By: Costas Bocelli — March 6, 2019
Many parts of the country are still feeling the effects of Old Man Winter.
And the sun is shining bright by the time I drop my son off at school. Ahh… my favorite time of the year.
And with it comes that annual spring cleaning ritual: Out with the old and in with the new. The perfect time to clean out closets, throw out junk and reduce all that clutter.
As investors, we should think about "spring cleaning" our portfolios. We want to toss any holdings that deserve to be kicked to the curb -- especially ones that have lagged the market in recent months.
And it's not just because spring is in the air that we'll want to weed out weak positions. It's also that the U.S. stock market has rallied sharply since the start of the year.
The S&P 500 rose 11% during the first two months of 2019, its best two months since October 2010. And since the December 24th correction low, the stock market benchmark has gained 19%.
(Click any image to enlarge)
Moreover, the rally has been relatively broad based; the rising tide has essentially lifted all boats, the good, the bad, and even some of the ugly ones.
I mention that because I know some investors have a hard time dumping their losers, especially on the lows. If that's you, you have an excellent opportunity to sell them now, and at higher prices.
After you swap out the weakest holdings, it's time to replace them with stronger ones.
After this recent big rally, the market has become overbought in the short-term, at the same time that the major stock market averages are approaching a major overhead resistance level.
So now is a good time to look for opportunities to adjust.
In Sector Prophets Pro, our data analytics product, it’s easy to identify which securities possess strong characteristics of technical strength (and should be held onto)...
... and which do not and for that reason should be scrubbed from the portfolio.
Here's a great way to get that done.
Step 1: Out With the Old
Here is a snapshot of the Position Key, one of the most valuable features in Sector Prophets.
Altria Group (MO) (the red band) could be considered a good candidate to sell on the recent strength.
Despite rallying off the lows, the stock is still demonstrating poor qualities of relative strength versus its sector peers (Food Beverage, Soaps) and versus the broad market. Sector Prophets shows both attributes are on Weak status.
The Food Beverage and Soaps sector is also one of the weakest groups in terms of relative strength among the 45 narrow industry groups we track. Currently, the sector's relative strength ranking is 43, near the bottom of the list.
And finally, the price chart in MO is in a long-term downtrend.
Now that the stock is trading significantly off of its lows, even a hoarder should find it easy to toss it out of the portfolio.
Step 2: In With the New
After you cleaned out the laggards, you'll have fresh capital to use more productively, such as by acquiring strong stocks in strong sectors. That’s the key to generating superior returns and reaching your financial goals at a faster pace.
And in Sector Prophets, it’s just as easy to identify high quality investment ideas.
Take Twilio (TWLO) as an example.
TWLO belongs to the Internet sector, which currently holds the top spot in our sector relative strength rankings. In other words, out of the 45 groups, the Internet sector is demonstrating the highest level of relative strength compared to all the others.
TWLO also demonstrates positive relative strength versus its sector peers and versus the broad market. Both attributes are on Strong status.
You can see the here, in the same snapshot of the Sector Prophets Position Key.
And lastly, the price chart in TWLO is in a long-term uptrend.
Want to learn more about Sector Prophets Pro and how it can help you “spring clean” your personal investment portfolio?
Then give us a call at 855-822-0269 or email us at firstname.lastname@example.org
Until next time!