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 The
Micro Cap Press newsletter has been picking some big winners of late. Broadcast
International (OTCBB:
BCST) rallied from $3.00 when we first mentioned it on November
8th to a suggested exit of $4.10 - a 33% gain - on November 21st. UAP
Holding Corp. (NASDAQ:
UAPH) jumped 21.5% in price from when we mentioned it on November
12th to its buy-out price offered last week. And, China Transinfo Tech
(OTCBB:
CTFO) rallied 44.5% between our mention on November 4th and our
recommended exit on Friday.
If you missed
out on those trading ideas, not to worry - we have another one slated
for this Thursday.
This company
is a true ground-floor opportunity in every since of the word. Yet, one
of the most compelling arguments for this micro cap company is that they're
not
trying to introduce something new. Rather, this organization has designed
a way to improve the delivery of a product with proven (and growing) demand.
Be sure to keep
an eye out for Thursday's full report. We believe it has the potential
to be as big as, if not bigger than, any of the other ideas we mentioned
above.
Looking for
the next hot sector? The media may not be the best place to
look for it. They're often late to the party, if they show up at all.
The recent relative results (i.e. comparative returns) can more effectively
show you when things are falling in and out of favor.
To that end,
we've updated our sector forecasts using such an analysis. Before we get
to it though, let's revisit our last batch of sector forecasts from the
August
10th and August
28th newsletters.
As of August
we were bullish on utilities, technology, and healthcare. Energy we could
have taken or left, and we were bearish on the financials. The nearby table
tells the tale.
All three of
our bullish picks outpaced the broad market. (Our market proxy was an average
of these eleven groups, highlighted in gray to represent neutrality). The
one area we definitely wanted to shy away from was the financial sector,
and it's a good thing we did - they were the worst of the worst. Our only
neutral pick was energy, which ended up outpacing the market anyway - with
some help from an oil rally.
Overall we'd
say our sector outlooks were spot on. More importantly though, they could
have made you as well as saved you a lot of money.
Being in the
right sector at the right time is estimated to be half the battle when
it comes to investing. Based on our recent sector forecast and results,
we believe it. Why? The six sectors that topped the market gained an average
of 5.7%, while the five that trailed the market lost an average of 7.1%.
The net result of a passive portfolio holding all eleven groups basically
netted you no real gain (+0.1%). Even if you had just removed the financials
from the equation, the net return for the four-month period would have
been 1.0%. And if you had only been holding the three groups we recommended,
you'd have a 5.7% return for the past four months.
Now, this isn't
to say we encourage everyone to own portfolios with only three sectors
represented in them at a time. That's probably too much risk for anybody
to assume.
On the other
hand, it does beg the question about whether or not holding a variety of
pieces of pie is really doing you any good. According to our results for
the last four months, the only thing owning all eleven sectors did was
water down what could have been a fairly nice return. It was only a few
percentage points for this timeframe, but extrapolate that four-month,
5.6% differential out to a full year. All of a sudden the little details
get bigger, even of you can only capture a small portion of the difference.
With that said,
let's take a look at what may be next for the major market sectors.
Coming on
Strong
Consumer
Staples - There probably couldn't be a more uninteresting group out
there...unless you think large gains are interesting. The second-best performer
of the last four months? Yet, there's still room to grow.
Utilities
- Slow and steady wins the race. These stocks have been a rock since August,
yet still look able to keep cranking out the same kind of progress.
Telecom -
The telecom sector was actually one of the better areas in 2006 and early
2007 - a long-term trend we expect to be renewed as 2008 comes into view.
We believe the recent weakness is only temporary, as the last couple of
weeks have been very fruitful.
Not Looking
So Good
Industrials
-
This group has been quietly losing ground, but the illness is getting worse
and worse by the week.
Troubling
Despite Its Strength
Energy
- We felt this group was a little bit bloated four months ago, yet they
rallied right past our dismissal. The thing is, it's pretty easy to be
an oil bull when crude prices are rising. It's not as easy to push oil
stocks higher when oil prices are pointed lower. Let's see how they fare
now.
A Long-Shot
Worth Waiting On
Financials
- The bleeding has to stop sometime, though the majority of the investing
world has to believe the same before these stocks can recover. The sub-prime
hysteria is winding down, and when investors realize so much value has
been left in the wake we expect a nice rebound. Patience though...there's
still a lot of pessimism to fight off.
This list of
sectors and stocks certainly isn't an exhaustive list of possibilities,
and as most things market-related, is subject to change at any time. But,
it may at least get you thinking about how you're going to reposition things
as the calendar year comes to a close.
In the meantime,
don't forget about Thursday's new company profile. We'll even give you
a hint of what to expect...it's in one of the sectors we're optimistic
about.
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Updated: 8:15 pm PDT (03:15 GMT), November 2, 2010
