by Jeff Marcus
THE PERFORMANCE PATTERN OF THE MARCH DECLINE IS STILL IN PLACE
In the 4/8/20 World Snapshot entitled Picking Up The Trash, TPA said, “… action from the 3/23 low is the result of investors just buying the most beaten down stocks, THE TRASH, versus buying companies that are poised to do well during the remainder of the crisis.”
On 4/9/20, TPA said,
“…it is time for clients to focus on the winners and shun the losers…Buying stocks on the basis of a low price or selling stocks on the basis of a high price has never been a consistently successful strategy. TPA sees the reasoning that divided the winners from the losers from 2/19 to 3/23 as prevailing for many months to come. In the table below, we highlight stocks that are the outperformers in both the 2/19 to 3/23 period and the period that includes both the decline and the rally (total performance from 2/19/20 to 4/8/20). These are TPA’s “winners”. We also highlight stocks that were the losers in the initial decline period and those that have underperformed over the past 7 weeks. (TPA’s universe for this analysis was the largest stocks in the DJ 30 and the NDX 100).”
Below is the performance, so far, for the hedged basket of buys and sells. The P&L since 4/9 is +5.64%. In that same timeframe, the S&P500 is down 1.9%. Admittedly, TSLA should not have been included in the SELL side. Without TSLA, the hedged basket was up 10.28% while the S&P500 was down 1.90%.
Clients do not have to buy and sell these specific stocks, but they will probably do better, buying stocks that are poised to be resilient during the Covid-19 fallout.