In a bull market, big gains usually come from the younger, newer, more entrepreneurial stocks with outstanding fundamentals. One reason for their outperformance is that during a market pullback, these are the type of stocks that institutional investors will hold onto the longest and try to add to their position as the market rallies. As a result it is no surprise these stocks will typically have stronger Relative Strength and Accumulation Distribution Ratings. That is why over the last 50 years we have dedicated countless hours to researching, studying and perfecting our exclusive ratings and rankings as a guide to the stocks with the greatest potential.

 

Take a look at the Retail-Restaurants Industry Group. Conventional wisdom might lead you to the company with the best brand recognition or largest market cap, in this case McDonalds Corp (MCD). However, there are many ways to define leadership. For us, the clear leader in this Industry Group is Chipotle Mexican Grill (CMG), due to its strong ratings; an EPS Rating of 98, an RS Rating of 95 and a Composite Rating of 99. Compare that with MCD’s EPS of 85, RS of 34 and Composite Rating of 70. It’s no surprise that CMG has outperformed MCD by over 20% since the beginning of the year.

 

If you notice there are slower moving stocks in your portfolio, there is no shame in hitching your wagon to a faster horse; just be sure the ratings and ranking reflect greater strength and a proper entry point exists. After all, it’s our goal to fill our portfolio with these higher rated, better performing leaders. There have been a few cases in the last few weeks where a clear leader emerged and presented investors with an opportunity to trade up from a weaker, lower ranked stock in the industry group.

 

Have you ever traded up? Tell us your story.

 

Best Returns,

Your MarketSmith Team