If a high-beta stock doesn’t correct with the rest of the market, it is because it is under accumulation. Stocks under accumulation tend to do very well when the market pressure is lifted.
If you believe in the notion that relative strength is a great equity selection tool during market pullbacks, consider adding the following stocks to your watchlist: HTGM, UPLD, NUS, QDEL.
Netflix recently hit new all-time highs and it ended up on the first page of many newspapers. 10,000 invested in Netflix’s IPO in 2002 is worth about $2.3 Million today. This amounts to about a 40% average annual appreciation.
As impressive as NFLX’s return is, it is not even the best-performing stock for the past fifteen years. Here are the top three. They are all consumer stocks – a Chinese video game maker, a U.S. energy drinks producer, and a U.S. video content creator and distributor.
NTES +11,706%
MNST +77,230%
NFLX +23,467%
I know that I should be telling you who the next Netflix, Monster, and Netease are but even if I knew the future, the odds are that you would not be able to hold through all the pullbacks and volatility associated with huge long-term returns.
Just because NFLX has appreciated at 40% per year for 16 years, it doesn’t mean that it was up 40% every single year. Its price history has been a lot more volatile. It had one 50%, two 80% drawdowns in its history (one of them happened in just five months), and multiple 20% pullbacks.
NTES had three 50% drawdowns.
MNST had two 50% and one 80% drawdowns.
No human can stomach such drawdowns. No machine is programmed to do it either.
What is a lot more achievable from a psychological and emotional perspective, is finding stocks that have the potential to go up 50% or 100% in a year, ride them until their trends are over and then jump on the next ones, compounding your gains along the way.
Holding stocks that double in a year also comes at a price of significant drawdowns – not 50% or 80%, but 15% to 20% pullbacks are normal along the way. Such types of corrections are a lot easier to stomach. There are many more stocks that go up 100% in a year than there are stocks that go up 2000% in a decade.
We can go even one step further in our analysis and find out that there are many more stocks that go up 20% in a month than stocks that double in a year. And holding a stock for a 20% gain in a few weeks doesn’t really require to go through significant drawdowns. Small 10% to 20% short-term gains can compound quickly.
In other words, you can have your cake and eat it at the same time. You can achieve a significant return without having to go through significant drawdowns. As usual, there is no free lunch. As Henry David Thoreau said once “the price of everything is the amount of life (time) you exchange for it.”
Financial Times reports that there were 1700 new IPOs around the globe in 2017 – an increase of 44% compared to 2016. China has been the clear leader with more than 400 listings. In the U.S. companies raised $49 billion or 2X the amount raised in 2016.
Here are some of the notable movers among new listings in 2017:
The crypto-mania has entered the stock market. The stock of any company with a blockchain press release has been hot in the past couple months. LFIN and VERI are two examples.
Coal is back. Believe it or not, coal stocks are gaining attention again. Is it because of Trump’s administration’s relaxed attitude towards coal or is it because the new crypto-mania has boosted energy demand, no one really knows.
The biotech sector was one of the best performers in 2017. Naturally, select biotech IPOS shined. ANAB and ARGX proved once again why price momentum is one of the most powerful equity selection tools.
Quite a few new Chinese companies started trading in the U.S. in 2017. The Chinese education company, BEDU went from $10 to $30 before it had a sizable pullback.
ROKU staged a massive short squeeze. It went from $20 to $60 in two months.
The Canadian maker of goose-feather jackets, GOOS almost doubled in 2017.
Redfin went public and now Zillow is not the only publicly-traded play in real-estate listings.
Let’s not forget to mention the disappointments in 2017: SNAP, APRN, YOGA, HAIR failed to live up to market’s high expectations:
