This Has Never Happened Before By Lucas Downey, Contributing Editor, TradeSmith Daily Imagine you’re driving down the road, and you see police lights ahead. Then you see the destruction – a mangled car hood, or an overturned SUV. Odds are your first reaction is to stop and stare… even though you know you won’t like what you see. To be human is to be curious about destruction. Like car accidents, every so often the stock market has crashes, too. Groups of stocks plummet… causing pundits to create scary charts, purely in an effort to incite emotion. The latest stop-and-stare mess is what’s happening in value stocks. In fact, the group has suffered a never-before-seen 10 consecutive down days. To many this may appear as an equity catastrophe. Just don’t fall for it. When you study history, there’s a positive omen that occurs after meltdowns like these. Value players, pay attention… Before you pump the brakes, history suggests we’re coasting toward a big rally ahead. Value Stocks Get Sold Hard Traders love stocks right now… just not all stocks. With the S&P 500 up nearly 27% in 2024, you’d think all tides are rising. But you’d be dead wrong. Under the surface reveals why the largest benchmark in the world is up so much. It’s due to growth stocks. The best way to understand this is via the basket returns below. Here I’ve listed out the year-to-date performance of the S&P 500, S&P 500 Growth, and S&P 500 Value indexes. Incredibly, the growth basket has gained a staggering 40%, more than triple the 12.6% gains for the value basket: 
You may be wondering which kind of stocks are in the S&P 500 Growth basket. It’s home to Magnificent 7 behemoths like Amazon (AMZN), Alphabet (GOOGL), and Meta Platforms (META) – which have jumped 52%, 41%, and 77%, respectively. (Disclosure, I own AMZN, GOOGL, and META.) Contrast this to the underperforming S&P 500 Value basket with names like McDonald’s (MCD), Ulta Beauty (ULTA), and Dollar General (DG) each returning 2.5%, -13.7%, and -43%, respectively. Below reveals how this favoritism for growth over value has been in place all year: 
Source: FactSet But what’s occurred the last few weeks is so rare, there’s reason to believe unloved value names will have their day in the sun. Don’t take my word for it. Read on to check out the proof… Value Stocks Fall 10 Days in a Row, Here’s What Comes Next The weakness in the S&P 500 Value index is off the chart. The lower-volatility basket fell a consecutive 10 days in a row as of December 13. The last time this happened was… never! Check it out: 
While it may be difficult to get a gist of what comes next, here’s a study to help. There have been 25 instances since 1993 where value stocks traded lower 9 out of 10 sessions. That’s a lot of down days in a 10-day span. Here’s why you’ll want to stop staring… and start caring about this unloved bunch. When the S&P 500 Value index falls in 9 out of 10 sessions, the group posts market-beating gains with: - A three-month average jump of 10.9%
- A six-month gain of 16.2%
- A 12-month rip of 26.1%
- And a 24-month market-beating climb of 39.8%
With a forward outlook like this, I’ll say it one more time. Don’t stop and stare… Get in there! Look for great stocks found in the value arena. They’re out there. You just need evidence-rich software to spot them. A top-notch company ranking high in the value bucket is American Express (AXP). This global integrated payments provider has a lot of positives going for it: - Next year’s (December 2025) revenue is expected to grow from $65.9 billion to $71.1 billion
- In the same time frame, net income is estimated to grow from $9.8 billion to $10.5 billion
- And let’s not forget the dividend yield of 0.9%
These few factors make AXP a solid choice. But to be sure, I like to double-check my analysis with the Quantum Score. This all-encompassing score gives me a snapshot of an equity’s fundamental health and technical rank. A score of 79.3 gives me the valuable green light: 
And if you’re signed up for the Quantum Edge Pro service, you can instantly score any stock you like, giving you further value-added clarity. Ten consecutive down days don’t often come along. With TradeSmith’s software and signal studies, you can stop staring… and start glaring at the opportunity! Regards, Lucas Downey
Contributing Editor, TradeSmith Daily Note from Michael Salvatore, Editor, TradeSmith Daily: When it comes to the AI Revolution, we haven’t seen anything yet. The reality is that most people – and even people at most large companies – have yet to interact with AI in a meaningful way. That will all start to change in 2025 when a new set of powerful “thinking” AI models are released. Because of this, the next huge AI stock winners will be the companies building new businesses on top of the AI superhighway. Now, it’s rare that you can get three people to agree on anything these days… But this is one area where our InvestorPlace colleagues Louis Navellier, Eric Fry, and Luke Lango all agree. And that’s why they’ve put together a special AI Day One presentation that tells you everything you need to know to profit… and lets you in on how to get their portfolio of the next wave of AI stock winners. Go here to watch that free broadcast now. | 
No comments:
Post a Comment