No big rockets | stockbee

3/16/2010

No big rockets

If you read the Investor's Business Daily today, it makes a very good point about this market. There has been no rocket stocks. Big moving growth stocks which make big move are hallmark of bull markets. But in this market again and again the market keeps going back to junk. 

Many good growth  stocks that  should have rocketed 25% plus in this are just sitting there doing nothing post breakout. If you see the stocks up 50% plus in a month , you would hardly find a real growth stock. CAGC is the only true growth stock in the list.

This kind of market makes it difficult to put big bets on single idea. This has been a problem in this market for sometime. In typical bull market I seldom look at stock with less than 100/25 kind of eps/sales growth. That along with top 20 sector stocks are more than enough to find big moves. But in this market you have to look at all kinds of situations like contrarian value, turnaround plays, cyclical plays and so on.

If you look at the market , it is up 10% from its low in February and all the gains have come essentially in 10 or 11 trading days. The number of stocks up 25% in a month peaked at 306 and now is at 164.  

Hit and run is the better strategy for this market. 

3 comments:

badar_basim said...

if u have a mkt dominated by institutions, and not much retail participation, ur not gna get rocket stocks

Joe said...

Hi Pradeep, my own research and other sources confirm that the biggest movers in this run have been value stocks (low price to sales P2S ratio etc), not increase in earnings or surprises. In addition, strong relative strength has not been a good predictive factor. This was similar situation in 2003. In 2004 and on, RS played a bigger role as well as earnings. low P2S did not. Small caps are leading right now (Russell 2000 has broken out), which suggests that money could be flowing into growth. We'll see.

Pradeep Bonde said...

I am not sure about strong relative strength not being good predictor part. It depends on how you construct the relative strength strategy and the period used for calculating relative strength. The Double Trouble kind of relative strength calculation which factors in price change from 52 week low as measure of strength has been a better measure of relative strength in this market.