re down -39.6%. Meta (previously known as Facebook); down -57.5%. Or Tesla, down -61.7%. What gives?
I don’t single these out so you can feel bad if you have them. But instead, to stop and think about ‘why’ you have them.
No one invests to underperform the market. If you are, why not? You don’t have to. If you’re underperforming the market, that means you have more of these types of laggards in your portfolio than leaders.
How the Other Half Lives
Of course, there are a lot of big names beating the S&P too. Lockheed Martin or Archer Daniels Midlands or Merck, for instance, are all examples. All are outperforming the S&P with gains of +19%, +24% and +35% respectively.
But now let’s move outside of the S&P.
Ever heard of Griffon? Imagine if you had. It has outperformed other markets by increasing +61.7% over 52 weeks. Or e.l.f. Beauty? They’re up +90.8%. Teekay Tankers? Up by +152% These are all Zacks #1 stocks.
Many stocks offer incredible returns that are not well-known to the general public.
How about you? How many times have you heard about a stock or read about a stock that skyrocketed — only to think to yourself; “if only I knew about that stock ahead of time, I would have been in that.”
Continued . . .
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Expand your world and find better stocks
It’s easier than you might think to increase your knowledge and awareness about new stocks. And you don’t have to reinvent the wheel.
• For example, since 1988, the Zacks Rank #1 Strong Buy stocks have beaten the S&P 500 in 29 of the last 35 years, with an average annual return of nearly 25% a year. That’s more than 2 x the S&P with an 82% annual win ratio. This includes four bear markets and four recessions. That can add up to more than just 2x the returns when you do this every year.
• Stick with the top industries. Since roughly half of a stock’s price movement can be attributed to the group that it’s in, you’ll significantly increase your odds of success by focusing on the best groups. How much? The top 50% of Zacks Ranked Industries has outperformed the bottom 50% by a factor 2 to 1. The top 10% of industries also outperforms the rest.
• Or select your next stock from a proven profitable stock picking strategy — like our ‘New Highs’ Strategy that has an average annual return of 38.7% (2000-2022); or our ‘Small-Cap Growth’ Strategy that has an average annual return of 46.4% ‘Filtered Zacks Rank 5’ Strategy that yields an average annual return 49.5%
You can transform your portfolio by learning what to look for and how you can pick better stocks.
You don’t need to turn yourself into an analyst to beat the market. Focus on the best methods and follow them.
New Market Leaders
For most of us, our investments are the largest, most important chunk of money we’ll ever be responsible for in our entire life.
And if it isn’t now, it likely will be one day.
The leaders in the past (stock names we’re all too familiar with) will likely not be the leaders in the future.
You can still be ahead of the game by adhering to some proven rules and techniques.
And don’t be afraid to consider a stock you may never have heard of before. You may have never heard of some of the top stocks in your portfolio before you purchased them. And now they’re one of your top performers.
The next time you read about or hear about a stock that’s skyrocketed in price; instead of thinking, ‘I could have been in that had I known about it’ — wouldn’t it be great to say, ‘I’m in it!’
Where to start
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Thank you for your good trades
Kevin
Kevin Matras, Zacks Executive Vice President, is responsible for all trading and investing services. He was instrumental in the development of many of our most successful market-beating strategy and directs all aspects of trading. Zacks Method of Trading: Home Study Course.
¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research’s newsletter editors and may represent the partial close of a position.
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