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MLR - With so many stocks to buy in an uptrending market, how do you find the best ones, or do you buy them all?

Q: With so many stocks to buy in an uptrending market, how do you find the best ones, or do you buy them all?

 

A: With so many stocks that we have reported on that are acting well (KORS, MNST, TSCO, INVN, RAX, PII, etc), the temptation might be to try and “kiss all the babies,” so to speak. In order to make big money, one must focus their capital into the strongest names. If you have 12 stocks that all issue pocket pivot or base breakout buy points over several days, but you set the maximum number of stocks in your portfolio at 5, you can either sell part of the position in your weakest name to make room for the new stock, meaning you will then own six stocks. Or you could sell a position in full so that you will not exceed five stocks. If all the stocks in your portfolio are doing fine, you can sell the one that is showing the weakest characteristics on the basis of fundamentals (earnings, sales, ROE, PM, industry group rank, institutional sponsorship, etc) or technicals (lowest RS, sloppier price/volume action, etc).

Keep in mind that if we have a good position at a good price in a new, emerging leader that has some aspects of “new” in it, like INVN or SAVE (as of February 8, 2012), for example, there is no need to tamper with it or sell off a position that might be consolidating recent, strong gains in favor of something that is “moving” today. For example, Monster Beverage did not move much on Thursday and Friday (February 2-3, 2012) when the market was up, but that is fine. Since it is often the characteristic of a leading stock to move up on days when the general market may be flat or even down, one should not be surprised if such leaders “rest” on a day when the market is up. As long as the stock is resting normally, there is nothing to do, and chances are if you bought something like MNST at around 100 and sell it after a quick 5-6% gain, the stock will then just move higher without you later on. Even looking at the daily chart of MNST we can see that the stock is perched along its 10-day moving average, and a continuation pocket pivot buy point could emerge at any time, perhaps even on a day when the market is going down, so for now that is all you need to focus on with MNST: the next buy point.

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This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2020 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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