Surprising Market Holds Big Profits (If You Know What to Buy)
The U.S. stock market has been the darling of the world this year. The trifecta of a strengthening economy, a stronger greenback and decreasing commodity prices helped drive U.S. corporate profits. Foreign and domestic money flowed into U.S. stocks, pushing the S&P 500 and Dow Jones Industrial Average to record highs.
While U.S. equities have been in high demand, with investors aggressively buying every dip in 2014, things have not been so rosy in all international markets.
European nations continue to struggle with deflation concerns amid slowing EU economies. Infighting at the European Central Bank (ECB) over increasing quantitative easing is causing market jitters. Debt default concerns have once again begun to emerge from Greece.
The Russian ruble crisis continues to smolder with economic and geopolitical ramifications. Growth is slowing in China, and its market has become the most volatile in the world after Greece.
My name is Tom Vician, and I am a Chartered Market Technician (CMT). I am a veteran portfolio manager with 20 years’ experience successfully navigating risk in equities and across asset classes.
I manage Profitable Trading’s quantitative Alpha Trader service. Despite the problems gripping international markets, some of Alpha Trader’s biggest winners have come from our International Portfolio.
Since inception in October 2013, the average gain from all Alpha Trader’s international picks is 17.5%. This trounces the paltry 8.5% blip in the Vanguard FTSE All-World ex-US ETF (NYSE: VEU).
What’s Alpha Trader’s secret? It’s our unique selection process.
We use two key factors to screen for stocks with a propensity for huge moves. These two factors have stood the test of time as drivers of large stock gains.
Alpha Trader combines these two factors into one measure called the Alpha Score, and only the highest scoring stocks make it into our portfolio.
These factors derive from the two main branches of investment analysis: fundamental and technical. This blending is powerful. Let me explain.
The technical component is called relative strength (RS). RS compares the price performance of a stock against every other stock in the market. A high relative strength value shows a stock is performing better than its peers.
Here is the most critical part: Top-performing stocks tend to show high relative strength prior to making further large moves up.
The second component of the Alpha Score lies at the foundation of successful companies. This bedrock fundamental metric is espoused by some of the best investors in the world like Donald Yacktman.
Morningstar named Yacktman “Portfolio Manager of the Year” in 1991, and he’s no flash in the pan. His flagship fund has beaten the S&P 500 by 8 percentage points over the past 15 years.
Alpha Trader takes this fundamental “X factor” and ranks all stocks. Only companies that rank in the top 30% make the cut for potential inclusion into the Alpha Trader portfolio. Simply put, we want the best of the best.
We add this fundamental rank to the RS score to generate a stock’s Alpha Score. This helps us narrow down the equities universe to a small group of stocks poised to make large moves.
Alpha Trader has a total of 10 portfolios that span the gamut of the market, including our Blue-Chip, Half-Priced Stocks, High-Yield and Extreme Growth Portfolios. But it is the International Portfolio that I want to highlight today with two of our biggest winners.
Bitauto Holdings (NASDAQ: BITA) is a Chinese Internet content and marketing services provider. Its popular websites supply consumers with up-to-date new and used automobile pricing information.
The stock sported an Alpha Score of 170 out of a possible 200 when we bought it in October 2013. It turned into a monster winner, returning 242% for subscribers in just one year.
Another big winner was European biotechnology firm Gentium S.p.A. In the seven months our readers held the position, Gentium rocketed nearly 115%. It turns out another biotech firm, Jazz Pharmaceuticals (NASDAQ: JAZZ), liked the company’s fundamentals so much it bought Gentium — and we benefitted handsomely.
Well ahead of the buyout, our system alerted us to Gentium, which had an Alpha Score of 198. That means the stock ranked in the top 2 percentile of all stocks traded on the market.
While Alpha Trader isn’t actively looking for takeover candidates, it’s not surprising that a stock with such a high technical and fundamental ranking would be a target.
Currently, in our International portfolio, we have a stock that has gained 17.6% in less than six months. And our latest pick is up just over 3% in 23 days. At their current pace, these rates of return annualize to 37% and 47.6%, respectively.
I expect even bigger profits from our International Portfolio as central banks around the world adopt easier monetary policies.
Of course, not all of our positions are winners. That is the nature of investing. Alpha Trader has disciplined sell rules to limit losses and protect subscriber capital. Alpha Trader’s systematic process of cutting losses is another huge boon to our readers.
Alpha Trader’s fundamental and technical factors plumb great depths to find stocks capable of big uptrends. And that raises the odds of generating triple-digits gains.
I welcome you to learn more about Alpha Trader and how our proprietary indicator works by clicking here.