5 Reasons I’m Thankful for TradeSmith Daily
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Families circle the dinner table, reflecting on their favorite memories… serving up lessons learned and generating thoughtful discussions with loved ones.
These moments not only unite us, they empower us.
With that framework in mind, I’ll offer up what I’m thankful for: TradeSmith Daily.
In the never-ending deluge of media doom and gloom, today’s message is a reminder of the abundant opportunities presented when fear runs wild.
Here’s a look back at five of my favorite recent writeups… And, more importantly, the valuable investing lessons they offered.
Let’s talk turkey!
Top 5 TradeSmith Daily Tips I’m Thankful ForUp first, a big shout-out to your editor Michael Salvatore, who started writing here in TradeSmith Daily at the start of October.
Michael picked an interesting time to join TradeSmith. The beginning of October saw some of the most aggressive selling in stocks all year.
But challenging environments don’t phase us here in TradeSmith Daily. We’re always looking for opportunities amid the carnage.
That’s how Michael quickly picked up on the all-out panic over long-term Treasury yields crashing to a 20-year low.
That looked like a big opportunity to take the other side of the trade, so he recommended a call option trade on TLT that booked a 100% win just two weeks later.
And today, TLT is over 8% higher from where Michael called the low.
Oversold extremes and scary narratives are a great way to profit on the stock market, and this year’s had no shortage of them.
That brings me to the second top tip from TradeSmith Daily, when we debunked the latest inflation worries back in late September.
As a reminder, the August CPI came in “hot” at 3.7%, well north of July’s 3.2% level.
But while the bears were busy growling, we reviewed history for market clues.
What we found was in stark contrast to the worrisome mainstream media narrative.
Since 1955, when inflation runs between 2% and 4%, the S&P 500 averages a 12-month forward return of 11%.
By now, you know I’m cautious of “wishbone” research analysis. I’m thankful for historical perspective. The S&P 500 is up 4.33% since this post.
For my third top tip I’m thankful we shared in TradeSmith Daily, we made a monstrous non-consensus call to buy the oversold utilities sector.
Pounding the table on a deep-value sector isn’t always popular. However, the evidence was overwhelming that utility stocks were due for a huge pop.
To note, in early October we saw some of the largest selling in utility names in years. Below outlines how the extreme oversold reading appears very similar to prior red days:
After reviewing history, there was one bet to make: Gobble up Utility stocks. Since 2013, when there are 20 or more utility stocks sold, you want to bet big on the group because:
- XLU gains an average of 4.7% a month later
- Six months later the group rips 8.7%
- Go big with a 12-month hold and the gains balloon to 13.4%
Nothing is ever perfect with investing, but analytics sure help. Since we published this call, the Utilities sector (XLU) is up nearly 10%.
But this next article has to be my favorite. The No. 4 top tip from TradeSmith Daily was our call to buy the mega-lagging small caps.
The S&P Small Cap 600 reached price-to-earnings (P/E) levels that historically pointed to huge gains. On Oct. 17, the index’s forward one-year P/E forecast dropped to 13.37.
Looking back to 2003 at all month-end instances when the S&P Small Cap 600 forward P/E dropped below 13.4, small caps surged:
- Three months later the group popped 1.9%
- Six months later offered a 6% return
- Be bold for 12 months and the gains produce an awe-inspiring 17.5%
Since this signal on Oct. 17, the small cap space is up 3.39%. It’s just a reminder that pain can turn to gain very quickly in the stock market.
Speaking of No. 5, our reminder to always remember to buy in November offered an incredibly positive outlook at the bleakest moment.
The S&P 500 sat at 4,200 in early November, with just 19% of its constituents above their 50-day moving average.
The bearish doom-loop was all over the news. Yet, at TradeSmith, we took a historical look and reminded folks that there’s a great chance of better days ahead.
October closes out a seasonally weak period for markets. November often brings life.
Since 1987, November through April sees the S&P 500 rally an average of 6.47% — more than triple the May through October months.
There you have it, the top five posts I’m thankful for over the last few months.
But before I sign off, there’s one more thing to give thanks for… November and December seasonality.
Since 1990, the S&P 500 boasts a November surge of 1.9% …typically followed by a 1.3% lift in December.
If you’re trading against the 7.6% month-to-date surge in the S&P 500, you may want to think again. An overflowing portfolio cornucopia is what you should expect.
As you can see, following our calls here in TradeSmith Daily has huge potential to push your brokerage account in the right direction.
If you’ve enjoyed reading our research as much as Michael and I have writing it, feel free to tell us at [email protected].
From my family to yours, have a wonderful Thanksgiving!
Contributing Editor, TradeSmith Daily