I launched this letter almost two years ago with one simple goal in mind: 

To share the best of what I’ve learned about personal finance and investing – through my own trials and tribulations — so that readers like you might be able to reach your own financial goals more easily.

I hope I delivered on that promise in at least some small way for you this year. And I hope you enjoyed reading these weekly letters as much as I liked writing them for you. 

In the spirit of the holiday, I wanted to share a few actionable investment opportunities from our TradeSmith tools that you can consider in the new year. 

These opportunities come from the three healthiest market indexes according to our TradeSmith tools: 

• The blue-chip Dow Jones Industrial Average (DJIA)
• The mid-cap S&P 400 Index (MID)
• The small-cap S&P 600 Index (SML)

As you can see in the snapshot below, all 12 major market indexes we follow are still in the TradeSmith Health Indicator Red Zone today. So, according to our system, the broad markets are still “unhealthy” — and a conservative stance is warranted if investing in most stocks today. 

However, the three indexes I just mentioned have recently triggered our proprietary TradeSmith Bullseye Signal — the bullish counterpart to the TradeSmith Bearseye Signal I’ve mentioned before. In short, the Bullseye acts as an early warning signal that an index could be starting a new uptrend. So, beginning an investment search with stocks in these three indexes should increase our odds of success in today’s challenging market environment. 

I then used our Screener tool to narrow down the stocks in these indexes to those that meet several additional criteria. Specifically, I searched for stocks that: 

• Are in the TradeSmith Health Indicator Green Zone (i.e., are in a healthy state).
• Are in an uptrend (showing positive upward momentum).
• Have a “Bullish” or “Strong Bullish” rating via our Ratings by TradeSmith tools (showing additional positive fundamental and technical characteristics).
• Are in or near a middle- or long-term “valley zrea” according to our Timing by TradeSmith tools (signaling the potential for a significant price bottom).
• Are trading at a price-to-earnings (P/E) ratio of 15 or less (indicating a reasonable valuation).
• Have positive free cash flow (FCF) (a hallmark of a solid business).
• Qualify for one or more Ideas by TradeSmith strategies (showing positive investment factors).

Finally, I ranked the results by the number of qualified Ideas by TradeSmith strategies and selected one top choice from each index. One of our system’s top opportunities from the Dow Jones Industrial Average is Chevron Corp. (CVX), among the biggest and best-run U.S. energy companies. 

CVX has been in a strong uptrend since triggering a TradeSmith Entry Signal in March 2021. And it has continued to make new highs as the broad markets struggled in a bear market this year. In addition to meeting all the positive criteria I mentioned above, CVX currently qualifies for multiple Ideas by TradeSmith strategies: 

• Growth (Sales and earnings are growing at a strong clip.)
• Best of the Billionaires (Six members of the TradeSmith Billionaires Club own it, including investment legends Warren Buffett and Ray Dalio.)
• Kinetic VQ (It has extra “energy” stored up that could fuel a big move higher.)
• Low Risk Runners (Its share price has recently pulled back to the Health Indicator Yellow Zone, offering a relatively low-risk buying opportunity.)

As you can see at the top of the snapshot above, this stock also has a bullish consumer sentiment score from our friends at LikeFolio. 

CVX has a medium-risk Volatility Quotient (VQ) of 28.66% in our system. That means we can expect this stock to move as much as 28.66% without indicating a meaningful change in its underlying trend. 

Based on this VQ, this stock’s Health Indicator Stop Loss (the red line in the chart above) is $133.50, or roughly 24% below its current share price. 

If you’re not a TradeSmith subscriber, you can use a simple 29% trailing stop from its recent high close of $188.05 on Nov. 15. 

Next, one of the top opportunities from the mid-cap S&P 400 Index is Steel Dynamics Inc. (STLD). STLD operates in the Materials sector as one of the largest domestic steel producers and metal recyclers in the U.S. 

STLD has also been in a long-term uptrend since re-entering the Health Indicator Green Zone in August 2020. And though its share price consolidated for most of 2022, it recently broke out to new all-time highs this fall as the broad markets have continued to trend lower. 

In addition to meeting all those same bullish criteria above, this stock also qualifies for two Ideas by TradeSmith strategies: 

• Growth
• Best of the Billionaires (It’s a favorite of hedge fund legend Ray Dalio.)

STLD has a high-risk VQ of 36.67% in our system, so be sure to size your positions accordingly if considering an investment today. 

Based on the VQ, the stock’s Health Indicator Stop Loss is $70.08, or roughly 34% below its current share price. But if you’re not a TradeSmith subscriber, you can use a simple 37% trailing stop from its recent high close of $110.38 on Dec. 13. 

And finally, one of our system’s top opportunities in the small-cap S&P 600 is Mueller Industries Inc. (MLI). 

MLI operates in the Industrials sector and is a leading U.S. manufacturer of copper, brass, aluminum, and plastic industrial products, including tubes, valves, and fittings. 

MLI has been in a long-term uptrend since triggering a TradeSmith Entry Signal in November 2020, and it recently made a new all-time high in November. 

This stock qualifies for two Ideas by TradeSmith strategies: 

• Growth
• Low Risk Runners

Like STLD, MLI has a high-risk VQ of 30.99% in our system. But it isn’t necessarily as risky today as it might appear. 

Based on the VQ, its Health Indicator Stop Loss is $48.26. Yet, because MLI is also a Low Risk Runner, investors who buy today would only be risking around 23% on this position at current prices. 

Again, if you’re not a TradeSmith subscriber, you can use a simple 31% trailing stop from the stock’s recent high close of $69.85 on Nov. 25. 

Well, that’s it for this week. 

Thank you for being a Money Talks reader. I hope you have a wonderful holiday. I’ll be back next week with my final column of 2022.