When it comes to investing, it pays to know what’s working and what’s not.
And that’s exactly what we are going to look at today.
The bottom line is, are we making money? Not how well-thought-out or well-researched a trading strategy is, but is it making money?
Here’s a chart depicting that for you — how certain sets of companies are performing. There’s a lot going on here, so I only want you to focus on a few things right now, and you can review the rest later if you wish.
First, you’ll notice the chart is sorted by TTM (Trailing Twelve Months) returns on the far-right column.
Second, I want you to look at the far-left column, Style. This tells you the category the group of stocks falls in. And Factor, right beside it, is more detail on that — but we don’t have to break down Factor today.
At the top for Style, which are those that are up the most based on TTM, there are several — Val (Valuation), Vol (Volatility) and PM (Price Momentum) — that are all working great over the past 12 months.
At the bottom of that same column, you can see that CE (Capital Efficiency), EQ (Earnings Quality) and SZ (Size) are most of those.
So what all of this is telling us is that for the past year, investors have favored low-value stocks, low-volatility stocks and stocks with momentum.
And when it comes to investing, what has been working usually is a guide for investing in the future.
I’ll break these styles down more in a Chart of the Day in the coming weeks, but you can see in March (the MTD column, or month-to-date) that all of those are down.
That means it’s a great time to get into stocks that fit those categories — good valuations, low volatility and price momentum.
Chad Shoop, CMT
Editor, Automatic Profits Alert