Different phases of market favors different groups of stocks. In the early years of the move small caps dominated the cycle. Large caps were languishing. The bull phase, which started in July has large number of large caps dominating the action. There has been a steady breakouts in large caps. I have been telling couple of traders whom I mentor for last couple of months, look at large caps, the elephants like them and are buying them aggressively.
Look and study this list carefully:
AIG,American Internat Group (Google Yahoo Earnings BW Chart)
AZN,Astrazeneca Plc (Google Yahoo Earnings BW Chart)
BAC,Bank Of America Corp (Google Yahoo Earnings BW Chart)
BCS,Barclays Plc Adr (Google Yahoo Earnings BW Chart)
BP,Bp Plc (Google Yahoo Earnings BW Chart)
BRKA,Berkshire Hathaway Cl A (Google Yahoo Earnings BW Chart)
C,Citigroup (Google Yahoo Earnings BW Chart)
CHL,China Mobile Ltd (Google Yahoo Earnings BW Chart)
COP,ConocoPhillips (Google Yahoo Earnings BW Chart)
CSCO,Cisco Systems Inc (Google Yahoo Earnings BW Chart)
CVX,Chevron Corp (Google Yahoo Earnings BW Chart)
DNA,Genentech Inc (Google Yahoo Earnings BW Chart)
E,ENI SpA ADS (Google Yahoo Earnings BW Chart)
GE,General Electric Co (Google Yahoo Earnings BW Chart)
GOOG,Google (Google Yahoo Earnings BW Chart)
GS,Goldman Sachs Group Inc (Google Yahoo Earnings BW Chart)
GSK,Glaxosmithkline Plc Adr (Google Yahoo Earnings BW Chart)
HBC,Hsbc Holdings Plc (Google Yahoo Earnings BW Chart)
HPQ,Hewlett-Packard Co (Google Yahoo Earnings BW Chart)
IBM,International Business Machines Corp (Google Yahoo Earnings BW Chart)
ING,ING Group N.V. (Google Yahoo Earnings BW Chart)
INTC,Intel Corp (Google Yahoo Earnings BW Chart)
JNJ,Johnson & Johnson (Google Yahoo Earnings BW Chart)
JPM,JPMorgan Chase & Co (Google Yahoo Earnings BW Chart)
KO,Coca-Cola Co (Google Yahoo Earnings BW Chart)
MO,Altria Group Inc (Google Yahoo Earnings BW Chart)
MRK,Merck & Co (Google Yahoo Earnings BW Chart)
MSFT,Microsoft Corp (Google Yahoo Earnings BW Chart)
MTU,Mitsubishi UFJ Financial Group Inc (Google Yahoo Earnings BW Chart)
NVS,Novartis Ag Ads (Google Yahoo Earnings BW Chart)
ORCL,Oracle Corporation (Google Yahoo Earnings BW Chart)
PEP,Pepsico Inc (Google Yahoo Earnings BW Chart)
PFE,Pfizer Inc (Google Yahoo Earnings BW Chart)
PG,Procter & Gamble Co (Google Yahoo Earnings BW Chart)
PTR,Petrochina Co Ltd Ads (Google Yahoo Earnings BW Chart)
RDS.A,Royal Dutch Shell plc Class A ADR (Google Yahoo Earnings BW Chart)
RDS.B,Royal Dutch Shell plc Class B ADR (Google Yahoo Earnings BW Chart)
SNY,Sanofi-Aventis (Google Yahoo Earnings BW Chart)
STD,Banco Sntndr Cen Hsp Ads (Google Yahoo Earnings BW Chart)
T,AT&T Inc (Google Yahoo Earnings BW Chart)
TEF,Telefonica Sa (Google Yahoo Earnings BW Chart)
TM,Toyota Motor Corp Ads (Google Yahoo Earnings BW Chart)
TOT,Total Sa Ads (Google Yahoo Earnings BW Chart)
UBS,Ubs Ag Ord. Shares (Google Yahoo Earnings BW Chart)
VOD,Vodafone Group Plc (Google Yahoo Earnings BW Chart)
VZ,Verizon Communications (Google Yahoo Earnings BW Chart)
WB,Wachovia Corp (Google Yahoo Earnings BW Chart)
WFC,Wells Fargo & Co New (Google Yahoo Earnings BW Chart)
WMT,Wal-Mart Stores Inc (Google Yahoo Earnings BW Chart)
XOM,Exxon Mobil Corporation (Google Yahoo Earnings BW Chart)
Look at this list carefully. If you are chart reader look at their charts. 70% of the companies in above top 50 companies by capitalisation have had 20% growth in their price in last one year. Out of the 30 % laggards some have recently broken out on huge volume like GE and C. Now no matter the methodology you were following this buying was evident for long time. The charts clearly show that.
The problem why many missed out was due to their belief and hypothesis. I saw TV pundits and macro commentators and the big picture kinds rushing to proclaim that there are only 30 stocks in Dow Jones Index, when it climbed above a significant milestone. That should take the cake for dumbest statement of the year. See how many stocks moved much beyond that level after that dumb statement. Everyday I am amazed at so much of bullshit is sold as analysis by pundits in mainstream media.
Large number of traders missed out on this opportunity, primarily because of the change in market focus. Once you become comfortable trading small caps, you continue to look for opportunities in them, while the market shifts and by the time you realise it best parts of the move is over. The elephants love different things at different times. Part of it is driven be earning cycle dynamics. Also most astute observers and students of market know that in later phases of long duration rallies the focus shifts to larger cap stock.
After years of under performance, the big companies have re-engineered their business, have cut cost, sold bad businesses, are cash rich and buying back shares aggressively. Several CEO's are under intense pressure to see meaningful increase in their share price. Many are handily beating analyst earning expectations.That is getting reflected in their price currently.
The key is to look at large caps which are in their early stages of earning cycles. For example look at a company like IBM, after a major restructuring , it is just about starting to get its act together. Like this there are number of large caps which are in early stages of their earning cycle recovery. It has been my observation that such businesses just do not go back in to trouble immediately. Yes there will be price corrections, but some of the large caps are in early stages of their earning and price acceleration cycle and they have more upside ahead of them.
Studying earning cycles can help you identify such opportunities. Studying market history can help. Tracking number of large cap breakout as % of breakout on daily basis can help. Having flexible mind can help. Having critical mind to challenge others assumptions and mis guided statements helps.
The current focus has been on large caps. That being said a small cap with a meaningful catalyst like blowout earning (GROW, IIG, AXR, IAAC, etc)will always beat a large cap in % growth.
3 comments:
Pradeep Bonde said...
Look at how many of the stocks in that 11 A.M. list made further gains. The computer does good job of picking best opportunities. I don't know how many actually trade them.
Dec 15, 2006 6:05:00 PM
You may have tapped into something powerful here - some time of temporal/price correlation, 7th derivative of some time series differential equation that perfectly models/simulates the "current" market - lets see how monday goes!
still have to read latest post - will be in touch
In the process of adding some new features, I think some of the old posts have got messed up.
Planning to put up lot of data later today for weekend, but currently experimenting with some new templates to make researching stocks in the list easier.
Yes. I went from small cap trader earlier this year to index and large cap (not exclusively though) this summer when I saw large caps showing relative strength.
Part of being a trader, as in many other high risk/high yield professions, is reinventing oneself.
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